MICROCAPITAL.ORG STORY: Social Capital Markets 2009 (SoCap09) and Global Impact Investing Network (GIIN) Support “Social Financing”

A recent story from The Economist titled, “Financial innovation and the poor: A place in society,” states that despite the recent financial crisis, bankers, investors, and philanthropists have not shied away from capital markets. [2]

The author argues that, rather, the crisis has helped fuel the movement of “social financing,” the idea that financial innovations can be used toward social betterment while creating profit, which has recently caught the attention of mainstream financial institutions and investors. The article calls attention to the increasing desire of clients and financial institutions to generate revenue by stimulating small businesses and the poor through socially conscious means, without having to increase government spending and depend on philanthropy. [2] This idea of “social financing” has led to other financial innovations, such as tapping into “social capital markets” and using the idea of “impact investing,” to address broader issues of social and environmental change, as well.

This article will highlight two recent events, Social Capital Markets 2009 (SoCap09) and the establishment of the Global Impact Investing Network (GIIN), that reflect this growing interest in social financing.

On September 1-3, the Social Capital Markets 2009 conference in San Francisco, known as SoCap09, involved much discussion over how new ideas in financial markets and utilization of new resources can lead to better social investing. [1] [8] Over one thousand investors, entrepreneurs, philanthropists, and service providers gathered to discuss various approaches to social investing. Themes discussed included the “social capital spectrum,” or array of possible investment tactics (ranging from venture philanthropy to high-return commercial funds), the role of government in social capital markets, establishment of a social impact metrics system. [8] During the event, panelists also discussed strategies for MFI investing, including the role of “hybrid” organizations that function through both for-profit and non-profit strategies to provide financial and credit access to rural entrepreneurs. [8]

A few weeks after SoCap09, on September 22-25, the Global Impact Investing Network (GIIN) was launched at the fifth annual meeting of Clinton Global Initiative (CGI). [3] The GIIN is a non-profit organization that focuses on creating a new asset class of “impact investing,” which involves making financial investments to tackle social and environmental issues while generating financial profit. [4], [5] The GIIN’s members include big banks, philanthropic institutions, the Acumen Fund, which invests donations in firms that provide sustainable health solutions in developing countries, and Generation Investment Management, co-founded by Al Gore, that aims to “mainstream sustainability in the capital markets.” [6] This network received a USD 2.5 million backing from the Rockefeller Foundations, a USD 750,000 commitment from JP Morgan, and USD 1 million from USAID toward developing the impact investing industry and creating an Impact Investing Reporting and Standards (IRIS) initiative to measure the impact of these social and environmental projects by establishing a framework for defining, tracking, and reporting performance of investments. [5], [7]

According to article in The Economist, the effects on globalized markets will only be seen in years to come. [2]

By Radhika Chandrasekhar, Research Assistant

Bibliography

[1] MICROFINANCE EVENT: SOCAP09 (Social Capital Markets 2009), 1-3 September 2009. https://www.microcapital.org/microfinance-event-socap09-social-capital-markets-2009-1-3-september-2009/

[2] The Economist. “Financial innovation and the poor: A place in society.” Sept. 25, 2009

http://www.economist.com/displaystory.cfm?story_id=14493098&fsrc=rss

[3] MICROFINANCE EVENT: Clinton Global Initiative (CGI) Fifth Annual Meeting September 22-25, 2009, New York City, U.S. https://www.microcapital.org/microfinance-event-clinton-global-initiative-cgi-fifth-annual-meeting-september-22-25-2009-new-york-city-us/

[4] President Bill Clinton and Secretary of State Hillary Clinton Close Fifth Annual Meeting of the Clinton Global Initiativehttp://www.prnewswire.com/news-releases/president-bill-clinton-and-secretary-of-state-hillary-clinton-close-fifth-annual-meeting-of-the-clinton-global-initiative-61887027.html

[5] Global Impact Investing Network (GIIN) http://www.globalimpactinvestingnetwork.org/cgi-bin/iowa/home/index.html

[6] Generation Investment Management. Mission and Values. http://www.generationim.com/about/mission.html

[7] Global Impact Investing Network. “New Industry Group Launched to Facilitate For-Profit Investing that Addresses Social and Environmental Challenges.” “http://www.rockfound.org/efforts/impact_investing/beyond_profit_bugg_levine.pdf

[8] Social Capital Spectrum. Next Million. http://www.nextbillion.net/blog/2009/09/03/social-capital-markets-2009-the-social-capital-spectrum

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