Making Money by Doing Good THE HAGUE FRAMEWORK TBLI - 2011 Arthur Wood Founding Partner Total Impact Advisors www.totalimpactadvisors.com firstname.lastname@example.org
The Social Finance CrunchThings are worse than we think!!66% of the debt is unaccounted for
Status Quo: The Bi Polar For-Profit and Not-For-Profit Paradigm The Logic of 1903 and May 1944 NOT FOR PROFIT Below Market Return FOR PROFITLow risk Programme- Related Investments CSR 1. No mechanism from “not for profit” to “for profit” Social Responsible 2. R&D detached from the mainstream success Investment ($1 in $8) 3. If successful community not stakeholders 4. No Collaborative mechanisms B Corp Grants 5. Highly fragmented and cost inefficient 50% Mainstream 6. Inter and Intra Sectoral silos “For Profit” 7. No Clear mechanism for corporate sector to engage Investments 8. Very Unsophisticated Capital Market 9. Makes no sense for any Stakeholder – Social MRI Entrepreneur, Corporate, or GovernmentHigh risk Impact Investment Venture Philanthropy
Are these the only Financialmechanisms to allocate society’s subsidy ?
The Hague Framework Financing the Future Today Outcome of two meetings hosted by the CEO of FMO: (March) with 11 DFI’s; and (June) the Tallberg Forum with thirty senior civil society representatives• Identify new systems and innovations that move in real scale – to demonstrate new impact investing models – “proving by doing”.• Identify a template christened “COILED” into which most social innovation would fit – set a road map• Identify how this innovation can be blended together to create greater impact focused on tangible outcomes delivered collaboratively by multiple stakeholders.• Specific focus was made as to how government can create an enabling environment given “Southern” youth demographics; and secondly to increase public sector productivity in the “North”.
COILED: The Move to Real Multi-Stakeholder CollaborativeModels Based on the Delivery of Tangible Social Outcomes no financial return blended market returns market return Capital Market Innovation – Impact Investing – Injecting Modern Capitalism into Social Market Investment Plus Programme Grants Related Investment Recoverable Grants Mainstream Investments OUTCOMES - Contingent Models Capturing Future Cash flow (Social Impact Bonds ) x 10+ INTERMEDIARIES – Blending Sources of Capital and Expertise for Social Purpose LEGAL Structures – Corporate (B Corp / CIC) and Partnership Structures (L3C / SELLP) + ABA Social ENTREPRENEURSHIP (The R&D of Society) DISTRIBUTION – Delivery of Social Services through Civil Society Mechanisms
Financing the Future Today COILED - Collaborative Systems Models• LEVERING WHAT WE HAVE ALREADY DONE IN COMMERCIAL BUSINESS AND MODELS ALREADY APPLIED (GAVI & CRA)TO COILED COLLABORATION – ONE EXAMPLE SOCIAL IMPACT BONDS (pay by outcome, trilateral/cash flow value of an intervention) married to HYBRID LEGAL STRUCTURES to allow easy replication (UK/ US $500mm)Next Steps: i) Securitize cash flow to create a tradable quasi equity for social goods (the greater the social impact the more money you make)iii) OPIC / ECGD guarantees would open up international marketiv) Contingent Return Franchise Structures (social entrepreneurial structures rewarded for effective replication)v) International Collaboration Structures (facilitated by legal structures)•OPEN UP: New capital markets - Ascending Market Finance. A Guarantee structure tolever the multi-trillion dollar local capital markets in local currency (1-2% market share;bigger than Gates in seven years)WHAT IF ? – You married opening up local capital markets to Social Impact Bonds –Paying by tangible outcomes in local currency delivered by a civil society organisation?
Political consensus, but have wethe political will ?Paul Martin – Ex PM of Canada“ We have learned that entrepreneurship is an unbeatable force. Government unleashed the power of business entrepreneurs when it provided them with the wherewithal to succeed. What I would now ask, is that government unleash the power of social entrepreneurs.”Gordon Brown – Ex PM of UK with UN Sec Gen Banki Moon“Our objectives cannot be achieved by government alone however well intentioned, or the private sector alone, however generous, or NGO’s or faith groups, however well meaning or determined. It can only be achieved in a genuine partnership together”David Cameron – UK PM“ I believe that this generation could see a revolution in our social economy comparable to the revolution in the commercial economy in the 1980s. That is the revolution that I want to lead…Don’t we need the same transformation in the social sphere that we have seen in the economic sphere? “