Just over a year ago I was living in an engineless truck parked at the foot of the Ko?olau Mountains on the jungly tropical island of Oahu. I fled there to escape the greed and mind-numbing monotony of corporate sales. I wanted to live simply, eat organically, wear flip-flops and drink little umbrella drinks until I either had an epiphany or died in a terrible hammock accident. While there I quite unexpectedly stumbled across an unfamiliar concept, the notion that business?the very thing I?d come to escape?could also be used to fix a host of social problems, and since then I?ve been on a mission to figure it out.?
Traveling thousands of miles across the US, and Skyping round the globe I?ve interviewed people who work from Austin to Afghanistan and everywhere in between. People who?ve built businesses that improve the world by design. Businesses that make it not only possible, but profitable to clean up beaches, reduce chronic disease rates, or provide education and inspiration to those without. But it wasn?t until I had a chance to chat with Jory Cohen, the Managing Director of Canada?s Youth Social Innovation Capital Fund (YSI), which connects social entrepreneurs with investors, that I was introduced to another level of social business: Impact Investing.
?You?re not the only one that?s new to impact investing,? he said as we Skyped from our respective countries, ?because impact investing is pretty new.?
This is definitely true. The trend toward sustainable, socially friendly businesses has only begun to gain mainstream recognition within the last few years. Previously, government regulation was the primary tool used to combat the potential pitfalls of a competitive business market?pitfalls like depletion of natural resources, slavery and pollution. Where regulation was ineffective, philanthropy and charity generally stepped in to pick up the pieces. Yet despite their good works, these two forms of not-for-profit giving have their limitations too, and are often criticized for relying on donations?a revenue stream with a high degree of unpredictability.
In response to this unmet need, a new type of business owner?the social entrepreneur?emerged. Social entrepreneurs seeks to combine the two models, learning to take the very same market demands that once caused problems and use them to create a self sustaining engine for positive social change.?
With the rise of the social entrepreneur came the impact investor.?
?I?ll admit, it?s not for everybody,? Cohen said, drawing out the particular differences between impact investors and their traditional counterparts. ?It?s for people who care about doing good in the world. People who are willing to accept a more patient financial return so that they can experience the benefits of the social and environmental improvements.??
Though a budding industry, research demonstrates that this type of investor isn?t as rare as one might think. Already, the industry is valued at well over fifty-billion dollars and projected to grow nearly 1,000% in the next decade. And optimistically, it seems that as the model proves more and more viable, people are lining up to put their dollars to good work.
?Doing well, while doing good,? Cohen called it.
Connecting impact investors with young social entrepreneurs, YSI?s focus is driving both the creation of sustainable social and environmental value, and triple bottom line returns for investors. They do that first through micro-loans ranging from one to ten thousand dollars, which entrepreneurs repay over the course of one to two years. Investors see a 3-5% financial return as well as a statement on the social, and environmental impact they helped create. YSI also provides non-monetary resources?like mentorship and connections to key players?services that facilitate long-term fiscal growth.
Roughly a year into the game, the YSI team has already dispensed two loans and received a prestigious grant from the Ontario Trillium Foundation?s Future Fund.?
This presents a fantastic opportunity for the entrepreneurially inclined, Cohen pointed out, because enthusiasm for impact investing with YSI has been exceedingly high. So high in fact, that they maintain an open call for finance applications in an effort to bring in suitable investments for their surplus of investment capital.?
?We?re really looking to expand our scale and scope,? Cohen said, describing that the fund is looking to invest in more entrepreneurs and also provide entrepreneurs with different solutions throughout the life-cycles of their enterprises. ?At different stages of growth, these entrepreneurs will have different financial needs. We want to be there to provide them with solutions while continuing to offer triple bottom line investment opportunities to impact investors,? he said.
Though they?re looking to bring on more entrepreneurs, Cohen went to great lengths to point out that they won?t invest in just anyone.
?When we invest in an entrepreneur, we?re not just investing in their potential to turn a short-term profit,? Cohen said, speaking on perhaps the primary difference between traditional investment funds and YSI?s impact fund. ?We?re looking to invest in them as a person for the long term and we want to see that they?re capable of driving a positive change into the future.?
In order to realize such a standard every project is thoroughly vetted by Jory and his team before being approved. A few of the things on their checklist: eligible social entrepreneurs must be between the ages of 18-35. Business must also be incorporated in Canada, though their impact may occur anywhere worldwide. If ventures meet match such criteria, the YSI team then rigorously analyzes the financial sustainability and potential social and environmental impact of the enterprise in question. Next, and perhaps most importantly, YSI staff analyze the character of the borrower to ensure they?re the type of person who will take the responsibility of their loan and their project seriously.
For me, that policy really highlighted the difference between impact investing and traditional debt financing. For YSI, it?s not just about fine print, and ink shackles chaining a person to a loan that will drive investor profit. Decisions are made responsibly, and sustainably, in an effort to benefit all parties. It stands in stark contrast to the practices which led to the recent American debt crisis, and frankly the world could use more of it.
?What?s great about this industry,? he said, ?is that everybody wants to make the world a better place, and we?re all doing it in very innovative ways. Now we just need to be connected to one another, and team up. That?s the way we?re going to make real impact.??
Editor's note: Interested in other stories that profile social finance professionals and their ventures? Let us know who you would like to see on SocialFinance.ca, and we'll do our best to accomodate!
Source: http://socialfinance.ca/blog/post/losing-the-shackles-a-profile-of-the-youth-social-innovation-fund
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