NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Katherine Fulton just kicked off Day 2 of the Social Capital Markets Conference. Her address focused on the complexities of this moment in history for the economy as a whole and for the social capital markets movement in particular.

Ms. Fulton addressed the driving forces behind impact investing and the social capital markets movement, Monitor’s characterization of the current moment for the sector and the critical success factors to move the sector forward towards consolidation and efficiency.–

Money seeking diversification, values-driven investment, talent demanding new career paths and more individuals interested in combining money and meaning in their careers are some of the driving forces behind this movement. The question is no longer whether it’s possible to reconcile impact and return motives in investment but rather whether the space around it will be able to take off.And by taking off we mean leaving its current period of “Uncoordinated innovation”, as Ms. Fulton and Monitor describe the state of the social investment space. Can it become an organized and efficient space and leave its current “rudimentary moment”, as described by Asad Mahmood yesterday?

Indeed, the sector finds itself in a tipping point. “Wishful thinking is not a strategy”, said Ms. Fulton and we must also avoid falling into generalizations like the negative “this is too hard to achieve” (due to difficulties of execution, impact assessment, not enough dealflow, etc.) or “too easy to achieve” (simply over-simplification of social impacts or greenwashing of non impact-related investments). Neither is true. A healthy, pragmatic and realistic balance must be found to create an impactful market for investments seeking both impact and return.

The last section of Ms. Fulton’s intervention focused on her view of the three key elements will be required to move this movement forward: Unlock talent and capital to make intermediation more efficient, build enabling infrastructure (i.e. an ecosystem of support for all the actors involved in these transactions), and develop “absorbing capacity for investment capital”.

In turn, these key elements translate into specific actions that Monitor envisions happening over the next 5 to 10 years and will be key for the sector to really take off. Following are the three that resonated most with my thinking of this sector and with the hallway conversations I’ve had at SoCap.–?

• The creation of large industry? defining funds that address specific social issues (i.e. shift towards greater specialization in sectors and/or geographies)?
• The design of industry standards for social impact metrics that show how it can be achieved and what it takes to make it durable.
• Lobby for specific policy/ regulatory changes that continue to enable impact-related investment.?

All in all, Ms. Fulton’s was a balanced and down-to-earth view of where the sector stands and what it needs to become a coherent and efficient agent of change. Success for the sector will mean creating credible alternatives to current investment vehicles, and achieving it will require bold leadership as well as greater collaboration among the players that are part of today’s “uncoordinated innovation”.

But foremost it will require, in Ms. Fulton words, “moving beyond wishful thinking and celebratory mood”.? ?