‘What is your hope?’
At the end of the panel on ‘The rise of key agents: women and youth’, Marie-Gabrielle Cajoly, executive director of the Sinopec-Addax Petroleum Foundation, hosting the second Addhope Forum in Geneva on 22 May, posed this question to me and the other panellists. This, to me, was a profound question, which I believe lay at the heart of the rich conversations that we had during the forum. After a minute of thought, I shared mine:
‘That young people will have the freedom to create the futures they envision regardless of their backgrounds.’
Indeed, it is that hope that drove me to establish Lead Us Today in my home country of Zimbabwe, where many young people’s desire and ability to live full, productive lives have been curtailed by years of difficult economic circumstances. After the forum, my passion to translate my hope into reality was heightened; I left eager to work so much more to create opportunities for young people to believe in themselves and build their capacity to create bright futures.
However, as speaker after speaker emphasized during the forum, it is dangerous for us – people with opportunities to serve others – to be enamoured by our own hopes for other people. The world’s history, especially with the rise of the ‘development’ paradigm, is littered with examples of incredibly well-intentioned people who had noble hopes for others but eventually did not do nearly as much good as they had anticipated. Dysfunctional wells, donor-dependent populations and distorted markets in the Global South are testimony to how fixation on a hope that disregards those of the people we serve is, at best, self-indulgent and, at worst, destroys other people’s capacity to have their own hopes. It is based on this realization, I believe, that one key message coming out of the forum was for philanthropists and development practitioners to listen, with sincerity, to the hopes of others.
Based on these reflections, I arrived at the point where I recognized that the question ‘What is your hope?’ cannot be directed only at the people who were privileged to attend the Addhope Forum but should be extended to the people we serve. Only that way can we make a real, sustained impact in their lives.
Yet, extending the question and truly listening is not a foolproof way of ensuring that the people we seek to serve, and who we have hopes for, are fully included in our work. What happens when you extend the question and in return you receive a blank stare from a disillusioned young person in Zimbabwe who confesses, ‘I have no hope’? Do we then impose our hopes on such people and their communities? Do we simply ‘give’ hope?
Here is my biggest takeaway from the forum: we cannot act based solely on our self-indulgent hopes. We cannot simply impose our hopes on people who often have their own. Even when we are confronted by seemingly hopeless people and communities, we must earnestly strive to recognize them as intelligent people who we can partner with to create conditions where their dormant hopes can be enlivened. Our responsibility as people who are privileged in different ways is to constantly balance our hopes against those of the people we serve and ensure that we are continually creating more space and opportunity for others to – at the least – hope, dream and envision as boldly as we do.
Thinking more about my own work with Lead Us Today, through which I develop the leadership and entrepreneurship skills of young Zimbabweans, I left the Addhope Forum with a fresh perspective. The easy path for me to take would be to descend from my place of privilege and exposure, dishing out hope that may, a few years from now, be meaningless. Thanks to the forum, I have renewed my commitment to listen first and then, based on the experiences of the young people I work with, build their capacity to hope more boldly and more fiercely than I ever would.
Dalumuzi H Mhlanga is founder and CEO of Lead Us Today, a non-profit organization that mobilizes Zimbabwean youth to be socially responsible citizens.
The recently released Monitor Deloitte report Beyond the Pioneer examines why so few market-based solutions to poverty are getting to scale and what can be done so that they can deliver meaningful benefits to the poor. Based on research spanning Asia and Africa, the report’s main finding is that many of the barriers to scale cannot or will not be addressed effectively by any individual firm. What is needed is external support in the form of market facilitators that can remove these barriers at an ecosystem level.
Our own experience at Artha Networks Inc (ANI) over the last ten years, helping to build ecosystems friendly to investors and SMEs in India, Africa and Latin America, bears out the report’s main findings.
Impact investors as market facilitators
In our view, impact investors are uniquely well placed to play the role of facilitator. Impact investing is still evolving and impact investors are therefore more open to new ways of working with firms and with one another. To use the language of Beyond the Pioneer, impact investors frequently have a ‘wider lens’ than other actors in the development space. In addition, their willingness to commit their own funds for periods of five to ten years gives them the heightened credibility that comes from having real skin in the game.
Unfortunately, much of this potential remains unrealized. Based on our experience, impact investors can be effective market facilitators when they do three things:
1 Look beyond the transaction to identify the kind of systemic change their activities (eg due diligence) can spark.
2 Leverage local knowledge and resources.
3 Recognize that scaling market-based solutions to poverty is a messy process.
Shareholder reports tend to highlight elegant models that yield clear and favourable outcomes, but the reality is that overcoming poverty-related challenges is incredibly complex and fraught with information gaps and feedback lags. This complexity is usually too much for any one impact investor to fully comprehend, let alone overcome, so we believe a network approach will work best.
When people think of private foundations, they often think of mega foundations with names like Ford, Kellogg, MacArthur or Rockefeller. These foundations have a few things in common besides name recognition: they each have endowments in excess of a billion dollars, and they were all founded by donors who have been deceased for decades. In stark contrast, the overwhelming majority of foundations do not have enormous endowments, and many are still connected with living donors.
Out of over 86,000 private foundations in the US, only about 70 hold assets worth more than $1 billion, and 98 per cent hold endowments of less than $50 million. Because most of what we read about the sector focuses exclusively on the behaviour of a 2 per cent minority, our perceptions of private foundations are terribly skewed. In fact, there are important differences between the 98 per cent and their billion-dollar brethren.
In Foundation Source’s most recent study of these foundations with assets under $50 million, we found that, unlike the mega foundations, which rely exclusively on investment income to support their charitable giving, these foundations are fueled by both investment income and new contributions from donors. In the aggregate, the 714 foundations that we studied put 89 cents back into their endowments for every dollar they disbursed in grants and charitable programmes.
The fact that these donors continuously supplement their endowments with new infusions of capital indicates that they are actively engaged with their foundation. We see additional evidence of this when we look at giving levels that are well in excess of the 5 per cent minimum mandated by law. The average distribution of all foundations in the study was 7.3 per cent, with foundations under $1 million leading the way, disbursing 14 per cent of their assets on average. This is a pattern we’ve seen repeated every year over the past six years – the most difficult economic climate in decades. All these findings suggest that despite their relatively small size, the foundations in our study ‘punch above their weight’, granting energetically and generously thanks to the enthusiasm of active and committed donors.
Not only do they give more relative to their size, but the types of grants they provide are the most coveted by non-profits. Foundations with less than $10 million in assets awarded almost as much in general operating support grants as they paid out in grants for specific projects.
Finally, our experience with these clients suggests that they aren’t content to leave funds to charity only after they’re gone. Instead, they take an active hand in creating their own legacies, frequently establishing their foundations during their lifetimes, often at the peak of their careers, and involving their children in the work.
Although mega foundations enjoy the lion’s share of assets held by private foundations – as well as media attention – we must recognize that they represent a small minority of the foundation community. The majority of the sector, the 98 per cent of foundations like those in our study, are likely to continue to grow both in number and in collective social impact. A better understanding of how these foundations behave will surely grow in importance too.
Andrew Schulz is executive vice president of Foundation Source and author of this year’s report.
Scalable, replicable market-based solutions are surely the holy grail for those seeking to solve the world’s most pressing social problems – and this is the focus of Monitor Inclusive Markets’ new report Beyond the Pioneer: Getting inclusive industries to scale. The June special feature is partly a response to this report. Guest editors are Audrey Selian and Ken Hynes of Artha Platform and Artha Networks Inc.
calable, replicable market-based solutions are surely the holy grail for those seeking to solve the world’s most pressing social problems – and this is the focus of Monitor Inclusive Markets’ new report Beyond the Pioneer: Getting inclusive industries to scale. The June special feature is partly a response to this report. Guest editors are Audrey Selian and Ken Hynes of Artha Platform and Artha Networks Inc.
Beyond the Pioneer outlines opportunities for intervening to address industry-level barriers to scaling, and we asked foundations, venture philanthropists, impact investors and social entrepreneurs how they view these. Most examples in the report are drawn from Asia and Africa, so we asked Alvaro Rodriguez of Ignia in Mexico and Guillaume Taylor of Quadia in Switzerland to consider how the report resonates in Latin America and in a more developed European economy.
The special feature also raises issues the report doesn’t address. Martin Brookes asks if there are some things that should never be for sale, while Suzanne Biegel looks at the value of a gender lens on investing.
The June issue of Alliance also features an interview with Ford Foundation president Darren Walker, looking at his priorities for Ford, especially in areas such as philanthropy, infrastructure and institution building. It includes an opinion piece asking ‘Should consultants be thought leaders?’ and articles on an overcrowded crowdfunding market, impact angels in Asia, India’s new CSR law, the implications for foundations of the new FATF international standards on money laundering and terrorism, and opportunities for philanthropy in Myanmar and Liberia.
Subscribers can read the issue here>
New readers can subscribe to Alliance magazine here>
It certainly is an exciting and interesting year for impact investing. The government is working to make the UK a global hub for social investment, a new tax relief has been announced and investment banks like Goldman Sachs and Morgan Stanley are entering the market. The most recent Impact Investor survey published by GIIN and JP Morgan also shows positive progress with market growth, investor collaboration, impact measurement practices, and pipeline quality.
But how do we know if investments are really creating a positive social impact? While the GIIN and JP Morgan report highlights promising progress I can’t help but wonder if impact investing is living up to expectations?
When it comes to measuring impact, the recent survey revealed that a quarter of all impact investors are indifferent to or prefer to avoid impact measurement post-investment. Great progress has been made in the last few years with many using impact standards and metrics like the Global Impact Investing Network standards or the BSC matrix. However, it seems that in practice fewer investors than we might expect measure these outcomes in a robust and systematic way. For many, merely stating that an organisation works to achieve outcome x or y is enough to show that impact is being achieved. Indeed, Clearly So and NPC’s investment readiness report found that most investors focus first and foremost on understanding the financial return of investments and social return comes as an afterthought. A 2013 LSE report concluded that the state of measurement was far from satisfactory. They found a lack of consensus over definitions and methodologies and, as a result, major differences between funds.
So, where does this leave us? Are we making well-meaning investments that look good but may not be changing anything for anyone? Research has shown us time and time again that great sounding things do not necessarily lead to positive impact or worse can do more harm than good. There is a growing realisation of the importance of measurement among investors but this needs to be backed up by impact measurement in practice.
Of course, this is easier said than done. Many investors (such as ourselves) back early stage ventures that are trying out new and innovative ways to tackle social problems. For these ventures, evidence will be hard to come by and the organisations are unlikely to have run a high quality impact evaluation. That is why it is essential to have a staged approach to impact measurement.
The NESTA Standards of Evidence for Impact Investing does exactly that. The standards on a 1-5 scale begin with organisations having a clear articulation of how their product or service leads to positive social change. As organisations grow and develop, we expect them to start gathering evidence to back up their initial understanding of their impact. Over time, we will work with organisations to understand whether that change was truly down to their activity, and finally, we hope to use this information to begin replicating the product in a number of different locations and contexts.
The five levels of NESTA’s Standards of Evidence for Impact Investing
For example, one of our investees, Oomph! delivers specially designed group exercise classes for older people in care homes to improve quality of life and physical health. Their impact story argues that interactive classes, specially designed for older people, are more successful in engaging residents. As a result, older people not only increase their level of enjoyment but over time improve their physical health and range of movement. Oomph! has used academic research to show that regular physical activity leads to improved life satisfaction, reduced cognitive decline and a reduction in falls. We are now working with them to gather evidence to see if this impact story rings true. So Oomph! is gathering data on the well-being and physical health of older people before and after exercise classes. This kind of data will allow them to reach level 2 on our standards of evidence. Over time, we will work with Oomph! to measure any difference between their participants and older people who did not attend the exercise classes. This way we will know if any change is purely down to the Oomph! classes.
Supporting our investees to start simple and increase the rigour of their evidence over time is crucial to our mission as an impact investor. Indeed, we will be judging our own impact as a fund on how well our investees do at delivering and evidencing impact as well as their financial success.
So, I would argue that as impact investors we need to worry most about what happens on the customer side of our investments. How many people is a venture working with? Who are they? And what kind of change are they seeing? Without asking these questions, we risk creating an elaborate house of cards—one that will begin to crumble if these fundamental questions remain unanswered and unmeasured.
Eibhlín Ní Ógáin, Insights manager at NESTA Impact Investments.
Globalization, long-term demographic trends, changing consumer preferences, and the state of public finances are collectively driving the emergence of an integrated social capital market for the first time in human history, currently valued at US$46 billion. Nonetheless, the social sector remains highly fragmented. This lack of coherence serves to hold back investment by raising costs and complexity.
Social entrepreneurs also need money for starting and scaling their ideas, but existing funding solutions are often imperfectly suited to their needs. Chris West, director of the Shell Foundation and a long-time supporter of social enterprises, commented: ‘One of the barriers social enterprises face in reaching scale and sustainability is the “valley of death” that exists between securing grant funding and investment capital. To bridge this gap, we need innovative tiered capital structures that blend “patient capital” with debt and equity.’
Building Impact Businesses through Hybrid Financing: Special impact starter edition, a new report released by Impact Economy last week, examines leading social enterprises operating in a number of fields ranging from alternative energy to solid waste management and explores how these efforts can be more effectively and efficiently funded for growth and greater impact. It is meant as a companion to Impact Starter, a new platform to help get social entrepreneurs started.
A key implication emerging from the work is that successful social enterprises can use hybrid financing to drive greater impact. Grants remain the best way to seed a social enterprise, but grants tend to become insufficient in providing the capital required for the venture to scale if it achieves initial success. Hybrid financing models use some combination of up to four forms of capital (eg grants, debt, equity, and mezzanine or convertible capital), as well as a variety of possible financial instruments such as internal credit enhancement through subordination or reserves, or external credit enhancement via letters of credit.
Time also plays a hugely important role in these structures: hybrid financing can be synchronic (or tiered), combining for example grant and non-grant sources of capital simultaneously to fund the joint expansion of profitable elements and the optimization of unprofitable elements of the value chain and reduce risk. Or they can be diachronic, with hybrid funding unfolding over time, typically beginning with grant funding and then ‘graduating’ to equity and debt funding as the venture achieves critical mass.
Transformative progress on a number of issues needs to be the shared objective of innovative hybrid financing strategies. Some of these issues, which are covered in the report, include the fact that only 40-70 per cent of all the urban solid waste in developing countries is collected; open dumping and burning of waste continues to be the norm rather than the exception; and a country like Peru alone has 108,000 informal waste pickers who often live on toxic dumps. What’s more, 2.5 billion people around the world do not even have toilets.
While the poor spend USS433 billion per year on energy, 1.2 billion people still lack access to electricity. India’s new government led by Narendra Modi recently made waves by planning to harness solar power to enable every home to run at least one light bulb by 2019. With 400 million people currently lacking electricity in India, fresh approaches will be needed to translate this ambitious goal into reality, and a strategic combination of patient or long-term capital as well as grants.
Jürgen Griesbeck, founder and CEO of streetfootballworld, the focus of one of the case studies in the report, commented that hybrid financing strategies offer ‘important components to transform entire industries. Like subsidies or public research grants in the private sector, donations are highly important to the social sector to fund innovation and to support hard-to-monetize thematic areas.’ Hybrid financing strategies ‘can help to bridge the gap: from the current reach of clients in the social sector to all of those that are not yet served,’ said Griesbeck.
With 270 million people around the world playing football, which also happens to be a great way to reach at-risk youth, and the opening match of this year’s FIFA World Cup only 10 days away, football-for-development as practised by streetfootballworld is one of the many areas where it is time to unleash the power of hybrid financing. Combining philanthropic and commercial capital can help achieve a step change in impact, and build and finance the social enterprises of the future.
Maximilian Martin is the founder and global managing director of Impact Economy and the author of Building Impact Businesses through Hybrid Financing: Special Impact Starter Edition.
On 28 May UK grantmaker Comic Relief made a commitment not to make investments in arms, alcohol and tobacco companies as part of a new investment policy ‘in line with the ethos of the charity’.
Comic Relief, which has an investment portfolio of £138 million, was criticized in a BBC TV Panorama programme last year for investing millions of pounds in companies that make most of their money in these areas, which run directly contrary to its mission. The charity announced a review of its policy the day after the programme aired. It has now published the review panel conclusions, all five of which it has agreed to accept.
The panel recommended Comic Relief have ‘only a small number of absolute prohibitions’ in its portfolios, in order to ‘avoid an excessive reduction in the universe available for investment’. But the panel said the charity should engage with companies it invests in to improve their behaviour.
The charity has already removed the excluded stocks from its portfolio. It has also promised to sign up to the UN Principles for Responsible Investment, to build stronger links between its investment committee and its trustees, and to allocate a proportion of its portfolio to social investment.
Source: Civil Society News. Click here to read the full story>
At the same time, according to British newspaper The Telegraph, Microsoft co-founder Bill Gates has sold down part of his stake in UK-based security services company G4S, held through Cascade Investment, his private vehicle, and the Bill & Melinda Gates Foundation. Pro-Palestinian activists have called on major investors and institutions to divest from G4S, which has contracts with Israeli prisons in the Palestinian territories and supplies surveillance equipment for West Bank checkpoints.
According to a recent stock exchange filing, the holding has been sold down to less than 3 per cent, the lowest threshold at which investors must declare stakes. The filing does not say how many, if any, G4S shares Mr Gates still holds, although it is thought that the stake has not been sold entirely and has been taken to just below the 3pc level.
This is the second of two blogs (earlier blog post available here) looking at India’s new CSR legislation. This will look at some issues and challenges for companies and NGOs arising from it.
A limited definition of CSR
The most glaring shortcoming of the new law is its limited definition of CSR. The ten areas specified under Schedule VII inexplicably seems to exclude a number of activities that may be just as crucial to social development in India, such as social businesses, promoting financial literacy and road safety. This makes life difficult for those unfortunate NGOs that previously received CSR contributions but whose activities are not listed under Schedule VII. It is a matter of active debate whether it was prudent of the legislature to remove the autonomy afforded by a catch-all clause of ‘such other matters’, which existed in the draft version of the law.
Another deficiency is that CSR is measured under the new law by expenditure, not actual impact. It takes into account only actual spending and excludes the value of any services a company may contribute to the social sector. NGOs often welcome such services, which allow them to leverage private sector expertise in key areas such as skills and technological support. Companies, too, may find it more meaningful and convenient to contribute services rather than capital. The fact that the new law does not provide for such flexibility means that any services a company may choose to contribute will have to be over and above its obligatory CSR expenditure.
Similarly, the definition excludes activities undertaken by companies in the normal course of their business. Companies often undertake CSR initiatives that are closely linked to their business (training, for example) because their contributions are likely to have the most impact in those areas. However, the new law might not allow for this and does not adequately explain what may be deemed to be the ‘normal course of business’.
No mandate to spend
A disappointment for NGOs is that the new law only makes it mandatory for companies to comply or disclose. This means that while the new law will certainly lead to greater transparency and reporting on CSR activities, it may not actually result in improved levels of impact from CSR. On the contrary, it may dissuade companies from being imaginative about their CSR initiatives and instead cause them to do the minimum required under the new law. However, the legal duty to disclose is expected to press the right moral buttons and create some healthy competition among companies to outdo each other in terms of the CSR initiatives they boast of in their annual reports, in order to appease shareholders and customers alike.
Implications for foreign companies
The new law is also likely to get into some gnarly entanglements with other Indian legislation. The biggest concern is the Foreign Contribution (Regulation) Act 2010 (FCRA) and its wide definition of the term ‘foreign source’, which has not been addressed under the new law. A local arm of a multinational company or a company with an overseas shareholding of more than 50 per cent will find itself coming up against the FCRA every time it wants to contribute CSR funds to any NGO in India. The FCRA implications of each donation to an NGO from a ‘foreign source’ company will have to be thoroughly evaluated to prevent an inadvertent breach of the law.
Tax treatment of CSR contributions
The tax treatment of CSR contributions is also a grey area at the moment. Typically, companies are allowed tax deductions for donations or contributions made for charitable purposes to entities that have 80-G registration under the Indian Income Tax Act 1961. Now that CSR spending has been made mandatory, it remains to be seen whether contributions will continue to be viewed as contributions made for a charitable purpose. On the other hand, since CSR contributions exclude expenditure incurred in the ‘normal course of business’, will companies be permitted to deduct their CSR expenditure as business expenditure while calculating taxable income? Only time will tell.
Overall, the new law is a commendable step in the right direction towards bringing about the change that we wish to see in this world. Companies and NGOs will undoubtedly experience some growth pangs and the devil lies in the detail in so far as efficient execution of the CSR framework is concerned; but that may be a small price to pay for the mature and healthy relationship between the Indian private and social sector that is likely to be forged in time as a consequence. Any financing, including grant of CSR funds, is a function of ‘ability to give’ and ‘ability to receive’. How organizations institutionalize their processes to give and receive responsibly in order to foster inclusive growth and reduce poverty is what remains to be seen.
Pankaj Jain is a principal and Sanjana Govil is an associate at Impact Law Ventures, a mission-focused, boutique law firm that works at the intersection of start-up, sustainable development, impact investment and non-profit sectors in India.
New York, NY — 29 May 2014. InterAction, the largest coalition of US-based NGOs working on international development and humanitarian assistance, and the Foundation Center, the leading authority on philanthropy, have announced a strategic partnership to promote greater visibility and understanding of global private development assistance.
Building on InterAction’s existing data-sharing efforts through NGO Aid Map and the Foundation Center’s commitment to build the global data platform for philanthropy, their partnership will focus on data sharing, capacity building, and data analysis within the NGO and foundation communities. Several key priorities have been identified, including to:
‘Our partnership with the Foundation Center will help us provide a more complete picture of private development projects around the world,’ said Samuel Worthington, president and CEO of InterAction.
‘We want to connect NGOs and donors to the knowledge they need to strategically deploy resources where they are most needed,’ said Bradford Smith, president of the Foundation Center.
This is the first of two blogs looking at India’s new CSR legislation. This will look at what the new legislation means; the second will look at some issues for companies and NGOs arising from it.
Philanthropy in India is gradually scaling up and being institutionalized, as is evident from the recent mandating of the corporate social responsibility (CSR) regime in India. As of 1 April this year, Section 135 of the Indian Companies Act 2013, read together with the Companies (Corporate Social Responsibility Policy) Rules 2014 (the new law), oblige certain companies in India to direct a portion of their profits towards social causes. Some see this as a clear underscoring of the triple bottom line approach by the Indian state, whereby the business of business is no longer business only.
The new law strives to achieve a fine balance between state-motivated and voluntary CSR spending by following a ‘comply-or-disclose’ model. It also details processes and formats for CSR policy framing, monitoring and reporting.
By bringing together vidhi (law), samaj (society) and bazaar (market) through the new law, the Indian government has laid down a national standard for CSR and a persuasive precedent for the rest of the world. If the legislative intent is realized, the new law could result in approximately 8,000 companies contributing an estimated USD 2 billion towards development-related activities in India each year.
The nuts and bolts of the new law
The first takeaway from the new law is that it applies only to companies with a minimum net worth of INR 5 billion, or which generate an annual turnover of INR 10 billion or an annual net profit of INR 50 million during a financial year. This applies not only to Indian companies but also to foreign companies which have branch or project offices in India.
Once a company becomes eligible under these criteria, it is required to set up a CSR committee consisting of at least three directors, one of whom is required to be an independent director. Private limited companies have been permitted a lower requirement of just two directors (whether independent or non-independent). The CSR committee must formulate a CSR policy for the company, setting forth the activities and the company’s proposed expenditure on them. The committee is also required to monitor the CSR policy from time to time, subject to its approval by the board of directors.
The board must ensure that the company is spending no less than 2 per cent of the average net profits made during the three immediately preceding financial years on implementing its CSR policy. It must also keep in mind that certain types of expenditure will not be considered as CSR expenditure. This includes expenditure incurred outside India, political contributions and expenditure incurred for the exclusive benefit of company employees or their families.
Most crucially, the new law limits its definition of CSR spending to expenditure incurred on one or more of ten specific social causes listed under Schedule VII of the Indian Companies Act 2013. The list includes poverty alleviation, nutrition, sanitation, livelihood, empowerment of disadvantaged sections of the society, preventive healthcare, education, gender equality, environmental sustainability, national heritage (including art and culture), veteran welfare, sports, rural development animal welfare and technology incubation. Companies have no flexibility to put CSR spending towards any activities outside this list. The new law also gives preference to spending in local areas of the company’s operation.
The new law also places eligibility restrictions on the types of legal entity on which companies may spend their CSR contributions. The receiving entity must be a registered trust, registered society or non-profit company (collectively, ‘NGOs’), so for-profit social businesses are excluded. Unless the receiving entity is established by the contributing company (or its holding, subsidiary or associate company), the new law also requires that the recipient entity should have a minimum track record of three years of carrying out charitable activities.
Finally, companies will be penalized not for their lack of spending but for their failure to disclose their CSR spending, or to explain publicly why they have not spent the required amount. Thus, the law relies predominantly on the persuasive value of shareholder disapproval or public disdain to motivate companies into undertaking CSR activities. Companies must ensure that they are well equipped to fulfil the law’s strict reporting obligations, since a failure to do so invites a hefty penalty – a fine of up to INR 2.5 million and up to three years’ imprisonment for every officer in default. The board must disclose the composition of the CSR committee and the contents of the CSR policy in its annual report. The contents of the CSR policy must also be published on the company website and the statement of profit and loss must reflect CSR expenditure. If two or more companies are collaborating on CSR activities, each company must fulfil its reporting obligations individually.
Pankaj Jain is a principal and Sanjana Govil is an associate at Impact Law Ventures, a mission-focused, boutique law firm that works at the intersection of start-up, sustainable development, impact investment and non-profit sectors in India.
Let’s start with some trivia for the philanthropy junkie: The largest gathering of foundations in Europe just took place in Hamburg, Germany (21-23 May). The motto of the conference was ‘Foundations: In the middle of the river and against the stream’. It derived from the location of this year’s conference in one of Europe’s largest harbour cities on the river Elbe.
Over the last couple of years the annual conference of the German Association of Foundations has grown into a networking event of astonishing size. It is a pretty big shoal that swims in the river. More than 2,000 participants were able to choose from over 80 workshops, talks, networking meetings, etc.
The topics covered a wide range of issues: transparency, collective impact, youth participation, school reform, women in philanthropy, sports, archives of foundations, Europe … The programme is a kaleidoscope of what foundations care about these days. It is also proof of how philanthropy swims with or against the stream. It documents the role of foundations, as drivers of innovation, but also as conveners, enablers and reliable partners of change. This was underlined in the opening speech by the German Federal President Joachim Gauck.
One of my observations is that foundations talked less about searching for their role in society than they have done in the recent past. It looks like the sector has a growing understanding and confidence about where it can contribute to social improvement and how this can be done. This is supported by a more diverse landscape of research on philanthropy and the third sector. To navigate through the currents is still not easy for grantmakers, but workshops on project transfer, scaling or impact reporting show that the exchange of experiences, analysis and methods has gained momentum.
Two issues that ‘stranded’ on the banks of the river are the investment of foundation endowments and fundraising. In the end I counted around 25 presentations on the most careful, best, strategic way to invest the foundation endowment – not including other events sponsored by banks. Yes, this is an important question for foundations these days. Yes, many foundations would not even exist without the profitable management of their endowment. Yes, banks are reliable sponsors for such a gathering. Nevertheless, it seems to be time to reflect on the role of banks in such events. They are important for the sector, but really at this level?
Fundraising is the other flotsam of our time. German foundations are exploring their options as fundraisers. The motivations are manifold: building up an endowment, low interest rates, inheritance management, being a fundraising NGO with the legal entity of a foundation … The number of players that are seeing fundraising as one option to finance their good deeds seems to be increasing. It will be interesting to see how these efforts to further professionalize fundraising will change the German foundation sector in the next few years. It may sound like a naive question, but what will be the difference between a fundraising NGO and foundation in the future?
Some readers may now ask, what’s really new? What can we learn from this snapshot of the German foundation community? Maybe it is just that the world of foundations is in flux, a flux that has a strong professionalization current. Maybe it is just that the river runs through it. It is a process that hardly changes the landscape on a day-to-day basis but a lot over time.
Michael Alberg-Seberich is managing partner of Active Philanthropy.
The 1st Fórum Brasileiro de Finanças Sociais e Negócios de Impacto – Investir para Transformar took place in Sao Paulo, Brazil on 6 and 7 May. Over 500 people participated in the event, organized by Artemísia, ICE and Vox Capital. Sponsors included some of the major foundations and institutes in the country, plus the federal government, represented by the development bank BNDES.
Participants agreed that patience and time are required to reap the results of investments that will transform society and the reality of millions. Collaboration and partnership among multiple stakeholders (including government) could also help collective dreams come true.
Financial results and social impact were discussed in numerous panels. It is not about financial results or social impact – everyone now wants both. And discussion goes beyond ESG risk management and competitive returns to include topics such as opportunities in underserved areas, employment and growth.
The impact investing space is already well populated. Brazil has 10 impact investing funds and 5 social business accelerators. Artemisia alone researches about 1,200 social businesses. Business schools are focusing on social entrepreneurs. It is a very exciting time and history is in the making. A newly published JP Morgan/GIIN survey shows that in Brazil the sectors where entrepreneurs see most opportunity are education, health and infrastructure, while microcredit and financial services count for 42% of current investments worldwide, followed by energy with 11% and housing with 8%.
Impact investing has a strong connection with the local philanthropic community. Early international investments looking for targeted social impact have found it hard to invest in Brazil during the last decade for several reasons, including the country language barrier (Brazil is the only Portuguese-speaking country in Latin America) and high costs. But locals are learning how to measure the impact of social business, and realizing the need to apply global metrics such as IRIS or GIIRS to local and government indicators. Every local context is different and early stage businesses are complex and challenging to measure.
The main challenges mentioned by the international players are the shortage of high quality investment opportunities with a track record and the lack of appropriate capital across the risk/return spectrum, mainly for early stage businesses.
The Forum included a session where several social entrepreneurs pitched their wares, showing innovative solutions with social impact. A challenge was launched to the audience: pick among the three finalists chosen by the selection jury to win a money prize and a ticket to participate in SOCAP14 in San Francisco in September:
To help the audience, the jury shared some of the parameters they used to select the top three:
• Profit-maximizing business, but differentiating between generating income and impact
• Impact going hand in hand with future growth
• Focus on the solution and possible impact (instead of focusing on the person or the organization)
• Why invest in one idea and not the other?
• Is it bringing innovation and possible change and transformation in scale?
Never mind the favourite. There were only winners at the end of the two-day forum.
But I don’t want to end without raising one recurring question: maybe it was my chosen panels, but I felt the environment was little discussed. I am not an environmentalist and I also know not all social problems can be tackled with social business. But I am now wondering if the environment has a toll to pay when we talk to people about social impact.
Elaine Smith is a Young Global Leader from the World Economic Forum; she helps organizations in their development process, focusing on innovative approaches to social issues.
Studies on global philanthropy indicate that cultural traditions, religious norms, political histories, and the economic strength of individual countries have profoundly shaped giving in individual countries and geographical regions, creating a rich and diverse global philanthropic landscape. However, some commonalities emerge from the various studies, including:
• The unique philanthropic heritage for each region needs to be acknowledged. Also, it is important to link new institutionalized forms of philanthropy with long-standing practices and traditions, and to support efforts to ensure that philanthropy is effectively organized and sustainable without destroying traditional giving motivations and practices.
• There is movement, albeit relatively slow, away from traditional charitable giving to more strategic giving aimed at achieving significant social change. There is a growing focus on the causes of social ills, and not merely on their symptoms. Also, there is an admission that solutions will not be found by the philanthropic sector alone and that collaborative efforts including government and private sector are needed for greater effectiveness.
Historically in the Arab region, endowments for much-needed social services like education and health services provided a sustainable approach to giving. However, more recently giving has been mainly charity-oriented, mostly state-sponsored, ill-studied and patronizing. The philanthropy thrust in recent years has been guided mainly by an Anglo-Saxon discourse not rooted in the local culture. When reading about the development of contemporary philanthropy, examples from the 1800s onward are cited, mostly from the UK or US, with no mention, for example, of experiences from other parts of the world like endowments or waqf set up in places like Jerusalem or Cairo to support schools, hospitals and poor and needy people. These have been active for more than 2,000 years with rudimentary documentation, with better records dating from the year 1200. The waqf of Hasseki Sultan, founded in 1552 in support of the needy in Jerusalem, with an endowment including agriculture land, shopping areas and rented properties that created revenue to support its mission, is one example of such rich past that we tend to overlook.
To take another example, at a recent global philanthropy meeting a session on networking indicated that the art of networking dated back a couple of hundred in the US when railways where built. Again networking along trading routes in other continents that existed over 2,000 years ago were never mentioned (trade links along the Silk Road is just one example). One can only blame oneself for failing to document the rich experience from one’s own region.
Many efforts are now under way in various regions to document local practices, learn from other regions, redevelop the local discourse, and reinvigorate local traditions and practices to enable the local philanthropy sector to find sustainable solutions to chronic problems such as the lack of relevant education, high youth unemployment, the absence of democracy and the lack of space for citizens to express themselves, etc. Writing an article on emerging practices in the Kingdom of Saudi Arabia (Alliance, March 2014), it was heartening to see that old practices are still living (markets, storehouses, housing and other facilities for commerce and light industry are among the assets set up by foundations as waqf dedicated to support and finance education and social welfare projects, just like waqf set up in old times) but with the added perspective of social justice and sustainable development.
Of specific relevance to global philanthropy in general and Arab philanthropy specifically is the increased consciousness that the cultural and social problems that societies face and philanthropy needs to address are complex and global. As a result, there is more awareness that solutions must be multidisciplinary and rooted in the local culture and values rather than copied blindly from other regions. The Arab Spring brought to the forefront terms like social justice, integrity, accountability and transparency in all aspects of life.
The main purpose of this blog is to create a platform to share the development of philanthropy in various regions and how it relates to its rich past while interacting with the global discourse. Hopefully it will encourage philanthropy leaders around the globe to reveal trends and document stories, old and new, from Europe, Asia, Latin America and Africa. The dream will be to see these stories quoted in the philanthropy literature, creating a truly global philanthropy enriched with its diversity.
Atallah Kuttab is chairman of SAANED for Philanthropy Advisory and is a Richard von Weizsaecker Fellow hosted by Robert Bosch Stiftung. The purpose of his fellowship is to identify the emerging new Arab philanthropy discourse, anchored in its rich past of giving and linking with contemporary philanthropy in other regions.
Following the session on women’s role in peace processes at the EFC conference in Sarajevo,I asked Madeleine Rees, secretary general of the Women’s International League for Peace and Freedom (WILPF), what WILPF would do in Ukraine if they had the resources and could act now.
MR: What we try to do is to prevent conflict in the first place, by identifying indicators of when and why things are beginning to go badly wrong. The network of women’s organizations in Ukraine gave us an excellent gender analysis, telling us their fears about the exclusion of women from the protest movements and the growth of armed militias, with more and more men feeling compelled to join them even though they had opposed violence in the first place. We have considerable experience in organizing with women in relation to Syria and so we suggested that women from the network (which has members from all over Ukraine) meet together in Ukraine to decide on common ground and start to analyse possible solutions. WILPF would then take representatives of these organizations to Geneva to meet with Member States in the context of the Human Rights Council and bilaterally, particularly with the Russians, the European Union and the Americans. We have already arranged for one woman to meet members of the Security Council in New York to explain the situation. There have been a lot of demonstrations in Moscow in solidarity with the women of Ukraine, but if violence escalates, then inevitably sides are taken. We need to start bringing the peaceful voice of civil society into the discussions before it gets too late.
What would bringing Ukrainian women together achieve?
We see in Syria that the women have a real knowledge of what is happening on the ground and how peaceful solutions can be brokered. They are occasionally able to secure ceasefires in particular areas or prisoner exchanges. They know exactly who the players are. Their exclusion means that you end up with men talking about territorial control and sectarianism, instead of looking for solutions. Had women’s voices been heard earlier, we may have had a peace process.
A similar situation could happen in Ukraine if we’re not careful. So the intelligent thing is to bring those solutions to the table now. The militias need to be demilitarized and disarmed and an economic solution needs to be found. Ukraine needs to trade with Russia and with the EU, it shouldn’t be either one or the other. The international community should stop its geopolitical strategizing over Ukraine and actually find solutions.
Do you have the resources to do what is needed in Ukraine?
No. Ideally we would bring ten people to Geneva for several days so that we could work with them and explain how the system works. Some of the people we’re working with have been doing excellent work promoting women’s rights in Ukraine, but they’ve never had to stop a conflict before – how many people have? We have to help them shape their arguments so that they can say to the Russians and the EU, this is how we see the issue and these are what the solutions could be and then bring everybody on board. It’s really hard work. And it’s allgoing to be more expensive because we’ve got to take people out of the country into a neutral place because it’s no longer safe for women to travel in Ukraine.
I hope with Ukraine that we’re going to be early enough in what we’re doing so that women can take a leading role rather catching up, which is what has happened in all other conflicts. In every situation where there could be violent conflict, if you are upstream in terms of your analysis, you can intervene in good time. You can make sure there are legal obligations on states not to start flooding the area with guns, that their trading agreements and economic policies towards those countries enable the government to respect its human rights obligations – that’s when and where we need the interventions, not when it’s too late.
What sort of sum would enable you to do this?
€50,000. It’s a tiny amount and we could probably raise it from Member States, but by the time that happens, it’s too late. If we had that sum now we could get women to the Human Rights Council in June. If we had a little more, we could take them to the Ending Sexual Violence in Conflict Summit in London in the second week of June where we are doing a session on root causes of conflict and how the gender dimensions play out before, during and after conflict and what the solutions should be. We want them there so they can explain to the 141 Member States how this works and what they should be doing. They would also come into contact with hundreds of NGOs there that could give them support.
What we’re trying to do with the summit is explain that, while there are many different entry points for addressing sexual violence, the best is before it happens. You can see with the way it happened in Bosnia and in Syria, and the way it could happen in Ukraine, you get to that stage where the men with guns are the ones who are dominating public space. You have this almost pack mentality where it becomes extremely dangerous, especially for women.
This is one of the reasons why we want to make sure we can bring a non-violent masculine voice into the picture, and we’re working closely with the men’s organizations who are trying to address issues of violent forms of masculinity. In Syria and Ukraine as well, the women have said the vast majority of the men are not violent and do not want violence, yet they’re silenced because it’s not seen to be very masculine to say we want peace. There are probably fewer than 500,000 fighters in Syria, and 23 million Syrians stuck in the middle who don’t want any of this. It’s going to be the same in Ukraine, it’s always the same, but men are co-opted into military service, having to perform these acts of violence. We need to fundamentally change this time-worn approach so that we stop matters of vital importance to everyone being decided only by those who can exercise the most violence.
Caroline Hartnell, is editor of Alliance magazine.