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!
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