IMPACT INVESTING
IMPACT INVESTING – BASIL SPRINGER COLUMN WHICH APPEARED IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON SEPTEMBER 12, 2011
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“In Your strength I can crush an army; with my God I can scale any wall.” – Psalm 18:29
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Last Friday I attended the launch of the Seminar Series – “Know the Business of your Art (BOYA)” mounted by the Business Development Department of the National Cultural Foundation.
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This six-module seminar series which takes place over six months aims to: (1) introduce basic principles for arts business practices; (2) educate artists about supply and demand; (3) train artists/cultural practitioners in creating a plan for their business; (4) introduce basic marketing principles and market research; and (5) assist artists in understanding finance, fund sourcing and cash flow.
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The series is structured in such a way that each module builds on the other, each imparting a particular and discrete set of skills and tools, leading to a tangible outcome which is the creation of a viable, potentially fundable project proposal.
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The systematic evolutionary (SEA) approach will be adopted where the magnitude and direction of the next step is informed by what has been gleaned in the previous step.
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CBET Inc. is a partner in the BOYA venture and I was asked to make a few remarks at the launch. I presented a positive philosophical position on “Strategies for Positive Change” and advised that one should adopt a very empowering state of mind by regarding road blocks, which impede the path of progress, as “challenges” rather than “problems”.
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I concluded my remarks as follows: “One last word of caution! Bitter experience has taught me that the most frustrating scenario that an entrepreneur can experience is to have his/her hopes raised by preparing a wonderful business plan but, at the end of it all, there is no funding available for investment in and sustainable ‘lift-off’ of the enterprise.” Therein lies another challenge.
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The BIM Ventures Barbados Entrepreneurs’ Venture Capital Fund (BEVCF) is promoted as a creative solution to address precisely this challenge. It comprises a Quick Response Seed Capital Revolving and Growth Fund and a Quick Response Benevolent Venture Capital Fund cocooned in the comfort and protection of the CBET Shepherding Modelâ„¢ which mitigates the risk of business failure. The process has been designed such that at no stage is the entrepreneur at any financial risk over and above that of an equity investor. All that is expected of the entrepreneur is that he/she should diligently pursue his/her passion for the business idea and develop it to its fullest.
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Last Thursday, Gregory Hinkson and I met with Laura Dorling, a Canadian consultant on an IDB mission, on the subject of Impact Investing. She was assessing the demand for Impact Investing in the Caribbean. The ambiance of the idyllic meeting setting of Graeme Hall Nature Sanctuary contributed significantly to the engaging experience which stimulated some interesting thought processes. Let me explain.
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Research on the Internet will reveal that Impact Investing is an investment strategy whereby an investor proactively seeks to place capital in businesses that can generate financial returns as well as an intentional social and/or environmental goal. This concept of combined financial and other benefits is known as the Triple Bottom Line. Impact investing is differentiated from socially responsible investing in that an investor will proactively seek investments that generate both financial as well as specific social and/or environmental returns. These businesses can thus provide social or environmental impact at a scale that purely philanthropic interventions usually cannot reach. The thesis here is that Impact Investing is the only form of investing that is really sustainable and that each country should be moving towards a higher percentage of Impact Investing in its portfolio of projects.
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Since the Second World War, billions of dollars have been spent in grant and investment funds in developing countries including the Caribbean. In Barbados, even though we cannot gainsay that some progress has been made, my opinion is that the sustainable Impact, as measured in socio-economic terms, has not been commensurate with the funds expended. A quick look at the Impact in South East Asian countries, for example, will corroborate this hypothesis. How can Impact Investing improve the situation?
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Let us take grant funding. Projects are selected, budgets are approved, the project is executed and completed and the project is signed off. What has been the Impact? Undoubtedly there is some benefit left behind, there is certainly much support service funding spent locally but is it part of a sustainable solution? When the project ends and the money runs out “the weeds that were the manifestation of the problem at the beginning of the assignment, begin to grow again”. This is not a sustainable solution in itself.
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Let us consider the traditional loan and investment funding. Only relatively “low risk” enterprises with the appropriate hard asset profile ,which can be used as collateral to protect against the “depositors'” money, are considered and even then this system experiences failures because it does not address the challenge of the mitigation of the risk of business failure. Those which are successful financially do not necessarily give specific social and/or environmental returns.
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There are two challenges that remain. The need to find an investment strategy whereby an investor proactively seeks to place capital in businesses that can generate financial returns as well as an intentional social and/or environmental goal; and the need to find an investing model for start-up enterprises.
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We shall work to scale the wall and provide a creative solution through the blending of the concepts of Impact Investing and BEVCF, using the CBET Shepherding Modelâ„¢.
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(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET – Columns are archived at www.cbetmodel.org)