The future of social capital markets is…

Having a day to begin to recover from the “firehose-to-mouth” effects of SoCap08, ideas are beginning to gel for me on how best to describe what I learned in a way that is useful to those who were not there and who might benefit from this translated knowledge.

Best way to start is probably with the basics….  What is this thing that is called, at various times, “blended value” investing, “impact” investing, “social” investing, and why did a conference about this movement draw 700 people from all over the world at a time when traditional financial markets are headed due south (and by that, I don’t mean to Texas)?

On the second part of the question – why is it important? - consider this.  Total foundation giving in the U.S. last year was $42.9 billion, which on the surface might sound like a lot.  But total U.S. charitable contributions for the same period totaled $300 billion.  And “impact investing,” which includes all investments that hope to achieve a blending of social and financial returns (i.e. mission-related investing and PRI’s by foundations; investments in companies, social enterprises, microlending, etc. that have dual goals of positive social impact on society as well as a financial return for the investor), was $2 TRILLION worldwide in the same year.

Add to this that the social problems of our world are not going away.  In fact, they’re continuing to grow.

An underlying belief shared by the conveners of SoCap08, and most of the attendees, is that MORE resources directed MORE EFFICIENTLY to great solutions, will result in signifcant, measurable, positive impact on many of the social problems in the world today – poverty, hunger, unequal access to health care and education, etc. etc.

And the source of significantly more dollars is not foundation grantmaking budgets.  Rather, it is their endowments (mission-related investing), other investment funds, corporations, and individuals.

Katherine Fulton from The Monitor Group / Institute gave a great keynote Tuesday morning where she described four phases of marketplace development: (1) uncoordinated innovation, (2) marketplace building, (3) capturing the value of the marketplace, and (4) maturity.

The social capital markets movement is in Stage 1.  A LOT of innovation happening that is focused on attracting these resources, including:
- Folks like George Overholser from the Nonprofit Finance Fund Capital Partners, Timothy Freundlich of Good Capital and Calvert Social Investment Foundation, and Marc Hand from Public Radio Capital creating creative structures where different sources of capital can comfortably “cohabitate;”

- Jeff Tuller and Allan Benamer launching socialmarkets.org , a marketplace through which nonprofit and socially-focused for-profit “stock” can be valued and traded (gross simplification, but check out their manifesto for a more indepth explanation);

- Cross sector partnerships like Intel and Grameen’s partnership (which includes an investment fund) to bring about self-sustained solutions based on information and communications technology to help empower the people of Bangladesh;

- b.Lab developing a new form of corporate structure (B Corp) for private enterprises that exist to create public benefit; and much more.

So much innovation, but it’s too early in the game to have synergy around what works best and to have all the gaps filled in.  What is agreed is that it has the potential to be huge. (Fulton estimates it could be as much as $600B).

To read other’s perspectives on SoCap08, go to del.icio.us and search for the SoCap08 tag and/or visit the blog section of the SoCap08 web site.

Kim Wilson
Development & Marketing Director