Transforming investment into impact: mechanisms for funding social innovation in Sustainable

Consumption and ProductionWorld Resources Forum – Davos, Switzerland

Tuesday, 13 October 2015, 12:30-14:20Presentation by Angel Versetti, WRF

As part of UNEP 10YFP / WRF Joint Workshop From Investment to Impact: Social Innovation for Sustainable Consumption and

Production (SCP)

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Plan

Introduction to Social InnovationExisting financing mechanisms for

social innovation and SCPOpportunities and benefitsChallenges and barriers IBIS: Igniting Business Investments in

Sustainable Lifestyles – solution for SCP

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What is Social Innovation?

“New ideas that work in meeting social needs” (Oxford)

“A novel solution to a social problem that is more effective, efficient, sustainable, or just than current solutions. The value created accrues primarily to society rather than to private individuals.” (Stanford)

Creating new modes of societal interactions

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Stages of Social Innovation1) Prompts, inspirations

and diagnoses

2) Proposals and ideas

3) Prototyping and pilots 4) Sustaining

5) Scaling and diffusion

6) Systemic change

Source: Center of American Progress, 2012

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Sub-Areas of Social Innovation

Social Entrepreneurship

Sustainable Design

Open Source Technology

Inclusive Public Policy

Cities and Urban Development

Social Movements

Lifecycle Thinking Community Development Anything Else?

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Existing Financing Mechanisms

Impact / Mission-Driven InvestmentsCSR departments of corporationsCommunity VC Funds with social missionSpecialist lenders for social innovation

Unlike charity these investments expect a return, social/environmental and monetary

Smaller profitability tolerated, if measurable positive impact on society achieved

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Focal Points for SCP Investments

Tendency of corporate and financial sector to invest into sector they operate / have expertise in capacity building, technology and best practices transfer:Evaluation systems for firms’ value chains to

identify hotspots where investment in SCP will create largest impact

Socio-environmental footprint comparison by brand / product

Investing upstream (extracting raw materials) or downstream (packaging waste recycling)

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Opportunities and Benefits

positive impact on society achievedSource: McKinsey Global Survey, 2014

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Benefits of Investment in SCP: Case-studies from Private Industry

Hewlett-Packard (HP) Company connected customer interest in SCP to over $24 billion in revenues in 2014 alone

General Electric reaped $25 billion in revenues in 2012 from investment of just 2$ billion into eco-and energy-efficiency programs (grew at twice the average speed)

The Clorox Company reported average cost savings from improved resource-efficiency of $15 million per year, after integrating SCP in their supply chains

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Benefits of Investment in SCP: Case-study from Financial Sector

McKinsey SRP Global Earnings Report 2014: “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high-sustainability companies would have grown to $22.60 by the end of 2010, compared with $15.40 for the portfolio of low-sustainability companies”

Better return on assets and on equity for portfolios with sustainable companies

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Challenges and Barriers

Opposition of senior management to uncertainty & risks

• Additional reviews needed; short-term profits preferred; SCP is new

Lack of metrics to measure sustainability or social innovation • Impact on revenues and profits? Value earned?

Lack of Incentives for Financial Sector

• 78% of investors do not consider ESG; <1% investments are ESG-driven

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Challenges and Barriers

Lack of appropriate infrastructure to invest into social innovation• Few theoretical/political/societal underpinnings compared to standard

Higher costs of due diligence with lower returns on investment• More time and effort to assess (business/society); lower ROI

Running a sustainable or social business is still much less profitable than doing “business as usual”: • Costs of SCP higher; more knowledge/technology needed; 3-5% ROI (?)

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IBIS: Igniting Business Investments in Sustainable Lifestyles

WRF-led 10-Year-Framework-Programme Candidate Flagship Project Proposal

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Funding Knowledge

Sustainable Businesses

Investors

I. Database for financing for Sustainable Businesses

Criteria for investmentMultilingualTraining on Drafting a Business Plan, Pitch, Investment Proposal

II. Direct Investment Platforms

Regional Approach, Global Model Showcasing of Sustainable SMEsCrowdfunding and Crowdsourcing

III. Knowledge Bank for SCP

Consultancy for Scaling UpMainstreaming Investments into SCPAdoption of SCP practices by larger corporations

IBIS: Online/Offline | Financing/Learning

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Funding Knowledge

Sustainable Businesses

Investors

Thank you!

To comment on this presentation or to request further information about IBIS contact angel.versetti@wrforum.org

Your feedback, critique and thoughts are welcome!