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Social Impact Investment

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by

Karl H Richter

on 20 November 2014

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Transcript of Social Impact Investment

What is it ?
Is it sustainable ?
Investors
Investees
Organisations:
Investment v grants ?

Not enough money available

Terms and conditions are too onerous / hard
Investors:
Why worry about social impact?

Not enough investible opportunities

Too risky, not enough return,
no collateral/ security etc
Language
1.
Landscape
Enabling
infrastructure
3.
Plurality
&
diversity
: social investment
means different things to different people

Seeks both
financial
&
social
returns

Requires
intentionality
&
measurement
Charity
& Corporate Social Responsibility
Subsidies
Social
Investment Intemediaries
12 Drivers for Growth
#8. Social Business Initiative
What is a social business?
The Commission uses the term 'social business' & 'social enterprise' to mean:

social impact priority (can make profit)

produce goods and services as part of the market economy

entrepreneurial and innovative

uses financial surpluses to achieve social goals

accountable and transparent

management involves workers, customers and stakeholders

A new financial instrument of €90 million to improve social businesses' access to funding

EIF launched Social Impact Accelerator (2013)
€60 million Fund of Funds
with Credit Cooperatif & Deutsche Bank
2014 - 2020 Budget
Yield/
capital preservation

Risk is assessible

Volatility (or lack of)

Correlation &
portfolio diversification
Public sector austerity: consider ALL sources of money

Tailored to suit cash-flow of organisation

Investment is complementary to grants

Sustainable finance: money is recouped & recycled
capacity building &
engaged investor approach
An emerging market

Journey of exploration
Trading revenue, sales
Government grants
(with thanks to Robert Kawalko, European Fundraising Association)
Corporate sponsors
Traditional Sources of Funding
Social
Impact
Investment
2.
EU 2020 Goals
Challenges
2007-13 budget figures
ERDF €201bn
ESF €76bn
(EuSEFs) European Social
Entrepreneurship Funds
Regulation (not directive - optional)

Voluntary new "passport" for funds
to assist cross-border fundraising

Streamline regulatory and compliance requirements - reduce costs

Common standards, processes and reporting
http://www.engagedinvestment.com/publications.html
Examples
Groupe d'experts de la Commission sur l'entrepreneuriat social
(GECES)
Improve access to funding

Improve visibility

Improve legal environment
http://ec.europa.eu/internal_market/social_business/expert-group/index_en.htm
http://ec.europa.eu/internal_market/smact/docs/20120206_new_growth_en.pdf
Inclusive, sustainable, smart growth
Opportunities
Karl H Richter
Chief Executive
@KarlHRichter
Definition

Impact
Current Focus
Single Market Act
Private donations
Social Impact
Investment
NGOs / Civil Society
Accelerating Market-Driven Partnerships (AMP)
Unlocking economic value
while delivering positive social and environmental impact
Social Enterprise Mark
provided that:
havin
g an asset lock
objects that made it clear it was "primarily concerned with providing b
enefit to society"
a constitutional requirement to exist for social benefit
safeguards to ensure its social mission continued in the case of an ownership change
remuneration levels that "reflect social sector norms".
Like other businesses:
compete to deliver goods and services in market
Legal "wrapper" on top of:

Company Limited by Shares
Company Limited by Guarantee
Social Enterprise
Social Business
Permits for-profit companies that seek to create significant social value
"Level playing field"
Social Business or Social Purpose Company:
for-profit business with social objectives
social objectives not necessarily primary objective
Differently from typical business:
social and environmental mission
focused on the community they serve
profits reinvested towards achieving social/ environmental purposes
Specifically defined community interest/ beneficiary group

Asset lock
Limits to profit distribution
Registered with regulator - ongoing monitoring
Government definition
“businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.”
Bill passed on 12 March 2013
http://www.euclidnetwork.eu/news-and-events/sector-news/1003-eusef-legislation-explained.html
Download here:
Mainstream investment &
Socially Responsible Investment (SRI)
www.karlhrichter.com

An investment priority for social businesses & enterprises in the ERDF and ESF regulations.
(up to €40bn/ year)
G8 Taskforce on Social Impact Investment
(Source: EVPA 2011)
London Stock Exchange, Oct 2011
Movement
Occupy
The text of the banner in this image has been digitally altered,
it originally read "Capitalism is crisis"
9 Jan 2012
http://www.ft.com/indepth/capitalism-in-crisis
?
?
Social Economy
Social Businesses
Social Enterprises
Social Market Economy
Impact Economy
Impact Investment
Cooperatives
NGO's / 3rd sector
Big Society
Solutions
"Impact"...
"Social"...
Darling, it all needs money...
The
Welfare State is dead...
Long live the
'Participation Society'
Public sector austerity
A new economic paradigm?
The rules are changing
King Willem-Alexander
Netherlands, 2013
Overcoming Social Exclusion
through Enterprise
Non-profit holding company for social enterprises
Active across France, la Réunion, Guyane and Mayotte.
Finances ‘social economy’ organisations
General banking services
Customised products
Annual turnover:
€560 million
Number of beneficiaries:
>1 million
Number of employees:
>11,000
Number of businesses:
>45
Year founded:
1984
Sources:
http://www.credit-cooperatif.coop/fileadmin/doc/communiques_de_presse/_CP_Resultats_2013_Groupe_Credit_Cooperatif_EN__.pdf
http://www.gabv.org/stories/overcoming-social-exclusion-through-enterprise-france#.U6rKkChhsTA
http://www.bigsocietycapital.com/sites/default/files/pdf/Social%20Investment%20Insights%20-%20Groupe%20SOS%20June%202014.pdf
Loan exposure:
€12 billion

Growing customers:
4%/ year
Active customers:
314,600
Established:
1893
Scale & reach of organisations
Amount of money
Long track record
1.
&
Helping people with Asperger Autism become employable
2.
France
Germany
&

Investment:

Area of activity:

Innovation:



Beneficiaries:

Clients:

Year of foundation:

Website:

€500,000

Berlin, later Germany and parts of Europe

AUTICON utilizes the special skills of people with Asperger Autism, trains them to be software testers and deploys them as consultants in IT departments within large and medium-sized organisation.

People with Asperger Autism

IT companies, companies with IT departments

2011

www.auticon.de
Source:
http://www.socialventurefund.com/eng/social_enterprises_portfolio/investment_example_auticon/
Innovative service delivery model
Save welfare bill
Enhance quality of life
Local Authorities can be both...
1) Social Investment as source of capital
2) Help deliver programmes & projects
1) Deploy own resources as social investment
Drive value for money of public sector budget
Recycle and reuse money
2) Encourage LA pension funds to invest
http://www.smith-institute.org.uk/file/local%20authority%20pension%20funds%20-%20investing%20for%20growth.pdf
"It is urgent that governments throughout the world
commit themselves to developing an international framework
capable of promoting a market of high impact investments"
http://www.news.va/en/news/pope-francis-investors-must-link-profit-to-solidar
“Investing for the Poor” 16-17 June 2014
'Commissioners' of social outcomes via
Social Impact Bond & payment-by-results contract
Promoters of social impact investing
&

Report - 16 September 2014
Full transcript