Skoll Scholars 2006

Next Steps on Pro-Social Capital Market Development

Graeme Glover — Fri, 31 Mar 2006 16:25:00 -0800

Friday 12:15 in the company of: Roger Martin (Dean, School of Management, University of Toronto), Jackie Khor (Rockefeller Foundation), Glenn Yago (Milken Institute), Henry Obi (Aureos Capital), Matthew Bishop (The Economist).

Matthew Bishop was quite happy to play the role of provocateur: the idea of a social stock market is crazy, you put money in but what do you get back etc.

Jackie Khor and Henry again highlighted the lack of a clear definition of what is a social entrepreneur. However, there were passionate defences of what they claim is a new area from the floor and how that even if it is not yet fully defined social entrepreneurs are already making a difference.

The few days we have had together, ended as it had started with Adivasis. We left with their words and music, and their call that we must continue to demystify what we mean by a Social Entrepreneur, but we must never forget the social part of what we are trying to do.

So that was the end of a special few days. It was a good chance for the floor to speak with passion and to fire us up as we all go out to try and do better what we do.

A fascinating hour with Jake Eberts on Cultural Identity

Graeme Glover — Fri, 31 Mar 2006 16:15:00 -0800

What a wonderful change of pace. A lot of the conference has been about finance and the use of financial resources in social enterprises, and whilst this session was linked it served as a very pleasant different angle.

I came in late, and Jake Eberts was halfway through an anecdote about him and Kev (which turned out to be the making of Dances of Wolves). Jake’s stories of raising finance for, and producing some wonderful movies (A River Runs Through It, Local Hero, The March of the Penguins etc) was a wonderful hour prior to the final session of the day.

Towards a Social Stock Exchange

Josh Hawn — Fri, 31 Mar 2006 12:25:00 -0800

Someone please define this.....
If the idea of a social stock exchange seems confusing, you are not alone. This panel included two pillars of the social enterprise movement, Muhammad Yunus and Ron Grzywinski, but also involved Celso Grecco, an entrepreneur who has built a social stock exchange based in Brazil. All three speakers appeared to have a different perspective and I suspect if you interviewed the audience, the number of opinions would differ by the number of attendees. The idea is compelling though, and the dialogue needs to continue.

What is a stock exchange?
Muhammad Yunus argued that it is time to recognise a different type of business with aims beyond profit maximisation. Some businesses measure ‘profit’ differently by serving humanity. The same distinction has been made between an entrepreneur and a social entrepreneur, thus why not make the same clarification within stock markets. Therefore, he is suggesting a different class of business, a social benefit enterprise (SBE), that are non-loss but non-dividend companies with social missions. The first step would be to label these companies and add them to already existing stock exchanges. Investors would then simply choose the company which provided the most benefits. The next phase would be to create a different exchange. He cautioned this does mean just changing buildings but completely thinking in a different framework.

Celso Grecco, through a very humble manner, had concerns with the approach of listing via existing exchanges because of costs. He mentioned a company in the United States takes three years to file an IPO. Firms then spend approximately $1 million a year maintaining that listing. In Brazil, the social sector is still quite new (17 - 18 years), but they have found success with their exchange. 43 NGOs, or social profit organisations as Celso has renamed them, have raised capital through the exchange. This exchange has a long way to go though – capital has been raised but a tradable price is a distant goal.

Finally, the ShoreBank provides a different example. Approximately $100 MM has been raised over the last twenty years from the full spectrum of investors. ShoreBank has 14 different companies with half of them divided profit driven. The non-profits are managed by ShoreBank but investors obviously do not have an ownership stake. They are required to be 50% self-sustaining with some achieving 70%. The most recent project makes equity investments in Africa, Asia and Russia with a goal of 7.1% return for investors. This rate is not market competitive, but investors are committed. While ShoreBank has actively trading shareholders, they ultimately decided not to list on a stock exchange.

Holy Grail
Peter Wheeler, the chairman of Futurebuilders and former partner with Goldman Sachs, concluded well. A social stock exchange would provide a price which allows investors to measure value. Therefore, investments could be exited, managers would have clear measures and capital would flow into socially-minded organisations.

However, is this merely a distraction for social enterprises? The idea of a social stock exchange has been debated for some time, but very few examples have emerged. Therefore, is this the unachievable Holy Grail or a legitimate model that has yet to emerge?

Want More?
A Co-authored report by Jed Emerson, a Visiting Fellow of the Skoll Centre and the Generation Foundation, was just published by the World Economic Report. Entitled “Blended Value Investing: Capital Opportunities for Social and Environmental Impact”.

Replication Ray of Hope

CatherineLudgate — Fri, 31 Mar 2006 08:35:00 -0800

Launching a successful social enterprise is challenging in itself. Now try launching several of these models, via franchising or otherwise, and you have a new set of caveats and recipes for disaster.

Thankfully, replication has a ray of hope. This morning's session featured UnLtd's Marta Garcia and Karen Atkinson, founder of Spruce Carpets, both of whom spoke candidly of the trials and tribulations of replication. While they admit there are natural stumbling blocks that occur, including funding issues, sector practices and the actual founder, they shared several key elements that support successful model extension. These include:

- Strong business/revenue model (seems obvious but you would be surprised)
- Clear market need for your product/services
- Favorable legislative environment
- Flexible social entrepreneur/founder who can let go of the reigns
- Short lead time to demonstrate concept success
- Low start-up costs
- Metrics, metrics...and have we mentioned metrics?

I found Karen's discussion of her organization, Spruce Carpets, particularly inspiring. While she will soon be leaving the organization to take on a consultant role for Spruce Carpet franchisers, Karen is anything but redundant. She mentioned she was stepping away so that a new manager with the ability to take the program to the next level could come on board. She also addressed an audience question regarding product expansion and reiterated that "we try to focus only on what we're good at." Someone who understands core competency and the ability to relinquish power? Now this is a social entrepreneur worthy of replication.

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For More Information:
UnLtd. is conducting a 3-year study on replication and has already gathered excellent information regarding best practices. For more information, visit: http://www.unltd.org.uk/

Many thanks to Marta, Karen, Richard and the entire UnLtd. team.

Investing for Social Good

M Sitaramachandra — Fri, 31 Mar 2006 07:10:00 -0800

By far the most infectious session at Skoll World Forum has been that of Sir Ronald Cohen, Chair, UK Social Investment Taskforce and Chair, Commission on Unclaimed Assets Chairman, Bridges Community Ventures. In his keynote address on ‘Investing for Social Good’ he delivered simple but crisp message with passion and marked alacrity.

Sir Cohen remarked that what happened to business entrepreneurship in 1970s is happening in social entrepreneurship now. But it is all about investing in social good and not investment in profits. He predicted that social entrepreneurship will rise to great heights for two reasons. Firstly, this form of entrepreneurship is beginning to be understood by Governments and tax incentives are being built into it. Secondly, the reduced influence of business in redistributing wealth in the communities in terms of either income or employment created a natural space for social sector.

He went on to draw parallel between Private Equity and Social Equity segments and suggested that Government, private sector and social sectors should organise in a way as to tap capital markets. Supply of money creates its own demand. While there is sufficient flow of capital, common refrain from sceptics in social capital markets is - where is the demand? Social entrepreneurship should therefore build itself into an asset class and command preferential allocation in investment portfolios.

He felt the role of private sector is still to be defined in scaling up social entrepreneurship. Today it is burdened only to deal with shareholders’ funds and allocate resources to maximise their returns. Nevertheless, it can be enabled to participate through low income tax rate, grant making handouts and market credit. There is huge potential to leverage at local level.

Defining the role of financial markets, he observed that market forces drove the private equity machine where returns dictated the direction of funds flow. Social investments face twin challenges of delivering not only financial returns but also social returns. There is need to measure financial and social returns with equal vigour. Measurement of social return must be quantifiable to attract investments and cannot hide behind fudgy double bottom lines. There is scope of developing replicable models, particularly in community development and micro finance sector where deep skills from private sector can be transferred to social capital markets.

There is a space in capital markets for specialised financial institutions like Local Initiatives Support Corporation (LISC) of USA that is expert in use of social capital. Such institutions can gather capital in the form of grants from Government, foundations and private sector using tax incentives. They can develop new security instruments and build an asset class that sub-serves the powerful engine for relief and poverty alleviation. Local organisation can then access LISC type Community Development Financial Institutions completing the hub and spoke organisation.

Concluding his address on a sentimental note, he exhorted that for supply of capital to generate its own demand in social entrepreneurship segment there is an immediate need to work on two fronts. One is to develop quantifiable measures for social return. Second is to create efficient organisations capable of pumping the capital to the communities. Otherwise we would have left behind communities, countries and continents creating a great divide between civilisations.

For those who would be interested to know little more about Sir Ronald Cohen. Sir Cohen, is a founding Partner and Executive Chairman, Apax Partners Worldwide, since 1972. Sir Ronald has a strong business background and expertise in venture capital. Apax Partners Worldwide is a leading global private equity investment group. He is currently chairman of the Social Investment Task force. A leading figure in the field of venture capital Sir Ronald has founded and played a principal role in various associations including British Venture Capital Association, European Venture Capital Association and the Quoted Companies Alliance. He also served as a member of the London Stock Exchange Working Party on Smaller Companies. An Oxford graduate, where he was President of the Oxford Union, he is an Honorary Fellow of Exeter College. Sir Ronald has an MBA from Harvard Business School to which he was awarded a Henry Fellowship.

Leading efforts to expand the spectrum of social investing

Juan Jose Ochoa — Fri, 31 Mar 2006 01:10:00 -0800

This was one on the most promising sessions and the quality and insight of speakers were at the level of the expectations.

We first had Jed Emerson, giving a complete framing of social finance in 10 minutes... yes he had to hurry up!!! The ppt presentation is here.

World Markets:

To me the most important insights were:
a) investing is about value creation / maximization: economic, social and environmental.
b) the spectrum of financial support alternatives (from grants, investments, guarantees/debt, blended value investment, private equity and the use of foundation assets for their social mission) and the fact that financial engineering can actually add value through capital multiplication.
c) a warning... let's be strict and realistic with regard to financial matters because there is a reputational risk for all the sector / industry.

Bill Drayton seems to have worked in McKinsey... did he? He brought a brief and focused presentation on guess how many points.... yes 3!!
1) the most critical stage in a social enterprises life cycle is the last one, when has to achieve sustainability / profitability.
2) the bottleneck for the movement is not so much lack of resources or intermediries but opportunities. there is a shortage of deal flow!
3) the citizen sector (brightly invited us not to call it non profit / not government anymore) is growing faster than the economy and full of opportunities (transaction costs being for governments and NGO's... sorry!!! ten times higher than private sector).

David Carrington commented on the 21st century foundation. He showed they are actually a very diverse group (50% having 1% the revenue) and some changes they have to make. Mainly going beyond grants, being more supportive of social entrepreneurs (take more risk and reduce transaction costs / bureaucracy) and invest their 50Billion in Assets on mission related investments.

Jaqueline Novogratz showed the power of philantropic capital unleashing non philantropic one in dealing with social ventures like sanitation. She surpised me with the idea of social entrepreneurs receiving income from royalties / property rights for the value of their ideas. Coinciding with Bill Drayton... the bottleneck is in management capacity!!!

Debt and Environmental Sustainability - with Stephen Sears

Graeme Glover — Thu, 30 Mar 2006 16:15:00 -0800

I originally planned on going to another seminar, however I happened to read a very interesting article on Stephen Sears in The Guardian and changed my mind.

Ealing Community Transport (ECT) a diversified social enterprise from public transport (buses and trains), public health and recycling. 80% of their revenue comes from the recycling business. This was a grant established group in 1979, so how on earth did it manage to grow like this?

Well through debt financing including:

- overdraft
- asset finance
- invoice discounting
- cash flow lending

Essentially, what this session seemed to be doing was showing how to use debt to build a socially minded organisation. There were negatives to this approach which included stress, high interest payments and without equity perhaps they are also undercapitalised. It also seemed that ECT had some specific circumstances that perhaps suited this approach: long term contracts with a slow paying but reliable contractor (local government).

In terms of acquisitions they were looking at failing or insecure businesses, and hoping that ECTs management resources and scale and credibility.

“Turnover is vanity, profit is sanity, cash flow is reality”

I asked him a question that went along the lines of:

Why is this a social enterprise as opposed to just an enterprise? What are the synergies between their disparate businesses?
- I was heartened that my first “serious” question of the forum seemed to make sense and was backed up by Peter Wheeler who also did not see why this was a social enterprise. There did not really appear to be a concrete answer of why this was a social enterprise
- It was also agreed that there was not great synergies at this stage.

In summary, Stephen is an entrepreneur trying to move in different ways, who clearly cares about the people that work with him and the society around. Although there are some things not fully clear, what was obvious that Stephen was someone well liked and admired by those of us in the boardroom spending a fascinating hour with him.

New Approaches to Bring Supply and Demand Together

Graeme Glover — Thu, 30 Mar 2006 16:10:00 -0800

- A thought provoking Thursday lunchtime in the company John Kingston (Venturesome), James Austin (Prof of Business Administration, Harvard), John Goldstein (Medley Advisors) and Maurice Machenbaum (WISE)

Let’s start with WISE – who are they? – well they link wealthy individuals and social entrepreneurs which leads to the wealthy individual providing capital and engagement whilst the social entrepreneur provides the social return and learning. What WISE does in all of this is to advise both sides and, I presume, break down any barriers of mistrust and managing mutual expectations. They are working through the Swiss private banking system. Essentially, trying to provide the same learning of service for these Wealthy Individual’s social dollars as they have for their commercial investments.

John Goldstein, a young go-getter with Medley Advisors was very listenable when he discussed what his organisation are trying to do. Essentially, there is a “deep pool” of capital that institutional investors are trying really hard to invest (what with low world interest rates etc they are struggling where to invest their trillions to make money). There are also lots of socially minded projects that might actually be attractive to these institutional investors. So what Medley originally tried to do was go to big name investors and try and sell them these potential investments. After a few knocks, they realised their key learning: do not change the investor but the investment. Essentially, they cannot change the way investors think so what they needed to do was to financially engineer the social project to make it attractive to the investor. It is with this learning that they appear to be now getting traction.

James “Jim” Austin from Harvard also resonated with his question “do motives matter?” Do we place too much emphasis on motives rather than getting to an outcome that we all want.

So what did I take away from this session? Well, perhaps it is that there are moves afoot to try and bridge the gap between the way investors do their investments and how they do their giving. It appears that the first place that this might be bridged will be with “high net worth” individuals and their personal foundations but people like John Goldstein and Maurice are trying to do a similar thing with institutional investors.

I’m off to the boardroom now to go and listen to Stephen Sears

Energy4All -- Community Equity vs. Climate Change

jesse — Thu, 30 Mar 2006 15:25:00 -0800

Angela Duignan of Energy4All -- the pioneering cooperative windfarm developer who are writing their own rules for financing renewable energy in the UK -- tells us has a few slides on energy and climate change to force-feed us before we get to 'talk about money'. She's either being disingenous or has underestimated her audience. Not that there isn't interest in new ways to raise equity for social and environmental causes, but Angela's audience today shared her passion for the issues of energy sustainability and climate change mitigation. And much of the conversation reflected that -- discussion of private and public sector leverage points in the climate change debate, to the crisis of underawareness around efficiency issues, to the need to speak out against those who block the low-hanging fruit of sensible legislation ... the energy in this discussion was all pushing in the same direction.

Energy4All is pushing for a new relationship between communities and their common energy futures. The group's forebear, BayWind, raised £1.9m in a share issue, creating cooperative ownership of generation capacity for the surrounding communities. While that cooperative has returned 9% per annum to the members of that cooperative, Duignan was surprised to discover that -- bless them -- the members were not interested in profits. The desire to repeat the experiment's success by reinvesting those profits led to the creation of Energy4All, which has since battled successfully to build the first wind farm in the wealthy areas of SE England (Westmill), and is looking at building a portfolio of potential future projects.

In raising money for Westmill, Energy4All stuck by its community ownership model: raising £4.4m through an oversusbcribed offer, but giving precedence in allottment to members of the local community, and even establishing an energy buyback option for coop members.

As someone who has worked in wind farm finance, I wondered if E4A's financing approach -- 40:60 debt:equity vs. 80:20 for most commercial farms -- wasn't holding back growth of what is clearly a model that creates true blended value. Duignan's answer was consistent with her fundamental belief in the cooperative model. By maximising the number of equity stakes -- typical investment level is £2000 -- Duignan believes she is maximising the engagement of people with the energy and environmental issues that she is so passionate about. Hearing her talk about this -- and hearing the room respond -- I couldn't help but come to the conclusion that her approach was absolutely correct.

Social Equity and Equity-Like Investing

jesse — Thu, 30 Mar 2006 15:10:00 -0800

It would be hard to put a better cast together to talk about the potential for 'social equity' -- that is, equity-like investments in social enterprises and social purpose businesses. Mark Campanale sat at the centre of this conversation, and as the head of SRI at Henderson Global Investors also sits at the centre of what effort there is to push socially responsible / sustainable and responsible equity investing away from the fundamentally uninspiring do-less-harm models that currently dominate. Campanale manages £7billion in his SRI funds, much of which he admits is not optimised in terms of potential for social value creation. Mark is here to moderate, but he's also clearly on a two-sided quest: to educate about the challenges to social equity market development, and to explore the kinds of ideas that might help overcome those challenges.

Jamie Hartzell, MD of the Ethical Property Company, is one of the growing number of entrepreneurs who have managed to raise something that could be called social equity. His company has turned £6.5 million in share capital -- largely raised the old-fashioned way, direct from individual investors, though with significant help from Henderson -- into a £16m property portfolio. The Ethical Property Company manages those properties in the way that Jamie always has done -- in the interest of communities (esp. groups who struggle to find appropriate housing) and with an eye on energy efficiency. His company has been a success on every front -- it retains unimpeachable credibility with its customers (read: tenants) and investors alike. The latter have enjoyed a very low-risk annual dividend return of 3%, along with share capital appreciation of a further 4-5%.

James Vaccaro represented Triodos Bank -- best known as Europe's most venerable provider of debt to social and environmental enterprises, but who actually manage a significant equity portfolio, from early stage to growth capital, much of which is in renewables. The group touched on a number of interesting points -- and on the way demystified some of the realities and possibilities, while still leaving important questions open.

Does distributed ownership threaten sustainability-driven ethics? The group agreed that the answer was, fundamentall, no. But there seemed to be some concern that tradability on a public market mechanism -- rather than through off-market trading, would invite the kind of speculation that undermines the long-termism so key to social value creation. Campanale pointedly noted that his study of clean technology companies on OfEx/AIM revealed that their investor bases was decidedly non-social ... indeed it was dominated by commercial hedge funds.

Interestingly, all participants argued that the current on-the-hoof trading mechanisms have worked quite well for shareholders in EPC, Cafe Direct, et al. Indeed, all three posited that Ethical Property Company was actually more liquid than many companies listed on OfEx. Given their long-term investor base, such companies rarely have problems meeting liquidity needs.

And here lay the rub -- though the participants never said it explicitly: how do companies scale up their access to risk capital, without losing the investor base that understands the full scope of the value they create? In Jamie Hartzell's hypothetical world where value, not price, positions a copmany's share offering on an Ethical Exchange, one can imagine the inversion of the activist investor trend seen in today's commercial equity markets. Managers could filter -- and perhaps even manage? -- their investors if the rules and mechanisms of an Ethical Exchange facilitated doing so. On the other hand, transparency and auditing of EthEx listings for the benefit of social investors, while essential, seemed destined to undershoot the aims of such a market. As Vaccaro put it, over-engineering regulations may distract from the patently obvious truths of who the good guys are (arguably the contrapositive of what has been seen in the world of CSR-driven SRI). Tick-box approaches won't work for companies like Hartzell's: but deep connections to investors have served it quite well so far.

Returns from the Un-bankable? Debt and Guarantees

Josh Hawn — Thu, 30 Mar 2006 13:50:00 -0800

The Debt and Guarantee session provided another perspective in one of the un-stated debates of the forum – return on capital. Can social enterprises create competitive market returns or should providers of capital with social aims expect a lower margin? The three presenters, Louis Boorstin, Phillip Angier, and Malcolm Hayday, appeared to have differing perspectives on this issue, but offered compelling ideas. Louis Bornstein began by outlining a somewhat academic framework to follow when considering finance options. Phillip Angier and Malcolm Hayday then added to these ideas by offering their experiences as ‘social bankers’.

Summary of Presentations

Louis Bornstein’s professional experience began with the IFC and he is now with the Gates Foundation focused on identifying new strategic opportunities. He proposed a framework for investors or donors to follow when considering what financial instruments to apply when financing social enterprises. The first step involves accurately diagnosing the issue. While this might seem apparent, he cited several cases where this failed first step led to immediate problems. The second is identifying specific barriers. These can be divided into the following four areas: ignorance, lack of capacity, understanding risk, and capital (or lack thereof). The final step is determining which market-based interventions. These tactics map closely to the specific barriers and involves identifying the necessary technical assistance (knowledge sharing or capacity building), and choosing the investment mix (risk sharing or capital funding).

Following this presentation, Phillip Angier, the non-executive chair of the Shared Interest Society provided further pragmatic thinking about finding success with debt financing. The Shared Interest Society is a social finance cooperative that provides loan finance for fair trade. They have about £25 Million in assets with approximately 8000 members. Their first business model provided credit to buyers of fair trade products but it has since evolved to developing term loans for producers, most of who are in developing countries. By in large, most of the loans are unsecured, but default rates are not comparatively high with established banks. The investors of Shared Interest Society however do understand that financial returns will not reach market averages, but prefer the lost capital returns for the social gains.

Finally, Malcolm Hayday, Chief Executive of Charity Bank offered a perspective on supporting social enterprises in the UK. Charity Bank began in 1995 through a £500,000 grant that offered loans to socially focused organisations. Traditional banks were ignoring this market or placed harsh terms on fund seekers. At the beginning, most borrowers wanted to either smooth cash flows or purchase a building, but increasingly social enterprises are looking to expand current capacity. Interestingly, as the lending business grew, Charity Bank began providing deposit accounts (2002). Customers now have the choice between accounts which have a zero interest rate or anything below 2% (expected inflation). However, most customers simply go with zero. This product provides socially-minded customers an outlet for social causes, but their money can be accessed in case of an emergency. Malcolm also mentioned a litany of regulatory problems because UK tax authorities were nervous about granting charity status to a bank (imagine HSBC filling as a NGO), but these were overcome.

Less Returns for Now

Returning to the original question, what returns can be expected? Everyone agreed that financing options are best viewed as a spectrum. Malcolm Hayday cited a continuum where bankable customers were on the far left with grant financing representing the right anchor. Grants are the riskiest of all investments and social banks were constantly striving to move left. Phillip Angier furthered this by explaining social banks are supporting ignored markets, but ultimately these customers will have mass appeal. Market returns might arrive some day, but lower returns should be expected until further development is achieved.

It is difficult to argue with these two pioneers but others within the forum would definitely disagree. Over dinner last night, a retail banker with a different cooperative explained that his customers would always choose a socially minded deposit product when returns were equal, but as soon as his firm lowered the interest rate, customers opted out. This bank was managing billions in assets, so perhaps this is a question of scale? Smaller banks can find socially-minded customers, but mass appeal is not achieved without equal returns. One thing is for sure, this argument has not been resolved.

Story of Tilonia - Abode of Sanjit 'Bunker' Roy

M Sitaramachandra — Thu, 30 Mar 2006 10:05:00 -0800

Sanjit ‘Bunker’ Roy has been a mentor of grand-parent stock to me. My mentor Vijay Kumar spent about three years at Tilonia before he joined Indian Administrative Service in 1983. Moreover, Bunker Roy also served in advisory role for development of rural non farm sector in my own parent organisation - NABARD during early stage of my career in nineties. Hence, his approaches to rural development and the situational context were quite familiar to me as he was unfolding his story at Skoll World Forum.

Bunker Roy, alumnus of Doon School and St. Stephen’s College, had all endowments at his command to shape a successful downtown career either in prestigious civil service or private sector. Very few know that Bunker Roy was also a three time national squash champion and was part of Indian brigade in World Championships. The sportsman that he is, chose to ride against tide. Drawn into relief operations during Bihar famine in mid-sixties, he gave himself to civil-society and made Tilonia his abode. Thus began the journey of Tilonia. Tilonia, a sleepy village near Ajmer in state/province of Rajasthan in India where is established Barefoot College.

Many a social entrepreneur of his tribe in India (me included) choose to work upon the challenges emanating from tougher demand side of social value chain and adopt subaltern approach to address socio-economic inequities. This paradigm is rooted in the conviction that poor can shape their own destinies if only enabling environment is created and investments are made to help them discover their knowledge and skills which already exist among them.

His humility left many things about him unsaid in his keynote address yesterday. I, therefore, felt it appropriate that an understanding of his background, philosophy and environmental context will help to appreciate his accomplishments. Bunker Roy established Barefoot College in the year 1972 investing in ‘barefoot professionals’. He coined the term ‘barefoot professionals’ to mean indigenous and traditional knowledge leaders in poor communities. Barefoot because it is symbolises poor, many of whom walk with naked feet. Professional because professionalism is competence, confidence and belief in their knowledge system.

Describing the Barefoot College as a place of learning and unlearning, he said it's a place where the teacher is the learner and the learner is the teacher. It's a place where people are encouraged to make mistakes so that they can learn humility, curiosity, the courage to take risks, to innovate, to improvise and to constantly experiment. Barefoot College was literally built by barefoot architects and barefoot engineers using traditional building knowledge, materials and practices. It also pioneered conjoint use of geodesic dome technology with rainwater harvesting structures solving the twin problems of safe shelter for poor and their access to drinking water. The success of rainwater harvesting in recharging groundwater in Tilonia led to its adoption as state policy in several parts of India.

Experiments with solar energy also proved successful. Barefoot College self sufficient with solar energy generation capacity of 45 kw, transferred this simple technology to far away Kashmir, Ladakh, Sikkim and even Afghanistan, that brought light in the lives of impoverished. Poor in Tilonia are empowered to stay connected to global village using a range of communication channels and IT technologies that include speed post, telecom, Internet and ISDN/OFC networks. Induction of barefoot professionals in manufacturing and services sector engaged poor women and vulnerable like physically challenged in gainful employment. Primary schools and night schools drive the education content of the program.

Next logical step for Barefoot College on empowerment agenda was involving communities that ranged from community supervision, managing programmes to governing institutions. Engaging communities in local governance structure based on Westminster model had powerful educational value for mainstreaming poor into formal political system. He ably presented case of Community Entrepreneurship presenting two short films that showcase Self Help Groups processes bear testimony for sustainability in development programs that are driven by community ownership and community management responding to demands of community.

Al Gore and David Blood - In Conversation with John Elkington

Rishi — Wed, 29 Mar 2006 21:50:00 -0800

Hello! Here is a brief look into In Conversation: Al Gore and David Blood.

Thinkers from Max Weber and Edmund Burke have reflected not only on the morality of marketplace but on the wider issue of the kind of the society gives rise to and is able to sustain a market economy.

In an increasingly globalizing world where markets are converging and integrating at a faster pace than societies, local societal issues need to be addressed not only by the governments but by the firms as well in order to ensure sustainability of the process.

Blood & Gore
Al Gore (former Vice President of the USA) and David Blood (former CEO of Gldman Sachs Asset Management Company) have been involved in Generation Investment Management LLP, an investment fund with an emphasis on sustainability in the capital market by valuing the intangibles into the price of the firm. Arguably, Generation LLP is the first firm to do so and take a long term view on the firms it invests in.

The context
The conversation started with a discussion on the importance of such an analysis and the need of such a firm in today’s environment. John Elkington (who coined the term triple bottom line, and is the CEO of SustainAbility) talked about fundamental landscape altering change. There are two ways of achieving that objective: by rebelling against the system and the second is to work with and within the system.

Such an investment firm is important in today’s scenario for the following reason:
- Most of the social entrepreneur (SE) work that goes on in the present world is below the radar of the media, public and most importantly the financial markets. The SE firms on the growth trajectory will need financing at intermittent stages to achieve economic scales
- The challenges facing the world are going to be multifaceted from abrupt climate change to endemics and poverty. Even at the recent World Economic Forum these topics found their way right up in the priority list. The number one issue at this stage is sustainable development in countries like China and India.

Al Gore on sustainable investing
There have been efforts over the years to integrate value of sustainaibility (environment, employees, mgmt quality, social, economic environ value) into the pricing of the firms. (*Indeed the equity researchers have been for the past five years now placing great emphasis on the governance of a firm to factor that in the valuation*).

The efforts could be classified into two waves. The first of which was seen 35 years ago, which involved trying to bring down the apartheid and involved companies refusing to do business in countries which promoted apartheid. This then moved in to the environmental movement and an ethical investment viewpoint rose which involved not investing in certain sectors (e.g. Tobacco) of the economy altogether on the basis of ethics. However, this approach to investment was unsatisfactory to fiduciaries/ financial institutions who accounted for 95% of investment flow and were under legal obligation to get the best financial returns. They took the view that if you took whole sectors of economy then you would suffer higher risk and over time a lower rate of return as well (very much in the line of the Capital Asset Pricing Model)

The second wave, which came recently proposed to take a holistic view of the investment. It proposed to tale the whole economy in consideration but invest only in the most responsible companies within the sector by undertaking deep research. However, the research was not so deep and the portfolios ended up looking replicas of the market portfolios.

There have been hurdles in a seamless integration of this facet of equity research in the mainstream, the main cause being the difficulty in measuring the value of the social value. As the market only sees value and understands prices it has ignored important factors in the business.

Here a useful analogy (as given by Al Gore) is to think of an electromagnetic spectrum and although there is a wide spectrum we can only see a tiny portion of it which is visible light. As we relate mostly to the things we can see we assume that it is only what it matters.

Similarly monetization can be thought of as a lens through which we perceive value, it is a narrow lens and it recognizes something very well, others are very fuzzy if they are visible at all! Hence, if the only tool is monetization, then if there is no monetary figure attached to an attribute then it might not be given value.

Therefore the challenge is to find a way to integrate sustainability analysis into equity research that adds value and does not incur a penalty. Towards this end, ‘Generations’ holds a concentrated portfolio of companies with a long term view and a three years (wow!) span of calculating returns. In an era where the average mutual fund turns over its entire portfolio in eleven months that is impressive.

Then the discussion moved to a conversation moderated by John. The talk amongst other things centred on working together where both Blood and Gore acted modest and heaped credit on their team.

Talking on their investment framework, David moved back to the spectrum analogy and the factoring in of all dimensions (market and sustainability) in the pricing of a company. An example for this was measuring the carbon intensity of profits for valuing the automobile companies.

David hopes to encourage the business and the investing community in looking at these factors by responsible lobbying with other investors for internalization of externalities. He however cautioned that the change is not as widespread as it seems to be as most of the corporations are playing lip-service to it either in search of publicity or due to the short term focused financial community (who are the majority owners).

Al Gore spoke on length about externality (for those who want to understand more about externality click here). He argued that since the national accounting was put together mainly by JM Keynes at the time when colonial era was just coming to an end and natural resources were considered to be limitless. It means that a country can hypothetically clear all forest cover without showing any effect on the national accounts. He argued that this could be internalized either through government action or through positive action by the companies.

The discussion was then opened to the floor with some interesting questions. The interesting ones were on the alternative approaches like private placement for the non profit organisations and the IPOs of social enterprises.

Hopefully this approach will be adopted by more investment firms driving change to avoid dealing with Planet Earth as if it is Business in liquidation.

Signing off from the Skoll forum!!

Noreena Hertz and Ian Goldin - In Conversation

Graeme Glover — Wed, 29 Mar 2006 19:00:00 -0800

Well, this is my first blog here and whilst I do not plan to give “official minutes” I do wish to give a feel for what I have just listened to over the last hour.

First a little bit of background….Noreena Hertz is someone I have wanted to listen to for a while. She (author of “The Silent Takeover”) is as well known to me as Naomi Klein (“No Logo”) is to North Americans. She was a famously impressive student (with an MBA from Wharton by her early twenties) and has been a visible and eloquent presence for a more just society. Ian Goldin (possibly playing the “bad cop” role?) is vice president for External and United Nations affairs at the World Bank. This French-South African also comes with an impressive background as a published economist.

Ian started off by setting the scene…a crazy world where cows in Europe are subsidised by $ 3 per day and yet millions of people live on under $ 1 a day….

Noreena and Ian then tossed some questions to and fro. Here are paraphrases of perhaps the best of them….

IG: What do you feel governments should do more of to promote social entrepreneurship?

A: Do not just blame governments, the international financial institutions have played quite a big part as well. We do have a problem about trying to create a level playing field. 1 in 4 children in the UK living in poverty.

(I noticed that as Noreena said that we saw the lack of a level playing field in the US when we saw the after affects of Hurricane Katrina, Al Gore, who is sitting in just in front of me nodded in agreement).

NH: What is the role of business in levelling the playing field?

IG: the Business of business will always be business. However, there is a large change over time in the norms of how people are treated by business.

NH: as soon as charity becomes an aim, it won’t work. Red, Bono’s newly launched label, is a good example of businesses doing well without trying to be charitable.

IG: No doubt in my mind that the world is better governed now than it was in 1960’s. Both on macro level (e.g. number of people living on less than $1 is now 400m less people)

NH: yes, but if you take out China and India from that equation it is going to be very different…one category also that has not benefited is women. So when you talk about literacy levels going up, it does not really affect women as much…I do a lot of these conferences and normally, in male dominated conferences, people eyes drop when I mention gender (editors note: I was listening fully).

IG: I am struck by the story of the Grameen bank, it is a story about women. 97% of women in the scheme are women.

NH: Raising peace and war…the amount we spent annually on military spending (900bn on war compared to 50bn of aid). It is not a matter of a lack of resources but how we choose to spend the money. We have to put pressure on our political leaders to reprioritise.

IG: Yep, the balance between military and development is crazy. It is a fundamental issue of our time

NH: Market access is crucial, but sometimes that is a bit of a red herring….it is not as simple as that.

IG: Market access is not a panacea, but it is a quick win. Scandal that developed countries spend far more on [trade] protection than development.

NH: Of course it is not “little farmers” being protected in these rich countries, it is huge companies (example of Philip Morris getting subsidy to put sugar in its cigarettes).

IG: The average EU consumer pays $1,000 (or pounds?) more per year than they need to for their products, and this damages not only producers in the developing world but also small producers in the developed world.

Then questions went out to the floor. One of the most impressive speakers was a lady who spoke very eloquently about the need to involve women more in working out what to do. Another very good comment was about ensuring the outcomes of such forums are shared with those doing the work on the ground.

There was more than one comment, along the lines of the fact that the front row (i.e. Al Gore, Robert Redford, David Blood, Jeff Skoll etc) here could solve the issue of poverty

I enjoyed the first session I am blogging and I hope that my notes gives some idea of what was said. I will see you all again with one of tomorrow’s sessions but in the meantime let me leave you with the words of Noreena Hertz:

“History is not an army on an unstoppable forward march, each of us can change its course…but we need to demand better environmental laws, roles for women, and push the World Bank. If we do pull it off then we can have a very very different world.

SKOLL WORLD FORUM IS SOLD OUT

MSitaramachandra — Wed, 29 Mar 2006 17:55:00 -0800

I did not quite understand what 'Skoll World Forum is sold out completely' meant when ever I visited Skoll Centre website during last two months. I was not prepared for the events to come when I entered the foyer of SBS as usual today in the morning. I had clearly bargained to see Jeff Skoll, Al Gore et al in flesh and blood.

At the entrance of Nelson Mandela Lecture Theatre (NMLT) sharp at 4.00 pm. Orange shirt smiled and said you can't go inside. SKOLL WORLD FORUM IS SOLD OUT. I said why? and flashed my blue badge that was given at the time of registration. She said such badges are plenty around , what is sold out today are blue passes for entry into NMLT issued on first-come-first-served basis. 450 delegates 300 seats, how could all get in there? Disappointed, dejected and unhappy that nobody told us before.

Viewing live electronic footage alongwith 100 odd misfortuned delegates, I started unpacking the delegate pack and found a clear instruction that entry into NMLT is indeed on first-come-first-served. I asked God why did you not tell me before? God replied, my child I kept my instructions in your bag, even before you asked for it? Moral: Take the help of God (instructions) before it is late. :(