IMPACT INVESTMENT FOR INCLUSIVE PROSPERITY: From Corporate Social Responsibility and Mission Investment to a Social Stock Exchange–how the private sector can do well by doing good

By Dr. Claire Nelson

 “Dateline: Jan 27, 2030″

In today’s news, the Jamaica Mission Investment Alliance breaks the $JA Billion dollar barrier for investments on the Social Stock Exchange.  Since its founding twelve years ago in 2017,  the Jamaica Social Stock Exchange which was established to bring into focus impact investment aimed at addressing the need to build inclusive prosperity and sustainable development  in Jamaica, the exchange which harnessed the potential of the Jamaican diaspora has provided cash, goods and services which has resulted in the creation of over 100,000 new jobs, 15,000 new businesses and social enterprises in communities all across Jamaica.” 

 Is such a vision possible?  Imagine 2030 and what the successful accomplishment of Vision 2030 might look like and imagine what paradigm shifts that might require.  Enter…Impact Investing! 

Sir Ronald Cohen, widely regarded as the father of British venture capital, once said “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.”

With Jamaica facing challenges in growing social inequity, owing to joblessness and weak economic performance, the time has come for us to look at new paradigms for growing our economy in ways that create both share and stake ownership at all levels.  The same can be said for the rest of the Caribbean that is increasingly been stymied by increasing despair and violence as seen by the rise in domestic and gang violence and interest in violent extremism among youth. This is why Development Foresight is focused on developing awareness of the impact investing economy in Jamaica and the Caribbean.

The buzz in the global financial community from New York to London to Toronto to Brazil, South Africa and Mauritius is that investment innovators, financiers and philanthropists are rethinking and engaging in this approach to investing which experienced a watershed moment in 2007, when the term “impact investing” was coined at a meeting hosted by The Rockefeller Foundation

In its fullest sense, impact investing, is defined as investing with the intent to generate tangible environmental and social impacts in addition to financial returns.  The approach defines strategies that are exploring how to construct and grow profitable models that can ably fuel solutions to the pressing problems, like access to housing, access to health, access to food, water and energy.  At its most basic – the low end of the spectrum is the practice of corporate social responsibility that focuses on social return on investment. At its most sophisticated, we are talking about a fully operational social stock exchange with profitable projects that provide a desirable financial return on investment with the added benefits of social and environmental impacts. 

Back in 2009 at the early stages of the movement, Monitor Consulting Report funded in part by JP Morgan Chase Foundation stated that given the size of screened social investments, over the next five to 10 years (i.e. up to 2018) investing for impact could grow to represent about 1 percent of estimated professionally managed global assets in 2008. That is a potential market of approximately $500 billion by 2018, or near double the amount given away in the U.S. in 2013.  Pro-social funds, such as university and foundation endowments and pension funds, along with traditional investors seeking philanthropic opportunities more aligned with their private sector experience, are at the leading edge of this front.  More recently, the Global Impact Investors Network (GIIN) with a  growing  membership of  over 220 organizations across the world— 2016 survey noted that the 158, respondents committed more than USD 15 billion to impact investments in 2015 and planned to commit 16% more capital than that in 2016  This USD $15.2 Billion represented 7,551 impact investing deals in 2015.  The survey also reported seeing more research and data available, improvements in the availability of trained professionals, and more high-quality investment opportunities. Additionally, it was noted that 99% of respondents report that they measure impact, with 65% using metrics aligned with IRIS, the GIIN’S catalog of social and environmental metrics.

Since 2013, Development Foresight Institute (DFI), a local think-do tank has been working to engage the Jamaica Stock Exchange (JSE) and others in the establishment of an ecosystem that would include education and training for stakeholders along various axes of the value chain; as well as regulations and policies that would serve as drivers and enablers that could provide impetus for private sector leadership in getting this done.

Getting traction on new ideas such as a social stock exchange has not been easy.  Yet, I note the increasing uptake of interests and investments in social enterprise construct and can state that I am excited about the possibilities to unleash the potential of social stock exchange.

Such an initiative would benefit from the leadership of the Jamaica Stock Exchange, which as one of the drivers of Jamaica’s economic growth, could view its contribution of an entity that would feed the need to ensure that increased growth and prosperity also drives  economic inclusion and social equity.  The JSE foray into creating a Junior Market has been a critical success and the pull towards even smaller and cheaper ways of capital formation for small businesses such as crowd funding would appear to be on the fast track.  We believe that the crushing feed back of youth who have lost hopes and dreams for a a prosperous life in Jamaica provides a strong driver for pushing us hard and fast into the impact investment stream of conscious capital.

Impact investing is not without its critics and skeptics. There are some who believe you can’t serve two masters (profit and mission).  Nonetheless, others see this as a mechanism needed to unleash significant new capital to engage investors who are sitting on the sidelines.  For Jamaica, this could include our diaspora.  The Jamaica Impact Investment Initiative would include the requisite research and training to s include a Seminar Series on the Impact Investment Economy that will bring together stakeholders and  leaders who want questions answered, and who believe that action speaks louder than debate. The ensuing analyses and conversations will explore challenges and opportunities such as– strategies to attract additional investment capital, the need for agreed-on definitions and measurement standards, and clear policy and practice recommendations for the government, investors, enterprises, and intermediaries.

It is our hope that this time around (as opposed to 2013) the uptake and outcry for more education and training, as well as the establishment an industry coalition made up of foundations and other philanthropists, would lead us rapidly to establish a platform and process for an impact investing ecosystem to start with low hanging fruit such as social service and social enterprise (no financial return) to the diaspora.

We hope you’ll join us on this journey to inclusive wealth and prosperity. To join the debate we invite you to join our community online.   Let us know what questions you think we should be asking, and what exemplary investors and enterprises you think we should be watching.  And let the journey to sustainable investing begin.

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