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Tuesday, May 31, 2011

SOCAP/Europe Kicks Off With Notes of Change

By NextBillion Editor

By Diana Hollmann and Martin Herrndorf

Building on 400 years of history

Amsterdam is a city of many vices - it may not be a coincidence that the impressive "Beurs von Berlage", the world's oldest stock exchange, marks the entrance of the red light district. These days, it could mark the coming of a new age of capitalism, said Frank van Beuningen, one of the founders of the SOCAP/Europe conference, in his opening speech. Where traders gathered 400 years ago to "share" the risks taken by enterprising captains in the emerging global shipping business, social entrepreneurs and investors now gather to share their latest insights and experience on how to invest capital for social progress.

The meeting is the first step of the SOCAP conference from California outside of the US. With The Netherlands, the organizers have chosen a country in the middle of Europe that is home to some of the leading players in social innovation and social finance (like Triodos or enviu). And a lot of players from the nearby and far countries (50 in total) have joined the effort.

The meeting comes at a crucial point - as impact investing is growing bigger, so are its impacts - are they good, as SOCPA Co-Founder Kevin Jones says, or counter-productive for social entrepreneurship, as Felix Oldenburg (who will also speak in the coming days) remarked in a recent NextBillion post?

Opening address - Princess Máxima

Princess Máxima of the Netherlands, herself Special Advocate for Inclusive Finance for Development of the Secretary General of the United Nations, kicked of the conference with her perspective on money for meaning. According to her, there is no silver bullet as to what finance vehicle will solve development challenges. The question is not about microfinance or impact investing, it is about creating sustainable value by providing access to finance, providing non-financial assistance and both in a socially responsible manner to those in need. 

Responsible finance is essentially build on three pillars: appropriate regulations need to be in place to create a level playing field, consumers need to be financially literate, and the investment industry needs to be self-regulated. Princess Máxima called upon investors and shareholders more broadly to advocate for self-regulation through means such as the UN Principles for Responsible Investment that were recently signed by 40 pioneering investors. These signatories commit themselves to transparency and sustainability in their operations.

Panel - Collaboration and Transparency, but still no silver bullet

The opening speech of Princess Maxima was followed by a quite diverse panel: Marilou van Golstein Brouwers of social bank Triodos, Klaus Tischhauser of social investor responsAbility, Jonathan Jenkins of social entrepreneurship promoting organization UnLtd, and SOCAP's Jones discussed issues around social capital with moderator Magaret MacGovern.

A recurring theme both in Princess Maxima's keynote and during the panel was the importance of collaboration. A first wave of social entrepreneurship was driven by charismatic individuals. But in the coming-of-age story of social entrepreneurship, individualism might be outdated: "We're beyond the hero. Heroes are not investable," Jones said. This trend toward "collaborative entrepreneurship" applies within and across organizations and sectors.

Tischhauser stressed the importance of transparency for the sector. At the same time, he emphasized that high transaction costs were already a strong burden for the sector. Having "complex systems" to measure impact would neither be in demand from investors, and probably counter-productive in bringing transaction costs down (providing a nuance to the debate about impact assessment). Transparency should thus come in different ways - in openness towards investors, or, proposed by Jenkins, in stories that stick in the head and inspire.

Taking up Princess Maxima's opening, all panelists agreed that there is no silver bullet to solving development challenges. However, some discord emerged as to the direction of change needed. Tischhauser, for instance, advocated for an approach to harvest low-hanging fruit and slowly grow the impact investing industry. He called for growing initiatives that have proven effective to then build on them. Once the first institutional investor is ready to commit to impact investing, others will follow. Marilou van Golstein Brouwers, managing director of Triodos Investment Management BV, on the other hand promoted transformational change - a radical shift in funders' mindset - to invest in innovative approaches. According to Brouwers, change starts with the people when you move hearts.

As to what is required to push impact investing to the next level, the panelists seemed to agree that finance vehicles allowing institutional investors to enter the space are needed. Also the search for patterns that enable initiatives to succeed needs to continue.

SOCAP's Jones outlined a shift that is already taking place: the power within the impact investing space turns from the investors to the entrepreneurs. While in the past entrepreneurs tended to be recipients of funding, they now are starting to be decision makers. One example is the model of Village Capital: entrepreneurs take charge in conducting the due diligence amongst each other selecting the most investable companies for investors. Additionally, peer-to-peer support will become more important than mentoring from investors or other partners. All in all Jones summarized: "The power of money is going down and the power of entrepreneurship is going up."

With their closing remarks, the panelists got personal. Tischhauser asked the participants to "come again" - not take SOCAP as a three-day stint into the sector, but take up the challenge to work on a problem on a longer-term basis, and dedicate themselves to the topic. On a similar note, Jenkins asked participants to "find your battle" - focus on a selected issue like angel investing or energy - and get together with the people in the crowd that already tackle the issues.

The SOCAP Social Entrepreneurs presented

The opening ceremony was finished with the introduction of the invited social entrepreneurs (for an inspiring hour, click through the full list, read the Social Capital Spotlights on selected entrepreneurs, or take the shortcut with our NextBillion preview). They're an amazing set of people, many of whom have a stand in the SOCAP exhibition hall, who have shown and proven how one can move from idea to impact.

Two full days ahead

SOCAP Europe has just started; the next two days bring a full schedule with workshop sessions and panel discussions. For those who want to follow offline and check the livestream from the panels, check the updates @SOCAPEurope or @Nextbillion accounts. Or, directly indulge in the Twitter chatter on #socapeurope channel, if you can't join the endless stream chatter and exchange on social investment's opportunities and pitfalls that's gonna fill the foyer over the next couple of days...

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