SOCAP Report: What Layer Cakes have to do with Social Finance

This post was written from SBS MBA Nikhil Neelakantan, dosage live from SOCAP/Europe in Amsterdam.

What does a recipe for a layered cake have to do with impact investing?

I would have said “nothing”. That is, healing until I attended the session titled “Layer Cake Deals”. This panel featured speakers from organizations like Triodos Bank (old hands at impact investing) and ABN Amro (a relative newcomer to the field).

According to the panel, medical “layer cakes” are created by putting funders with different priorities in the mixing bowl.  That means funders providing grants, subsidies and soft debt can work with risk-taking venture impact investors to create bigger, faster and more scalable solutions to some of the world’s biggest problems.

Triodos Investment Management has developed a fund that adopts this structure to fund agricultural entrepreneurs in the developing world.  Governments and social investors form the first layer of the cake, providing external guarantees against  default. Social investors seeking lower returns form the second layer, providing subordinated debt. Triodos Bank provides the final layer with a commercial credit line (which it is comfortable doing, partly because of its confidence in the other layers).

However there is a darker side to layer cake deals. The senior debtors are those who often receive the lowest returns. This can partly be explained by the fact that donor agencies and other social investors are willing  to fund high-risk ventures in order to bring in more mainstream funding, therefore providing a “multiplier effect”.   Thus, how to balance the different “ingredients” of the layered cake is a discussion certain come up at impact-investing conferences and offices of funders across the world.

SBSers everywhere

SOCAP has made realize once again that Saïd Business School is extremely well represented in the impact investing space.

I have met practitioners, speakers and leaders of social enterprises who are alumni of the Business School. Some of my “networking time” was spent swapping stories with other SBS’ers about everything from rowing to exams (Am I glad that we don’t have to come back for exams in August that cover material taught over one year!)

My classmates – including budding entrepreneurs building social enterprises in Chad and India – are also representing SBS at SOCAP.  I am impressed by the reach of this strong and cohesive group of former and current students – and I am looking forward to being part of this contingent in the years to come.