The power of 'impact investing'
Rockefeller Foundation sees a bright future for social entrepreneurship in the developing world
- Published: 9/09/2013 at 11:26 AM
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It is a little-known fact that one of the oldest witnesses to Thailand's evolution in modern history also happens to be one of the oldest and most influential philanthropic organisations in the world.
Founded in 1913, the Rockefeller Foundation traces its presence in Thailand back nearly as long, starting with the foundation's global initiative in 1915 to eradicate hookworm. In 1922, HRH Prince Mahidol Adulyadej, known as the country's father of modern medicine, helped broker an agreement between the Thai government and the Rockefeller Foundation to establish local medical programmes and train staff.
Dayal: ‘‘Getting investors, entrepreneurs and NGOs to work together.’’ PORNPROM SATTRABHAYA
From those early days, the foundation has remained active in the country with its support for public health, agriculture, education and scientific research programmes.
While economic development in Thailand and Asia over the decades has helped alleviate poverty, extended lifespans and eased suffering for billions in the region, many challenges still remain, according to Ashvin Dayal, managing director for Asia at the Rockefeller Foundation.
He cited inequality, whether it be economic, regional or social, as one of the most pressing challenges. “The gap between those with resources and those without has not closed. Not only is this a threat to growth, but it is also morally indefensible.”
Countries such as Thailand also face the “middle-income trap”, where low wages no longer stand as a competitive advantage but innovation and technology remain lacking compared with the most developed nations.
“The question is how can an economy like Thailand build human capital and innovation,” Mr Dayal said. “It's about promoting equitable growth, building resilience [to shocks] and creating the conditions for growth.”
He said he was optimistic about the activity across Asia among small and medium-sized enterprises and social enterprises toward sustainable business models.
“There's a much greater level of awareness among new graduates. And there's a sense of frustration with the public sector and over crony capitalism, which is helping drive greater commitment to change,” he said.
New technology, the influence of social media and the trend toward “impact investing” are other factors helping drive innovation in the region.
“Before, those people who were interested in working in development either went into government or went to work with non-government organisations. Now, we see a growing space for social entrepreneurship,” Mr Dayal said.
“There's an incredible amount of energy in the region. People are thinking about how they can help, and are developing business strategies to suit.”
The Rockefeller Foundation is a strong supporter of impact investing, a catch-all term referring to investment aimed not only at generating financial returns, but also environmental and social gains as well. In 2007, the foundation helped create the Global Impact Investing Network (GIIN), a group of like-minded investors.
The foundation has also invested in rating methodologies such as IRIS (Impact Reporting and Investment Standards) and GIIRS (Global Impact Investing Rating System) to help investors, companies and communities assess the social and environmental impact of companies and funds worldwide.
Other new companies are emerging across the region using innovative business models to not only profit, but also to address development issues in areas such as sanitation, waste management, alternative energy and health.
“Our core strategy is to help build awareness among investors. ... It's how to get investors, entrepreneurs and NGOs working together,” Mr Dayal said.
The Rockefeller Foundation also helps promote strategies to help get the private sector involved in broader multi-stakeholder partnerships.
“Government alone will not solve the [world's] problems. And neither will social enterprises,” Mr Dayal said. “I see the role of the state in helping regulate and align incentives. ... I'm optimistic about the role of the private sector, but no one is advocating that we should leave the business of development to businesses.”
Policymakers are increasingly recognising the role that social entrepreneurship can play in development, through agencies such as the Thai Social Enterprise Office, set up in 2010 to work with companies interested in social and environmental issues.
“We see several governments in the region actively investing in social entrepreneurship,” Mr Dayal said. “Where governments need to improve is in how they regulate specific sectors to encourage development.”
In Cambodia and Myanmar, for example, large areas remain outside of the electricity grid. Much could be done to ease shortages if the private sector was offered to right incentives to establish renewable energy or small-scale power projects in rural areas.
“Sometimes innovation comes simply from authorities setting a new standard,” said Mr Dayal. “That in itself can lead to an entire industry shifting, as the private sector aligns to the new rule.”
For businesses, CEOs should spend time building relationships with NGOs to help maximise returns from CSR and sustainability programmes.
True sustainability begins after a deep look at one's core business model, its underlying process and how operations and the supply chain affect stakeholders.
“You need to draw on your corporate DNA. That is what will sustain change. You should also understand the NGO community, and build meaningful relationships with stakeholders,” Mr Dayal said.
“Will it be effective and sustainable? You need to engage the people in your organisation, not just write a cheque.”
About the author
- Writer: Chiratas Nivatpumin
Position: Managing Editor