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Winter 2013: Building a marketplace for social impact investment

From the Editor

Social impact investment aims to place capital and capability to create positive social and environmental outcomes, while maintaining some financial return. It is not a new idea but has in the last few years has reached unprecedented global scale and the depth and sophistication of research supporting the market has grown.

This year saw the release of the Federal Government’s Impact: Australia report, which issued a call to action for all of us to tip Australia past our current point of ‘uncoordinated innovation’. We have a series of innovative social impact investments in Australia, like the Social Benefit Bond and SEDIF, which have taken international ideas and have tailored them to the needs of an Australian context. But we do not yet have an effective, efficient marketplace to support the creation of social and environmental impact, and scale Australia’s social enterprises.

This edition of Knowledge Connect explores what we can collectively do to develop this social impact marketplace in Australia by developing a better understanding of the ecosystem and its interactions and interconnections.

We cover recent literature from leading international social marketplaces as well as Australia and explore perspectives from a variety of market actors.

There are some key themes that resonate through these resources: leveraging the diversity of many market actors; exploring the unique role of the social impact investor and importantly, ensuring the market remains driven by meaningful social purpose.

Firstly, it is critical that a social marketplace should leverage the many diverse actors in the ecosystem. Clark et al identify six market dynamics that characterise and define social impact investment, and highlight innovative ways that marketplace actors create new opportunities. The report by the UK Cabinet office considers how philanthropy can be used strategically to unlock capital and build capabilities in the social marketplace through co-mingled investment funds. Burkett identifies a diverse range of roles that are played by financial intermediaries in supporting the growth and sustainability of the social marketplace. This complements the detailed review by Gregory et al, which highlights the tensions and mismatches between market actors with respect to investment readiness.

Secondly, the unique role of the investor in social impact investing is one of capital provider, market maker, coach, verifier and policy maker, requiring them to be far more active than an investor in the traditional markets. Goldman and Bannick explore the need for investment to create industries in which enterprises trade rather than funding the enterprise alone. And Clark et al develops the concept of the active investor and how they interact with fund managers to create flexible platforms.

Finally, we are reminded in this period of growth and development to ensure we maintain a constant and careful focus on social purpose. Burkett argues that we must ensure that all investment marketplace is demand-led and driven by creating impact, defending against supply-driven mission drift. Ebrahim and Rangan inject some rationality into the debate over social impact measurement, by linking the social purpose to what may feasibly be expected of social impact measurement. And finally, Geoff Mulgan’s new book The Locus and the Bee, allows us to take a step back and consider how social impact investment fits into the broader landscape of capitalism, and leverages capitalism’s potent creative forces.

In this edition, we connect you with some of the most recent thinking on social impact investment as we convene a series of events in the coming months on building a marketplace for social investment. Links to these and further resources are provided if you cannot make our events in person, and please provide your comments and ideas through the blog.

Sandy Blackburn-Wright & Sarah Adams

Guest Editors, Knowledge Connect


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