Social investing session

As a social entrepreneur, I am particularly attracted to sessions that are primarily about the social sector.  I just attended one hosted by Alec Hogg of South Africa called “Strengthening the Visible Hand,” on social investing. 

Jed Emerson, one of the deans of the social enterprise field, spoke about his blended value concepts (see blendedvalue.org).  He’s working against the segregation of two kinds of value creation: business value creation and social value creation.  His argument is that businesses create social value, and that the nonprofit sector creates huge economic value. 

Lynn Fritz, the logistics executive who has turned to helping humanitarian organizations with his Fritz Institute, talked about getting more engaged with nonprofits than just writing a check.  He thinks there is a huge amount of interest from businesspeople to help nonprofits with business skills.  He brought up the concept of ROD: return on donation, where the return being measured is the social impact. 

Steve Pagliuca of Bain Capital joked about being on the dark side, because his private capital firm is primarily concerned with financial return on investment.  But, he said several times that good social behavior is good business, and got specific about how his firm engages in that.  First of all, they do screen out investments in fields such as gambling, arms and alcohol/tobacco.  Secondly, he said that if they had two investments that both offered 20% returns, they would pick the socially beneficial one.  But, they wouldn’t look at a social investment that offered sub-par returns unless someone else (the government, the social sector) could lower their cost of capital to bring the returns back in line.

Pierre Tami runs the Hagar NGO in Cambodia, and they start business that employ disadvantaged women (street women, trafficked women).  They have had good luck getting more through the IFC to fund these businesses, which they set up with real business boards to ensure that they succeed as businesses while delivering the social benefit of creating relatively good paying jobs for their community.

Half the session was discussion, and there were many engaged and knowledgeable people in the audience. Social entrepreneurs talked about their real experiences trying to raise capital for social enterprises, businesspeople about their efforts to engage with the social sector and foundation people about their creativity in finding new ways to bring capital to the social sector.  Overall, the attendance was a bit light: much heavier on true believers than on people exploring the topic for the first time.

The WEF is trying to push this topic, and I think it is critically important.  There is a need for improved access to capital for social entrepreneurs who can scale, which is what Klaus Schwab's Foundation is concentrating on (they invite leading social entrepreneurs to the Forum to engage in these discussions).