From Barack to Bono, the social investment fund is no longer about people over profit

In 2010, Triple Pundit teamed up with the SOCAP network to ask how we might unlock the estimated $120 billion of equity available for social investment.

My suggestion was based on our recent project proposal described as a ‘Marshall Plan’ for Ukraine which proposed a social investment fund of $1.5 billion upwards to propagate social enterprise, delivering social benefit which would pay for itself by reducing state costs.

The plan itself was the product of what has since become known as Fourth Sector business, based on an autonomous business model where profit is applied primarily for social outcome rather than shareholder return.

In 2008 our call on USAID and the Senate FRC would put the argument in front of a committee which included Barack Obama and Joe Biden. The ‘Marshall Plan’ drew attention to the $1.5 billion being spent at the time on the war in Iraq and called on forward thinking business for investment:

It is proposed that the United States of America be actively engaged in supporting this project, financially and any other way possible. Ukraine has clearly demonstrated common will for democracy. Ukraine has also unilaterally taken the first critical step to fulfill this program, thus clearly demonstrating initiative and commitment to participation required in the original Marshall Plan sixty years ago. The US side is presumably attempting to foster democracy in another country, which never expressed much interest and shows little real interest now. That of course is Iraq, where recent estimates indicate a cost of $1.5 billion per week.

That same amount of money, spread over five years instead of one week, would more than cover the investment cost of the initial components of this project, and allow a reserve fund for creating new projects as Ukraine’s intelligentsia invents them in the Center for Social Enterprise. It is proposed that Ukraine and the US provide equal portions of this amount. Ukraine is certainly able to provide that level of funding, given that projects are designed with the same fiscal discipline employed in the traditional business sector. That means they pay for themselves, one way or another.

Project funding should be placed as a social-benefit fund under oversight of an independent board of directors, particularly including representatives from grassroots level Ukraine citizens action groups, networks, and human rights leaders.

This program provides for near-term social relief for Ukraine’s neediest citizens, most particularly children who normally have least possible influence and no public voice. Over a few years time, the net cost financially is zero. Every component is designed to become financially solvent, through mechanisms of cost-savings and shared revenue with other components. One component, Internet, provides essential communications infrastructure as well as a cash surplus to be used to offset any lingering costs of other components such as childcare, and otherwise goes to a permanent social benefit fund under oversight of the aforementioned independent, citizens-based non-government board of directors.

Any number of other social enterprises can be created. Furthermore, any number of existing for-profit enterprises are entirely free to contribute any percentage of profits they wish to increase the proposed initial $1.5 billion social investment fund. If for example the total fund comes to $3 billion, that amount would generate at least $300 million per year in a hryvnia deposit accounts at any one of several major Ukrainian banks, to provide ongoing funding to continue to create and expand social enterprises.

Later in 2008, as President Elect, Barack Obama would announce plans for a social innovation fund of 3.5 billion

The second thing I’ll do is invest in ideas that can help us meet our common challenges, because more often than not the next great social innovation won’t be generated by the government.”

With these words, candidate Obama promised to create a Social Entrepreneurship Agency within the Corporation for National and Community Service. He proposed $3.5 billion a year for social investment, paid for by ending the war in Iraq and eliminating corporate tax loopholes.

The social innovation fund, or SIF, was what was delivered.

In the quest to find forward thinking business leaders, I’d made several approaches. One was to Sir Richard Branson,

who had recently spoken at Davos saying business should focus more on social problems. Virgin Unite, his charity, were seeking project ideas.

Another was B Labs , who were behind the B Corporation model

There was also Erste Bank who with Grameen Creative Labs, were soliciting social business ideas.

In August 2010, Terry Hallman was interviewed about his efforts by Axiom News

Hallman is currently investigating the setup of a multi-million dollar fund offering split financial ROI if needed, that is, a portion to investor(s) and the remainder to P-CED.

The funds will be directed to concluding a project in the Ukraine which involves funding the training of residents to develop social businesses. Included in this work is supporting children who have disabilities, many of whom have been left to die in secretive locations. P-CED is helping to move these children to safety and give them access to modern healthcare.

The profit maximisers were not far behind.

Very soon we will hear of pay-for-success finance or social impact bonds, with which a commitment is made to pay for improved social outcomes that result in public sector savings, as described in the ‘Marshall Plan’ proposal.

What follows is several years of relentless marketing. A few weeks ago, Laurie Lane Zucker gave us his 2016 Impact Report Card where social impact bonds, failed to demonstrate any significant impact.

A social enterprise contemporary, David Floyd, has been equally critical of what’s been achieved to-date with SIBs

We now have Bono fronting another social investment fund for TPG

“Capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model,” Bono said. “I think giving those two equal time is the way forward, and I think that in the present climate, we need to rethink, reimagine what it is. It’s not that capitalism is immoral; it’s amoral. And it’s a better servant than master.”

Oddly enough, that’s how we saw it 10 years ago, when discussing profit for a purpose on Jeff Skoll’s network.

Re-imagining Capitalism — The New ‘Bottom Line’

Back then, our primary focus had not been money:

Core focus is always on people and their needs, with neediest people having first priority — as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether.

Laurence Demarco of Senscot puts it plainly:

Performer-turned-activist Bono — and a bunch of self-made celebrity billionaires — promoting a new impact fund; along with good dividends, it promises improved measurement of how your profit helps the poor; no one appears to find this embarrassing.