The Challenges and Opportunities of Social Change

Posted on February 16, 2012 by thea

Lydia Cutrer, Investment Officer at Calvert Foundation. Twitter: @LydiaCutrer

Lydia Cutrer

Lydia Cutrer

Recently, I had the opportunity to moderate the Social Finance panel at The Wharton School’s Social Impact Conference. The theme of the conference was “A Look Inside the Enterprise of Social Change,” and the breadth of sessions certainly offered insights into how to participate in advancing the impact investing industry. It was great to return to my graduate alma mater, and to learn so much from the experts and pioneers of social impact. I can see how our current efforts to transform investor culture align with the opportunities and challenges discussed at the conference.

The opening keynote featured William Lauder, Chairman of Estée Lauder Companies, who spoke on the “Beauty of Responsibility.” He highlighted the company’s efforts to go beyond making consumers look good, to also engaging them in “contributing to good.” Estée Lauder strives to instill in its employees a corporate value system that goes beyond simply selling and incorporates the ethical decisions and cultural sensitivities involved in sourcing ingredients and distributing products around the globe. In Lauder’s view, it comes down to motivating employees with service opportunities and maintaining integrity of the brand.

Another panel featured social entrepreneurs who are current Wharton undergraduate and graduate students and recent alumni.  From online platforms (@ElectNext, @PoverUP, @Pledge4good) to product & service businesses (@TheWashCyclist, @HydrosBottle), they provided great insight into structuring and developing enterprises that offer value and make an impact. I was impressed by their creative and simple solutions. For example, Wash Cycle Laundry seeks to incorporate environmentally sound practices at every stage by using water- and energy-efficient methods and delivering laundry to hotels, hospitals, and restaurants in downtown Philadelphia via bicycles all while providing job opportunities to welfare-to-work participants.

My Social Finance panel featured for-profit and non-profit investors.  Amy Dalal of @Acumenfund spoke both of the wide spectrum of investment opportunities and of the hurdles faced when trying to prove a socially motivated business concept and grow it to scale. The main industry challenge, said Tom Balderston of SustainVC, is the greater need for more capital and critical mass to grow impact capital. John Buley of @CASEatDuke highlighted the lack of intermediation to bring that capital to mission-driven companies and the dearth of financially trained leaders. Mona Sinha of @Asiaiix noted that while a lot of these small companies and entrepreneurs are quite sophisticated, investors tend to assume otherwise and may miss out on quality investment opportunities. I commented on the importance of investor partnerships as we seek to address the challenge of increasing, aggregating, and channeling capital to the marketplace. We were fortunate to enjoy a flurry of questions at the end from students such as whether they should pursue larger financial institutions or smaller impact-focused organizations after graduation.  John answered it best: “Integrate your skills and beliefs no matter what career you are in.”

In her keynote, Tracy Palandjian of @SocialFinanceUS presented an overview of the Social Impact Bond concept that her sister organization in the United Kingdom pioneered and which she is making progress implementing in the United States, first in the state of Massachusetts. Calvert Foundation is also at the table with other investors to assist Social Finance in solutions to monetize prevention (such as homelessness and recidivism), shift siloed thinking in government agencies, transfer financial risk appropriately, align incentives, and drive out inefficiencies.

I’m thankful that I was able to participate throughout the day, meet students and industry peers, and take away so many valuable lessons: (1) the time is now for both institutional and high-net worth investors to collaborate on solutions to bring patient capital to innovative businesses and (2) socially-focused enterprises must continue to compete effectively, manage risks and strengthen their business models to attract and retain that capital.

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It’s Time to Expand the Circle

Posted on January 31, 2012 by thea

This post by Lisa Green Hall, President and CEO, was originally published on the Center for Financial Inclusion blog, and is part of their Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at ACCION International.

Lisa Hall

Lisa Hall

In September, I had the opportunity to participate in a dialogue with more than 45 other participants as part of a roundtable hosted by ACCION’s Center for Financial Inclusion. The purpose of this new blog is to continue the conversation we started that day – and I am honored to be the first to post here.

At Calvert Foundation, we often talk about impact investing as a virtuous circle, one that creates empowerment, opportunity, and engagement by connecting investors, underprivileged individuals, and communities. This connection – to me – is the ultimate goal of financial inclusion. It’s about a connected circle of people, with mutual benefit for all the stakeholders involved, and with clients at the center.

So how do we make finance more inclusive?

First, we have to build out the community of those dedicated to financial inclusion by expanding the types of partnerships we pursue. Strategic partnerships are difficult due to competing interests. Key information can be proprietary, and goals don’t always align. In general, the financial inclusion industry needs to continue to build that capacity.

I am proud of the collaboration we at Calvert Foundation (through our subsidiary, Community Investment Partners) established with Citibank to get more dollars to communities where jobs and investments are needed most. In less than two years, this cooperation increased our lending activities by more than 50 percent. Partnerships are critical. At an industry level, therefore, we need to think about what partnership models will look like in the future, moving partnerships beyond the typical investor/service provider relationship. We need to do more – and we can’t do it alone.

Second, we also need to constantly look ahead. The needs of microfinance institutions and their clients are evolving and changing every day. New technologies bring new opportunities, but are also disruptive. The microfinance community can continue to provide niche services, or it can explore new products and new business models that will take it out of its comfort zone. Throughout, there will continue to be a need for patient, flexible, and affordable capital – but this is just one building block, and the delivery mechanisms are changing.

Finally, we must work to protect clients and continue to evaluate social impact. In 2009 Calvert Foundation began working with CGAP and ACCION to provide an investor perspective at the beginning stages of the Client Protection Principles now called the Smart Campaign. We were proud to become one of the first signatories, and have since worked to incorporate the principles into our investment process from beginning to end. We began using social impact covenants in our loan agreements, requiring MFI borrowers to comply with the Smart Campaign, or have their own code of ethics with equivalent emphasis on client protection. We have expanded the social impact section of our due diligence reports to include evaluation of the potential MFI borrower’s compliance with the principles. As of Q3 2011, 77 percent of Calvert Foundation’s MFI borrowers had signed on to the Smart Campaign. We hope by the end of 2012 that number will be 100 percent.

This last point about client protection and social impact is fundamental. When I was at the TBLI Conference in London earlier this month, I saw “Occupy” protesters just a block from where the conference was being held. They were camped out in tents near St. Paul’s Cathedral, waving signs that expressed frustration about a system they felt had harmed more than helped them. Financial inclusion is about bringing everyone into the system – but also about ensuring that that system is beneficial for those who participate.

You can follow Lisa Hall on Twitter: @LisaGreenHall

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Which is better? Giving or Investing?

Posted on January 17, 2012 by thea

By Sally Boulter, Manager of Individual Initiatives at Calvert Foundation

Which is better? Coke or Pepsi? Even a casual reader of the commentary around impact investing and philanthropy will note that much of the discussion is centered on which is better. But it is not a Coke-or-Pepsi decision with one option being clearly superior.
Impact investing and philanthropy each have their own unique roles to play in moving society forward. They are distinct and yet collaborative tools that can be accessed and employed to improve people’s lives.

To oversimplify, investment capital can help build things like small businesses, affordable housing, community health clinics, senior centers, schools, water systems in the developing world, etc. On the other hand, philanthropy is essential to providing funding for the arts, job and literacy training, pregnancy prevention, eldercare, and similar programs which will never be supported by the market alone. In many situations, these needs and the programs that support them aren’t exclusively served by one or the other. In fact, in many cases, we see the clear benefit in having both, working in partnership.

Naishaune Spencer with his daughterA prime example of the investment-philanthropy partnership can be seen at St. John’s Bread & Life in Brooklyn, NY. Every day at St. John’s more than 1,000 hungry Brooklyn children, families, and individuals receive nutritious meals. Recently the Low Income Investment Fund, a Calvert Foundation borrower for the last five years, provided a $7 million loan to enable St. John’s to expand their facilities and serve a total of 450,000 meals annually. Using a loan to fund St. John’s space needs meant that more philanthropy was available to provide services to the recipients of the meals, like Naishaune Spencer (pictured right with his daughter). At St. John’s, Naishaune receives nutritional counseling, health and hygiene products, and social services such as workforce development, literacy training, psychiatric services, and substance-abuse counseling. “I ran with the wrong crowd and ended up homeless, jobless, and in a whole lot of trouble,” he said. “With the help of St. John’s Bread & life, loving family and friends, and sheer dedication, I was able to go back to school, get a great job, have a steady income and, most significantly, get my first apartment.”

Traditional philanthropy and government programs, while critical to improving the lives of the poor, can never by themselves meet all the needs of disadvantaged communities. Impact investing offers a new way to bring capital to improving lives and a new way for people to connect with each other based on mutual benefit.

At Calvert Foundation, our aim is to transform investment culture so that every investor becomes an impact investor. As a nonprofit, however, we recognize and value the vital role that philanthropy plays even within the impact investing sector, for things like risk capital and technical assistance for social entrepreneurs.

I look forward to the day when we stop viewing philanthropy and impact investing as a Coke-or-Pepsi choice and start to see them for what they are: natural allies in the struggle to make the world a better place for ALL of us to live, work, raise our families, and perhaps have a little fun.

As for soda, we all know Coke is it.

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Keeping the Faith

Posted on December 28, 2011 by thea

By Patrick Davis, Calvert Foundation Senior Associate.

In November, after returning from the Resource Center for Religious Institutes (RCRI) Conference in St. Louis, I was moved to write about my experience for the UnSectored blog. Now, a few weeks later, I wanted to share a version of that post with readers of Calvert Foundation’s blog.

RCRI is primarily a conference for religious treasurers to learn about developments in financial management that relate to their ministry. Not surprisingly, topics in Socially Responsible Investing are particularly prominent, and so I attended on behalf of Calvert Foundation. There I was joined by many impact investing (or community investing) organizations including Oikocredit, Partners for the Common Good, Leviticus Fund, Hope Enterprise Corporation, Urban Partnership Bank, and Mercy Loan Fund, among others.

I was fortunate enough to spend some time with many great people, but I especially appreciated the chance to reconnect with two nuns that I’ve worked with previously. Sister Pam Buganski of the Sisters of Notre Dame and Sister Corinne Florek of the Religious Communities Investment Fund are each forces of nature in their own right – inspiring, compassionate, tireless advocates for social justice…and new thinking in finance. Sister Corinne has been featured in this blog before, for her work using impact investing principles to care for retired nuns while supporting people in underserved communities

My conversations with the sisters reminded me of the faith community’s special and often unrecognized place in the development of what we now call impact investing. More than 30 years ago, faith-based investors began to point to scripture as a basis for moving real assets into the community development space. In fact, the faith community provided critical seed funding that jump-started countless community loan funds and microfinance institutions that we know well today. For more background, check out the Community Investing Toolkit for the Faith Community report from the Social Investment Forum Foundation.

Congregations and religious retirement funds continue to be some of the most significant contributors to impact investing institutions, and this commitment to social justice through investment was established decades prior to the current excitement about impact investing. As an industry, impact investing cannot realize its vision without understanding its roots. Faith communities have continued to support the industry when it’s been difficult, unpopular, or in glaring contradiction to the prevailing financial philosophies of the day.

Flying home from RCRI, I found myself reflecting on the recent buzz around impact investing. The industry has attracted interest from a wide range of institutions – some are drawn to impact investing because they believe in the potential for market-beating returns in the long run, others because it allows for the integration of social or environmental values in investment portfolios. Perhaps the most fascinating aspect of the impact investing movement is that serves such a wide spectrum of beliefs and values, and as such, transcends common political, religious, and social boundaries.

In the melting pot of all those beliefs and values, though, there have been only a handful of steadfast supporters. In our culture, we approach hot new things with both enthusiasm and trepidation. As it was described to me recently, everyone wants to be the “first second” adopter of a new behavior. When it comes to impact investing, the faith community has been quite the opposite – jumping in with both feet. With values systems firmly rooted in concepts of equity and social justice, faith-based institutions have contributed enormously to the development of the impact investing industry. Personally, I’m deeply grateful to Sister Pam, Sister Corrine, and the countless other supporters of our work that I get to see each year at RCRI. In years to come, I hope that our supporters in the faith community earn as much benefit from their investment as we have from their involvement.

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