Becoming generally available from the Cabinet Office in July 2013, the analysis of the social impact market by Maximilian Martin, Status of the Social Impact Investing Market: A Primer, sets the scene well regarding the subtle shape of the market and how a whole new eco-system of investors and vehicles for their capital have emerged, and are still emerging, into this relatively new field.
We recently published an article featuring the latest report from New Philanthropy Capital, Best to Invest, which we stressed was a primer for the structure of the UK social investment market. You can read more here.
The Martin position paper in this article looks at the broader, global context of the social impact investing model and examines the origins of the market meta-structure across the globe, with some interesting analysis on the developing gap between public demand for new social investment and the ‘public’ finance shortfall in meeting it.
View, print or download the Martin paper here (pdf format)
This huge gap, Dr. Martin argues, is ripe for topping up by private capital, or capital from non-traditional sources, which deployed by the social outcome minded investor can transform community landscapes – in both the developing and developed world.
The Canadian shortfall estimated is 90 billion US Dollars (USD). the German gap some 80 billion USD and the UK expected need is for an additional 170 billion USD in investment over the same period.
This pan-global approach is interesting, in that the Martin paper shows, that when seen globally, responding to social investment demands can stimulate traditional and mainstream market provider outputs. Martin quotes the example of the French company, EDF, who in 2002 began a programme of investment in Morocco to bring electricity to the 10% of the country’s population with no access. to power. EDF’s innovative partnerships brought dividends in market development, new market creation ideas based on its approaches to the Moroccan market and proved the power of public/private partnerships for them and their shareholders.
The problem they were trying to solve was, according to Martin, the pent up demand generated in all economies by the ‘Bottom of the Pyramid’ (BoP). Martin argues that the efforts of the World Bank, pan global organisations and national governments have failed to eradicate the contentious issue of millions of humans living on less than 2 USD per day.
Even as early as 2007 we had a clear view of the world from the BoP. This short executive summary from the World Resources Institute gives a insight into the lives of four billion people and the latent economic potential these communities have. (Being lower down the World Bank Pyramid is not, for us, an economic failure, it is a sign of unrealised economic and human potential)
View, print or download The Next Four Billion here…(pdf format)
In economies, scale is everything, and whilst veering away from any descriptor of communities as a residuum of society, a deeply negative, high Victorian view of the pryramidal effect of social and economic power and facility, the Martin model also has resonance for local communities in the UK, we would argue.
If innovation and bold thinking about investment, the risk supported and partially mitigated by mainstream government infrastructures, then change and transformation in societies where the median income level is significantly higher than 2 USD per day, where educational and functioning literacy levels in matters economic are that much higher – surely we can use social finance to turn the pyramid upside down?
Read the Cabinet Office primer and let us have your take on the global narrative too!