As I approached the majestic Guildhall building in the heart of London’s financial district, I thought how apt a venue it was for this year’s Global Impact Investing Network Forum. A powerhouse dating back to the 12th century that fine-tuned the laws and trading regulations that helped create London’s wealth, now in 2013 Guildhall is acting as the melting pot for investors to find new ways to use their assets to create social and environmental value.
So what does a grantmaking foundation that tackles global development challenges, and measures their effectiveness on scale of impact have in common with investors that expect financial return? Well in fact there is a lot. The GIIN Forum was able to connect a wide range of stakeholders that are crucial to creating and scaling market-based solutions to major problems around the world.
What struck me was the number of people working in this field and especially the amount of people who travelled far to be part of the discussion. This is a great sign of an increasing global industry. With so many organizations striving to deliver impact, and billions of dollars of available capital ready to be deployed, the event provided a great opportunity to think how, as a growing industry, we can work together more effectively to realize its potential.
The view of many people I spoke to at the GIIN forum was that, while things are clearly progressing, the real obstacle to unlocking this potential is a lack of investable opportunities. So can grantmakers play a role in catalysing the impact investment sector? Our experience, and that of a small but growing number of foundations and venture philanthropists, is yes. We could start by making better use of one of our biggest assets: access to risk-tolerant, patient, flexible capital.
The topic was well discussed at this year’s GIIN event – both through the launch of an excellent brief on Catalytic First Loss Capital (exploring new ways for early-stage investors or grantmakers to unlock a wider pool of capital) and also at a dedicated session to examine the role of grant funding through the eyes of organizations such as Omidyar Network, Mission Investors Exchange, Esmée Fairbairn Foundation and City Bridge Trust.
Though we work in very different sectors and geographies, it’s clear from speaking to these organizations that there is a huge alignment with our experience – and that smart grant funding (typically accompanied by high levels of business support and market linkages) can play a critical role in supporting high-risk early-stage social enterprises to pilot new technologies, demonstrate new models, and build capacity to operate at scale and service harder forms of finance.
What seems equally clear is that this type of crucial support is not readily available. The size of this gap is not yet clear (though a recent report from the Overseas Development Institute has proposed a new framework to map the social investment landscape and quantify the support given to social enterprises at different phases of growth) but the good work of GIIN, EVPA and many others is critical to help us understand how different organizations can deploy and combine different types of resources for maximum impact.
The consensus seemed to be that grantmakers could be a key part of the ecosystem that can identify and nurture viable social enterprises ready for impact investment to bring solutions to scale. There is however a danger that we fail to support financial viability by ‘competing’ with otherwise available capital or distorting the mindset of social entrepreneurs.
That’s why it’s important to have networks such as GIIN and EVPA to ensure we can understand the full ecosystem and make sure the strengths and resources of the stakeholders are complementary.
This is just a start but this year’s forum showed that great progress is being made – and we need to be able to keep the conversations going … even outside these majestic buildings.
Heidi Hafes is Communications and Business Manager, Shell Foundation