"Social Capital Markets Conference 2010: The Evolution of Money and Meaning"
The very existence of the Social Capital Markets conference, known as SOCAP, says it all - over 1,300 vibrant, excited, inspired, brilliant leaders - philanthropists, social entrepreneurs, venture capitalists, micro-finance entrepreneurs, advisors, and consultants who joined together at San Francisco's Fort Mason in early October. They're all working with investing as a means to create better lives for the world's poor, restore and grow healthy ecosystems, foster social entrepreneurs, local food systems, local businesses, and more. All this was just a glimmer in the eye of SRI investors decades ago. Now, it is a reality.
It began this year for me the moment I took a photo of one of the receptions with my phone and posted it with this caption: "Tune in - turn on! Can you feel the Evolution happening? Social Capital Thought Leaders Meta Networking for the Common Good! It's REALLY happening all around the world and a thriving vortex in San Francisco! http://www.socialcapitalmarkets.net "
Estimates are that upwards of $120 billion of investment capital is now available for investments which have meaningful returns, while at the same time address environmental and social woes.
How have things grown, how have things evolved?
There are many areas of development. The meaning of "Capital Market" itself is being explored with innovations like Hoop Fund, where purchass of organic apparel, organic chocolate, quinoa and other foodstuffs are resulting in direct investments in the rural entrepreneurs who produce those products, and the well known micro-finance organization Kiva.org, enabling a global marketplace of people to people investing for good.
The Development of the Impact Investing Space
Impact Investing is a type of Socially Responsible Investing (SRI) that aims to provide environmental or social benefits in addition to economic profit. While the exact size of the Impact Investing market is not known, it is thought to be around $50 billion today, and according to some estimates may reach an astounding $500 billion within the next decade.
Many organizations, including the Rockefeller Foundation, have been part of an effort to create "the basic systems and networks necessary to identify, vet, and monitor investments efficiently"[1]. A comprehensive, dynamic database of the Impact Investing space will be a useful tool for investment advisors in that space who currently rely on a large amount of "one-to-one communication methods" to gather information. Further, those companies seeking investors want a formalized and functioning marketplace to attract capital. The effort is not a small one, and it seems that many smaller efforts have begun to work together. A project created through a Rockefeller Foundation Impact Investment Initiative grantee called the Global Impact Investing Network ( http://www.globalimpactinvestingnetwork.org ) aims to develop the Impact Investing space through a number of initiatives.
These initiatives include:
- IRIS - Impact Reporting and Investment Standards. Includes specific data points in setting impact standards. Sarah Gelfand is director of the IRIS project. More information about IRIS at: http://www.iris-standards.org
- GIIRS - Global Impact Investment Rating System. A rating system similar to Morningstar's on how effective an investment creates an impact in a particular area. The system is being built by B-Lab.
- Data Aggregator - "a repository to compile the data points on multitudes of organizations for market comparisons, benchmarking, and other analytics."
- PULSE - "a web-based portfolio management software application designed to help money managers track the socially positive impact of investments by plugging directly into the IRIS taxonomy and database." Currently 6 companies are using a beta version, and there will be 150 using the next version soon. Acumen is a principle author along with Salesforce, Google, and App-X.
Partners include: Rockefeller Foundation, Deloitte, PricewaterhouseCoopers, Hitachi, Citigroup, Deutsche Bank, J.P.Morgan, the Bill & Melinda Gates Foundation, Imprint Capital, RSF Social Finance, Calvert Foundation, Acumen, and B-Lab.
GIIRS is a ratings endeavor that provides social and environmental impact ratings for companies and funds seeking to raise capital from impact investors.
The GIIRS community has launched the "Pioneer Funds," a compilation of the leading funds in the space, enabling investors, analysts, and researchers to have a better handle on the core of the movement through what are perceived to be the leading funds representing the scope of impact investing. GIIRS is a project of the non-profit B Lab whose mission is to use the power of business for a better world. More information about GIIRS at http://www.giirs.org/about-giirs/about
Twelve leading North American impact investing funds were announced as GIIRS Pioneer Funds at the conference and thirteen leading emerging market funds were highlighted at the Presidential Summit on Entrepreneurship in April. In sum, the 25 GIIRS Pioneer fund managers represent $1.2 billion in assets under management and have investments in more than 200 high impact companies in over 40 countries. The twelve North American Funds named include City Light, Capital, Core Innovation Capital, Equilibrium Capital, Good Capital, Mindful Investors, Murex Investments, Renewal Partners, RSF Social Finance, Satori Capital, SJF Ventures, SustainVC, and TBL Capital. More information at http://www.giirs.org/for-funds/pioneer
Markets with a Mission
Another effort to make the market of impact investments more transparent and thriving was represented by the launch of Mission Markets, "a financial services company that operates ‘The Impact Investment Platform' supporting the social and environmental capital markets." Mission Markets' unique trading platform, Mission Markets Earth Exchange, includes transactions in environmental commodities such as carbon credits and Renewable Energy Certificates (RECs) as well as Wetland Mitigation and Habitat Credits. In the future, lesser known vehicles including Stormwater Runoff Credits, Mangrove Credits, Biomass Units and Marine Carbon Credits. Mission Markets CEO and Founder Michael Van Patten unveiled his groundbreaking platform during the panel entitled "Mapping the Space: Innovative Markets for Good," and stressed that the company supports both social and environmental markets. More on Mission Markets at http://missionmarkets.com
SOCAP has been kind enough to share videos the insightful panel discussions and keynote speakers from its conferences. To view the "Innovative Markets for Good" panel featuring Michael Van Patten and a demonstration of the Mission Market Earth Exchange, visit:http://video.socialcapitalmarkets.net/2010/10/innovative-markets-for-good-mappin...
Getting Individuals and Families Involved
While much of the Impact Investment space has been limited to institutional investors, the Money for Good report by Hope Consulting includes a number of valuable studies to help unlock the Impact Investing marketplace to all sectors. Their initiative outlines that there marketplace represents nearly $120 billion of retail investors willing to invest in impact investing, with amounts smaller than $100,000.
Their studies also outline important barriers due primarily to the fact that impact investing is still in the early stages. Some of the issues are:
- Lack of track record
- Investors don't know where to find information on Impact Investments
- Advisors not recommending Impact Investments
- Limited advice available
- Insufficient ratings/benchmarks
Also their study identified three major segments of investors with different motivations for impact investing: Safety of investment first. Socially focused, and Quality of organization to be invested in.
In order to move forward to broaden the access for individuals, there are several key factors necessary to be developed: Information and infrastructure, Financial Advisors, Products.
For organizations trying to unlock this market:
A. Clarify what impact investing means
B. Build awareness of impact investing and the opportunities available for investors
C. Develop and disseminate information on impact investing to financial advisors
For all organizations involved in Impact Investing:
D. Structure products with small initial investments (<$25,000)
E. Tailor products and messages by segment, to appeal to different motivations
F. Make opportunities accessible to investors
G. Position these as investments, not as alternatives to charity
H. Address barriers related to the markets' immaturity, which are consistent across segments
Another key point is that in order for Impact Investments to reach the retail marketplace, financial advisors need to be a central part of the equation. Here are the points that Hope Consulting identified.
Majority of respondents used an advisor:
- #1 source of information for investors
- 45% want to transact through their advisor
However, many advisors don't know about these opportunities. And when they do know, they see barriers to recommending them:
- "There isn't a database with these options"
- "I can't find out about them where I find out about other opportunities"
- "I am not confident in the track record"
- "Where is my upside?"
There are just the highlights of the study, find out more here http://hopeconsulting.us/money-for-good
Shopping the Talk
Another exciting development is the work of Gloria Nelund CEO of TriLinc Global. Her firm's effort is to bring retail investors to the impact investing space based on her years of experience in many different roles in major investment banks:
"TriLinc Global, LLC is the world's first impact investment firm dedicated to harnessing the collective power of main street investors in the United States to help businesses in developing countries create jobs, grow the middle class and generate measurable positive impact. Founded by a team of proven investors and entrepreneurs, TriLinc Global is dedicated to the idea that positive economic growth, social progress and environmental sustainability can and must go hand and hand.
The Company currently operates in the U.S., Latin America and South Asia and invests capital through a series of proprietary funds with a new focus on non-traded SEC registered retail fund vehicles. These vehicles pay a fixed current dividend, offer long-term capital appreciation potential, and produce measurable social and/or environmental impact results."
The Good Pitch
The Good Pitch is a British-based venture that introduces impact filmmakers to parties such as NGOs, foundations, brands, and other potential allies and funders who share a passion for socially inspired films. Among the films pitched was Megan Gelstein's documentary Green Shall Overcome about Van Jones, the former Green Jobs Czar, whose time in Washington was cut short due to some of his "controversial" views. Jones also spoke at the event, sharing stories of his travails as well as his mission to help build a new socially empowering green jobs economy, themes both at the heart of the film. Trailers of the eight films selected for good pitch are available here: http://goodfilm.org/goodpitch/overview
Other Groups and Projects of Note
Social Venture Technology (SVT) Group ( http://www.svtgroup.net ) has published a book called Social Return on Investment: A guide to SROI analysis. Their analysis of the existing methodologies on Impact Investing helped inform the development of IRIS.
According to Investment News, there is another platform being developed called Alternative Investment Product. The platform is being developed by the Depository Trust and Clearing Corp. (DTCC) and is already being utilized by Pershing, and Schwab is testing it. DTCC is hoping that its new platform will become the industry standard. [2]
In London, plans are underway to create a Social Stock Exchange. The exchange would feature companies with a social or environmental purpose, and its creators also hope to eventually attract businesses from the developing world. [3]
The Evolving Social Capital Markets Ecosystem
One brief article cannot cover the myriad conversations, projects, desires, intentions and enthusiasm in the space. And there is more to come. At a recent speech in San Francisco, Secretary of State Hillary Clinton announced SOCAP@State, a joint endeavor with SOCAP and the State Department to take place in Washington, D.C. in 2011. Meanwhile, across the pond, SOCAP Europe runs from May 31 through June 2, 2011 in Amsterdam.
We are making a difference, one dollar, one idea, one intention at a time, for the common good!
To see many of the dynamic and powerful speakers from the past two SOCAP conferences, watch videos here: http://video.socialcapitalmarkets.net
Article References:
[1] Investment strategy - Architects of a ‘social investment data engine'. (2010, April 11). Financial Times. Retrieved June 15, 2010, from http://www.ft.com/cms/s/0/e297b7de-440b-11df-9235-00144feab49a.html
[2] Kelly, B. (2010, June 6). Coming soon: Clarity on alternative investments? Investment News. Retrieved June 15, 2010, fromhttp://www.investmentnews.com/article/20100606/REG/306069981/-1/INIssueAlert01
[3] Social Stock Exchange Could Be 18 Months Away. (2010, April). The Rockefeller Foundation. Retrieved June 23, 2010, from http://www.rockefellerfoundation.org/news/social-stock-exchange-could-be-18-mont...
Article by Gregory Wendt, CFP is the Vice President of Sustainable and Responsible Investing. He is frequently profiled or quoted as an expert in the media including "Living with Ed" Television Show on Home and Garden Television, Business Ethics magazine, Daily Variety, Financial Planning magazine and Yogi Times magazine. Greg speaks regularly at conferences on the matters of new paradigms in economics, sustainable and responsible investing, new consciousness around wealth and related matters. Mr. Wendt is also the co-founder of the non-profit Green Business Networking (http://www.greenbusinessnetworking.org), a community of over 3,500 green business owners and professionals in Los Angeles dedicated to green economy, and the founder/visionary behind Green Economy Think Tank Day (http://www.greeneconomythinktank.org ) an annual conference for LA Region's sustainability leaders. Contact Greg by email at gwendt@epwealth.com.
Special thanks to Mark Sutton who provided research and editorial support for this article. Mark is an Environmental Market Analyst at the San Francisco Carbon Collaborative who share's Greg passion for Impact Investing.
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