Social Finance Thought

Why companies invest in the poor/ social finance[1]:

1.     Companies see it as a way to make money. These investments are expected to grow faster in emerging economies than developed ones.

2.     Philanthropic reasons: they actually do care

3.     There is a demand for skills and private capital

4.     Governments support companies. Ie the Community Reinvestment and US act.

My question is are these enough reasons to help society become more financially well off? Are these reasons accurate as to why companies invest in social finance?

Yes, definitely, these are the reasons why companies invest in social finance. The number one is to make a PROFIT, to improve the company’s bottom line!  The second reason, is just an added perk, that while a company invests in for example loans for the credit averse or free services, the employees of that company actually feel good for doing it.

I would like to highlight JP Morgan Chase and Co. This company initiated the “J.P. Morgan Social Finance” program.

Take a look at this objective:

Investing J.P. Morgan capital in impact investment funds with the dual objective of achieving both positive impact and financial return.[2]

 It looks very similar to the first four reasons stated above.

Now, what kinds of products does JP Morgan offer[3]?

·      Financial advisory and traditional banking products and services to impact organizations

·      Structuring of impact investment funds or securities

·      Placement of impact investment funds to clients, including private individuals, foundations and institutional investors

What do these mean? One, JP & Co offers a place to store money hence a bank. Two, JP & Co will help you decide where and how to invest your money. Do the people from low-socioeconomic backgrounds need this? I could see a benefit in this, so that a person could develop a credit history and be able to say purchase a product online (make an electronic transaction).

The placement of impact investment funds: what exactly does this mean? It means that JP Morgan has investment portfolios like:

IGNIA[4]: Venture capital fund supporting the founding and expansion of high growth social enterprises serving low-income populations in Mexico. Investments span multiple sectors and include healthcare, housing, water, technology and food/agriculture.

  Hence, JP & Co. invests in Venture Capital- meaning high-risk start up companies[5]. This could lead JO &Co. to increasing their profits and creating jobs. I see this as a positive thing. For this particular investment, the people of Mexico now have an opportunity at creating their own business, with the chances of expanding it globally.  I consider JP Morgan a bit selfish for wanting a big piece of the profits, but they are giving people a chance to stimulate the economy of their own country. Do you think that companies invest selfishly? Or do companies actually have philanthropic reasons at heart(if a company is a person)? If a company like Monsanto has “social finance” does that make the company a positive change or addition to the world?

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[1] http://www.economist.com/node/14493098

[2] http://www.jpmorganchase.com/corporate/socialfinance/social-finance.htm

[3] http://www.jpmorganchase.com/corporate/socialfinance/solutions.htm

[4] http://www.jpmorganchase.com/corporate/socialfinance/portfolio.htm

[5] http://en.wikipedia.org/wiki/Venture_capital