I recently came across and short and interesting interview with Dr. Judith Rodin, president of the Rockefeller Foundation. I roughly capture and comment on two Dr. Rodin's points below. The full interview is here:
http://www.bbc.co.uk/news/business-15102389.
If you look at the problems in the world ... it's estimated that there are trillions of dollars in need. It's very clear that when we did the catalogue that there are really only billions of dollars of money in government aid and philanthropy that are the traditional sources of trying to solve some of the world's problems... At the same time we were beginning to understand that capital markets were developing funds with what we called double bottom line mandates...
I think that this quote captures an interesting shift in the social contract between businessmen and citizens in general and the governments under which they operate. The way I understand the original social contract is that people unite under governments, and agree to surrender to it some rights and resources, and the government agrees to resolve for those people a set of collective problems that they alone cannot address, such as providing for a common defense. When the Great Depression drastically undercut social welfare, not just in the United States but also abroad, the government took a much larger role in creating and sustaining social safety nets -- we now taxed everyone much more and redistributed welfare to a greater extent.
We now seem to be moving away from looking to governments and international development agencies for safety nets and economic development assistance. Most of the funding and technical acumen still resides within governments. But people seem to be increasingly looking toward non-governmental solutions - whether by giving to NGOs as a way to assist with acute crises like in Haiti and Chile, or by preferring double-bottom line solutions like microfinance (through Kiva and others) rather than waiting for the IMF or USAID.
High net worth individuals are acutely aware of the growing inequality in Asia and other developing countries. They want to give back in ways that are consistent with the ways in which they gave money ... For those who would like to figure out how to use their financial acumen and have social impact within the same set of vehicles ... impact investing is becoming a great idea.
I take away from this quote that economic and social development by businessmen will look drastically different from that done by international development agencies and NGOs. Already, as I sit in classes at Harvard Business School where we discuss impact investment and social businesses, I see a focus on financial health of socially responsible enterprises at the expense, at least in my mind, of focus on the social impact of those businesses' activities on their target populations. Whereas financial return is measured using complex instruments, validity of the logic model for the social impact seems to suffice for many business investors when evaluating social return.
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