This post originally appeared on SocialFinance.ca. It was published on August 26, 2013.
At the beginning of August, I had the chance to speak with Jed Emerson, originator of the term “blended value”, co-author of one of the most well-known books on impact investing, Chief Impact Strategist at ImpactAssets, advisor to three “all in” impact investing families—and soon to be speaker at SOCAP13.
In the wide-ranging interview, Jed shared his insights on the growth of the social capital market, on the development of the social finance talent pipeline and on leading a “blended life”. Below are nine insights gleaned from the conversation. Jed’s comments have been edited here for length and clarity.
1. The growth of the social capital marketplace is progressing at an encouraging rate and is dependant on the continued development of new tools, platforms and policy.
I think that the continued progress of social finance practices, the development of new social finance tools, of platforms, of policy changes—Social Impact Bonds, Social Venture Exchanges, B Corporations—and others are all critical in the development of the impact ecosystem. What we’re seeing happen is the evolution of this social capital market.
We’re seeing the development from individual deals and small syndication offerings to the next level of evolution that requires intermediation, investment instruments people can come into and come out of, and the creation of a functioning capital market, rather than a niche market. The field is rapidly evolving to a time when we will have a variety of impact products. Instead of 400-500 funds that present themselves as impact funds, we’ll have 4000-5000 vehicles, impact instruments and options for investors.
2. Metrics are important, but must be useful for the investor andthe entrepreneur.
Over fifteen years ago when we were working on the Social Return on Investment framework, I really felt like there was the possibility of coming up with a definitive framework by which entrepreneurs and investors could assess impact, value creation and capital performance. Now fifteen years later, what I think I’m coming to as a conclusion is that there will be real diversity around the type, form and function that metrics play with regard to how we execute an impact agenda.
I think the conversation needs to be a “both/and” discussion around the metrics most investors really need in order to have certainty regarding performance. But even more importantly than the need of the investor for those types of metrics, is the need of the entrepreneur. The entrepreneur needs to be supported in developing metrics that are relevant to the management of their enterprise. I think at the end of the day, if the metrics aren’t improving practice, they’re not going to have integrity; and from an investor’s perspective, they’re not really going to tell you anything.
3. Canada needs to shout louder.
Canada has always been the world’s quiet secret in the world of impact investing. Canada has had a ton of innovation with regard to community and social finance—the MaRS Centre for Impact Investing and the Task Force on Social Finance are two examples—but I think Canada’s challenge, (as is always the case!), is that Canadians are the most polite people in the world. I think Canadians have been hesitant to promote the innovations and the lessons they’re pioneering. In the next 5 years I’d like to see Canadians do more to promote the good work, thinking and practice that’s taking place north of us.
4. SOCAP is like “Burning Man meets Wall St.”
Last year, someone asked me why they should attend SOCAP and I told them, “The reason you should go is because it’s kind of like Burning Man meets Wall St.”—and that’s kind of it. It’s a celebration and it’s a party. It’s an opportunity to learn more about finance and investment—everything that has to do with how to move capital for good—and it’s a lot of fun.
In attending major conferences such as SOCAP, you can go too far. There was a period where I felt like I was attending every single conference that was happening all over the world and personally, I’ve really started to dial back. But I have an emotional affinity with SOCAP. I have personal and professional connections with the co-founders; I’ve had the pleasure of watching SOCAP evolve over the years, and it’s just a fun place to go.
5. Global collaboration is important—if all parties are truly open to learning from one another.
As a field, I think we have to learn how to collaborate better because I think that too often when thinking about collaboration, many from the US, Canada and Europe, think of bringing things to developing markets and other countries; whereas when we really look at the examples of microfinance or a lot of what has happened in sustainable agriculture, there’s phenomenal innovations that have come from outside of the US that can really inform and make stronger the efforts and initiatives that are occurring in North America.
I don’t think the question is whether to collaborate, but rather about figuring out how to collaborate in a way that adds value on both sides.
6. In the world of impact investing, talent has outpaced demand for skilled workers, but young people aren’t waiting around.
I think impact investing is in an “awkward adolescence” period, the phase in which we have a surplus of talent and enthusiasm and we don’t have enough places for that talent and enthusiasm to plug in.
We’re seeing a lot of people coming into the conversation from traditional finance and we’re seeing more and more folks coming out of more traditional non-profits. We’re also seeing a wealth of people in their twenties who are coming into this space, folks who almost seem to be prewired to play, (meaning they don’t think, generally speaking, with a bifurcated mindset). They’re not coming out with this traditional idea that you have to develop a skill set in one place before you can move onto the next stage. And they certainly have a better understanding of the possibilities of pursuing profit with purpose.
The challenge is that for a lot of these folks, they’re almost ahead of what the market has to offer in terms of specific job possibilities. We still only have 400-500 funds that you can look to—we don’t have 4000-5000 funds. I think this is why you see things like theUnreasonable Institute and other initiatives that are being envisioned and created by people in their twenties, because they’re not willing to wait for innovation, they’re ready to play today!
For both people in their 20s and for the rest of us, the key lesson here is that impact investing is really about creating your opportunity. In impact investing you really have to be playing on the balls of your feet, leaning forward and engaged in order to make things happen in accordance with the vision you want to create.
7. In the world of social innovation, “multilingual” leadership is essential.
For a number of months, I’ve been working with Cathy Clark (of theCASE Center at Duke University) and Ben Thornley (of the research group, Insight)—along with a team of great staff and interns—on a research initiative called The Impact Investor, where we’re looking at promising practices among leading impact funds around the world.
One of the things that’s been really interesting to see is the reality of what we’re calling “multilingual leaders”—or what I used to call “mutant managers”—people who come into the conversation not having had ten years of private equity but rather having done a chunk of time doing private equity complemented by a chunk of time in the development arena or the social finance arena. These are leaders and fund managers who really aren’t from one track or another, but have had kind of a cross-sector breeding, if you will. This training puts them in a much stronger position to run an effective fund because they can manage teams that cross-cut those same silos.
8. Innovation is coming from the outside in with respect to increasing gender, ethnic and socioeconomic diversity in impact investing. People aren’t looking to the top for direction, they’re looking horizontally.
I think a lot of innovation comes from the outside in. People in the US and around the world are really breaking across and breaking through—and not looking necessarily to the “top” to give them direction. I think the gender and racial, ethnic diversity you see internationally around social entrepreneurship and impact investing is really inspiring and exciting and will continue to be central to our collective success.
From the asset and owners side, we need to be looking for individuals and organizations that are advancing that agenda together with their impact strategy. That’s really where the future is going to be around a lot of this work and quite frankly where the innovation will come from. They’re bringing new, better and more insightful perspectives to this work.
9. Now, a few decades in, there are a lot of super heroes in the social finance space. As a result, Jed’s taking a more “blended” approach to life.
It likely won’t surprise you to know I don’t really believe in balance! I want to have a fully integrated life; so I want to live blended value if you will. For me, I feel like I’ve been active in this conversation since 1989 and I’ve spent different phases moving through venture philanthropy, social entrepreneurship, performance metrics, the whole community development, venture capital arena, and then all of the work with respect to blended value and promoting impact investing. I think we’re at a point now where there is so much good work going on and so many great voices being raised that I don’t personally feel like I have to be in every place, everywhere promoting all these ideas. There are so many people promoting good ideas, all of which are a part of this conversation and so I can (as my colleague Fran Seegull says, Step Back; Step Up—ie. Let other voices be heard!).
For me personally, it makes it easier to step back and not feel like I’ve got to do so much externally. The other thing for me personally, is that I feel like I’ve moved from being someone who really wants to be out there, pointing the way and calling the questions to someone who’s really now, refocusing on practice and execution.
I’m trying to sharpen the focus of my work at the same time as I’m trying to spend more time here in Colorado and home in San Fransisco with my wife Mia. I’m really realizing that I don’t have to be overseas for a month at time anymore in order to be a part of the conversation or to help advance and shine a light on the good work I see out there. It’s a great feeling to see how our community has grown and to hear the variety of voices being raised today as opposed to two decades ago!