Breakout: “Innovations in Philanthropy: Investing for Social and Environmental Impact”

April 21, 2010

This breakout session brings together a range of investors who are confronting social problems with their companies and investments. One panelist began her business when she was dramatically confronted by the problems of human trafficking – and realized that this problem functions according to market incentives. If she could provide other incentives to the parents and relatives who sell children into slavery, she could confront trafficking at its source. This led her to found a social enterprise that employs those at risk as weavers and artisans. The enterprise is led by local partners, who can plug into a business model that brings these products to market all over the world. The value is added here by creating a global value chain.

The creative application of existing business models to social problems can be very effective as well. Another panelist saw a need for a capital partner who could come in and purchase ranch land in the American West that needs to be conserved and protected. Conservation, in fact, is the core of the investment model that his firm uses to acquire land. The firm functions with a private equity model, investing in properties where conserving the land will “make it worth more tomorrow than it is worth today.” Ranch land in the American West is a very inefficient marketplace, he notes, which allows his firm to create a lot of value. This is an example of a very typical private equity model applied to an atypical area of investment: value through ecological conservation.

Others in the group discuss how they measure the social goods produced by their enterprises. There is significant agreement that while it is useful to count things (number of people served, acres conserved, jobs created, etc.), these numbers quite often fail to communicate the full scope of changes like increased dignity. A transparent model for social investment must quantify certain things, both financial and social, but will inevitably have repercussions beyond those metrics generated. The success of the enterprise is itself perhaps the most fundamental metric.

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