NOTE: I invited socially responsible investment expert Greg Wendt to attend SOCAP 09, the Social Capital Markets conference in San Francisco, and cover it for MNN.com. Below is his recap of the event:
I attended the second Social Capital Markets conference last week in San Francisco, a sold-out conference of the leading minds in evolving our use and investing of capital to heal, and evolve the manner in which we live on the planet. To quote the SOCAP organizers:
Our financial system has been rocked to its core. Belief in profit-driven motives as the sole metrics of performance has been fundamentally shaken. Our perceptions of risk have been forever altered. And our economy is shifting toward a new foundation.
What is that “new foundation” of which they speak?
Traditionally, investments are made with one, and only one, measure in mind -- how much money does the investment return? With the advent of what is now called “social capital” other factors have been introduced into the equation.
Socially responsible investing, mission-related and program-related investing by foundations, venture philanthropy, social entrepreneurship, local economies, consumer demand for organics and green products – these are the first stages of a more profound fiduciary realignment. Some of these initiatives remain incremental and ambiguity laden. Others are indicators of more fundamental, tectonic shifts along the boundaries of for-profit and nonprofit, shareholder and stakeholder, global investor and local citizen.
Woody states it clearly. Yet the issue remains -- how do you MEASURE the progress in all of the non-financial dimensions? From the “sole metrics of performance” to something more inclusive of the factors essential to well-being?
For example, one of the key methods that we gauge the success of our economic activity is through the measures GNP and GDP. But to meet the Earth’s challenges, these outmoded ways of measuring the “product” of our economy have to be reexamined. They are out of touch with our finite supply of natural resources (or natural capital) upon which our economic growth depends.
One of the key challenges of such indices is they can not be considered sustainable because they do not account for depletion of either human or natural capital. Consider statement of the late Robert Kennedy on what GNP does not measure:
The Gross National Product includes air pollution and advertising for cigarettes, and ambulances to clear out highways of carnage. It counts special locks for our doors, and jails for people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and nuclear warheads ... and if GNP includes all this, there is much that it does not comprehend.
One of the key aims in the “social” capital space is to define new measures, new metrics to determine the “non-financial” impact of any economic activity or any investment. Here's a video of SOCAP founder Kevin Jones explaining more about social capital markets:
I learned of one such effort at the SOCAP Conference which is a collaboration between Acumen Fund, B Lab and Rockefeller Foundation which created measurement tools that for the first time provided performance indicators for measuring an investment’s social and environmental impact, called IRIS (Impact Reporting and Investment Standards).
In the last few years, a proliferation of investment dollars has been allocated to funds and enterprises seeking to generate social and/or environmental impact as well as a financial return. The sector has grown to over $50B in total assets and the pace of new investment grew by an average of over 35 percent over the past five years until the middle of 2008.
Close to 150 organizations are providing approximately $4 billion in capital and services to small and growing businesses in developing countries. And areas like clean tech and socially responsible investing have seen double-digit growth year-over year, despite challenging economic conditions. Within the next 10 years, impact investing has the potential to grow to about 1 percent of total managed assets, which would result in about $500 billion of capital channeled toward social and environmental impact.
In addition to creating standardized ways of measuring impact, the collaboration has also generated software tools and data gathering collaborations amongst a wide range of impact driven investment groups.
This effort has created a framework for measuring social and environmental performance based on a set of common indicators and definitions which can be applied in many contexts, beyond investing and money.
It is efforts like these which are the building blocks that are fundamental in recalibrating the thinking of the actors in our economy. In order to develop a new economic paradigm, we have to know where we are, and where we are going, and to be able to communicate and measure this. By incorporating new thinking into civilization’s economic activity, true costs, benefits it will become much more obvious what needs to be done to steer our system toward well being and sustainability for all of our Earth’s inhabitants.
Greg Wendt, CFP , is the Director of Sustainable Investing at Enright Premier Wealth Advisors, Inc, an established RIA with over $700 Million under management. Greg is a leading expert in Sustainable Investing and has been profiled often in the media including "Living with Ed" on HG TV, Air America Radio, Business Ethics magazine, Daily Variety, Financial Planning Magazine and Yogi Times. Greg is Founder of the non-profit community Green Business Networking (GBN); a networking group of over 2,500 business owners and professionals committed to greening LA's regional economy.
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