Co-authored by Bob Harrison, CEO and Bulbul Gupta, Head of Market-Based Approaches at the Clinton Global Initiative
As the world rapidly changes, markets and investors must keep up. If we care about meeting the economic, social, and environmental demands of the 21st century, and growing consumer demand for responsible products, then we need to collaborate to support and scale more inclusive and sustainable enterprises. However, there are obstacles to building a more responsive entrepreneurial ecosystem. In the impact investing industry, many large and institutional investors feel that they have an insufficient pipeline of investment-ready enterprises, especially those large enough to absorb the amount of capital they want to invest in them, that can provide desired returns.
Many forums, including the Clinton Global Initiative, are encouraging impact investors to invest in businesses at an earlier stage of enterprise where they need patient capital to get to a proof-of-concept where other investors would also find them attractive. Doing this in partnership between philanthropists willing to give grant capital to prove the concept (the type of capital most able to take on the most risk), and investors like Deutsche Bank Americas’ 2012 Essential Capital Consortium signals a commitment to action. In doing so, they provide catalytic venture debt to social enterprises in health, education, housing, finance and energy, incentivizing other investors to participate. This is key to achieving the ideal pipeline needed to scale successful impact enterprises that are building a new and better capitalism for us all. For example, one of Deutsche Bank’s investments (through one of its funds that closed in 2012) d.light Design, which innovates solar lighting products for the base of the pyramid, has also received past grant funding from other CGI members, such as the Omidyar Network and Acumen Fund – allowing them to get to the stage where they could scale further.
Another CGI Commitment by the National Association for Latino Capital Assets Builders (NALCAB) is unleashing enterprise creation in American Latino populations; a historically untapped market that has accounted for 56% of the population growth of the United States in the last decade. As part of its CGI Commitment, NALCAB has loaned more than $50 million to over 2,000 small businesses, harnessing capital from private and corporate foundations, private investors, and the public sector.
In the US and globally, we see our members increasingly investing in cluster development approaches using incubators and accelerators as aggregation points to better provide capital and technical assistance to entrepreneurs at seed-stage, helped by ecosystem enablers such as the Aspen Network of Development Entrepreneurs, Endeavor, and others. We also increasingly see corporates using their value chain finance power in impact investing approaches to source from more socially or environmentally responsible enterprises, as one pillar of a shared value approach that many CGI members are embracing. CGI’s theme for 2014 is “Reimagining Impact” – and one of our goals is to work with the public and private sectors to also reimagine ROI through mutually beneficial partnerships – financially, socially, and environmentally, for all involved.
The Clinton Global Initiative is a membership-based organization that advances public-private partnerships both globally and in the US, through its CGI America platform. CGI America will be held in Denver June 13-14; please visit www.cgiamerica.org for more information. CGI’s Annual Meeting is held every September in New York City; please visit www.clintonglobalinitiative.org for more information.