Talking social returns at Skoll

I just attended the Skoll World Forum on Social Entrepreneurship in Oxford, England. At the conference, Sir Ronald Cohen spoke of the need for a private equity model that would allow investors to back and build substantial businesses that promise a financial return plus social returns (increasing employment, role models, flows of capital, perhaps increased tax revenues, etc). The metrics around social returns, he said, are crucial to ensuring the true building of this market; otherwise, we will find it too difficult to connect with deep pools of capital.

His solution? To find ways of insisting on scale in everything we do. He argued that we need to establish in each country an institution that is expert in the area of social financial capital that can help build this sector into an asset class so that a wealthy family, pension club or foundation can choose social private equity as another investment option.

I agree with Cohen and would add that we need not only to measure social returns more effectively but that we must build scalable institutions. To do the latter effectively, we also need a better understanding of different classes of investors - their risk preferences and return thresholds. We also need to improve our ability to discern between classes of social investments and their relation to other sectors. Health prevention, for instance, typically will not be driven solely through private markets (nor should it be); moreover, the marketing costs associated with encouraging behavior change (so that people use malaria bednets, get vaccinated, use clean water, etc.) tend to be much higher than marketing costs in other sectors. Understanding these nuances is key to building effective business models associated with using entrepreneurial approaches to solving problems of poverty.