(Transcript of Dr CC Tan’s opening remarks at the Asia Venture Philanthropist Network (AVPN) Conference, 2013)
I am very grateful to Asia Venture Philanthropy Network or AVPN for this opportunity to co-chair this seminal conference on “creating social impact: blending philanthropic and investment capital”. At the outset, I congratulate AVPN for neatly dodging the definitional dilemma that exists between the terms “venture philanthropy” and “impact investing” through this clever title. I will not muddy the waters and say only that we are talking about investments that have common goals of impact, scalability and sustainability as well as the application of more professional and business-like models to achieve these goals.
We know that Asia’s economic growth has lifted millions of people out of poverty and improved living conditions in many countries. In fact, Asia is now perhaps the last bastion of positive economic performance on earth. The world is knocking on Asia’s door to invest for returns that are no longer available elsewhere.
However, if investments are going to be limited to those that maximize profits as the chief goal of business, then we are headed for disaster, arising from the twin villains of social inequality and environmental degradation. Equitability and sustainability are the new watchwords.
Here I would like to quote the Chairman of the Board of Trustees of Singapore Management University (in which Lien Centre sits). Mr Ho Kwon Ping said that “The mission of business and the purpose of growth is to build a better society for all.” Herein lies the ideal. If out of the ashes of the economic crisis can arise a new business paradigm and a new social-economic order that envisages that successful business and societal good are no longer mutually exclusive but in fact the two sides of the same coin, then we have considerable hope for the future of civilisation. I believe that society is now at an inflexion point in history and we are at the cusp of one of the most exciting periods of social-economic development.
The complexity and magnitude of the social problems that we face today demand a cross-sectoral approach – no one sector alone has the skills or capital to solve them. There are many aspects to be addressed: For instance, growing the demand side by increasing the number of high performing impact entrepreneurs – and that requires among other things, an enlightened culture that values the impact economy and capacity building for the non-profit sector. Then we have to influence government policies to provide a conducive environment. We need to access new and larger sources of capital and we need to develop measurement tools to assess impact.
All of this is an interdependent matrix. The development of all aspects is required for success. For instance, investors waiting in the wings would have few opportunities to make an impact if the substrate of social innovation in society is poor. If the non-profit field is evolutionarily backward and uninspired, then social entrepreneurship will be lacking and social enterprises will be weak. There will be precious little to invest in. Capacity building improves the investment readiness of potential investees to a level or size attractive to investors. Capacity building needs can often be as basic as improving financial reporting systems that are able to absorb and account for incoming funds and that meet the reporting requirements of potential investors.
On the part of the investors, they must themselves build their capacity to source and execute deals. At this stage of evolution, investing in social entities can be a labour-intensive affair requiring specialist local knowledge at all stages of the process – a) sourcing b) capacity building c) due diligence and assessment, and d) post-investment monitoring and evaluation of performance. For international and regional investors, who are still the primary source of funds, this is complicated by the multiple regulatory jurisdictions, markets and cultures in which they must operate and understand in Asia.
Given the early stage of development of the social investment market in the region, each local market may not be able to develop or support, on its own, all the necessary infrastructure and capabilities within their own boundaries. There is therefore the need to develop the intermediary entities, such as enabling institutions to aggregate knowledge and experience and bridge some of the gaps.
Social finance is one of the fastest growing areas where the business and social sectors are beginning to intersect globally. Over the last few years, we have seen increasing interest in investing for social impact, and the “impact economy” with numerous reports estimating the billions of dollars that could be put to use on social issues. We also note the growth of venture philanthropy movements in the U.S. And Europe
While these movements all began in the West, they are now arriving in Asia and look set to accelerate their growth here. In Singapore the President’s Office launched the inaugural President’s Challenge for Social Enterprise Awards in 2012 in an effort to highlight the efforts of social enterprises. A number of enabling organisations have sprung up here and a number of venture philanthropy and impact investing funds have recently been set up in Asia.
All of these movements leverage private sector skills and capital to enable the professionals and entrepreneurs of the social sector to have a greater impact on whichever area(s) they are involved in.
I would like to conclude by referring to the Monitor Institute’s 2009 report “Investing for social and environmental impact” which gives a crisp and pithy summary of the challenges.
The report warns against two perils: Firstly the risk that impact investing will ultimately be too hard. It warns against hype (such as promising assured financial returns), sloppy thinking and poor execution leading to a messy field, disappointing investors who will then give up. Secondly the risk that impact investing will ultimately be too easy. It warns that the definitions of social and environmental impact must not be so loose and diluted as to be virtually meaningless, reducing it to a “feel good” rather than a “do good” exercise.
I am confident that this conference will help us all to avoid these risks at either extreme.
Creating Social Impact: Blending Philanthropic and Investment Capital
(Transcript of Dr CC Tan’s opening remarks at the Asia Venture Philanthropist Network (AVPN) Conference, 2013)
I am very grateful to Asia Venture Philanthropy Network or AVPN for this opportunity to co-chair this seminal conference on “creating social impact: blending philanthropic and investment capital”. At the outset, I congratulate AVPN for neatly dodging the definitional dilemma that exists between the terms “venture philanthropy” and “impact investing” through this clever title. I will not muddy the waters and say only that we are talking about investments that have common goals of impact, scalability and sustainability as well as the application of more professional and business-like models to achieve these goals.
We know that Asia’s economic growth has lifted millions of people out of poverty and improved living conditions in many countries. In fact, Asia is now perhaps the last bastion of positive economic performance on earth. The world is knocking on Asia’s door to invest for returns that are no longer available elsewhere.
However, if investments are going to be limited to those that maximize profits as the chief goal of business, then we are headed for disaster, arising from the twin villains of social inequality and environmental degradation. Equitability and sustainability are the new watchwords.
Here I would like to quote the Chairman of the Board of Trustees of Singapore Management University (in which Lien Centre sits). Mr Ho Kwon Ping said that “The mission of business and the purpose of growth is to build a better society for all.” Herein lies the ideal. If out of the ashes of the economic crisis can arise a new business paradigm and a new social-economic order that envisages that successful business and societal good are no longer mutually exclusive but in fact the two sides of the same coin, then we have considerable hope for the future of civilisation. I believe that society is now at an inflexion point in history and we are at the cusp of one of the most exciting periods of social-economic development.
The complexity and magnitude of the social problems that we face today demand a cross-sectoral approach – no one sector alone has the skills or capital to solve them. There are many aspects to be addressed: For instance, growing the demand side by increasing the number of high performing impact entrepreneurs – and that requires among other things, an enlightened culture that values the impact economy and capacity building for the non-profit sector. Then we have to influence government policies to provide a conducive environment. We need to access new and larger sources of capital and we need to develop measurement tools to assess impact.
All of this is an interdependent matrix. The development of all aspects is required for success. For instance, investors waiting in the wings would have few opportunities to make an impact if the substrate of social innovation in society is poor. If the non-profit field is evolutionarily backward and uninspired, then social entrepreneurship will be lacking and social enterprises will be weak. There will be precious little to invest in. Capacity building improves the investment readiness of potential investees to a level or size attractive to investors. Capacity building needs can often be as basic as improving financial reporting systems that are able to absorb and account for incoming funds and that meet the reporting requirements of potential investors.
On the part of the investors, they must themselves build their capacity to source and execute deals. At this stage of evolution, investing in social entities can be a labour-intensive affair requiring specialist local knowledge at all stages of the process – a) sourcing b) capacity building c) due diligence and assessment, and d) post-investment monitoring and evaluation of performance. For international and regional investors, who are still the primary source of funds, this is complicated by the multiple regulatory jurisdictions, markets and cultures in which they must operate and understand in Asia.
Given the early stage of development of the social investment market in the region, each local market may not be able to develop or support, on its own, all the necessary infrastructure and capabilities within their own boundaries. There is therefore the need to develop the intermediary entities, such as enabling institutions to aggregate knowledge and experience and bridge some of the gaps.
Social finance is one of the fastest growing areas where the business and social sectors are beginning to intersect globally. Over the last few years, we have seen increasing interest in investing for social impact, and the “impact economy” with numerous reports estimating the billions of dollars that could be put to use on social issues. We also note the growth of venture philanthropy movements in the U.S. And Europe
While these movements all began in the West, they are now arriving in Asia and look set to accelerate their growth here. In Singapore the President’s Office launched the inaugural President’s Challenge for Social Enterprise Awards in 2012 in an effort to highlight the efforts of social enterprises. A number of enabling organisations have sprung up here and a number of venture philanthropy and impact investing funds have recently been set up in Asia.
All of these movements leverage private sector skills and capital to enable the professionals and entrepreneurs of the social sector to have a greater impact on whichever area(s) they are involved in.
I would like to conclude by referring to the Monitor Institute’s 2009 report “Investing for social and environmental impact” which gives a crisp and pithy summary of the challenges.
The report warns against two perils: Firstly the risk that impact investing will ultimately be too hard. It warns against hype (such as promising assured financial returns), sloppy thinking and poor execution leading to a messy field, disappointing investors who will then give up. Secondly the risk that impact investing will ultimately be too easy. It warns that the definitions of social and environmental impact must not be so loose and diluted as to be virtually meaningless, reducing it to a “feel good” rather than a “do good” exercise.
I am confident that this conference will help us all to avoid these risks at either extreme.
Send us a message