Last Friday, I sat in on a preview of the discussions and sessions that will take place shortly at SOCAP10. Hosted at the Commonwealth Club of California, the program featured many of the key people behind this year’s program. The panel included three SOCAP10 track curators: Melanie Cheng, founder of OmOrganics.org and FarmsReach.com and curator of the Food Systems track; David Hodgson, co-founder of the Idea Hive, Fellow at the International Futures Forum, and curator of the Innovation in International Development track; and Sean Stannard-Stockton, CEO at Tactical Philanthropy Advisors, author of the Tactical Philanthropy Blog, and curator of the Tactical Philanthropy track.
It also included Kevin Jones, founder of Good Capital and the convener of SOCAP10, as well as Hope Neighbor, founder and CEO of Hope Consulting. The panel was moderated by Amy Benziger, who is co-producing SOCAP10.
The panel used the recent “Money for Good” report (PDF) issued by Hope Consulting to frame specific issues related to the session tracks at SOCAP10. Having Hope Neighbor on the panel also provided us with a great opportunity to hear first-hand about the key takeaways from the study.
In highlighting the report findings, Hope started by defining impact investments as any investment that seeks to create a social or environment along with financial return. She then summarized three major findings from the report.
First, Hope stated that here is not a single social capital market – donors think of impact investing and charitable giving as separate approaches. The social capital market is young as a concept and still in its formative stage. However, we need to address needs of individual investors in order effectively build the impact investment market.
Two, (as covered extensively) there is a $120 billion market opportunity for impact investing with over half of potential individual investors interested in making investments of $25,000 or less. Potential investors cite barriers to making impact investments, but the major barriers identified in the Money for Good report reflect the fact that this is a new investment product. Importantly, these investors are also much more open to impact investment when it is not positioned as an alternative to charitable giving.
Last, there is a $45 billion market opportunity for charitable giving that more effectively meets donor needs. Access to this market is more challenging, since 86% of donors are loyal with their gifts; i.e., shifting their donation purpose will be difficult. An additional opportunity exists to get donors to use information to better inform their decisions – while 85% of the research respondents care about nonprofit performance, only 32% conducted research on the charity prior to giving and only 3% would use comparative data to make decisions on where to donate.
While much attention has been given to help donors engage in comparative data analysis (e.g., Charity Navigator, Philanthropedia, etc.), there is a market opportunity to focus on the 85% of donors who care about nonprofit performance and educate them better on how to conduct research on a charity prior to giving a donation.
After Hope spoke, the panel began a conversation that will hopefully continue throughout SOCAP10. It focused on both how organizations can address the report’s findings and some of the challenges moving ahead in this direction.
Sean Stannard-Stockton, CEO at Tactical Philanthropy Advisors, and curator of the Tactical Philanthropy track, acknowledged the general appeal of impact investment to individual donors, but noted that establishing the practice could be challenging. Importantly, he said that there needs to be a new supply side to explain why the impact investment market is important, which will drive individual demand. Further, minimal exposure to impact investments by individual investors would help develop a body of practice that can increase such investments in future years.
Kevin Jones, founder of Good Capital and the convener of SOCAP10, responded that this is the way people think today – the impact investments and charitable giving markets are separate. Individual investors do not use portfolio thinking when examining their charitable giving and impact investments. However, there is also a lot of mixing of market behavior going on right now by these individuals. More research and tracking of investor and donor behavior will show how to best move forward in building the impact investment market.
Toward the end of the panel discussion, Amy Benziger, co-producer of SOCAP10, asked the panel to list examples of top opportunities for impact investments. David Hodgson, co-founder of the Idea Hive, and curator of the Innovation in International Development track, highlighted LifeGivingForce as a social impact organization that has combined an “LLC and a Foundation under the one umbrella” that has received focused impact investments. The LLC provide water purification technology for disaster relief and recovery. Its affiliated foundation delivers support to social and economic development programs in Haiti.
Melanie Cheng, founder of OmOrganics.org and FarmsReach.com and curator of the Food Systems track, didn’t cite any specific organizations but did note that the top opportunities should focus on key organizations able to generate change that need capital now. And while some of those organizations require charitable gifts, most of their funding needs are more appropriate in scale for impact investments.
Sean, in particular, pointed out a Tactical Philanthropy track session that will focus on Evergreen Lodge, a social propose resort in Yosemite, which has used both impact investments and charitable giving. Sean wrote a blog post detailing the session in more detail.
As the audience engaged in the discussion, it raised questions that highlighted important issues that should keep resonating during SOCAP10. Those questions focused on 1) the ongoing need for more transparency, including information on how funds provided for impact investments or as charitable donations are being used by nonprofits; 2) global examples that can inform the SOCAP audience; and 3) shifting the discussion to include a focus on sharing social impact approaches away from propriety approaches by organizations.
Hope closed the panel discussion by restating a question from earlier during the panel discussion: will improved information systems be used by donors and impact investors as and change their behavior? The panel agreed that for individual investors, the social and environmental factors will become important as second order considerations as they gain confidence on the market development. For charitable donors, though, it remains difficult to believe that they will place more importance on performance and outcome metrics, and modify their behavior in the short term. Ultimately, we need to find more creative ways to convince donors to give more thought about how and where they allocate their resources – whether it’s through impact investments, charitable giving, or a combination of a blended approach. The discussions at SOCAP10 should certainly move us in that direction.
-By Adin Miller (Cross Post from Adin Miller Consulting)
