This presentation was delivered at the International Fundraising Congress (IFC), held in The Netherlands, on 15 October 2014.

1. Connecting Capital:
The Rise of
Social Finance
Colin Habberton
@relatomics
colin@givengain.com

2. Introduction to the Session
• This session is an exploratory look into the
emerging field of Social Finance which builds the
bridge between the fundraising strategies in
commercial finance and the development sector
for nonprofit fundraising innovation.
• It will look into the wider details of the field, covering
a series of examples of existing products e.g.
Social Impact Notes & Bonds.
• Through real world case studies, the session
provides a view on the potential for raising funds for
nonprofits in the future.

3. Introduction to the Session
Learning outcomes:
• Attendees can expect to learn about what
'social' finance is and how solutions are
constructed through connecting with
traditional financiers.
• Outcomes will address why they are
important for fundraising professionals
and executive nonprofit leaders to
understand and use as additional options
in their strategic agenda.

4. Session Outline
• Why is this relevant?
• What is ‘Social’ Finance?
• Instruments & Options
• How these solutions are constructed
• Case Study: Social Impact Bonds
• Case Study: UNHCR Social Impact Notes
• Their importance for nonprofit leaders

5. The Relevance of Finance

6. Wealth & Income Inequality
(Adapted: Piketty, 2014: Capital in the 21st Century)

7. The Significance of the 1%
(Adapted: Piketty, 2014: Capital in the 21st Century)

8. Just an Emerging Market issue?
(Adapted: Piketty, 2014: Capital in the 21st Century)

9. The Bad & The Ugly

10. The Good?

11. The Birth of Social Finance

12. The Investment Continuum
12
FINANCIAL CAPITAL
MARKETS
Financial Return
Financial Performance Measurement
• Debt
• Equity
• Retail (mutual funds, online brokers)
• Institutional (Exchanges, Alternative
Trading Systems)
About 5%
FINANCIAL
CAPITAL
MARKETS
$165 Trillion
(SOCIALLY)
RESPONSIBLE
INVESTING
Social Screening and
Shareholder Advocacy
$7-45 Trillion
RETURN
MEASUREMENT
INVESTMENT
TYPE
PLATFORMS
AVERAGE
TRANSACTION
COST
MARKET SIZE
IMPACT INVESTING
MARKETS
Financial + Social Return
Financial + Social Measurement
• Debt
• Equity
• Retail (online micro finance)
• Institutional (Impact Funds,
emerging platforms)
About 10%
$5 Billion
PHILANTHROPY
(GIVING MARKETS)
Social Return
Social Performance Measurement
• Grants
• Retail (offline channels, online
giving, Donor Advised Funds)
• Institutional (Foundations)
About 30%
$300 Billion
SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD
(Adapted: Markets for Good, 2010)

13. The 21st Century Donor
(Source: Markets for Good, 2010)

14. The 21st Century Giving ‘Ecosystem’
(Source: Markets for Good, 2010)
RETURN:
“I demand a high social return
on my investment and I know
that I am making an impact.”
RETURN:
“We can demonstrate that we
are making a difference and
are able to attract more funding
to continue to do so.”
RETURN:
“My needs are being met and I have
a voice.”

15. Social Finance Instruments & Options
• Microfinance
² Affordable Loans
• Social Venture Capital
² Impact Investing
• Crowdfunding
² ‘Social’ fundraising
• Social Bonds
² Pay-for-performance
• Social Notes
² Leveraging financial instruments

16. Case Study: Social Impact Bonds
Source:
h*ps://www.youtube.com/watch?v=E6GrQtCh83w

17. Case Study: Social Impact Bonds
(Source: McKinsey & Company 2012)

18. Hype, Hope or Holy Grail?
UK: Peterborough Prison
• Pioneer pilot study
• Recidivism rate reduction
• Shift in funding model risks
US: Harvard & Goldman Sachs
• Multi-purpose projects
• Public sector imagination
Rest of the World
• Examples slowly emerging

19. Case Study: Social Impact Notes
UNHCR: Kashmir Earthquake
• 2006: Rapid response funding
• Social Impact ‘Note’ debut
• Trade-able financial security
• Capital guaranteed
• Return orientated
• Investment in equity portfolios
• 2% ‘coupon’ immediate funding
• 18+% return over 5yr period

20. Importance of Social Finance
Threats
• Disruption of giving markets
• Demands of hyperconnected donors
• Transformation of funding sources
• Proliferation of funding channels
Opportunities
• Research for Development
• Prepare your leadership
• First mover advantages
• Experience & momentum exists

21. Connecting Capital:
The Rise of
Social Finance
Colin Habberton
@relatomics
colin@givengain.com