Author: Marta Kozielska, UK Consultant for Social Impact Alliance for Central & Eastern Europe
Impact Investing Summit
London, Dec 4-5, 2019
Annually, Impact Investing Summit gathers experts and disruptors who innovate ways in which social impact is and should be more widely thought of, enforced and delivered by both individual and intuitional agents.
The two-day engagement left us informed, inspired and hungry for more, having exchanged perspectives with leaders from Bill & Melinda Gates Foundation, Oxford University, Thomson Reuters Foundation, Big Society Capital, UBS, AXA, Credit Suisse and many others.
Generally speaking, the coined phrase suggests to forego the traditional form of investment by providing sizeable capital to address critical social, environmental and economic issues regionally and internationally. Impact Investing calls not only for financial return but also a measurable positive outcome inducing tangible social betterment. Perceived by some as evolution of Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) initiatives, which were designed to reduce negative imprint of companies’ services or products, it effectively integrates both competitive returns and impact, according to Nordea and UBS Philanthropy.
FINANCIAL RETURN ON CAPITAL VS. REDUCTION OF FUTURE ECONOMIC COSTS FOR BUSINESS
Finding itself amongst the visionaries from charities, philanthropic foundations, investment firms and private companies, Social Impact Alliance for Central & Eastern Europe has had a chance to share its own ideas contributing to the development of the impact investing sphere, by introducing its Social Fund EDU 1.0 (valued at EUR 1mln.). The fund proposes a long-term vision of tackling social challenge(s) within the region – here it being the competence gap on the job market, from which both young employees and firms suffer; stalling the economy, contributing to vast unemployment and deskilling. With no immediate (financial) revenues on this investment, it may sound counterintuitive and unappealing. In effect, an unobvious form of impact investment – a term used by Mitch Reznick from Hermes Investment Management – it reduces; or better yet – attempts to redefine implications of credit risk. As the earnings come from later economic return, the fund constructively proposes a long-lasting solution for a deep-rooted problem, which has backed support from the Summit participants.
The – now – obvious, popularized and intensifying scrutiny around companies’ focus on maximizing gain, at all (social and environmental) costs, and doing so with a short-term tunnel vision has led many corporate leaders to shift their attention toward long-lasting implications of socio-political, technological and environmental changes, inexorably influential across the company’s public backing, stakeholder engagement and shareholder satisfaction.
Acknowledged long term risks for companies include those directly related to the core of its operations – workforce, manifesting itself in forms of unemployment, migration, brain drain, or an entrenched competence gap, engraved in the educational structures. The risk here is not a lack of timely returns, but future lack of skilled, competent workforce trained to further disrupt the sector.
CHALLENGES FOR THE NEW DECADE
The social impact sphere has developed from charitable giving, social finance and integration of ESG measures into corporate procedures to strategic philanthropy and impact investing – both of which face a number of challenges in this new upcoming decade.
We require more consolidated, tangible and quantifiable proof for the benefits of impact investing. Credit Suisse’s ex-Managing Director, Lea Blinoff, points out that whilst environmental impact is easier to measure, the complex and contextually varied social sphere is not so. Furthermore, consistency, commonality and comparability of measurement is what will prompt investors to engage. Yet Oxford University GO Lab’s Nigel Ball points to limits of such comparability of social investments due to their intricacy and ambiguity, where outcomes will differ by contexts. But we sure can: collaborate, declare, measure and share to our best ability.
According to UBS Philanthropy, from 2010 when the first impact bond was launched (marking inception of the impact market) to today, as we draw to a close of this decade, over $400mln. has been invested in impact bonds. As the deliverables of impact investments are being more and more recognized and valued by investors across industries, we face a large amount of capital seeking real impact.
The bottom line is… the capital is there, we just need to continue finding frameworks which unleash its potential and convince the overarching financial structures of their overwhelming benefits to invest, rather than divert attention from what will inevitably affect you and me, and if not now, then tomorrow.
The learnings drawn from the Summit leave us motivated for the – now – clearer challenges which lie ahead of Social Impact Alliance for CEE and the impact investing sphere in 2020, and broadens our imagination for what solutions to implement, and how.