Reflections From the Social Finance Forum

This past November, over 600 investors, entrepreneurs and professionals from the world of finance, nonprofit and public policy, converged upon the MaRS Discovery District in Toronto, Canada. They were assembled for the annual Social Finance Forum (#SFF19), which I attended as a participant; as well as, moderator of the Purpose & Impact panel in my role as Board Chair of Social Value Canada.

#SFF19 brought forward a number of important takeaways and conversations which have given me much to contemplate. They’re of particular interest to those of us organizing the upcoming Social Value International (SVI) Global Social Value Conference Toronto 2020, and we anticipate continuing to advance these discussions at our international event.

At the end of the day, the biggest takeaway for me was the need to urgently act upon the promise of bringing a holistic perspective to everything we do; one that embraces social, environmental and financial value and returns. Without urgent action, available financial resources will continue to sustain a system of inequality, negate other more environmentally sustainable options and reduce the overall wellbeing of society. The promise of social finance will not be realized without a clear commitment to value social and environmental outcomes as equal in priority to financial return.

It is time for action. While social finance can offer us ‘patient capital’1 we can no longer be patient in our approach to incorporate social value into our thinking and approach. That belief system underpins the international social value worldview, inspires our work and guides us forward.

Principles are universal

Similar to all professional management practices, an assessment of social value is conducted with a close eye upon the underlying principles of good, transparent practice. Social value thinking references seven core principles as central to the pathway to evaluate and report: involve stakeholders; understand what changes; value the things that matter; only include what is material; do not over-claim; be transparent; and verify the result.

I found it especially heartening to hear the confirmation of those principles by numerous speakers throughout #SFF19. There was a lot of discussion around the need for transparency, for example, and the importance of a stakeholder-driven approach that truly meets community needs and creates opportunity that is truly desired in community.

As they continue to be referenced and integrated into evolving and emerging measurement and reporting standards, it becomes obvious that the social value principles are universal in nature. As companies discuss social and environmental impact integrating balance sheets and annual reports 2, as social purchasing brings forward opportunities for government to create value through infrastructure spend3, as multiple actors come together in a bid to create a consistent approach to manage impact4 – the social value principles are embedded within that work.

Heed the off-balance sheet risk

At #SFF19, there were several calls to evolve the definition of fiduciary duty. The current, traditional definition stands in contrast to the mounting evidence, research and discussion on off-balance sheet risks and the perils of ignoring them.

As we’ve seen with pipelines and other matters, when the off-balance risks are significantly social in nature, an investment will be disrupted. Without question, we need to think long and hard about the value created by addressing off-balance sheet risks and opportunities, something we will be doing at SVM2020 later this year.

Focus on value creation

Another issue of focus during the Global Social Value Conference Toronto 2020 will be the need to stop thinking of impact investments as offering a reduced return. I’m tired of hearing investors say they made a sacrifice opting for an investment with social or environmental impact. Here’s the thing: if you truly valued that impact, you would view it as a greater return, not a lesser one.

Moreover, clear assessment of your off-balance sheet risk would become priority. Take the UK’s Scottish Power. When upgrading their energy infrastructure, two options were clearly presented. The first was to continue to ignore concerns of locals regarding the footprint of much-needed upgrades. The second was to alter the infrastructure in order to address the significant concerns of stakeholders along the infrastructure pathway. They chose option 2 at significant additional upfront cost. Imagine investing more AND increasing ROI by creating stakeholder value – this is the result of social value thinking.

The Scottish Power example illustrates what happens when you make a mindset shift and view investments as generating a greater return when they offer social and financial impact, versus financial impact alone.

Keep in mind that no investment sits alone. It’s integrated into a portfolio with other investments, intended to collectively meet your needs. One investment in that portfolio can yield higher financial returns, while another can be more socially or environmentally valuable. As in any portfolio, tradeoffs are common and a balance is key, so long as your portfolio achieves your goals overall.

Don’t leave half your brain at home

Finally, in the session I facilitated, one question provoked a very lively response that was a fantastic way to round up our session and launch into the rest of the Forum. Interested in a career in the broad social finance space, Jake Stacey (Vancity Community Investment Bank) and Jed Emerson (Blended Value.org – and our social value Godfather) were asked whether opportunities were truly available if one’s background was social not financial. While both had a positive and emphatic respone, Jed was particularly vehement and reflected on his own personal journey from social worker, to organizational leader, to now international expert in financial markets.

Rejecting the notion that someone working in the social sector leaves half their brain at home every day, Jed emphasized that solutions to the urgent problems that our world is now facing will only be addressed if we bring our whole brains and selves to work. To think otherwise only advances a false narrative and perpetuates a system that prioritizes financial return over equality, environmental sustainability and our overall well-being.

The timeliness of this conversation cannot be overstated. Thinking and acting from both sides of the equation, embracing a comprehensive approach that embodies a social, environmental and financial perspective, is the social value mindset. And it’s the only way to fully attain our social value principles toward meeting the UN’s Sustainable Development Goals.

I’m writing this on my way to the Social Value UK Conference: Time to Act. Time to act indeed! Right now. I look forward to pursuing opportunities for action at SVM2020 September 29-30th, in Toronto.

See you there!

1 https://en.wikipedia.org/wiki/Patient_capital
2 Capitals Coalitions
3 Social Purchasing Agenda
4 Impact Measurement Project