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Symposium 2011

Funding Social Enterprises

The Challenge

The global financial crisis has raised fundamental questions about capitalism. Questions of morals in society and business have regained momentum, demanding more acceptance of responsibility for a sustainable, value-oriented society, particularly from business. With this in mind, the growing social business sector might be one of many solutions to the transformation of the capitalist system.

Using the methodology of capitalism for social outcomes, social enterprises have inherently long-term goals and, in the process of fulfilling these goals, they benefit society. But although the sector has grown fast, it is still very small. One reason is the lack of funding. In the aftermath of the crisis, investors willing to put their money into potentially high-risk and moderate-return social enterprises may be particularly hard to find.

Tax incentives could foster investment in social businesses, making it more attractive for investors to put their money into such ventures. In addition, social enterprises can be funded partly by charity supporting the purely social activities of those companies. What is the optimal mix between private, institutional and governmental funding and charity? Which ones should these enterprises target primarily?

What kinds of institutions and private actors would be willing to invest in social businesses? How can relatively small social enterprises be visible and attract large investment funds, particularly in regions where traditional market infrastructure is lacking? These funds would be able to raise the capital that is needed to bring the enterprises’ social impact to a larger scale.

Most financial assets are focused on investors that want to maximize their financial return. Are some of these asset classes nevertheless relevant for social investment or are new asset classes needed? Since social businesses target social issues at large, what is the role of broad-based measures such as “crowd funding”? Are there regulatory procedures that need to be changed to allow different kinds of funding with different kinds of risks, duration of investment and measurement of returns?

For investors to fund social businesses, social impact needs to be transparently and clearly measured. If social businesses want to attract big institutional investors, then it must become easier to compare investment opportunities in social (and financial) terms. If this is not done, it will impede investments in those enterprises. Hence the measurement needs to be clear and precise. Should governments define and regulate how social impact is measured?

    Solutions

    Solution
    Symposium 2011

    Measure social impact using relevant metrics, such as the number of jobs created or the number of people affected by the activities of a social enterprise.

    Measure social impact using relevant metrics, such as the number of jobs created or the number of people affected by the activities of a social enterprise.

    Measure social impact using relevant metrics, such as the number of jobs created or the number of people affected by the activities of a social enterprise.

    Polity, Academia, Business, Civil Society
    Solution
    Symposium 2011

    Invest in the financial literacy of social entrepreneurs and the social literacy of investors.

    Invest in the financial literacy of social entrepreneurs and the social literacy of investors.

    Invest in the financial literacy of social entrepreneurs and the social literacy of investors.

    Business
    Solution
    Symposium 2011

    Establish a social finance wholesaler to channel investment funds and champion the growth of social investment finance intermediaries.

    Establish a social finance wholesaler to channel investment funds and champion the growth of social investment finance intermediaries.

    Establish a social finance wholesaler to channel investment funds and champion the growth of social investment finance intermediaries.

    Polity, Academia, Business, Civil Society
    Solution
    Symposium 2011

    Develop public or private transnational impact investment funds, as sources of finance for social business, which aim to catalyze the growth of the sector.

    Develop public or private transnational impact investment funds, as sources of finance for social business, which aim to catalyze the growth of the sector.

    Develop public or private transnational impact investment funds, as sources of finance for social business, which aim to catalyze the growth of the sector.

    Polity, Business, Civil Society

    Proposals

    Proposal
    Symposium 2011

    Youth Ministry Solution-Funding Social Enterprises

    Due to the dual objectives that social enterprises integrate, namely financial growth and profit maximization and positive contributions to social, ethical and issues, they have the capacity to partne ...

    Due to the dual objectives that social enterprises integrate, namely financial growth and profit maximization and positive contributions to social, ethical and issues, they have the capacity to partner with different types of institutions. For start-up social enterprises for example those involved in rural activities and production, local and central government would be a good place for them to access capital funding and seed money. On the part of government there is the realization that it will require political will and a deeper understanding of the functions of the social enterprise and the expected benefits within the community. There is

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2011

    From the Ethic Finance to the Social Finance: Patient Capital and Social Investment

    Techniques and tools, specific to the financial world, represent a great opportunity for the Third Sector organizations and "socially oriented" businesses. The study must necessarily start from an ana ...

    Techniques and tools, specific to the financial world, represent a great opportunity for the Third Sector organizations and "socially oriented" businesses. The study must necessarily start from an analysis of the investors, individuals and/or entities, interested in supporting economically organizations belonging to the diverse world of the Third Sector. In particular, there are two categories: the first category consists of the actors who deliver resources in various capacities in the form of grants in favour of non-profit organizations; the second category, instead consists of those subjects - the so-called venture philanthropist - that "enter" in the capital of a social

    Business, Civil Society
    Proposal
    Symposium 2011

    Funding – Achilles’ heel of Social Enterprises

    The social entrepreneurship model fundamentally calls into question the traditional assumption that the role of the market is to create value, while the state and civil society are responsible for red ...

    The social entrepreneurship model fundamentally calls into question the traditional assumption that the role of the market is to create value, while the state and civil society are responsible for redistribution and social concerns. By no means, however, is social entrepreneurship in opposition to our existing economic system − on the contrary: Successful examples of social businesses offer an approach that is rooted in the market economy, in the best sense of the word, and enrich philanthropic and governmental solutions to social problems. They fill a need that existing systems cannot. Social entrepreneurship is capable of triggering flexible, creative

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2011

    Funding Social Enterprises

    Solution 1: Develop new sources of finance for social business Impact investment funds focused on regions where traditional investment is lacking could raise the capital that is needed to bring capita ...

    Solution 1: Develop new sources of finance for social business Impact investment funds focused on regions where traditional investment is lacking could raise the capital that is needed to bring capital into innovative social business areas, thus increasing innovation in the sector. Theses fund can use traditional or new financial instruments and may be public or private and supported by tax incentives (see solution 2). Solution 2: Create tax incentives for investment in social businesses One reason for the lack of funding for social businesses is the potentially high risk and moderate return they offer. However, if it is in

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2011

    Invest in “financial” literacy of social entrepreneurs and in “social” literacy of investors

    Invest in “financial” literacy of social entrepreneurs and in “social” literacy of investors We are at an inflection point in our efforts to stimulate entrepreneurial activity to address some ...

    Invest in “financial” literacy of social entrepreneurs and in “social” literacy of investors We are at an inflection point in our efforts to stimulate entrepreneurial activity to address some of the most stubborn as well as newly arising social needs and problems. While access to financial capital remains important we have realized that 1) providing financial capital alone is not enough to encourage innovation and to scale and replicate solutions that work; 2) introducing new concepts such as “social business” is useful, but only if such concepts are filled with meaning and attain legal status, and 3) a new industry

    Business, Civil Society
    Proposal
    Symposium 2011

    Developing a Social Investment Wholesaler

    Support the development of the Social Investment Market by establishing a social finance wholesaler to channel investment funds and champion the growth of social investment finance intermediaries. Rec ...

    Support the development of the Social Investment Market by establishing a social finance wholesaler to channel investment funds and champion the growth of social investment finance intermediaries. Recent disillusionment with banking, finance and investment has accelerated the appetite among the broad investment community – from individual savers to large institutions – for investments that combine positive social impact with financial return. There is a growing belief that managing wealth does not have to be a binary choice between philanthropy and maximising a risk adjusted return. There exists a third option – social or impact investing – which provides some security

    Polity, Business, Civil Society

    Background Paper

    Background Paper
    Symposium 2011

    The Future of Funding for Social Enterprises

    The funding of social enterprises has undergone significant transformation over the last 20 years shifting from direct grants provided by government and philanthropic foundation sources, to earned ...

    The funding of social enterprises has undergone significant transformation over the last 20 years shifting from direct grants provided by government and philanthropic foundation sources, to earned revenues from a broader range of sources.

    In addition, the global economic crisis in 2008 has created new challenges and opportunities for the social enterprise sector. Fiscal tightening by traditional social funding sources was exacerbated by investor wariness of investments without clear reporting transparency and impact accountability. However, the high volatility of conventional markets has led investors to consider diversification strategies and counter‐cyclical investments, benefiting many types of social enterprise (e.g. microfinance).

    This paper describes the challenges and opportunities for funding faced by the social enterprise sector post‐economic crisis. It also proposes recommendations for social enterprise managers and policy makers that are intended to increase the pool of funding available to the social enterprise sector.

    Polity, Academia, Business, Civil Society