Aligning Investments with Grantmaking - Feb 12 At Hudson Institute
Market Fundamentalists

Good Capital

Sean, a professional financial advisor, on Good Capital, a social investment firm.  Will there be a capital market for "slow" money that will abstain from profit maximization, if need be, in order to produce a higher social return? Will people who are willing to devote their life energy, at low wages, to creating socially significant businesses find their match in investors who are willing to forgo the utmost return on investment? I know, we are supposed to say that high returns and high social returns are possible, and sometimes no doubt that is the case, but between a pure philanthropic "give away" and a "pure investment play" there is a wide spectrum. How about businesses that do huge good, while just breaking even, or operating at a small ongoing loss? Would they make a good investment for a foundation or a good-hearted social investor? Will pools of socially conscious capital come together so that social entrepreneurs will approach funders with not only a business plan showing dollar returns, but also a "theory of social change" addressing social good? And will investors then settle for a "blended" return? Also, how will intermediaries be organized and paid? Will funds like this be offered by merchant bankers to wealthy qualified investors only? Packaged as funds provided by brokers on commission? Traded inside wrap accounts? Hedge funds? How will this market work to match investors and investee organizations? Will it be regulated? (How does one verify the claims made in a prospectus that the social venture will do social good? What are the conventions about "hype" and acceptable sales practices? Who will settle issues like fraud? "Your fund made me money, but show me the social good! You knew, or should have known, those organic tomatos were harvested by migrant labor at $3 an hour. That is not good capital, it is bad, bad, bad! You defrauded me." Who will settle such cases, on what basis?)