Yes, this is a provocative headline.
Offering a critique of a Nobel Prize winner who revolutionized financial inclusion and positively impacted the lives of tens of millions is not something we take lightly. Nor would we flippantly critique the Rockefeller Foundation, an organization that quite literally wrote the book on impact investing, and, in this case, has partnered with Yunus Social Business on its new “social success notes”.
That said, we have found that constructive criticism is sorely absent from most dialogue on impact investment. As a community of practitioners, we are quick to celebrate intention and innovation rather than outcomes. Because we must work collaboratively and demonstrate momentum, we can too often hold our tongues. At Ceniarth, we prefer a more direct approach. The problems that we all hope to solve are too big and too important for us to offer pleasant courtesies when we could be working together for solutions.
Mr. Yunus co-authored an article last month with Rockefeller President Judith Rodin entitled, “Save the World, Turn a Profit”. They begin by succinctly explaining a problem that we all hope to solve. Namely, that the world’s development challenges are expensive to fix and that there is not nearly enough international aid and philanthropic money to adequately finance solutions. As a result, we must find ways to mobilize a portion of the world’s $210 trillion in commercial capital toward these issues. On this, we could not be in more emphatic agreement.
Our disagreement is centered on how to catalyze a shift in large, commercial pools of capital. The authors cite rural energy access as an example of a market where “social success notes” could be useful. The premise behind “social success notes” is that philanthropic institutions would provide “impact payments” to subsidize investments in social enterprises. For example, if a social enterprise were to hit a particular impact target (e.g. number of households served), the contingent payment would be triggered, thus improving an investor’s financial return. If all goes as planned, the authors suggest, “it’s a win-win-win: Investors receive a risk-adjusted commercial return, thanks to the impact payment; foundations achieve far greater leverage for their philanthropic dollars while achieving a desired social outcome; and social businesses receive access to low-cost capital, allowing them to focus on improving the world without the pressure of offering market-rate financial returns.”