The Spectrum of Social Capital Investment - bogner

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Social Capital for Sanitation
“It is time for Change”
Arthur Wood – VP, Social Financial
Services, Ashoka
[email protected]
“The coming Social Finance Crunch – “Population aging is a
worldwide phenomenon that will affect all G-7 countries”
There is simply not enough money in the current paradigm–
“Population aging will be a key challenge facing the G7 economies over the coming
decades”
There is a double whammy coming “The projected decline in the
employment-to-population ratio will gradually become a hindrance to
growth in living standards beyond 2010”
The Spectrum of Social Capital Investment - created in 1888 /
1944 – “essentially pre modern capitalism” – the Gap
no financial return
below market return
market return
Low risk
Programme-related
investments
NO INDIVIDUAL OR SYSTEM
MECHANISMS – THE GAP
Mainstream
“For Profit”
Investments
Investment plus
Grants
$400bn
50%
Venture
philanthropy
High risk
”
Social Responsible
Investment
circa $4trn
Corporate
Engagement incl
CSR
Value Chain Financing – Sanitation
no financial return
below market return
market return
Legal
Process – ie
L3C / CIC
Scale (GAVI) & Synthetic Profit (Corporate
Investment Plus
Programme
incentive)
Grants
Recoverable Related Investment
Grants
Mainstream
Investments
Increase the credit quality of social capital markets ie. Leveraging - Microfinance / DB Eye fund model
Incentivising Innovation / Collaboration at the bottom of the pyramid – Social Entrepreneurship
Financing Mechanisms incentivising Community and Corporates Carbon / Vouchers / Fertiliser / Power
Enables a Range of Financing options; incentivising corporates, banks, civil society;
integrating “ for profit” and “not for profit” players
Based on “Foundations and Social Investment” Margaret Bolton 2005 and Bates Wells & Braithwaite
Why is Sanitation such an opportunity ?
• Political Will – The IYS 2008 - Call by Brown / Moon to end of Silo’s
• A moral imperative “Adequate Sanitation is the most effective public
health intervention the international community has at its disposal.”
Lancet – 11 / 07
• Metrics, Single Data Set and Audit Mechanism in place - Clear Cost
Benefit Analysis – WHO,UNICEF, DFID,WSP
• You can Identify the Community / Distribution chain – WSSCC, SuSanna
• Not enough Money - $500m vs. $8bn per year for ten years
• It is however a business opportunity – a size to attract
• Structurally the status quo is not going to be bailed out – GAVI ?
• Banks looking for markets in real scale
• Path-finding for other MDG Financing Structures
World Sanitation Financing Facility
Participation
WSSCC, UNICEF, WHO, WSP, OPIC, SuSanna, IFAD, Deutsche Bank x2, UBS, Legal
Group – (Caplin Drysdale, Gibson Dumm, Latham’s, Linklaters, Bates, Morrison), Acumen, L3C Advisors,
Environtrade, Ashoka 10/40 Fellows incl WTO, Keystone, SROI – we welcome partners
Open Supply Side Model – www.changemakers.net - 250 ideas
UN Foundation (GWC) Funding Competitive / Collaborative – Sanitation supported by
CNN, Coke, Hilton Foundation and Morgan Stanley
Facility Not Fund
• Different banks / Organisations – with different proposals on the Value chain
• Inclusive, Leverages Different Financial Players / Concepts
• Via Banks - Links into other core funders – ADB, IADB
• Wider range of Investment opportunities – ultimately integrated
• To many different constituencies including the corporate sector
• Identifying a Single Language and Single platform - Integrating Social and Financial
Profiling
NEXT STEPS – SINGLE PLATFORM / SINGLE LANGUAGE
QUALATITIVE PLATFORM >> A MECHANISM DEFINING WHAT IS
EFFECTIVE TO THE CORPORATE / BANKING WORLD
PHASE 1 – Completed in March - http://www.changemakers.net/enus/competition/waterandsanitation
PHASE 2 – Open Model Update with involvement of key Players
QUANTATIVE PLATFORM >> A MECHANISM DEFINING WHAT
THE SOCIAL SECTOR HAS TO DO TO GAIN ACCESS TO
CAPITAL MARKETS
Commenced this week with OPIC, UBS, Deutsche Bank, WSP,
Keystone, SROI, Ashoka, Acumen, U of Geneva – combining the
best of Top Down and Bottom up models – with Feedback
Mechanisms and Audit Mechanism
MECHANISM TO ENGAGE ALL PLAYERS IN SCALE
Looked at as a Business Problem
SIX GLOBAL BUSINESS LINES TO SOLVE THE SANITATION ISSUE
(may be others)
• 1 - Municipal Financing ;2 - Public Toilets; 3 - Mortgage / Housing
• 4 - Small Entrepreneurs; 5 - Methane / Carbon / Energy; 6 – Fertilizer
>> SCALING - Three Tier Corporate Engagement – Primary (i.e. Toilet
Manufactures, Secondary (Soap), Tertiary (Companies with an
Opportunity Cost – Capture the Value of the Social Externalities)
>> COLLABORATION Social Entrepreneurs, Corporate , Social Sector
The New Legal Paradigms >> L3C and CIC and New Intermediaries
>> ENGAGEMENT of the Banks – The need for Banking Skills!!
>> Are we part of a broader solution >> Water, Climate and Sanitation
IF I AM A SOCIAL SECTOR ORGANISATION / CORPORATE
- WHAT ARE THE NEXT PRACTICAL STEPS NOW
PHASE 1
• WORK ON PLATFORM – QUALATIVE & QUANTATIVE PLATFORM –
UNIVERSITY OF GENEVA
• CREATION OF A GOOGLE WORKING GROUP – SHARE MODELS
• DESIGN BOTTOM UP FEEDBACK SYSTEM WITH KEYSTONE AND
SROI – YOUR ENGAGEMENT NEEDED INDEED CRUCIAL
>> CONSUMERS ARE SEPARATE FROM FINANCIERS
• WORK WITH WSP TO VERIFY FINANCIAL MODELS AND PROCESS
AND MARRY TO TOP DOWN
THE SYSTEM CAN BE CHANGED IN SANITATION
A NEW PARADIGM - “IT IS TIME FOR CHANGE”
PHASE TWO
• APPLY TO BUSINESS LINES ACROSS ALL POTENTIAL RETURNS > CAPACITY @ 100% to FOR PROFIT MODELS – DESIGN TEMPLATE
>> WHERE DOES YOUR EXPERTISE FIT?
>> NOT JUST SILVER BULLETS BUT THE MAGAZINE OF SOLUTIONS – NOV 2007 PM –
GORDON BROWN AND UN SEC GEN - BAN KI MOON – “AN END TO SILOS”
PHASE THREE
>> INTEGRATED REINFORCING ASKS CREATING A COLLABORATIVE MARKET
CAPABLE OF SCALING
>> NOT JUST AT “FOR PROFIT” (+5%) AND “NOT FOR PROFIT” (-100%) BUT ALL
INVESTORS AND INVESTMENT POSITIONS TO ADDRESS SANITATION
HOW DOES FINANCE CHANGE THE INCENTIVES FOR ALL THE PLAYERS
>> A SYSTEM THAT REINFORCES COLLABORATION BETWEEN ALL THE PLAYERS IN
MOVING A MARKET TO SCALE NOT FRAGMENTATION
WHAT DO I DO IF I AM A BANK OR GOVERNMENT ?
Paul Martin - Former PM of Canada
“The question I would put to you is quite simple” – Nov 2007
“If we are prepared to use these kinds of (tax / legislative)
incentives to enable business entrepreneurs to tap capital
markets for the betterment of the economy, why would we not
provide similar incentives to social entrepreneurs as they seek
to tap capital markets for the betterment of society.
• Financial experts ought to be developing new cutting edge
instruments to make funding available to social entrepreneurs
• Tax experts ought to be thinking about mechanisms that can
support social enterprise in a meaningful way.
• Legislators should encourage an environment that allows
foundations to become more imaginative in support of social
enterprise”.
SUMMARY THE IMPORTANCE OF COLLABORATION AND SCALE
• To solve the problems of Sanitation on a systemic basis
requires:
– Governments to change legislation – Tax treatment and
Legal structures >> CIC, L3C
– Empower the bottom of the Pyramid
– Collaboration from the Social sector / NGO’s
– Foundations / Donors – Leverage - HOW to draw in more
Private capital - LEVERAGE THE 100% NOT ALLOCATE 5%
– Corporates to engage in “for profit” for social impact
– Banks bringing their skills to bear along the whole Value
Chain
– Creation / Evolving of Intermediaries to create Collaborative
behaviour and Safeguard the Sector
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