IMPACT INVESTMENT: THE INVISIBLE  HEART OF MARKETS

Harnessing the power of entrepreneurship, innovation and capital for public good

Report of the SOCIAL IMPACT INVESTMENT TASK FORCE

Established under the UK’s presidency of the G8

15 September 2014

It is urgent that governments throughout

the world commit themselves to developing an

international framework capable of promoting

a market of high impact investments and

thus to combating an economy which

excludes and discards.

Pope Francis, June 2014

In June last year Prime Minister David Cameron announced, during the UK’s presidency of the G8,

the launch of an independent Taskforce and set it the ambitious objective of reporting on ‘catalysing

a global market in impact investment’ in order to improve society.

It has been a remarkable experience since then to lead an exceptionally talented and committed group of

more than 200 people across the world in achieving this inspiring mission and I thank them most warmly

for all they have done. The Taskforce itself comprises some twenty-two people, including one government

official and one representative of the social or private sector from seven countries and the EU, as well

as one observer from Australia. But to inform our work and to drive its implementation in the future,

we created eight National Advisory Boards. We also established four international expert Working

Groups to address in depth the particular challenges of measuring impact, asset allocation, mission

in business and international development, all of which are critical to the success of our endeavour.

We are honoured to deliver to you this report together with four subject papers that provide

supplementary detail on important elements of our work. Each of the National Advisory Boards also

launches today its own report on what is required in its country if it is to bring impact investment to

take off. Our reports have all been written with the aim of attracting as wide a readership as possible,

to include all audiences interested in impact investing.

Our investigations have benefitted greatly from the insights of numerous impact-driven organisations

and entrepreneurs, foundations and philanthropists, investors, businesses, government ministers and

officials who have contributed their expertise and their experience to our deliberations. We are most

grateful to them all. As a result, we can confirm the tremendous potential of impact investment to

improve society and the environment. We note that it is already shifting the paradigm in how we think

about and tackle social and environmental issues in the 21st century, in developed and in developing

countries alike. The Taskforce will now continue its work for a second year to drive the take-up and

implementation of our recommendations.

Our recommendations are critical to the success of impact investment. They define what is needed

from all actors in our society: government, business, the social sector and foundations, institutional

and private investors, and most importantly impact entrepreneurs. The role of each of these groups

is addressed in this report. Impact investment is emerging as a new unifying force among them in

dealing with social issues, driving innovation and prevention to improve lives. It harnesses the forces

of entrepreneurship, innovation and capital and the power of markets to do good. One might with

justification say that it brings the invisible heart of markets to guide their invisible hand.

Yours sincerely,

Sir Ronald Cohen

Taskforce Chair

The world is on the brink of

a revolution in how we solve

society’s toughest problems.

The force capable of driving

this revolution is ‘social impact

investing’, which harnesses

entrepreneurship, innovation

and capital to power social

improvement.

It is already bringing significant advances in areas

such as reducing prisoner reoffending, caring for

children and the elderly, community regeneration,

financial inclusion, and supported housing. It

has the potential to generate great benefits in

developed as well as developing countries.

Social impact investing, impact investing for short

throughout this report, encompasses environmental

impact. It is at the core of a broad ‘impact continuum’,

that runs from philanthropy to responsible and

sustainable investment, which includes all those

seeking to achieve positive impact. Impact

investment is growing fast. The amount invested by

the 125 leading impact investors is forecast to grow

by nearly 20% this year, according to the latest study

by the Global Impact Investment Network (GIIN) and

JP Morgan.

 Given that $45 trillion are in mainstream

investment funds that have publicly committed to

incorporate environmental, social and governance

factors into their investment decisions,2

 it would only

need a small fraction of this money to start moving

into impact investment for it to expand rapidly along

the growth path to the mainstream previously taken

by venture capital and private equity.

Social Impact Investments are those that

intentionally target specific social objectives

along with a financial return and measure the

achievement of both.

The financial crash of 2008 highlighted the need for

a renewed effort to ensure that finance helps build

a healthy society.

This requires a paradigm shift in capital market

thinking, from two-dimensions to three. By bringing

a third dimension, impact, to the 20th century

capital market dimensions of risk and return,

impact investing has the potential to transform

our ability to build a better society for all.

It is arriving at a time when a generational shift is

taking place in how people, especially younger

people, see their role in solving society’s problems.3

Doing good and doing well are no longer seen as

incompatible. There is a growing desire to reconnect

work with meaning and purpose, to make a

difference. This is leading to an increasing supply

of people looking for employers with an explicit

commitment to improve the world. There has

been a rapid rise globally in the number of impact

entrepreneurs who want to find innovative ways to

solve society’s problems, and they are increasingly

deploying the methods of business and private

capital if that helps them to do so. They include

people in the social sector who can now tap the

markets for finance in addition to seeking grants

from donors, and philanthropists who are willing

to fund businesses rather than social sector

organisations if that offers a greater likelihood of

achieving the social impact they desire. They are

leading a shift in philanthropy from a focus on the

act of giving to the impact it achieves.

This new approach is built on a number of shared

beliefs: that, in some cases, investment can be

more effective than donations in helping the poor;

that social motivations harnessed to financial ones

can sometimes do good more effectively; and that

in many situations there is no inevitable trade-off

between financial and social return.

It is also becoming ever clearer that there

is an increasing need for innovative and effective

solutions to society’s problems. Impact investment

is a response to the growing awareness in both the

public and private sectors that the challenges

facing society in the 21st century are too large and

too complex to be solved by government and the

social sector alone. Old problems are proving more

resistant than expected to efforts to solve them,

whilst some problems such as diabetes and

recidivism are taking on a new urgency and may

well prove cheaper to prevent than the costs of

dealing with their consequences.

So despite their different models for tackling social

and environmental challenges, governments

everywhere are under ever greater pressure to make

meaningful progress in tackling the social problems

facing their countries. All of the countries on the

Taskforce also face growing pressure, in a context

of fiscal restraint, to allocate government spending

more efficiently and effectively to social needs.

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This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.

We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies. 

Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 

Click HERE to read more....