Friday, September 4, 2009

Can Impact Sell?

It is nice to arrive on scene where 800 people in modest surroundings are energetically pursuing questions that have to be answered to build a movement. At Fort Mason on San Francisco Bay investors, fund managers and social entrepreneurs put their heads together to discuss what it will take to do better, and do more, in the space that lies between strictly nonprofit and strictly for profit.

The Basics
I experienced day two of the SoCap09 conference where one of the first presenters joked about “glimpses of demystification”. In the spirit of demystification here is a definition and a couple of resources about the social capital market.

The social capital market is the arena that allows investors to "do well by doing good." An easy example is green technology. Others examples include loans to schools in India and capital for small manufacturers in Ghana. These ventures offer solid rates of return as well as environmental and/or social benefits, sometimes called blended value. Some are calling it impact investing.

The first SoCap conference in 2008 coincided with the launch of this paper,

Investing for Social & Environmental Impact: A Design for Catalyzing an Emerging Industry A Monitor Institute Report

and a wiki with definitions of the lingo

Last week I gave a colleague a hard time about aspiring to “create an enabling environment” so I deserved to be surrounded by smart people who are making strides to create the infrastructure needed to drive capital to social change. I sought out sessions that focused on setting industry standards for social measurement. Lucy Bernholz, moderating, said that metrics are the carbon in the ecosystem and the oxygen is the policy frame. She’s launched a policy project you can read about here.

What these investors and fund managers find missing are the social sector equivalents of GAAP, LEED building certification, Venture One, or Standard and Poor’s ratings.

Moderator Antony Bugg-Levine from the Rockefeller Foundation got a big laugh when he made the usual polite introductions of one panel’s speakers and summarized by saying, “they have an incredible impact on the world… or maybe they don’t”. Investors need simple indicators that managers have taken a deep dive to understand the social and environmental impact of the projects in their portfolios. The result of the work might be the “Platinum low cost housing project” and the “Gold job creations” project.

People are open sourcing their metrics, and building taxonomy. In order to compare job creation projects “job” must be defined. There is a difference between seasonal agricultural work and a full time job with benefits. To get the market from niche to mainstream people are working on taxonomy, metrics and peer and trend ratings. It was a bit tough catching up on the acronyms but the Global Impact Investing Network (GINN) has taken up a chunk of the work . I’ve lifted this from their website.

"To address these challenges, the GIIN will continue work initiated by The Rockefeller Foundation, Acumen Fund, and B Lab to advance a common framework for defining, tracking, and reporting the performance of impact investing capital. The group, in collaboration with other impact investors and intermediaries, has developed a set of standards (taxonomy) that would facilitate comparisons of financial, operational, and impact data. The project has been supported by Deloitte and PricewaterhouseCoopers and builds on prior work in the social impact assessment field while further developing and clarifying the means and metrics for enabling investment choices. The taxonomy of social and environmental terms enables the aggregation of data from different providers and multiple data collection systems. “

The conference itself and the comment below shows how hard everyone seems to be trying to work together in an environment where some are saying the efforts are proliferating.

“IRIS is working in conjunction with other efforts, including Pulse, Acumen Fund's portfolio data management system, and the GIIRS rating system.”
You can read more about their work here

Dilemmas - Q&A periods are great for pointing up dilemmas, here are a few.
Lagging indicators -. One participant pointed out that the metrics tend to be lagging indicators and don’t support innovation. We were invited to check out David Hunter‘s work, Alliance for Effective Social Investing. Folks from Good and Ideo spoke up saying that they are looking at this issue, and they invited people to join them blogging this topic.
Adoption – It will take time and energy to adopt the standards and they will likely be wrong at first
Range of use – Learning or Leaving? -No conference is homogenous and there was a range of views about how metrics should be used. Some talked from a capacity building frame, using the data to improve operational efficacy. Those noted that we need to listen better to the people doing the work. Others were more focused on investors needing to act differently based on the information, to “shut down” ineffective organizations

Role of Foundations in the movement
Foundations appear to be at the table in a number of ways, being interviewed as things are being designed, funding infrastructure efforts and participating as early catalytic investors in funds. Foundations also do their own mission related and program related investing

This may be one of those times when it is best to get out of the way. People took some pains to clarify that these metrics and ratings were not intended for institutional philanthropy consumption. Margot Brandenburg embodied this when it was pointed out the kind of metrics that are being gathered are more "outputs" or "activities' than impact indicators. What I heard is “yes we know, and let’s keep it simple” These investors do not need what another speaker referred to as the “complex and opaque” evaluation results that some other approaches yield. And if these high caliber players can make progress on challenges like the diversity in the work or attribution for advocacy efforts we can all celebrate and use the tools.

What is at stake ? From the GINN site – “The ultimate success of the initiative will require collaboration and cooperation from a great number of organizations. The challenges of this effort cannot be underestimated; neither can the potential benefits resulting from the more robust and efficient flow of capital with a social and environmental benefit”. I like thinking about a world where two pocket thinking (1.make the money, 2. Use it for social good) has a robust alternative.

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