Clinton Global Initiative’s CGI America 2013

This morning at the CGI America 2013 opening plenary, the formal announcement of Goldman Sach’s first Social Impact Bond (SIB) for an early childhood preschool program in the state of Utah was made. Here were former President Clinton’s remarks on that announcement and the significance of social impact bonds.

Bill Clinton CGI America 2013

“The first Social Impact Bond (SIB) done in the US for early childhood development. These bonds, I believe, are going to be a very important part of our future as state and local governments and the federal government grapple with the challenges of their budgets. Finding the way to get private sector capital into solve public problems with the promise of a return and the risk of no return if the strategy doesn’t work holds REAL potential, particularly in this area. We know that about 85% of the infrastructure of the brain fills out before a child ever gets to kindergarten. We also know, and this is good news for people like me, that you can form new neural networks in your brain when you’re in your late 60’s, early 70’s. But you still stand after all these years on the foundation established in early childhood.

Of all the things in this year’s budget that was in the President’s State of the Union address that I was most excited about was a relatively small item to make US$100 MM down payment on a massive scientific project to map the human brain. Based on what we now know, I am confident that when it is finished, it will confirm the imperative of trying to bring Americans to the same starting line by doing more in early childhood development.” – Bill Clinton at CGI America 2013, June 13, 2013

Ethos

Ethos: the distinguishing character, sentiment, moral nature, or guiding beliefs of a person, group, or institution.

Our ethos at CLC Advisors is the exchange of ideas through art, film, music or dance so that the communication gap does not exist between international relations, business, or emerging markets. Coca-Cola’s Small World vending machine achieved that in Indian-Pakistani relationship during the recent launch that was captured in a short video and widely spread over YouTube. It is a illustration of the effect of how the combination of the arts can cross borders, grow or innovate brand recognition and sales in an industry sector, measure the neuroscience in human receptivity to brands, and create new global ecosystems.

From the science of understanding the human mind and condition to how a individual perceives information, consumes material goods, to purchasing decisions affecting economic markets, models creating and shaping developing markets, there are tipping points that exist in which points of social change can be directly measured and quantified. With these points, changes in philanthropic giving and new capitalist models are created by incorporating salient data points from both public and private sectors. By observing the growing shift in market share from the for-profit sector into the not-for-profit sector, social impact and financial products such as social impact bonds will continue to grow and open without borders in the impact investing sector where there is no other market for philanthropy.

The Future of Impact Investing: A conversation with Sir Ronald Cohen

Cohen255This blog post originally appeared on the Huffington Post.

Sir Ronald Cohen, widely regarded as the father of British venture capital, caused a stir with a recent post on the HBR-Bridgespan Insight Center: “Social Impact Investing is the New Venture Capital.” The piece, co-authored with Harvard Business School’s William Sahlman, argued that impact investing (the practice of investing for both profit and social impact) will be as transformative for society as the institution of venture capital has been for the state of entrepreneurship globally.

This point of view, part of a series on scaling social impact supported by the Omidyar Network (ON), provoked a conversation so rich that it begged for an encore. ON Knowledge and Advocacy Director Paula Goldman’s following interview with Sir Ronald portends his webinar discussion on Friday, April 19 at noon on HBR.org.

Q. We’re intrigued by the parallel you draw between the early days of venture capital and the early days of impact investing. It took roughly 30 years for Silicon Valley to establish itself (from the time people starting doing venture deals to 1980 when Apple’s IPO proved the model.) Do you think impact investing will take the same amount of time to prove the case?

Sir Ronald: I feel impact investing is where venture capital was in 1983, 30 years ago. My experience of the growth of venture capital suggests that social impact investment will be established in the next seven years. I would hope by the end of the decade a significant number of institutions would have made an allocation from their investment pools to impact investing. These institutional investors are likely to include charitable foundations’ endowments, pension funds and family offices.

Q. What’s the number one obstacle preventing the impact investing market from taking off?

Sir Ronald: In my view the first challenge is to get charitable foundations to accept that the fulfilment of their mission would be aided by impact investments made from their balance sheets. I believe the asset class of impact investment should be able to deliver a 7-percent return, uncorrelated with equity markets. If I am right, this would enable charitable foundations to pay out 5 percent of assets each year and maintain the value of their endowment while achieving significant social returns.

Q. There are some who fear that impact investing will divert money from worthy nonprofits because wealthy individuals will believe that grants are no longer necessary. What’s your take on this?

Sir Ronald: Impact investment focuses on releasing assets from balance sheets, not grant allocations. If successful, this will significantly increase, perhaps even double, the flow of money into nonprofits. The discipline that comes from measuring social performance or evidencing it in other ways should hugely increase the impact that the social sector achieves.

Q. You’ve been the driving force behind social impact bonds. Tell us about one of the currently outstanding bonds you’re most excited about and why.

Sir Ronald: At this stage all social impact bonds are exciting. I think the one launched by the Private Equity Foundation to equip vulnerable teenagers for employment is particularly exciting. It is very focused on improving their lives and measuring the results it achieves. It combines passion for the mission with the management skills required to achieve scale in tackling such a widespread social issue.

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Q. Paint us a picture of what the impact investing market looks like 10 years from today.

Sir Ronald: Ten years from now, a social investment firm will be a recognised entity and social investment a recognisable asset class. Social entrepreneurs of every age will have innovated in the ways we tackle different social issues and they will be admired for it.

Q. So many young people are looking to start their careers in impact investing—what advice do you have for them?

Sir Ronald: Impact investing is the next Big Thing. Society cannot continue to cope with prevailing social issues in the traditional way. We need to harness entrepreneurship, innovation and capital to achieve in the social area what they have achieved in the creation and growth of entrepreneurial firms in general, and technology firms in particular.

(Interviewer Paula Goldman, director of knowledge and advocacy for the Omidyar Network, is an advisor to the HBR-Bridgespan Insight Center on Scaling Social Impact)
Follow Paula Goldman on Twitter: www.twitter.com/pdgoldman