by Monika Mitchell
Social Entrepreneurship is not only booming on college campuses, it is also a fast-growing business trend for a socially and economically troubled world. Business students and experienced leaders are increasingly turning their energy to solving society’s problems through economic initiatives. For many it has become a call to action in the face of government failure.
What is social enterprise? In the words of Joe Sibilia, Founder of CSR Wire, SE is an initiative “that applies business tools and models to solve social and economic challenges.” This includes for-profits, non-profits, and hybrid ventures whose mission is to solve critical social problems through economic means. Investing in community development and underserved markets is the purpose of the Community Reinvestment Act (CRA).
The 1977 law was originally intended to break “the discriminatory credit practices” that plague low-income neighborhoods. It has been revised and updated several times since its enactment, most recently in the aftermath of 2008 housing crisis.
The Social Enterprise Conference at Columbia Business School last week examined, “Financial Innovations in Community Reinvestment.” The panel was moderated by the dynamic Antony Bugg-Levine co-author of “Impact Investing: Transforming How We Make Money While Making a Difference” and adjunct professor at Columbia Business School. Panelists included Cathy Dolan, COO of Opportunity Finance Network, Scott Budde, Founder of Better Harvest Credit Union, Jeannine Jacokes, Senior Policy Advisor at Community Development Bankers Association, and Columbia B-School alum (’88) Daniel Nissenbaum, COO overseeing the Urban Investment Group at Goldman Sachs.
The diversity of the panel yielded a lively discussion prompting one MBA candidate to ask whether government anti-discrimination policy was responsible for the financial crisis. Professor Bugg-Levine rephrased the question and asked, “Was CRA responsible for the collapse of Lehman Brothers?” “No,” answered the Professor, “It was not.” (Most experts recognize that incentivized executive greed and loose credit standards by mortgage lending companies and financial institutions were the causes of the collapse.)
The panel’s primary objective was to offer solutions for entrepreneurs to access social good capital. All the panelists represented capital sources for social enterprises and expressed that these programs were simply not enough. Bugg-Levine discussed how private foundations are mandated to donate 5% of their annual income to non-profits or hybrid L3C ventures. The foundations are often driving the change in the world and making the greatest impact on solving social problems.
In addition to the panel’s initiatives, other mission-based investors are out on the scene. Good Capital, a San Francisco Bay area investment fund that supports ventures that create “market-based solutions to inequality and poverty.” Mission Markets in New York is a “capital marketplace for the sustainable and impact investment community.” However, the majority of the social enterprise investment to date remains in renewable energy and clean tech initiatives for their obvious revenue potential.
But the real truth is that as the field of social entrepreneurship grows by leaps and bounds, the investment community is not keeping pace. In a post-panel comment, Professor Bugg-Levine summed it up simply: Traditional VC and Angel investing will catch up in about 20 years. The real change always begins with wealthy individuals and philanthropists who are driving the change.
That brings us back to private and family foundation money and the new platform for the socially conscious: Crowd Funding. To date, these offer the best opportunities for funding sources for social good enterprises.
Category: impact investing