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Leveraging Social Capital: Its Time for Change
 

Leveraging Social Capital: Its Time for Change

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Arthur Wood - VP, Social Financial Services, Ashoka. Covers the spectrum of social capital investment.

Arthur Wood - VP, Social Financial Services, Ashoka. Covers the spectrum of social capital investment.

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    Leveraging Social Capital: Its Time for Change Leveraging Social Capital: Its Time for Change Presentation Transcript

    • Leveraging Social Capital – “Its Time for Change” Arthur Wood – VP, Social Financial Services, Ashoka [email_address]
    • COMMUNICATION
    • “ The coming Social Finance Crunch – “ Population aging is a worldwide phenomenon that will affect all G-7 countries ”
    • There is simply not enough money in the current paradigm– “ Population aging will be a key challenge facing the G7 economies over the coming decades”
    • There is a double whammy coming “The projected decline in the employment-to-population ratio will gradually become a hindrance to growth in living standards beyond 2010”
    • The Spectrum of Social Capital Investment - created in 1888 / 1944 – “essentially pre modern capitalism” – the Gap no financial return below market return market return High risk Low risk Grants $400bn 50% Programme-related investments Venture philanthropy Mainstream “ For Profit” Investments Investment plus Social Responsible Investment circa $4trn Corporate Engagement incl CSR ” NO INDIVIDUAL OR SYSTEM MECHANISMS – THE GAP
    • Case Study - Value Chain Financing – Sanitation Grants Recoverable Grants Investment Plus Mainstream Investments no financial return below market return market return Scale (GAVI) & Synthetic Profit (Corporate incentive) Increase the credit quality of social capital markets ie. Leveraging - Microfinance / DB Eye fund model Incentivising Innovation / Collaboration at the bottom of the pyramid – Social Entrepreneurship
        • Enables a Range of Financing options; incentivising corporates, banks, civil society; integrating “ for profit” and “not for profit” players
      Based on “Foundations and Social Investment” Margaret Bolton 2005 and Bates Wells & Braithwaite Legal Process – ie L3C / CIC Financing Mechanisms incentivising Community and Corporates Carbon / Vouchers / Fertiliser / Power Programme Related Investment
    • What are the critical Ingredients ?
      • Political Will – The IYS 2008 - Call by Brown / Moon to end of Silo’s
      • Metrics and Audit- Clear Cost Benefit Analysis – WHO,UNICEF, DFID,WSP – if not non enforceable Grant
      • You can Identify the Community / Distribution chain
      • Not enough Money – it is however a business opportunity – a size to attract ?
      • Structurally the status quo is not going to be bailed out – - decline in funding
      • Banks looking for markets in real scale – this is an under leveraged market
      • The more efficient allocation of subsidy – move to scale will bring benefits to many - Quicker R&D for Society and MC=MR
    • Collaborative Financing Facility NOT Just Funds
      • Participation
      • WSSCC, UNICEF, WHO, WSP, OPIC, SuSanna, IFAD, Deutsche Bank x2, UBS, Legal Group – (Caplin Drysdale, Gibson Dumm, Latham’s, Linklaters, Bates, Morrison), Acumen, L3C Advisors, Environtrade, Ashoka 10/40 Fellows incl WTO, Keystone, SROI – we welcome partners
      • Open Supply Side Model – www.changemakers.net - 250 ideas
      • UN Foundation (GWC) Funding Competitive / Collaborative – Sanitation supported by CNN, Coke, Hilton Foundation and Morgan Stanley
      • Facility Not Fund
      • Many social issues requires Collaboration – ie Water >> Sanitation>>Climate
      • Different banks / Organisations – with different proposals on the Value chain
      • Inclusive, Leverages Different Financial Players / Concepts
      • Via Banks - Links into other core funders – Governmental
      • Audit Mechanism
      • Wider range of Investment opportunities – ultimately integrated
      • To many different constituencies including the corporate sector
      • Identifying a Single Language and Single platform - Integrating Social and Financial Profiling
    • NEXT STEPS – SINGLE PLATFORM / SINGLE LANGUAGE
      • QUALATITIVE PLATFORM >> A MECHANISM DEFINING WHAT IS EFFECTIVE TO THE CORPORATE / BANKING WORLD
      • PHASE 1 – Completed in March - http://www.changemakers.net/en-us/competition/waterandsanitation
      • PHASE 2 – Open Model Update with involvement of key Players
      • QUANTATIVE PLATFORM >> A MECHANISM DEFINING WHAT THE SOCIAL SECTOR HAS TO DO TO GAIN ACCESS TO CAPITAL
      • Commenced this week with OPIC, UBS, Deutsche Bank, WSP, Keystone, SROI, Ashoka, Acumen, U of Geneva – combining the best of Top Down and Bottom up models – with Feedback Mechanisms and Audit Mechanism
    • MECHANISM TO ENGAGE ALL PLAYERS IN SCALE Looked at as a Business Problem
      • SIX GLOBAL BUSINESS LINES TO SOLVE THE SANITATION ISSUE (may be others)
      • 1 - Municipal Financing ;2 - Public Toilets; 3 - Mortgage / Housing
      • 4 - Small Entrepreneurs; 5 - Methane / Carbon / Energy; 6 – Fertilizer
      • >> SCALING - Three Tier Corporate Engagement – Primary (i.e. Toilet Manufactures, Secondary (Soap), Tertiary (Companies with an Opportunity Cost)
      • >> COLLABORATION Social Entrepreneurs, Corporate , Social Sector The New Legal Paradigms >> L3C and CIC and New Intermediaries
      • >> ENGAGEMENT of the Banks – The need for Banking Skills!!
      • >> Are we part of a broader solution >> Water, Climate and Sanitation
    • IF I AM A SOCIAL SECTOR ORGANISATION / CORPORATE - WHAT ARE THE NEXT PRACTICAL STEPS NOW
      • PHASE 1
      • WORK ON PLATFORM – QUALATIVE & QUANTATIVE PLATFORM – UNIVERSITY OF GENEVA
      • CREATION OF A GOOGLE WORKING GROUP – SHARE MODELS
      • DESIGN BOTTOM UP FEEDBACK SYSTEM WITH KEYSTONE AND SROI – YOUR ENGAGEMENT NEEDED INDEED CRUCIAL
      • >> CONSUMERS ARE SEPARATE FROM FINANCIERS
      • WORK WITH WSP TO VERIFY FINANCIAL MODELS AND PROCESS AND MARRY TO TOP DOWN
    • THE SYSTEM CAN BE CHANGED A NEW PARADIGM - “IT IS TIME FOR CHANGE”
      • PHASE TWO
      • APPLY TO BUSINESS LINES ACROSS ALL POTENTIAL RETURNS > CAPACITY @ -100% to FOR PROFIT MODELS – DESIGN TEMPLATE
      • >> WHERE DOES YOUR EXPERTISE FIT?
      • >> NOT JUST SILVER BULLETS BUT THE MAGAZINE OF SOLUTIONS – NOV 2007 PM –GORDON BROWN AND UN SEC GEN - BAN KI MOON – “AN END TO SILOS”
      • PHASE THREE
      • >> INTEGRATED REINFORCING ASKS CREATING A COLLABORATIVE MARKET CAPABLE OF SCALING
      • >> NOT JUST AT “FOR PROFIT” AND “NOT FOR PROFIT” BUT ALL INVESTORS AND INVESTMENTS TO ADDRESS THE ISSUE
      • HOW DOES FINANCE CHANGE THE INCENTIVES FOR ALL THE PLAYERS
      • >> A SYSTEM THAT REINFORCES COLLABORATION BETWEEN ALL THE PLAYERS IN MOVING A MARKET TO SCALE NOT FRAGMENTATION
    • WHAT DO I DO IF I AM A BANK OR GOVERNMENT ? Paul Martin - Former PM of Canada “The question I would put to you is quite simple” – Nov 2007
      • “ If we are prepared to use these kinds of (tax / legislative) incentives to enable business entrepreneurs to tap capital markets for the betterment of the economy, why would we not provide similar incentives to social entrepreneurs as they seek to tap capital markets for the betterment of society.
      • Financial experts ought to be developing new cutting edge instruments to make funding available to social entrepreneurs
      • Tax experts ought to be thinking about mechanisms that can support social enterprise in a meaningful way.
      • Legislators should encourage an environment that allows foundations to become more imaginative in support of social enterprise”.
    • SUMMARY THE IMPORTANCE OF COLLABORATION AND SCALE
      • To solve the problems of Sanitation on a systemic basis requires:
        • Governments to change legislation – Tax treatment and Legal structures >> CIC, L3C
        • Empower the bottom of the Pyramid / Community
        • Collaboration from the Social sector / NGO’s
        • Foundations / Donors – Leverage - HOW to draw in more Private capital - LEVERAGE THE 100% NOT ALLOCATE 5%
        • Corporates to engage in “for profit” for social impact
        • Banks bringing their skills to bear along the whole Value Chain
        • Creation / Evolving of New Intermediaries to safeguard the interests of both players