Is Giving Not Enough?

Exploring Social Investment and Social Enterprise

Clive Pedley

Traditional giving to charities, even when done well, will not be enough to sustain growth and mission fulfillment in our sector.

The scale of social and environmental need requires us to accept, quite simply, that traditional giving is not enough. While traditional giving can increase with effort, our challenge is to recognise that there is also private equity with a social conscience requiring sophisticated and clever solutions. These solutions will significantly contribute to transformational impact that can only be delivered by the social-profit sector.

There are amazing examples of effective social investment and social enterprise practices all around the world, and in New Zealand for that matter, but it is still an emerging part of our sector with a lot of experimentation contributing to what will one day, no doubt, define best practice in this sophisticated sphere of socially and environmentally active finance.

Below is a brief summary of what was considered in a constructive and informative FINZ Masterclass presented by Giving Architects and associated experts.

Sustainability

This is directly relevant to social-profit organisations seeking social investment. Julia Jackson from Sustainable Business New Zealand presented an array of issues and opportunities that need to be addressed before presenting a worthy investment option to social investors.

It isn't overly complex or demanding, but unless sustainability is thoroughly considered, you cannot add this important quality to your investment credentials.

Responsible Investment

David Buell from AMP Capital, introduced the Principles of Responsible Investment and how the institutional investment industry is dealing with ever increasing demand from retail investors to invest there money in 'good places'.

Every non-profit should be investing endowments and reserves in places that actually match their values. On the other side, there is certainly a leap required for social-profit organisations to develop market-ready options for large institutional investors.

Impact Investment

Nick Winstone joined Derek Handley as a partner at AERA, a private foundation, in 2014. Nick presented Case studies and experiences from AERA in what is known as impact investment. AERA has made several significant impact investments that will return a combination of financial and social return. It was an insight into work of a sophisticated impact investor and a specialised area of social investment.

Our challenge is to think differently about how our sector uses its balance sheet equity to increase social and environmental outcomes. Commercially oriented impact investment is attracting new equity into the social-profit sector.

Impact Reporting

Giving Architects presented a variety of information on the essential nature of establishing and executing impact reporting to match social investment requirements. The simple necessity of measuring a few important things well and consistently was a major takeaway. the online resources of Global Impact Investing Network (and the IRIS metrics resource) along with benchmark impact reporting were reviewed, underpinning the difference between outcomes and impact reporting.

Social Enterprise

Shona McElroy from Akina Foundation went into the critical success factors for social enterprise in New Zealand and provided international examples. Trading in non-profit organisations is nothing new, but there is an increasing emphasis on this solution from Government.

It is clear that social enterprise isn't for everyone and needs to be carefully assessed and managed. The array of resources available supports giving time and energy into what may be a great opportunity for sustainable growth and financial diversity. 

Following this Masterclass, one of the attendees, Paul Brown, CEO at ChildFund New Zealand, offered the following succinct insight:

"Across the world there are seismic shifts in information, wealth and power - from baby boomers to millennials, from developed economies to the developing. All businesses, particularly those in the non-profit sector, must leverage these shifts, through balancing economic good with social and environmental good. Businesses are being challenged to protect their core mission, and simultaneously embrace a new age of rapid disruption.

Thankfully, as non-profit organisations, we have passionate teams who are engaged through our organisations' purposes; now we need to galvanise these teams to embrace new business models of profit with a purpose. It's an exciting time, requiring fresh thinking - and above all, leaders who have a strong social compass. Accordingly, one of the dilemmas we face, is how we lead teams into this ambiguous space, without knowing the exact outcome. Many of the problems we are looking to resolve through our missions are indeed complex - more than ever we need lateral thinkers who can synthesise these problems into simple, sustainable solutions.

Thankfully, clusters of thinkers and doers, from a wide range of industries, are shaping these solutions through conversations, as at the recent FINZ Master Class with Giving Architects. More importantly, these are not just shaping but sharing conversations - the atmosphere is deeply collegial, rather than competitive. If your board and staff are not contesting how your business is evolving along the social enterprise continuum, then it's high time to start the journey!

Traditional giving will always be the backbone of our sector, and there is always room for improvement. But to meet social and environmental needs, we must consider how to attract new equity. We must grow the pie. We must become increasingly familiar with the emergence of social investment and social enterprise.

 
 

 

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