Findings of the G8 Social Impact Investing Task force
by Marta Maretich, Chief Editor @mmmaretich
A webinar with Sir Ronald Cohen and Rosemary Addis gave a taste of what is to come from the full report of the G8 taskforce for Social Investing.
Convened by David Cameron at last year’s Impact G8, the taskforce was given the brief of informing “governments and the worlds of finance and industry about what needs to be done” to develop the impact market. It consists of representatives from the G7 nations (no longer eight due to the exit of Russia) plus Australia.
The taskforce’s final report is due September 15, 2014, but in the meantime participants logged on form all over the world to hear Cohen, head of the task force, and Addis, from Impact Investing Australia, present highlights of the findings so far. The results were encouraging for the growing impact sector. Here are some key points.
Setting objectives for social and environmental impact will change everything
Some 40 years ago, Cohen pointed out, businesses learned the art of setting strategic objectives, a practice that led directly to a huge boom in corporate success. Setting strategic goals for social and environmental benefit for business, will lead to a similar upsurge for social impact organizations.
A trillion dollar marketplace is achievable—soon
Social impact investing is racing ahead on strong tailwinds from young millennial investors, the “gray wave” of responsible older investors and, with huge effect, governments seeking new ways to finance social programs. There are currently some $10 trillion now committed to SRI and CSR investing. This gives some indication of the appetite among investors for socially responsible investing and suggests impact investing may be able to scale quickly.
Impact investing has “uncovered a new set of opportunities for investors”
Impact investing is more than just a nice idea, according to Cohen. Products like Social Impact Bonds and Development Impact Bonds behave differently from other instruments in the marketplace—they don’t go up and down with the market, for example—and this makes them valuable assets in a diversified portfolio. Cohen compared the advent of impact investing with the early days of tech investing, which led to an explosion of new ways to invest as well as new approaches to finance.
The ecosystem around impact investing is all-important
The size and success of the social impact investing sector will be determined by the ecosystem around it, said Cohen. The taskforce looked at the regulatory and policy landscape in each of the eight participating countries and found that factors such as legal constraints on nonprofits and social benefit organizations can stop the growth of impact investing while incentives, for example tax breaks, help it flourish. The taskforce will make general recommendations for ways governments can strengthen the impact ecosystems in their countries.
Quantitative information will transform the sector
We now have information we didn’t have before. Though the science of social impact measurement is still young and imperfect, many social issues can be counted and the social outcomes quantified and costed. (The UK government has already published some early figures for the cost of some public services. data.gov.uk ) This information “will bind this marketplace together”, according to Cohen, and provide the key to creating a vibrant sector that harnesses impact capital to address social issues in an effective way. Ideally the discipline of social data gathering and metrics will spread out into the business and philanthropic sectors, too.
Different countries will come up with different solutions
No country on the taskforce has social impact investing “nailed as yet”, observed Addis. While there is much to learn from experience so far, all need to do more for the sector and all will come up with different solutions for building the marketplace. Geography, tradition and political climate are important. In addition to the main taskforce report, individual reports will be published for each country. For an early look: the US has already published theirs.
Ideas of charity are changing
In response to questions about the future role of philanthropy, Cohen had this to say: “There’s a shifting perception of charity now. It’s moving away from the act of giving and toward social outcomes.” He pointed out the example of Heron Foundation, who have pledged to dedicate their entire investment portfolio to impact. Philanthropic bodies also have an important role in addressing the social constraints, such as health and literacy, that stop economic development, he said.
This is just a taste of what’s to come from the G8 taskforce but one thing is already clear: the group’s findings will be influential as the sector grows and gains momentum. While it can be tempting to keep our focus on the purely business side of impact, it’s good to be reminded that much still depends on government policy, regulation and the measurable outcomes achieved by the sector. Watch out for further briefings on the progress of the taskforce, including future webinars from the Global Learning Collaborative and publications from the Impact Investing Policy Collaborative.