Pioneers Post
social investment

Radical report pushes private capital towards social mission

15 November 2011

First and foremost, in the next ten years, you will see a whole ecosystem for investment that's just emerging now.

Ambassador John Simon, founding partner, Total Impact Advisors

An initiative to radically shift the way private investment can be deployed for social benefit is gaining support from leaders across financial and government spheres.

The Hague Financing Framework and its initiative, ‘Financing the Future Today’, follows meetings earlier this year that convened around 70 senior representatives from across the development world.
 
The meetings were hosted respectively by the Dutch Ministry of Foreign Affairs, the Dutch development bank FMO, and the Tallberg Forum – an annual event in which leaders from all over the world and from various sectors of society gather to reflect upon the challenges and opportunities that stem from global interdependence.
 
The conclusion of this year’s forum resulted in the ‘Tallberg Declaration’, published at the end of June, which stated that: 
 
  • The social, environmental and economic dimensions of the international development agenda are relevant to us all, whether public or private sector.
  • Governments should use their convening power to develop – together with international financial institutions (IFIs), development finance institutions (DFIs) and private sector – innovative, catalytic policies and instruments.
  • There is a clear opportunity to mutually leverage public and private sector resources to further developments and build new markets.
  • Underlying any such approach is the principle of equitable treatment to all such stakeholders.
  • Multiple concepts and cases, building on these principles, have been successfully put into practice, and now offer the opportunity for replication and scale with higher capital efficiency and development effectiveness.
  • The above is a matter of high importance and urgency.
 
Now, a paper has been produced which aims to muster the combined power of social entrepreneurs, impact investors, governments and corporates – and which aims to promote a model of ‘multi stakeholder collaborative partnership’ for all engaged in development.
 
The authors have embarked on a series of high-level meetings, including recent presentations to the World Bank and the Dutch Minister, and currently are taking soundings at a senior level with the UK and Swedish governments, as well as to the commercial sector, to make their case for support.
 
A key element of their proposals is a template for action they have named ‘COILED’. This links together new ‘Capital’ structures, a focus on ‘Outcome’ models, ‘Intermediaries’ focused on social mission, innovative ‘Legal’ mechanisms, a strong role for social ‘Entrepreneurship’, and support to leverage the evolving ‘Distribution’ mechanisms of civil society. 
 
The paper says governments should ‘catalyse the creation of new innovative and market-based policy instruments (impact investing)’, as well as encourage tax incentives and processes to encourage international collaboration, cost efficiency and increase public sector productivity. Their aim is ‘to create policies that “crowd in” investment and to incentivise scale’.
 
The paper also calls for a shift away from ‘how many programmes do we fund and launch bilaterally’ towards, multi-stakeholder solutions focused on tangible outcomes such as, ‘how many children do we educate’.
 
The paper contends that new intermediaries focused on social mission are critical in order to broaden education and encourage local entrepreneurship and marry the different sources of capital. Legal innovation is also necessary so that charitable, government and private sector funding can be combined under one umbrella with social mission hardwired and with a cost structure that makes these solutions accessible to the social sector.
 
Social entrepreneurship is described by the authors as ‘the R&D (Research and Development) of society’, which has witnessed a wave of growth in the last decade. Quoting Ashoka, the world’s first and largest global social entrepreneurs network, it says “social entrepreneurs act as the change agents for society, seizing opportunities others miss and improving systems, inventing new approaches, and creating solutions to change society for the better. While a business entrepreneur might create entirely new industries, a social entrepreneur comes up with new solutions to social problems and then implements them on a large scale.”
 
SocialEnterpriselive.com will be linking to a series of videos from the Tallberg Finance stream which outline many of the concepts outlined in the paper. The first two, featuring Charlotte Petri Gornitzka, Director-General of Sida (Swedish International Development Cooperation Agency), and Ambassador John Simon, Founding Partner, Total Impact Advisors and former Executive Vice President of OPIC (Overseas Private Investment Corporation), are featured here:

Arthur Wood, one of the report's authors and founding partner of Total Impact Advisors, will be taking part in the ‘Reinventing Capitalism’ workshop at Good Deals, on Thursday 24 November. See the full programme here.
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