Ideas
Impact Investing

Impact Investing ... BlendedValue ... by: Jed Emerson & Antony Bugg-Levine

Burgess COMMENTARY

Peter Burgess

Impact Investing ... BlendedValue

Transforming How We Make Money While Making A Difference

by: Jed Emerson & Antony Bugg-Levine

0:13so just a couple of words of introduction about how I happened 0:16to 0:17myself involved in this field so I lead 0:22a packs for many years and I also had close connections with the British 0:27government 0:28because in the process of developing the industry they had needed advice about 0:32entrepreneurship from 0:34also been you not been interested there's any is cool person would be 0:38to try and hope a Britain a 0:41do the right thing and subsequently Europe do the right thing and we have 0:45offices here to set policy makers generally 0:48and in 2000 I got a phone call from the Treasury 0:52in the UK saying 0:55with very concerned but we're not making better progress in dealing with poverty 1:01would you have a more entrepreneurial 1:05look at how we might better cope 1:08I'm not been aware of the factors Outback entrepreneurs all of whom 1:13came from nothing don't usually get 1:16very wealthy people wanting to become entrepreneurs must have the people with 1:20back to take backs 1:21came from nothing and so we were helping people create well for themselves and 1:26and their families but I'd also been aware of the fact but the gap between 1:31rich and poor was getting bigger and bigger the average standard of living 1:36was going up 1:37but in a strange way those left behind was stuck behind 1:42and over my whole generation 1:45had as its slogan equality of opportunity that was what made society 1:49seem fair 1:50if you were born into the wrong family your chances of escaping 1:55poverty were extremely luck 1:59and so I began to look 2:02at why it is that this was 2:05happening and I began to realize that as we all know the B school 2:10the market mechanism deals with social 2:15and financial consequences but that does not deal with social consequences 2:20and as I analyze things 2:23I realized that philanthropists so it started 2:27obviously they've been around for millennia but that stop 2:30occurred in a more organized way in the nineteenth century 2:34to create activities to help those left behind 2:38by the beginning to the 20th century they got tax breaks on the big 2:41foundations rockefeller 2:42cetera were set up the Wellcome Trust and in the UK 2:46by the thirties government realized they couldn't 2:50you pay for that purpose couldn't deal 2:53with all the social issues and government started to get involved by 2:57the forties government said 2:58we need to organize welfare states but provide the safety net for those 3:03living in them and many welfare states was set up 3:06and by 2000 when I got the telephone call from the Treasury the welfare 3:11states were throwing their hands up and saying we can't cope 3:14we can't cope with social issues we don't have the resources 3:17we may not even be the best people to cope with the and as I analyzed how our 3:23system works I realized 3:25but the only part of the system but was that to help those who were left behind 3:30was the philanthropic sector used to be called the third sector I hate that back 3:35in a bun with banished its 3:37here you'll hear about the social sector bob that sector 3:40I can anybody be proud big for right specially im 3:44in a room with people like you and 3:48the social sector had one characteristic come out to be the advantage over 3:52hindsight the fourteen years working on this had the characteristic 3:57a common characteristic everywhere in the world I've having no money 4:02and no scale so if you look at how many businesses in the United States over the 4:09last thirty years made it through fifty million dollars up sales 4:12the answer is fifty thousand how many not for profits made it through fifty 4:18million dollars of revenues. 4:19anybody know 144 4:24now why was that I ask myself 4:28I didn't know that figure them but ike certainly could say that there was no 4:32scale and no money anywhere 4:34why was that and the answer was very simple 4:37philanthropy wealthy philanthropists had given money to these organizations 4:43and said to them will give you money for a year or two 4:46and then after that as a sanity check please go to raise money from somebody 4:51else 4:51and don't spend any money on your overheads 4:55and that was the way that philanthropy has operated 4:59and now with the benefit of hindsight we realize 5:02but the reason that was the case was but nobody was measuring and I think 5:07you couldn't tell who was doing a good job at the lib ringo social 5:12Ritter and so I tossed myself in 5:172002 day I could give the answer to it how could we 5:21give social entrepreneurs those 5:25who don't just want to make money but want to devote their lives to helping 5:30others 5:30hard to keep we give them the same means 5:34to achieve their objectives as we do business entrepreneurs 5:38and fast forwarding in 2010 5:43social finance which it started in the basement of my office in the UK 5:47gone from by 12 eighteen people 5:52and that the young people have social finance came to see me one day and they 5:56said look 5:56we think we may have announcer 6:01to how we tackle some social issues 6:04said what's that said we met to Chapin 6:08Birmingham who told us to look at recidivism 6:11prison re-offending you probably know that across the world two-thirds 6:16young prisoners go back to jail within 18 months 6:20and we think weaken Lincoln improvement in that trait 6:26every offending a reduction to a financial return 6:30what do you think of that for me it was a lightbulb moment like the general 6:35doria 6:36comment for me it was the key to the capital markets 6:41when you begin to measure social return 6:44social improvement and 6:47you connect 6:48it to a financial return you can allocate capital to those who couldn't 6:54deliver the highest social 6:56return and those who have the ability to scale up can raise the capital they need 7:02in the same way as a business entrepreneur can on the back up that and 7:07on the back up bridges ventures which I confounded than 7:102002 also started in the basement that my 7:14office in London in London we don't have garages for startups their basements 7:19up bridges ventures to invest in the poorest 25 percent to britain 7:24and bridges benches now eleven years later managers a billion dollars 7:29delivered 50 percent met I rock by investing in the poorest parts of 7:33Britain 7:34on the back I've bridges recalled 7:37and on the back for the 7:40for social impact bond which was launched in 2010 7:44the british government is on all said allowed us to access 7:48basically a billion dollars a for capital $600 million 7:52600 million pounds and Big Society capital 7:56which I was the founding chairman began 7:59to invest in impact investment 8:03organizations there are now 21 impact investment organization's funding 8:08not-for-profits 8:09in the UK which have received funding 8:12from Big Society capital and 8:17on the back at that David Cameron the British Prime Minister 8:22in June 2012 suggested to the g8 countries 8:27that we should put 8:31impact investment on the agenda and asked me to lead the task force 8:36which has involved twenty-two people on the task force 8:41with another couple of hundred people in National Advisory Board such as the UK 8:46National the US National Advisory Board which 8:49Tracy Co chairs and working groups such as the impact measurement working group 8:55and which own or participated and in each 8:59country in each of the g7 countries growth Russia 9:03fell out to have the picture pretty soon 9:07but Australia had been had been from the beginning because the Australians would 9:11launch some social impact bonds and 9:13I was impressed with what they were doing we worked for 14 months 9:17and we delivered this report there are some copies 9:21for you here and the report is entitled The Invisible 9:26heart %uh markets why 9:29well you'll know about Adam Smith from the invisible hand 9:33markets the way I see it in the nineteenth century 9:38people talked about financial return in the 20th century 9:43they talked a brisk and return in the 21st century 9:48we're already talking and we will talk about risk 9:51return and impact and when you begin 9:55to bring impact into the picture 9:58you bring motivations that go beyond 10:02profit so Adam Smith was actually prouder 10:05have his book called the theory of moral sentiments 10:09which was all about that but then that he was about the wealth of nations 10:13and when you begin to bring empathy 10:17into the equation you begin to bring the measurement of impact 10:21capital that is motivated by an improvement in people's lives or an 10:27improvement in the planet 10:28and everything I say by the way the report says includes environmental 10:33social for us social impact investment 10:36includes environmental when you begin to bring 10:40impact you bring the invisible Harper markets 10:43to guide their invisible hand and prior to the report being Britney 10:49people would say we don't know what the impact investment really 10:54today it's defined as any investment 10:57which involves clear objectives 11:01to deliver both the social including environmental 11:05and the financial return and whose achievement 11:09is measured was achieved 11:11is measured just like we measure financial 11:14performance and 11:17if you wonder about how big can this get 11:20there are two dine mentions that can give you an answer 11:25want I mention is 11:28the pool entrepreneurial talents is there a millennial generation 11:33but wants to go beyond the old models with involve making money 11:38alone rather than delivering an improvement 11:42in people's lives are in the planet and the answer I think for most though is 11:48how many have you think that there is a change 11:50in terms of the attitudes of the Millennial Generation 11:53abouts you're almost all love you and the second 11:58I mention that can give you an answer is how big is the pool of capital 12:04if investment capital that is interested in this 12:07well if I tell you that forty six trillion dollars have signed up 12:11to the United Nations principles for Responsible Investment 12:15that gives you a partial answer even if two percent 12:20that went into impact investment it would be a trillion and I'll close with 12:25the 12:26comments VN Duncan Smith the UK's 12:29cabinet minister who has 12:32issued 7/ social impact bonds to help unemployed youths getting to work 12:37he said to the clothes task force meeting 12:41I think this could bring about a revolution 12:45in the way government works and the reason is this 12:50when you're a minister and you want to try and get 12:53a policy implemented you agree on the policy and on 12:58the initiative and as it gets closer and closer to the level of implementation 13:04people added things they always wanted to do 13:08and people take out things they always hated 13:11and by the time it begins to get implemented it's already looking 13:16different then there's an election 13:18and you go away and no ones responsible for the outcome 13:22what I like about impacted by 13:24smutty said is what you get its work written 13:28on the 10 it brings discipline to government 13:33and because it transfers risk it brings 13:37innovation and what all of this is about 13:40is harnessing entrepreneurship 13:44innovation and capital to improve people's lives 13:48thank you very much