Blazing New Paths For Social Impact

Picture an island: On one side is a small but rapidly growing group of intrepid farmers, planting different varieties of seeds in arid soil and creatively pioneering new ways to grow crops despite the dry climate. On the other side of the island are huge underground aquifers of fresh water. The group on this side of the island is beginning to dig wells pulling this water up to the surface, but they do not have seeds or land to irrigate. Unfortunately, treacherous terrain divides the island, keeping these groups apart.

Last week in Rio de Janeiro, a path was forged between these divided regions during the Social Enterprise World Forum 2012 (SEWF2012), hosted and organized by NESsT. Hundreds of social entrepreneurs (the “farmers” pioneering new ways to address social problems) came together with an engaged group of impact investors (the “well-diggers” raising pools of investment capital and looking for deals to support).

Impact investors at SEWF2012 included representatives from mainstream banks like UBS, the National Bank for Economic and Social Development (BNDES), and the Inter-American Development Bank. Participants also included early investors such as the UK-based Actis (a private equity fund manager incubated decades ago), and more recent arrivals such as Kaeté Investimentos and Bamboo Finance. While you can still tell the groups apart (not too many social entrepreneurs wear suits in Rio’s spring time), social entrepreneurs and investors are increasingly united by a common understanding that they need each other to succeed. SEWF2012 felt palpably different from early convenings, in which social entrepreneurs approached investors with mistrust and investors regarded social entrepreneurs with some disdain.

The conversation has also become more sophisticated. Those who worry that impact investing will cannibalize philanthropy and force social entrepreneurs into an inappropriate embrace of revenue-seeking models will be heartened to know that both sides emphasized that impact investing is only one tool among many. The recent Acumen Fund and Monitor Institute paper on the role of “enterprise philanthropy” in impact investing also resonated in Rio—a session called “Philanthropy First” explored the role of philanthropy in supporting social enterprise and enabling more effective impact investing.

The conference was also unique in that it embraced its local setting. NESsT worked tirelessly to ensure this was a Brazilian conference with a global angle, rather than a global conference that happened to be in Brazil. Hosting SEWF for the first time in a non-English-speaking country, NESsT organized pre-forum social enterprise site visits, offered all event information bilingually, and used interpreters to ensure that Portuguese speakers (half of the 650 delegates) could fully participate. NESsT also walked the talk, investing 75% of the event’s total budget in vendors from local social enterprises. The remarkable venue, Centro Cultural Ação da Cidadania—a social enterprise itself, located in a historical semi-restored warehouse—is also one of the largest investment and economic development projects in Latin America.

So if social entrepreneurs are the seed-planting farmers and impact investors are the well-diggers, then government is the heavy-equipment operator rearranging our island landscape with massive excavators. Government can use this equipment to make our land much more fertile; as a frequent purchaser of the social good we create, it often helps to scale up social enterprise.

Social entrepreneurs and impact investors often fail to recognize government’s importance. For many, the attraction of social enterprise and impact investing is its potential to offer solutions that work around government failure. The Brazilian government’s involvement in the conference, as a supporter and participant, signals that we social sector stakeholders are getting closer to an inclusive conversation, acknowledging the role public policy plays in shaping the landscape. But we still have a long way to go.

In the end, we need to ask ourselves what we’re aiming for. Are we content to see just a few social enterprise crops grow to maturity and flourish? Should we look to cultivate fields of industry clusters (as the Omidyar Network argued in its great “Priming the Pump” series)? Or should we aim for something even bolder, leveraging all the tools we have—whether private investments, grants, or creative policymaking—to solve social problems?

As Celso Grecco, co-chair of the Social Stock Exchange, noted during the conference: "You can't find new routes by looking at old maps." By embracing public-private collaboration and reinvigorating our basic belief that we have a mutual obligation to secure a good life for all our fellow citizens, we can work more effectively to negotiate and transform the entire landscape.

Author: Antony Bugg-Levine, CEO, Nonprofit Finance Fund