Lessons from Lugano: Partnering for Global Impact 2013

I had the pleasure of attending Partnering for Global Impact 2013 in Lugano, Switzerland, on July 10 and 11. The conference’s aim was to bring together renowned global leaders in impact investing with social enterprises that are bringing about changes in healthcare, education, agriculture, clean technology and housing.

Speakers included Sir Ronald Cohen, head of Big Society Capital, who I had the opportunity to interview; Jed Emerson, author of Blended Value; and John Morton, chief of staff at the Overseas Private Investment Corporation. Speakers varied in sector experience, as well as geographic target, which allowed participants to gauge where impact investing is going next and what we can do to build the market.

“We’re on the brink of a revolution”

During the conference, I had the pleasure of interviewing Sir Ronald Cohen and getting his take on the future of impact investing. He believes that we can do with social and environmental investing what we did with technology investing. He believes that as venture capital continues to acquire impact investing assets, so too will mainstream financial institutions, followed by retail investors. “We’re on the brink of a revolution,” Cohen said.

These assets will play many roles in companies new and old. Social technologies will begin to form models of new companies that have locked-in social missions, while well-established traditional for-profit companies will begin to adapt social enterprise models so that they can play a role in this new paradigm. The result will be continued and growing impact that cuts across sectors, across industries and throughout supply chains.

We have to be critical and thoughtful

Filipe Santos, academic director of the INSEAD Social Entrepreneurship Initiative, warned conference participants to avoid the hype of impact investing. He stressed the importance of finding the gaps, clarifying opportunities, building infrastructure, and validating models and niches. Impact investing is not just about what’s trending.

To further stress overcoming the hype, Ken Crossley of the United Nations World Food Programme posed five questions that social entrepreneurs and impact investors should consider when thinking about their solutions or impact investment:

1. How grand is your vision? Many of our world’s most persistent problems are not small ones. For instance, there are 870 million undernourished people in the world and solutions to this problem need to be applicable and replicable across regions.
2. How deep is your vision? Solutions need to have depth, meaning they must impact the people most affected by the problem or else the problem will still persist but at different magnitudes.
3. How textured is your vision? Many solutions run the risk of treating problems without regard to the greater issues at hand. Hunger is a problem, but increasing access to processed foods, for example, will do little to tackle malnutrition and food-related health ailments such as stunted growth in children. Entrepreneurs must consider the many facets of a problem and take a systems approach to understanding where the key issues lie.
4. How realistic is your vision? Being able to execute and implement a solution is critical. Social entrepreneurs cannot overlook the barriers that are in front of them. Whether there are political considerations or administrative barriers, social entrepreneurs must be honest with themselves about what can be implemented and what the capabilities of their solutions really are.
5. How inclusive is your vision? Partnerships are critical to addressing each of the previous four questions. The right partners collaborating with the right resources can bring validity to a solution and ensure that it is more than just hype around a good idea.

Impact entrepreneurs and investors who critically evaluate a problem, a vision and a solution will be critical to the growth of impact investing. Being thoughtful and deliberate about what the impact will be and how that impact will be achieved will help investors and entrepreneurs avoid the pitfalls of following a trend or falling for the hype.

We can’t overlook the supply chain

Innovation doesn’t just lie in an end product or consumer service. Brendon Brewster of Veerhouse Voda described how his firm builds affordable housing with a particular focus on working with suppliers to develop the most sustainable materials and inputs. This approach amplifies impact while increasing the quality of the company’s housing stock.

Impact investing will play a larger role in supply chains. For instance, as clean technology grows and achieves scale, it will need a supply chain that is also clean, sustainable and at scale. Whether it is mineral processors or plastics producers, innovation in sustainability in these lines of business is critical.

It’s even more important for investors to understand that they can have an impact throughout the supply chain, rather than just at the end or the beginning. These middle suppliers will need the same impact capital and business supports to help them bring their innovations to market and scale.

Partnering for Global Impact 2013 was a remarkable experience for investors and entrepreneurs trying to understand and cement their roles in the ecosystem of social and environmental change. I look forward to next year!