The FIFA World Cup is over. It was an exciting display of drama, talent, and endurance of football’s finest. But there is a big gap in the lives of hundreds of millions that needs to be filled until the Women’s World Cup next year and the next men’s tournament in 2022.
So what if we convened a World Cup of impact investing to fill that gap? Ok, so it may not be quite as exciting as watching Ronaldo, Neymar, or Mbappé. (Or Christine Sinclair). But strikingly more important. What nations would make the tournament cut? Who would make the quarters, or semis, or even the finals? Are there regional powers?
It is a vaguely dangerous proposition to evaluate the planet in a single post. But it could be a bit of fun, an opportunity to spark some debate, and a big motivation for Canada (and all countries) to pick up the ball in this fast-emerging field. It’s already been done in social enterprise, albeit with a fair amount of rigor by the Thomson Reuters Foundation.
So let’s give it a go: Here’s an unscientific, imprecise, fan-styled, and mostly fact-free analysis.
Ground Rules: Conditions for Success
Before the coin toss, we should sort out some basic ground rules for the game. Here are some conditions for success:
- Field the right team of companies and investors including superstars and role players;
- Combine the right strategic management and coaching team including financial institutions, specialized intermediaries, and government; and
- Demonstrate statistical firepower including capital and measureable social and/or environmental impact.
The stakes are high in this $228 billion and growing market. Let the tournament for the World Cup of impact investing begin!
A key question: like the FIFA World Cup, would the Impact Investing World Cup be dominated by Europe?
The Europeans would have the right ingredients to lead in the Group round and to have many nations go deep in the tournament:
- According to Bloomberg, Europe’s banks are moving to greener finance in response to climate change risks. UBS recently introduced a sustainable investing strategy to its wealth management arm in Europe that has amassed $2.4 billion from investors in the last six months.
- Many European pension funds are going big on sustainable and impact investing, from PGGM in the Netherlands to ATP in Denmark, which has about $120 billion in assets under management and is based north of Copenhagen, predicts it will make about 10–12 percent with its bet on the Danish SDG Investment Fund, an investment vehicle that’s based on the United Nation’s sustainable development goals.
- BNP Paribas, headquartered in Paris, France, and one of the world’s largest financial services institutions, was named “World’s Best Bank for Sustainable Finance 2018.”
- The European Commission is creating the regulatory framework to enable sustainable finance to thrive.
- Europe is home to the Luxembourg Green Exchange (LGX), the first fully operational stock exchange globally to introduce a platform for green financial instruments which lists 50 per cent of the world’s green bonds.
- In Ireland, Clann Credo, a specialized social finance lender just reached the 100 million Euro mark in lending.
And then there is Vatican City, which could be the Iceland of this particular tournament, as they continue to have an outsized impact on the impact investing game compared to their population of one thousand souls. The Pope has been a big advocate for impact investing, while the institutional Church continues to convene and seek a path on this approach to investment.
The United Kingdom has been recognized for the past few decades as a leader in social finance, which would put them in a strong position to compete for the Cup finals.
The U.K. Government has cultivated and invested millions in the impact investing team over time, and they are advancing to move policies to move billions more through pension schemes under new regulations. At present, they are gearing up for a big social impact investment drive with major mainstream market players.
Alongside government, there is a well-known group of specialized intermediaries like the London Social Stock Exchange, Ethex, Big Society Capital, Social Investment Business, and Good Investing that represent big threats to any competing team. Plus, they have Sir Ronald Cohen, who can only be described as the David Beckham (or maybe Ronaldo for now) of impact investing.
And there a massive team of impact enterprises with big reach. According to the Social Enterprise: Market Trends 2017 report, nine (9) per cent of Britain’s small and midsize enterprises are social enterprises. That means that the U.K. has 470,000 social enterprises that have created 1.44 million jobs.
The statistical firepower is similarly strong, with the impact investing market last measured at £150 billion in 2017.
Impact investing teams in Latin America are vibrant and highly competitive, with market leaders in Mexico, Brazil and Colombia.
Mexico has highly creative and motivated management group, with outstanding intermediaries like New Ventures, Promotora Social Mexico, and SVX Mexico. Mexico is also creating a highly innovative Regenerative Investments Hub that advance nature-based solutions that restore and and develop natural capital, social capital and economic capital. UNDP has identified Mexico as having great potential for opportunities to invest in nature.
Alongside a solid management group, Mexico also has one of the most outstanding impact investing convenings around the globe, providing a solid training ground for current and future impact leaders.
In terms of their stat line, it is estimated that $392 million USD has been dedicated to impact investing to date.
Alongside Mexico, Colombia has the potential to be a powerful nation in the impact investing field, particularly given its national development plan that seeks to drive inclusive, green growth. The social innovation, social enterprise and social impact investing ecosystem has rapidly developed and emerged in Colombia with active support organizations, government support, and impact investors, led by organizations including Socialab, Sistema B, Instiglio, Acumen, Root Capital, Impact Hub, and Avina. Colombia is already experimenting with innovative social finance strategies, and it is one of the first countries in the Global South to sign social impact bond contracts.
There is a lot of potential for impact investing in Colombia, so they have the opportunity to make it out of the Group round and to be a top team in future Cups.
Brazil is another Latin American team to watch, with local leaders creating a great team and management group, and stuffing their stat line. They have leaders like Vox Capital and in 2017, the President signed a Decree to promote and enable the social finance ecosystem.
There are a number of current, emerging and potential impact investing powers in the Asia-Pacific including China, South Korea, Japan, and Australia. It is believed that there is a lot of upside and potential for this market to be a future leader, with interest in sustainable finance surging in Asia.
Australia could be considered a regional power in the Asia-Pacific, with a definite path to the quarterfinals (and possibly beyond):
- The Australian government has made a solid commitment to impact investing, with recent statements on government principles for impact investing. The territorial government in New South Wales even has an Office of Social Impact Investment.
- The stat line is solid, with the Australian impact investing market now sitting at $6 billion.
- InnovationXchange, an initiative of the Australian Department of Foreign Affairs and Trade, is actively working to build the impact investing ecosystem in Asia-Pacific.
Outside of Australia, there are other competitors that could catch fire in the tournament this year and beyond:
- The market in Japan is estimated to be $718 million in 2017, and they are likely to dedicate more through dormant bank accounts.
- By the end of 2018, government and foundation partners in South Korea are planning to complete fundraising for a $276 million USD fund for social enterprises and co-operatives.
- China has intriguing players like Dao Ventures, and an opportunity to nurture a growing impact investing market.
- The impact investing market in India was $1.1 billion in 2016, projected to grow to between $6–8 billion by 2025.
Africa and Middle East / North Africa
Admittedly, I don’t have a lot of first-hand experience in the MENA and African impact investing markets. But this region is as diverse and vibrant as any other, with centres of activity in West Africa and East Africa, from Ghana to Nigeria to South Africa.
There are top coaches like the Tony Elemelu Foundation building an outstanding team of entrepreneurs and managers like AHL Venture Partners, alongside players like RENEW that are building a growing impact investor network.
It is clear there is great potential for the impact investing market, according to scouting reports from the UNDP, Wharton, and the GIIN (East Africa and West Africa). The question is which nations in this region could make it to the round of 16? South Africa? Ghana?
According to the Global Impact Investing Network (GIIN), North America would top the statistical leaderboard amongst impact investing teams.
The United States has loads of individual talent, capital, and superstars. They would be able to field a super-team of foundations, investors, and companies to make them a definite foe of the Europeans.
- The U.S. has major players like Nonprofit Finance Fund, ImpactAssets, and Omidyar with hundreds of millions of dollars in capital deployed;
- There are foundations with billions in capital dedicated to impact investing, including F.B. Heron, Macarthur, and Ford, as well as foundations building market capacity such as Case Foundation and Rockefeller Foundation. There are also multiple local community foundations including Atlanta, Philadelphia, San Francisco, Silicon Valley, and more that are focused on the communities and regions with local partners.
- The US has acquired ringers recently like KKR, Bain Capital, and BlackRock. They will need to provide themselves over the long-term that they are not short-term market rentals, like a free-agent ready to bolt to the next team after a one year stint.
- They have one of the biggest fan bases and gatherings. The annual SOCAP gathering attracts over 2,500 people from around the world.
- The US Community Reinvestment Act pours billions of impact capital into local communities, they are moving quickly to do more with opportunity zones, and there is tremendous local and state government action in impact investing.
Will the US just field collection of stars? Or will they have a coherent team that could win the Final? Will chaotic management challenges at the very top undo all of the progress made to date? Big questions. But they would likely be the team to beat in this competition.
And what about Canada?
Would we make the tournament? And could we make it past the Group round to make a run for the Finals?
There is stiff competition. But we do have a solid team, management, and good firepower:
- There are great managers including Renewal Partners, New Market and New Commons, Investeco, Sarona, Cycle Capital, Fondaction, and Genus Capital Management;
- Our national pension board (CPPIB) did just issue $1.5 billion in green bonds last month with, “…plans to invest more than $3 billion in renewable energy as it prepares for an expected global transition to a lower-carbon economy.”
- The government of Ontario has a longstanding commitment to social enterprise and social finance with tens of millions committed to building a market that can stands alongside global leaders;
- The credit union movement in Canada has a longstanding commitment to impact investing, led by folks like Desjardins, Vancity, and Libro Financial;
- We have a strong stat line with $9.2 billion in impact investing assets. And major asset owners like the J.W. McConnell Family Foundation and Hamilton Community Foundation have placed millions into the market.
- We also have the Wayne Gretzky of impact investing in Bill Young of Social Capital Partners (SCP). Apologies for the cross-over sports analogy – but we’re Canadian, eh?
So, how do we stack up? Let me be a bit bold.
Canada is being outplayed and outmatched by the Americans and Europeans (including the British)…. Canada needs to play catch-up in this field, particularly through our federal government, our major financial institutions, and our big financial services firms.
Like football (or as we call it: soccer) or basketball, we have all of the tools and talent. If we can put the pieces together in a coherent fashion, we could be a world changer.
Does it really matter who wins the finals? Perhaps not. But we should all try to compete. The drive for friendly competition will push us all harder. Riding on the outcome is our climate, our health, the resilience of our society and economy and much, much more.
Adam Spence is the director of SVX at MaRS in Toronto. Adam helped found the MaRS Centre for Impact Investing and the School for Social Entrepreneurs – Ontario. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of SVX. This article has been reposted with permission.