Social Finance Israel
SOCIAL IMPACT BONDS

"The G8 Social Impact Investment Forum and the important initiatives resulting from it are big steps forward in the development of impact investment. I am delighted to be chairing the G8 taskforce, whose bold mission is to turn impact investment into a global force." Sir Ronald Cohen

AIMS OF THE G8 TASK FORCE FOR SOCIAL IMPACT INVESTMENT

On June 6th 2013, the UK Government hosted a G8 Forum, which drew together leaders from the G8 nations and beyond. As a result, The G8 Task Force for Social Investment was established in order to explore the potential of impact investment as a means to tackle significant social issues.

Chaired by Sir Ronald Cohen (chairman of Social Finance Israel), the task force will focus on the measurement of social returns and the asset allocation strategies that frame impact investing.

Below are some key roles of the G8 Task Force for Social Investment:

  • Establishing definitions: Reducing ambiguity about what impact investing is, and what social enterprise encompasses: simply having the intent to deliver measurable social or environmental benefits through a purpose-built investment strategy or business model is not sufficiently concise. International development, microfinance, access to capital for charities, Social Impact Bonds and community investment in infrastructure, housing or SMEs are all simply too different. And as Nick O'Donohoe, CEO of Big Society Capital, explained: "We must be able to recognize social enterprise".
     
  • Developing patience and focus: At the meeting on June 6th, Elizabeth Littlefield, President and CEO of the US Overseas Private Investment Corporation explained that Impact investing represents a revolution in the way the world thinks about money, the purpose of our lives, and the relationships between the global north and south, and the public and private sectors. By extension, we must be patient as we build an ecosystem and a track-record of performance that provides insight into financial and social trade-offs, as investors and policymakers are educated on the tools of impact investing, and as we solve difficult market barriers like the hand-off between early-stage grants and then investments in enterprises.
     
  • Defining the role of commercial capital: Commercial capital brings discipline, but also unrealistic financial expectations in some parts of the market. Segmentation will be critical here also. As Nick O'Donohoe explained through the prism of the three key sectors of the UK market: community finance, which is essentially debt and equity investment in SMEs in underserved areas, which can and should accommodate commercial capital; the funding of charities, where commercial capital is helpful at the lower end of the risk spectrum, where assets can be pledged; and equity for profit-with-purpose enterprises, which is largely not ready for commercial capital.
     
  • Defining the role of concessionary capital: In addition to private foundations, traditional providers of high-risk capital should undertake well-structured risks in social investment, as a means of diversifying away from low-risk, project-based donations to existing organisations.

    Meanwhile, "retailization" through crowdsourcing and other innovations is generating excitement about the entry of small-dollar investors. There are implications here for the local nature of impact investing.

 

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