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This presentation was delivered at the International Fundraising Congress (IFC), held in The Netherlands, on 15 October 2014.
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Introduction to the Session
• This session is an exploratory look into the emerging field of Social Finance which builds the bridge between the fundraising strategies in commercial finance and the development sector for nonprofit fundraising innovation.
• It will look into the wider details of the field, covering a series of examples of existing products e.g. Social Impact Notes & Bonds.
• Through real world case studies, the session provides a view on the potential for raising funds for nonprofits in the future.
Introduction to the Session
Learning outcomes: • Attendees can expect to learn about what 'social' finance is and how solutions are constructed through connecting with traditional financiers.
• Outcomes will address why they are important for fundraising professionals and executive nonprofit leaders to understand and use as additional options in their strategic agenda.
Session Outline
• Why is this relevant? • What is ‘Social’ Finance? • Instruments & Options • How these solutions are constructed • Case Study: Social Impact Bonds • Case Study: UNHCR Social Impact Notes • Their importance for nonprofit leaders
The Relevance of Finance
Wealth & Income Inequality
(Adapted: Piketty, 2014: Capital in the 21st Century)
The Significance of the 1%
(Adapted: Piketty, 2014: Capital in the 21st Century)
Just an Emerging Market issue?
(Adapted: Piketty, 2014: Capital in the 21st Century)
The Bad & The Ugly
The Good?
The Birth of Social Finance
The Investment Continuum
12
FINANCIAL CAPITAL MARKETS
Financial Return
Financial Performance Measurement
• Debt • Equity
• Retail (mutual funds, online brokers) • Institutional (Exchanges, Alternative
Trading Systems)
About 5%
FINANCIAL CAPITAL
MARKETS
$165 Trillion
(SOCIALLY) RESPONSIBLE
INVESTING Social Screening and Shareholder Advocacy
$7-45 Trillion
RETURN
MEASUREMENT
PLATFORMS
INVESTMENT TYPE
AVERAGE TRANSACTION
COST
MARKET SIZE
IMPACT INVESTING MARKETS
Financial + Social Return
Financial + Social Measurement
• Debt • Equity
• Retail (online micro finance) • Institutional (Impact Funds,
emerging platforms)
About 10%
$5 Billion
PHILANTHROPY (GIVING MARKETS)
Social Return
Social Performance Measurement
• Grants
• Retail (offline channels, online giving, Donor Advised Funds)
• Institutional (Foundations)
About 30%
$300 Billion
SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD
(Adapted: Markets for Good, 2010)
The 21st Century Donor
(Source: Markets for Good, 2010)
The 21st Century Giving ‘Ecosystem’
(Source: Markets for Good, 2010)
RETURN: “I demand a high social return on my investment and I know that I am making an impact.”
RETURN: “We can demonstrate that we are making a difference and
are able to attract more funding to continue to do so.”
RETURN: “My needs are being met and I have
a voice.”
Social Finance Instruments & Options
• Microfinance ² Affordable Loans
• Social Venture Capital ² Impact Investing
• Crowdfunding ² ‘Social’ fundraising
• Social Bonds ² Pay-for-performance
• Social Notes ² Leveraging financial instruments
Case Study: Social Impact Bonds
Source: h*ps://www.youtube.com/watch?v=E6GrQtCh83w
Case Study: Social Impact Bonds
(Source: McKinsey & Company 2012)
Hype, Hope or Holy Grail?
UK: Peterborough Prison • Pioneer pilot study • Recidivism rate reduction • Shift in funding model risks US: Harvard & Goldman Sachs • Multi-purpose projects • Public sector imagination Rest of the World • Examples slowly emerging
Case Study: Social Impact Notes
UNHCR: Kashmir Earthquake • 2006: Rapid response funding • Social Impact ‘Note’ debut • Trade-able financial security • Capital guaranteed • Return orientated • Investment in equity portfolios • 2% ‘coupon’ immediate funding • 18+% return over 5yr period
Importance of Social Finance
Threats • Disruption of giving markets • Demands of hyperconnected donors • Transformation of funding sources • Proliferation of funding channels Opportunities • Research for Development • Prepare your leadership • First mover advantages • Experience & momentum exists
