SVA’s Mark Peacock, Director, Impact Investing, was among the thousands of attendees at this year’s Social Capital Markets Conference (SOCAP) in San Francisco. Having had time to absorb all that he saw and heard, he reflects on key learnings from the event and his feelings of optimism for the sector moving forward.
‘There’s a time for everything’, said King Solomon 1000 years before Christ. ‘A time to plant and a time to uproot. A time to tear down and a time to build. A time to mourn and a time to dance’.
SOCAP is ‘a network of heart-centred investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges.’ No small ambition. Its flagship event is held in San Francisco each year, and provides a platform for social impact leaders to connect and present their ideas to a global audience.
This year, SOCAP16 participants weren’t quite sure whether it was a time to mourn or a time to dance in its 9th annual jamboree.
Naysayers (of which very few were in attendance amongst the thousands of participants) cite a number of proof points to affirm their bearish view of the sector, nine years on from the first SOCAP. Amongst the largest fund managers in the world (who manage assets in the trillions), integrating ESG is still a work in progress with a lot more attention on ‘G’ (Governance), increasing focus on ‘E’ (Environment) and still limited attention on ‘S’ (Social).
David Chen, Managing Director at the Equilibrium Group, which is a fund manager with a $1bn under management and with an institutional investor base, says his firm pitches to its investors that its investment strategy is ‘deliberately impactful’, rather than using the term ‘impact investing’. This is because they think that impact investing has connotations of sub-market returns, regardless of its accuracy.
By comparison, Jed Emerson, originator of the concept of Blended Value, warns that if we lose connection to why we are doing impact investing we run the risk of creating a high functioning marketplace with minimum impact.
In the UK, six years after the first social impact bond (SIB) launched, the UK Government spends over £240bn on human services each year, and yet only £3bn is allocated to outcomes contracts and £20m delivered through a SIB, observed James Taylor from Bridges Ventures. Time to mourn?
Not so fast.
The true believers have plenty of reasons to be optimistic for the future of the sector. Impact investments, and fund managers with a mandate to invest for both social and financial return are fast reaching a meaningful size and scale.
The Equilibrium Group has over $1bn under management for example, and Impact Assets have over $300m under management through Donor Advised Funds (equivalent of Private Ancillary Funds here in Australia). DBL Partners just closed its fourth fund at $400m and it was heavily oversubscribed. Elevar Equity is also up to its fourth fund, has backed 24 companies across seven countries and recently announced a partnership with TPG (a global private equity firm) to raise a $1bn impact fund.
Not to mention the social outcomes being achieved through the deployment of this capital. A cursory glance at the commercial banks and private equity players that are engaging with impact investing and it’s hard not to get the sense that impact is going mainstream – Deutsche Bank, Morgan Stanley, Goldman Sachs, JP Morgan, TPG, KKR… the list goes on.
There is growing sophistication amongst practitioners within impact investing. The Calvert Foundation has established partnership vehicles that create a very accessible vehicle for retail investors seeking exposure to emerging markets in the impact space. Community Housing Capital are leveraging Government and philanthropic capital to raise debt from commercial banks and then on-lending at a concessionary rate to not-for-profit housing providers.
And finally, Government is increasingly playing an enabling role to unlock more private capital into impact product. An example is the Low Income Tax Housing Credit that has been operating in the American market for over 15 years and now accounts for over 65 per cent of all the affordable housing development activity in the country. Even the NSW Government is getting in on the act, with the latest Social and Affordable Housing Fund initiative.
Almost enough reason to get up and dance?
*Image credit: Social Capital Markets, photographer Sumit Kohli.