Environmental Finance Conference Part 1: Is It Impact Investment’s Indian Summer?

A stroll along Camden Locks

It’s September 30th and we’re having an Indian Summer in London.The streets are filled with people and the air is pleasant, not a wink of rain on the horizon…So it’s easy to talk about taking care of the environment when the environment is being so good to you, but most of those who attended Environmental Finance’s 2011 Impact Investing Conference last Friday have been working for environmental stewardship for a long time. They’re no fair weather folks; they’re experts in their fields. Thus, it was at a relief to hear on Friday that within the world of impact investing, most would agree that despite that first killing frost/ economic downturn, they’re also having an Indian summer.

“The financial crisis has left donors disappointed by the traditional market economy while philanthropists continue to take issue with the lack of oversight and discipline in NGOs,” Vivina Berla, Senior Associate at Sarona Asset Management reported. “This leaves an important gap where impact investing can attract newcomers…There are more internationally trained, globally located investment firms than ever before and the potential capital going into this sector is very high.”

However, unlike some of London’s other announcements (i.e. The Royal Wedding or 2012 Summer Olympics), the newcomers have not arrived overnight. What’s the hold up? It may have to do with the fact that nobody seems to have a clear idea of what impact investing is:

• Is it values-led?
• Is it socially responsible?
• Is it mission-based?
• Is it conscious-intentioned?
• Is it environmentally friendly?
• Is it blended returns?
• Is it “that thing I’ve been doing for years, but nobody had a name for it?”

Everyone seemed a bit too eager to beat a dead horse, but finally, there sounded two voices of reason.

“We can sit all day long and argue about what impact investment is,” Michele Giddens, Executive Director of Bridges Ventures pointed out, “but it sits in a larger world of investments and what we should be discussing is how we can make ALL investments more responsible.” (Amen, sister. Now let’s get on with this conference).

And then there was James Vaccaro, Management Director of Triodos Renewables, who described his public limited sustainable energy investment company as a “footprint for a mentality” which was about the sexiest thing I heard all day. That’s the kind of phrase that’s going to draw people into impact investing – something smart and sassy that doesn’t sound overtly religious or heavily technical, but makes you want to know more.

Mark Campanale at the podium.

There were lots of compelling sound bytes throughout the day long conference, but I was most consistently impressed by two-time speaker, Mark Campanale, the Executive Director of The Social Stock Exchange. Campanale identified the two fundamental barriers to increasing impact investment deals is a lack of visibility and a need to make the process more democratic. In other words, investors cannot easily find the products that they are looking for without going to specially trained financial advisors (who still are yet to be mainstream) and impact investing appears only to be a possibility for the rich. (If you recall, similar concerns came up in our coverage of SOCAP 11).

Campanale’s latter comment certainly resonated with me as I don’t – and may never have – a lot of money to my name, but I am excited about impact investment and would like to actively participate in its growth. I am from the generation that graduated in the midst of the 2008 economic collapse and as a consequence, I have lost all faith in traditional banking methods. Now finally out from under my student loan debt, the next step is to start building a retirement fund…yet there are very few places where I feel comfortable putting my money.

Fortunately, Campanale’s answer to these problems is very exciting. He and his partner, Pradeep Jethi, are in the process of starting the first ever UK Social Stock Exchange (SSE) – a platform which allows trading of securities in social enterprises on a Financial Authority Regulated stock exchange. As a grantee of the Rockefeller Impact Investing Initiative, SSE’s goal is to have up to 200 companies listed within the first 5 years,(all subject to a social audit), with steady projected growth in the years to come.

Campanale says that when it comes to social enterprises, seed capital is no longer the main problem. Investors have already warmed to the social enterprise movement in numbers. However, securing sustainable, long-term capital is another story and that is where the SSE can help. By transforming the exisiting economy to better fit the needs of the new social enterprise business model and finally paying closer attention to the triple bottom line…well, it may be just the tweaks needed to fully restore our faith in finance. Whether it is a pipe dream or an emerging reality remains to be tested, but Campanale had more than a few of us impressed with his futuristic thinking.

What do you think? Is a social stock exchange a more effective way to connect social enterprises and private investors? Is it the answer to taking what is now a niche market and turning it into the mainstream? I encourage your comments below.

Please keep reading for part 2 of our coverage on the 2011 Environmental Finance Impact Investing Conference in the days to come.