“Over the coming decade, millennials will inherit trillions of dollars in assets from the baby boomer generation. Today women control 75% of disposable income. We know that these two demographics invest and consume differently [from past patterns]- 76% of women say they want to invest in organizations that promote social well-being and 93% of millennials believe that a company’s social and environmental impact is key to their investing decisions….approximately 80% of global consumers say that business must play a role in societal issues and nearly 70% of businesses worldwide are [already] working to incorporate sustainability into their overall mission and values.” Robert J. Caruso, Chairman, Intentional Media
Last week I attended SOCAP18, an annual gathering of those who want to “join the market at the intersection of money and meaning”. When I attended the first SOCAP in 2008, we were thrilled that nearly 500 people (mostly white men) were looking for ways to promote “Social Capital Markets” through social entrepreneurship and impact investing. This year’s conference, held on the banks of the San Francisco Bay at the Fort Mason Center for Arts & Culture, was attended by nearly 3200 folks representing many countries, ethnicities and all ages. (and women might have outnumbered men.)
Since there were hundreds of sessions organized around over a dozen themes, no one person could begin to summarize all there is to learn there. What follows are some of my most valuable discoveries and inspirations:
The numbers: One out of five dollars are now invested in Social Responsible Investing (SRI) Environmental, Social & Government (ESG) or Impact Funds. “Pure” Impact funds have so far captured $230 billion and may soon dwarf dwarfing foundations & other forms of charitable giving (total charitable giving last year was $410 billion per US Trust report). For example, Impact Assets which was spun out of Calvert Investments in 2010 now has 1500 investors and manages nearly a billion dollars. RISE, DBL Partners, SJF Ventures, Bridges Fund Mgmt, Bronze Investments and Kapor Capital are other high growth examples. There are now so many Impact Investing funds that a trade association is being established, Impact Capital Management Network, to share best practices and improve efficiency of vetting and finance process.
This phenomenal growth is also producing challenges to those trying to authentically evaluate and measure performance. “Impact Washing” is being driven by fact that big funds are trying to put out big dollars and have trouble finding appropriate ventures. One strategy is to use the UN Global Sustainability Goals as a filter. Others are turning to existing standard-setters (Aeris, B-Lab, CASE) for help in creating credible impact measures. SOCAP continues to play an important role in helping folks to learn from each other about due diligence practices and best ways to measure impact.
For entrepreneurs, the “missing middle” is between initial start-up and ability to scale. 80% of entrepreneurs have no access to capital- most money is still going to “people of privilege.” Only 16% going to women. When seeking capital, data matters but personal connections and the ability to touch people emotionally is also crucial. Accordingly, efforts to build local eco-systems are expanding. One panel on local eco-systems featured Colorado (Impact Finance Center), Minneapolis (Social Impact Strategies Group) and Philadelphia (ImpactPHL) who emphasized the need for building collaborative efforts between academics, funders and those who aggregate entrepreneurs, such as Incubators. Creating new models of Donors Circles, crowd sourcing and workshops to teach people how to invest are all being used to accelerate “deal flow”.
The traditional venture capital high growth model is not a match for most social enterprises. Patient capital or gifts generally needed during start up and early growth phases. The Center for Advancement of Social Entrepreneurship (CASE) at Duke University has created a spectacular resource for entrepreneurs trying to access funding, https://casesmartimpact.com/capital. The website is well worth a long look and if you are serious about using it, a six month subscription is only $350 for entrepreneurs.
Corporations are getting into the game, though mostly tech companies so far. At meta-level, they see that all businesses need a thriving middle class for goods and services. On the ground, they see opportunities to partner, enhance their brand and perhaps buy successful startups.
New Opportunity Zones tax credit program which was part of last tax bill is supposed to funnel capital to small businesses, especially minorities and women. To benefit small businesses, though, it will need organizations that pool businesses such as CDFIs or Incubators. Meanwhile, the “Tax Credit Industrial Complex”, mostly RE Developers, are racing to capture these dollars.
A track on new ownership structures featured coops and legislation which promotes new legal forms such as hybrids and Benefit corporations. One especially innovative example was a staffing business which has organized itself into different corporations based on industry sector, which are all part of a holding company that is a Coop, owned by those who work in the various companies.
There were numerous sessions highlighting opportunities to build businesses around recycling or repurposing what we now discard, creating social purpose businesses in fashion, food, electronics and packaging.
I treasure my program book for all the names and organizations that will soon educate and inspire ASE’s clients. Stay tuned!