“We are not living in an era of change but in a change of an era”. As one welcomes the new year 2022 – or mischievously called 2020too… after 2020won – these words spoken prophetically by Pope Francis ring truer than ever.
With probably the highest levels of poverty in the past two decades and staring at the highest levels of inequality as the K-shaped recovery unfolds with stark impudence, the call to action is more urgent and emphatic than ever before.
We have stopped talking about the ‘new normal’ because even that has changed. Every status quo seems to be challenged, every tried and tested path disrupted. Even the fabled and fancied unicorns don’t seem to excite investors anymore, as the search steps up for the decacorns … or is it hectocorn time already?
But irrespective of where we look – they all start with the acorn. The small Inclusive Business begun by the passionate, creative and honest entrepreneur.
Some of them become unicorns in valuation… some in impact.
Today I want to introduce the concept of the social unicorn. It’s not just about valuation … but more importantly about transformation – social, environmental and economic. How do we value the Inclusive Business based on the overall and transformational impact it generates? Interestingly, it is the same thrust for SEE (social, environmental and economic) that Sonja Haut, Head of Strategic Measurement and Materiality at Novartis speaks about in this first issue of CLUED-iN of 2022.
We need NEW EYES to SEE this impact, new tools to measure in this paradigm, and new valuation models to calculate ROSI (Return on Social Investment). Remember you heard this term first here; this is what we need to focus on if we do want our future to look ROSI (can’t help this cringe-worthy pun).
FRESH EARS AND FRESH EYES. We need ears to the ground and keen eyes to assess real impact. Green-washing, impact-washing and ESG-washing can take us only so far but not further. Already the challenge to meet Agenda 2030 by 2030 is looking more onerous than ever. We now need a huge dose of realism, honesty… and investment.
$30 trillion is needed to meet the Sustainable Development Goals (SDGs) globally. And that number has escalated, (no) thanks to Covid-19. Some estimates peg that number at $50 trillion. The good news is that we seem to be within touching distance of the $1 trillion mark in impact investment… but in some sense that is only the starting line; we have miles to go. What we need is the vision and pharresia (Greek: boldness) of both entrepreneurs and investors; and the interviews in this issue clearly give us hope – as many of them seem to exhibit both the needed vision and boldness.
Arun Venkatesan, CEO of Villgro USA, talks about the crucial access to significant capital and incubation support needed for early-stage businesses. His concept of iPitch sounds like a great initiative with 1,200 to 1,500 applications every year. Hope also comes our way from enlightened investors – like Kate Cochran, CEO, Upaya Social Ventures, who is focused on ensuring impact and scale. “We actively promote our portfolio companies to other investors in our network when we feel they are ready to raise their next round. Our current ratio of follow-on investment is 4X our investment.” Her statement that “$1 out of four is going into ESG investments” gives a lot of reassurance to IB entrepreneurs who might be concerned about follow-on funding and scale.
Grameen Capital’s own journey in microfinance, which we launched 15 years ago (how times flies when you’re having fun), demonstrated the ability to build scale and significant double-bottom-line returns in enterprises serving the bottom of the economic pyramid. As Chair of the Microfinance Network in India, Sa-Dhan, I was blessed to have a ringside view of the journey (many ups and downs too – all providing immense learning) as over 60 million women were covered by our network members. The wide spectrum of investors in the sector – from philanthropists, to foundations, to venture capitalists (VCs), to private equity PEs, to pension funds, to IPOs, to crowd-funding, etc. – all indicate the vivaciousness and vigour of a sector where a thousand flowers (and models) can co-exist and bloom.
Today, we have launched Grameen Impact to initiate and crowd-in capital into SDG financing, our signature, innovative and pioneering SDG Impact Bonds being the product we have designed to bring in different pools/motivations of capital. I’m delighted to share that we have rolled out seven of these SDG Impact Bonds across SDG#2, SDG#5 SDG#7, SDG#8 and a couple of Covid-Impact Bonds - all driven by outcomes and impact, in a true pay-for-success paradigm.
Innovative financing as mentioned above, seems to be corroborated by the INSEAD blog “Using Innovative Finance to Scale Up Corporate Base-of-Pyramid Initiatives,” of Jayanth Bhuvaraghan, and Jasjit Singh who speak to iBAN in this issue sharing their insights into the evolving space of impact investment and innovative financing and why impact measurement is key to attracting investment to scale inclusive businesses.
Today billions, if not trillions of investment monies are looking for ESG and SDG destinations to invest in… because it makes good investment sense. Because the pension funds, their High Net Worth clients and family offices are asking for it, and because they know the millennials will vote with their feet if these fund houses do not walk the talk. But their biggest challenge is the pipeline. There is a need to develop absorptive capacity, leadership depth and the governance of the impact enterprises. This is what iBAN and other ecosystem builders of the impact and social sector need to focus on.
It is refreshing hearing David Chen, Founder, AgriG8 and COO, Golden Sunland, and Ebun Feludu, CEO of JAM The Coconut Food Company sharing honestly the potential (David: "I personally believe that it is important to look at all dimensions of ESG holistically") and challenges of a fledgling enterprise (Ebun: "a business is like a hungry baby, when it wants to eat, it wants to eat NOW”). Ebun also provides some unique insights on what IB entrepreneurs need to do which I would use to conclude, “Lift your head up … Tell your story through the eyes of the consumer and the stakeholders that are impacted through your work. There is a sweet spot in the universe for every entrepreneur. That sweet spot is your unique intersection of investors that align with your vision, yourself, and your customers. Keep doing the work and telling your story.”
Feature image: www.instagram.com/wilmer.lens
