{"id":1644,"date":"2009-09-12T05:40:21","date_gmt":"2009-09-12T05:40:21","guid":{"rendered":"http:\/\/ietransfer.wpengine.com\/?p=1644"},"modified":"2009-09-12T05:40:21","modified_gmt":"2009-09-12T05:40:21","slug":"growth-potential-the-new-intersection-of-meaning-metrics-and-money","status":"publish","type":"post","link":"https:\/\/inspiredeconomist.com\/articles\/growth-potential-the-new-intersection-of-meaning-metrics-and-money\/","title":{"rendered":"Growth Potential: The New Intersection of Meaning, Metrics and Money"},"content":{"rendered":"
<\/a><\/p>\n Even a year gone since the failure of Lehman, fundamental questions remain regarding the core underlying assumptions of our financial system. Though currently derivatives trading\u00a0and black boxes appear out of favour, what will replace them in terms of helpful and productive uses of capital still has yet to be determined. This question was what the\u00a0Conference on Social Capital Market\u2019s<\/a>, or\u00a0SoCap09<\/a> tried to give some structure to; while the trend towards sustainable investments and long-term ROI seems to have taken the place of actively managed funds seeking 20x returns.<\/p>\n <\/p>\n So what does this world presently look like? For one, It is not as easy to quantify as the Deloitte\u2019s of the world would want it to be. In fact, Christopher Park from the company referred to standard accounting metrics as \u201ca warm blanket\u201d when compared with the confused and nascent metrics which provide assessment in this space.\u00a0 Secondly, these markets are not as tested as traditional investment options. The oldest of these players, Calvert Foundation has only been around for ten years in it\u2019s current form. The new-kid-on-the-block-phenomenon is both Social Capital\u2019s largest asset, since apparently Wall Street pre-2008 logic wasn\u2019t exactly perfect, as well as being it\u2019s biggest challenge. Though\u00a0the perception of\u00a0Social Capital investments as a novelty, coupled with\u00a0a\u00a0palpable unfamiliarity with the valuations\u00a0make this space\u00a0seem unlikely to attract traditional capital, maybe \u2018Social Investing\u2019 is just a new word for a very old idea.<\/p>\n From the start of capitalism there have been players whose goals were multiple. From the massive endowments of the Rockerfellers and Carnegies to the educational scholarships committed by what today are called \u2018high net-worth individuals.\u2019 These acts of philanthropy were the yin to the yang of free-market capitalism. The question now is whether metrics and forcastable, and market-rate ROI can be properly delivered by such investments. Fittingly, Rockerfeller Foundation and Deliotte among others are behind the current push to bring the metrics of high finance down into the social sphere. One such project, called\u00a0IRIS<\/a> for \u2018Impact Reporting and Investing Standard\u2019s\u2019 goal is to set agreeable metrics so comparing between these investments will be simpler. These metrics will require reporting of data such as: job\u2019s created, revenue, etc., and are the underlying piece to developing the GIIRS, or \u2018Global Impact Investing Rating System\u2019, which will be similar to rating agencies in other asset classes. These new elements will undoubtedly smooth the road between capital and investments, if only just through the process itself introducing these actors to one another. There will have to be strong deliberative processes since the space constitutes of everyone from hedge funds to single social entrepreneurs.<\/p>\n While metrics and ratings are one solution to the problem of moving capital into the social sphere, other problems remain. One refrain at the conference was that investors feel comfortable\u00a0either<\/em> maximizing their investment returns\u00a0or<\/em> giving away money to charity. Oddly enough investors who were asked to invest in these blended value products had so much difficulty bridging these two worlds that they often wanted to\u00a0 offer the money as a charitable donation. Though there are some reasons for making donations above proper investments due to tax laws, by-in-large this kind of response is nonsensical. Social funds not only infuse money towards inherently sustainable models, which need seed or growth funds, but they can often provide returns on the investments which in some cases exceed market-rate.<\/p>\n To combat this cultural wall, members of the Social Capitorati made the case that in order to attract capital, would-be ambassadors must use only the language of traditional finance. Jed Emerson of Uruhu Capital, who hasespoused such social investments for many years<\/a> discussed how at his fund he only speaks in phrases like \u2018risk management\u2019 and \u2018qualitative assessment\u2019 which, while they might seem euphemistic, could succeed in bringing down the barriers present for capital infusion into the space.<\/p>\n