Globalizing the Social Market

Impact investing has been getting more and more attention in a context where the urge of finding alternative solutions to dealing with social problems has become pressing. Governments have a crucial role to play in facilitating this dynamic as they can create a friendly environment where resources can be more easily linked to needs and where impact can be better monitored. Impact investing could grow even more exponentially if the conversation is taken beyond the national level to the global scene where a common language and assessment tools would help expand the reach of such initiatives. But how feasible is that?

Indeed, in the past decades, the public sector has been rethinking the models through which it delivers public goods. For instance, public-private partnerships (PPP) have been gaining momentum as it has been proven that collaborative efforts between the public sector and the private sector are often far more efficient than what each one can do separately. In the same vein, another emerging model is also taking-off where the private sector simply takes over the responsibility of managing basic necessities. This can take many forms such us social ventures focusing on delivering social impact or large companies dedicating a portion of their revenues to impact investing. Recently, new innovative ideas like social bonds – a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings¹- have also started to appear, which paves the way to new win-win partnership models for the public good. The public sector has everything to gain in being the catalyst triggering the growth of these new models as it would help decrease its direct intervention in managing complicated social issues while increasing efficiency. To do so successfully, it should initiate and build a comprehensive ecosystem around social innovation and facilitate the creation of formal networks of organizations who can help supervise and boost this ecosystem.

But what if we could go beyond the national level and were able to implement a global scheme that would propel impact investing? Indeed, speaking a common language and using the same assessment tools would probably facilitate collaboration around this topic and enable a globalization of access to funding and resources. Think about the carbon credits model. If we could build something similar, say “social credits”, which can be circulated and marketed around the world, more money and efforts can be transferred towards social initiatives and research. The social footprint is becoming more and more important to companies which are increasing their social responsibility investments but it could become even more important if there is a formal market and quantifiable benefits to it. However, the biggest hurdle in this case is how to uniformly measure the impact generated and give it a precise numeric value that could serve as a market price. Indeed, in the case of carbon credits, a ton of CO2 can be easily quantified but the impact of a social endeavor may not be as easy to measure because of the nature of its value. Could it be broken down to numbers? It has been done with some abstract notions like governance or happiness. Or should we create new global organizations like social impact auditing firms, or global rating agencies, or even a market index? This would add a qualitative assessment to quantitative measures which would result in a more complete review and assessment. The implementation of such a global measure seems very complicated but, in my opinion, the discussion around social innovation is now mature enough to start having this discussion. What do you think?

¹ https://en.wikipedia.org/wiki/Social_impact_bond#cite_note-1