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Finding Common Ground Between the Financing Fault Lines

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

 Skoll Scholar and Oxford MBA Candidate 2016-17, Ashley Thomas, draws on this year’s Skoll World Forum theme in relation to social impact business models.

There is a fault line between models of international development financing. On one side, there is the traditional donor and philanthropic capital that utilises grant money to support projects. On the other side is the social enterprise space that seeks to create sustainable impact through revenue generation.  There has been a lot of excitement in utilising grant funding for social enterprises to build and tweak their business model, but to date there has been little appetite for true hybrid models of ongoing subsidies for social enterprises.

This is a conversation that I had in numerous sessions and coffees throughout Skoll World Forum. It was also one of the key themes from the session hosted by Mercy Corps and USAID on sharing the learnings from their investments in the Innovation Investment Alliance. There is a common ground emerging; these conversations are hinting at the start of innovative new business models that allow for hybrid grant and revenue streams.

The Problem:

Social enterprises are addressing market failures. They bring products or services to underserved markets, often at low margins, and often at high costs. However, market failures exist for a reason; many companies are realising that even at scale, high volume low margin products are not able to generate the revenues that are necessary to be sustainable. However, social enterprises often sell themselves on this vision- that with initial capital to pilot and build systems, they will be financially sustainable at scale.

The Solution:

Philanthropic capital- which does not require financial returns, can help bridge this fault line, and maximise the potential impact of social enterprises. This does not mean we should revert to the large scale unsustainable development models of the 1990’s, but use philanthropic capital as way of targeting the market failure and allowing social enterprises to maintain their focus on their mission and outcomes. This hybrid model is being utilised in the FundiFix hand pump repair service designed by Dr. Rob Hope out of the University of Oxford. The model uses monthly user subscription payments to pool capital to finance prompt hand pump repairs. However, the willingness to pay only accounts for 2/3 of the cost of the service, and the remaining cost is subsidised through grant funding. This is also used in much larger social enterprises.  Ella Gudwin from Vision Spring spoke about how their model has shifted from seeking to maintain cost recovery- and retailing glasses at increasingly higher prices, to minimising the “philanthropy per pair” and serving their target customer.  They were able to do this under a scaling innovation grant from USAID and Mercy Corps, demonstrating that donors are also recognising the need for the pivot into these hybrid models.

It is increasingly clear that there is not one single model for social enterprise, and a single-minded focus on achieving commercial sustainability may limit the impact. Innovative hybrid models that use the social enterprise ethos of cost effectiveness in combination with smart grant funding that can subsidise the product can address the market failures preventing social enterprises achieving impact at scale. There is immense opportunity to achieve scale and impact through creating this common ground.

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Making Leadership Great Again: Breakthrough Educational Models

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Gillian Benjamin, Oxford MBA at the Saïd Business School, shares key takeaways from the  Skoll World Forum session “Making Leadership Great Again: Breakthrough Educational Models”.

In the lunchtime session directly prior to this panel, Bill Drayton, Founder and CEO of Ashoka, implored audience members to help others understand the implications of the new world order in which the repetitive actions of a machinist on a factory floor, or a line manager in a multi-national company, were fast becoming redundant. He highlighted the need for a radically different skill-set and ‘growing up system’ to give young people the competencies needed to thrive in environments of constant and rapid change.

During the panel on ‘Breakthrough Educational Models’ the founders of two innovative institutions, both based in the global South, shared key ingredients of their success.

Fig 1 - Making Leadership Great Again

Jose Zaglul, Co-Founder and former President of EARTH University shared the story of the establishment of the institution he helped set up. The campus, based in Costa Rica, offers an innovative four-year undergraduate programme in agricultural sciences and natural resources management with one crucial difference from ordinary degree programmes – the technical and scientific knowledge gleaned on the course is just one of the four pillars that make up the curriculum. The other three pillars ensure that students leave with a deep social and environmental awareness, the attitudes and values needed to drive change and the lived experience of having set up their own entrepreneurial venture. EARTH has 430 students from 41 countries, 83% of whom are from rural communities.

Hopping across continents to South Africa, co-founded and CEO Chris Bradford shared the story of the African Leadership Academy (ALA), ALA is a two-year pre-university programme based on the UK A-Level system, combined with unique curricula in Entrepreneurial Leadership, African Studies and Writing and Rhetoric. ALA currently has 264 students drawn from 47 African countries, with many graduates going on to study at some of the most prestigious universities around the world before coming back to the continent to drive growth and development. One such example is Moroccan panelist Jihad Hajjouji who is an ALA alumn currently pursuing her MBA at the Stanford Business School.

When discussing the ALA curriculum Bradford stated with respectful veneration that Zaglul was his personal hero and had been a huge inspiration to ALA as they crafted their programme two decades after the formation of EARTH.

Fig 2 - Making Leadership Great Again

Three key lessons can be drawn from the success of these two institutions:

1) Create opportunities for youth leadership

Recruiting students from underserved communities can be challenging as prior academic performance can be a poor shorthand for future potential. Zaglul shared how a track-record of civic action in teenage years helped EARTH identify and recruit the most promising students, many of whom lacked the top grades of their peers from more privileged contexts, but who made up for this through exhibiting tangible leadership capabilities. Such leadership skills, developed through implementing projects to improve their immediate contexts, point to an understanding of their personal agency and a world-view that sees the status quo as malleable and open to improvement through personal action.

Youth social action projects therefore play an important role in the development of young change-makers, and serve as important identifiers to institutions who are driven to recruit talented students from underserved contexts where quality primary and secondary school instruction may be lacking.

2) Put the emphasis on learning, not teaching

Bradford shared a word association game he has tested the world-over: To begin, think of words associated with ‘school’. Then follow the same process for ‘learning’. Having played this game with educators and students from all corners of the globe the results are resoundingly similar:

When asked to think about ‘school’ people mention nouns such as headmaster, teacher, bell and test. ‘Learning’ rarely appears in the top five most-mentioned associations.

When asked about ‘learning’ people talk about things like discovering new skills through stretch experiences and the value of engaging with inspirational mentors to guide them on their journey.

The contrast in the associations is stark and points to the need to explicitly redesign our education apparatus in a way that fosters experiential learning. Bradford calls for a radical re-organisation of how we deliver the educational experience through two key shifts:

  • Educators need to shift from thinking about learning as the delivery of content towards the learning as nurturing the key skills students need to hone.
  • The learning environment needs to shift from a space where the teacher is seen as an imparter of knowledge to a peer-learning space where students learn from one another and the teacher through experiential projects.

Fig 3 - Making Leadership Great Again

3) Inspire teachers to rethink their positions  

Passionate teachers strive to replicate the best classroom experience they had as students and in many contexts this means replicating the best lecturer who had the clearest notes on the board.

To shift to a new norm that truly serves students, institutions need to expose their faculty to radically different versions of best-practice to support them in refashioning outdated ideals they may be striving towards. This involves exposure to new teaching practices to support them re-imagine their roles.

In this regard, moderator Debora Dunn, co-founder of FEED collaborative at Stanford University pointed to the work of The Stanford d.school’s K12 Lab Network which achieves this goal by supporting educators think beyond current school models while concurrently building a community of practitioners to share the best practices that emerge.

She commented, “To tackle the many challenges that stand between us and a just and sustainable world we need a global army of young leaders who combine character, confidence and capability.” The lessons extracted from the work of EARTH and ALA highlight exciting leverage points to help transform education systems from those that merely equip students for repetitive work to those that foster the competencies, care and concern needed in our current socio-economic context.

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Global Goals for an Uncertain World

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Avery Bang, Oxford MBA at the Saïd Business School, shares her insight from the  Skoll World Forum session “Global Goals for an Uncertain World”.

The buzz of the Skoll World Forum is something any attendee is not soon to forget. I look forward to this week every year with excitement for the flood of new ideas, and dread for the lack of sleep and inevitable FOMO (not familiar with FOMO? You clearly haven’t yet studied at Oxford Saïd).

One of the sessions I most looked forward at this year’s Forum was Global Goals for an Uncertain World, moderated by Susan Myers of the United Nations Foundation. I entered to session with a genuine curiosity of how she would lead a conversation about the Sustainable Development Goals (SDGs) through a diverse panel including a Skoll Awardee, a Deputy Minister and an Oxford social entrepreneur. When the session started with a 90 second, dance-move inspiring animated video Turning Plans into Action, my FOMO melted away and I knew I had found my people.

For those who are not familiar, the Sustainable Development Goals (officially known as Transforming our world: the 2030 Agenda for Sustainable Development) are a set of 17 targets to fight inequality and tackle climate change launched in 2016. The SDGs were announced as the United Nations wrapped up the 15-year cycle of the anti-poverty Millennium Development Goals (MDGs), and launched the even more ambitious plan to banish a host of social ills by 2030. For those of you that skipped the video animation above, the MDGs got us half way over the last 15 years; the SDGs will get us the ‘rest of the way’ over the next 15.

I personally love audience participation, and really appreciated that the afternoon discussion weaved in each of the panelist’s favorite goals, invoking an audience-wide inquisition of our own (mine is #9 – comment below with yours!). I walked away with a much greater appreciation for a range of issues – access to justice for building effective, accountable and inclusive institutions (goal #16) in particular jumped out. Vivek Maru of Namati, a 2015 Skoll Awardee, painted a story of a world with access to social justice through ensuring all people ‘know law; use law; and shape law’. The panel conversation also shed light on how close several goals were from being cut, and how the world will truly be a different place in 15 years because they weren’t.

Susan framed the session with three main discussion points; how to sustain momentum for the SDG release, particularly in a time of political turnover; how to empower social entrepreneurs to work on SDGs; and how to empower action across all levels. Throughout the conversation, it became clear that there has been a fundamental shift between the MDGs and SDGs – a shift towards aligning international commitments with those right at home.  Elissa Goldberg, the Assistant Deputy Ministry of Global Affairs for Canada shared her government’s commitment to develop their national plan using the SDGs as a framework, and it occurred as something of an ‘ah-ha’ moment for me – how incredible is it that we are all one, operating under one global framework, all aligned towards one (or 17, in this case) common goal. By aligning our domestic agenda with our investments overseas the global community is speaking loudly that there no longer can be an ‘us’ or ‘them’.

One common goal – one common framework – and one incredibly inspiring conversation. After another, after another, after another. With a new common vocabulary that we all can work towards, and within, I believe the SDGs will continue to ensure that social entrepreneurs, policy makers, private sectors players and everyone in between continue to contribute one common direction.

 Follow Avery: @AveryBang

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Philanthropy for a Fractured World

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

David Sanders, Oxford MBA at the Saïd Business School, gives his perspective on the Skoll World Forum session, “Philanthropy for a Fractured World”.

On the final morning of the 2017 Skoll World Forum, simultaneous panels were offered on Impact Investing and Philanthropy.  I debated whether to catch up on the latest from the former, with its sex appeal of “profit + purpose”, a proposed new kind of capitalism, or to return to the original solution for affecting positive change: strategic donations.

A simple realisation drew me to Philanthropy for a Fractured World:  the most pressing, extreme problems facing society today do not lend themselves to viable business models, but through giving, these issues can be remedied.

Foundations and family offices are increasingly seeking hybrid organisational models when deploying capital, and I expected the session on philanthropy to at least touch on this growing practice.  Much to my surprise, and relief, on the contrary, the panelists reminded the packed room that philanthropy has a unique, and extremely important role to play in the social impact space.

Panelists at the Skoll World Forum, from philanthropy and government, discuss the role of their organisations in an increasingly polarised society.

Panelists at the Skoll World Forum, from philanthropy and government, discuss the role of their organisations in an increasingly polarised society.

The speakers, who included Lillianne Ploumen from the Government of The Netherlands, Darren Walker from the Ford Foundation, Laleh Ispahani from Open Society Foundations and Pia Infante from the Whitman Institute, discussed their organisations’ respective responses to crises, with significant focus paid to the risks facing women and minorities in the U.S. under a Trump presidency.  Ms. Ploumen’s department has partnered on the #SheDecides campaign, which swiftly raised €183 million to help fill the gap in maternal health provisions following the president’s drastic cuts to Planned Parenthood services.  This initiative, from a foreign government to the U.S., is admirable, but indeed troublesome—it seems the U.S. is entering a period of international reliance for the protection of human rights.

Mr. Walker emphasised the importance of minority representation in leadership positions today, especially where racism and sexism persist, and he also cited specific concerns on the failure of the economy to deliver stable jobs to low-income populations.  These shortcomings, coupled with a shrinking government social mandate, escalates demand for Big Philanthropy.

While the panelists focused more on the role of philanthropy than they did on specific causes, a highlight of the conversation was a recognition that there are causes that span the political spectrum.  Disability issues and criminal justice-reform, to name two, are both values-based issues, and garner support from the right-leaning Koch brothers, and progressive institutions like Open Society Foundations.

The world of giving does grapple with some important questions, however, around its own identity and purpose.  As Mr. Walker acknowledged, philanthropists are incredibly privileged, and it is easy for practitioners to succumb to an ivory tower mentality.  One proposed solution to this, as posed by the distinguished moderator Marc Gunther from Nonprofit Circles, is to democratise the work.  Like shareholders of a public company, who convene regularly to take a voice in key decisions, should not beneficiaries to causes also be gathered to express their views to donors?

In the Trump era, the culture of giving in the U.S. plays an essential role for social progress and human protections.  And it seems, based on the views of those at the Skoll World Forum, philanthropy is stepping into its heightened role with a determined spirit.

Follow David: @DavidSandersUSA

 

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Has Impact Investing Been Inflated?

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Rareș Pamfil, Oxford MBA Candidate at the Saïd Business School, shares insight on the Skoll World Forum debate, “Has Impact Investing Been Inflated?”

Participating at this panel were:

  • Julia Sze, Director of Impact Investing at Arabella Advisors
  • Chris West, Partner, Sumerian Partners (formerly Director of Shell Foundation)
  • Mara Bolis – Senior Advisor, Private Sector Department, Oxfam America
  • Cathy Clark – Director of CASE i3, Center for the Advancement of Social Entrepreneurship at Duke University
  • Lisa Kleissner, Co-Founder, Toniic

This was a special session at the Skoll World Forum, because it centered around an Oxford-style debate on the motion “Has impact investing been inflated?” Chris West and Mara Bolis argued for the motion, Cathy Clark and Lisa Kleissner argued against, and Julia Sze moderated.

It should be noted that speakers on both sides of the debate are active in developing the impact investing space, with neither of them opposed to the practice. Nonetheless, today they took a firm position either for or against the motion being debated, for the sake of creating a more thought-provoking debate.

The argument from Chris West and Mara Bolis broadly followed the one made in their recently launched report: “Impact Investing: Who are we Serving” (blog by Mara Bolis). Their key concern with the field as it stands today is that there is a mismatch between the type of capital supplied and the type of capital needed. “Because this sector is trying to behave differently, this money should behave differently”, pleads Mara Bolis. Too frequently, the social entrepreneurs who are knowledgeable about the financing needs of enterprises which serve the poor in developing countries, are left out the conversation when impact funds and other investment vehicles are designed. This has lead to unrealistic expectations about returns, and risks undermining the sector.

What can be done? Chris West argues that more patient capital is required, as well as more realistic expectations about returns. Entrepreneurs also need to ensure that they accept investment only at the right time, from the right people, and under the appropriate terms. Otherwise, enterprises can end up with “schizophrenic boards”, which cannot agree on whether to prioritize financial growth of social impact. Participants from all sides agreed that social investment finance intermediaries have a key role to play in helping entrepreneurs raise the right kind of capital, as do resources developed for entrepreneurs seeking investment, such as the CASE Smart Impact Capital toolkit.

Nigel Kershaw, OBE Chair of The Big Issue Group, addresses the panel of speakers.

On the other side of the debate, Cathy Clark and Lisa Kleissner spoke about the progress that has been made in developing this field, emphasising that there is genuine commitment to social impact among many of the funders have in the field. For instance, in the Toniic 100% impact network, over 130 individuals have pledged to use 100% of their assets for positive social and environmental impact, amounting to a total of over $4.5 billion in assets. Lisa Kleissner, who is a member of the network, shared her personal perspective: “The money that we [received] was more than we had hoped for, so we were willing to take a risk.” Her approach has been to work closely with entrepreneurs, understand their business model, and provide a combination of grants, loans, and other investments as needed.

The T100 project will provide other personal journeys and insight from 50 Toniic 100% impact members. The early findings are that 83% met or outperformed financial return expectations (in a sample of 40 portfolios), and 87% of all respondents met or exceeded their impact return expectations. However, what constitutes an annualised market rate of return varies considerably among respondents, leading 53% of respondents to state that the discussion around financial returns needs to be re-framed.

What can we conclude from this this debate? By one metric, the side against the motion won. The small group of 7 audience members who felt that impact investing had not been inflated grew to over 15 after the speakers finished their remarks. But they remained a minority in the room. Nonetheless, many audience members commented that “Has [the promise of] impact investing been inflated?” was the wrong question to ask. Inflated according to whom? And is it not too early to tell? What is clear is that the field has developed substantially in the last 15 years. Regardless of whether early results meet or defy expectations, the recently created sector infrastructure (funds, advisors, measurement experts, and other intermediaries) will enable growth, better capital placement, and better impact outcomes in the coming years.

 

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More in Common

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Skoll Scholar and Oxford MBA Candidate 2016-17, Alex Shapland-Howes, gives his perspective on the  Skoll World Forum session “Mobalizing a Movement: More in Common”.

How many articles have you read over the last year about the rise of populist politicians? How Brexit and Trump were caused by a great divide within our societies? How xenophobia so easily becomes the go-to response?

Almost all the articles end with something like “…and we must start acting now to fix this”.

But perhaps the thing that’s been most alarming is the lack of ideas as to how we should go about tackling these issues. Lamenting their existence is an important start – few of us had appreciated the scale of the problem until recently – yet of course without deliberate, concrete actions, it’s hard to see the situation changing.

This week at Skoll World Forum, I heard from an amazing group of people who are founding a new organisation to stimulate the changes they want to see. Led by Gemma Mortensen, Tim Dixon and Brendan Cox, More in Common will focus on five key areas:

  1. Public opinion research

It’s easy to make assumptions about the views of individuals or groups across society, but to make deliberative change successfully, we need to listen very carefully to each other. We often hear, for example, that there’s a divide between liberal cosmopolitans and what could be termed ‘angry nationalists’ in our societies. More In Common’s detailed research has found that whilst that divide very much does exist, roughly half the population have mixed views and don’t fall into either camp.

  1. Communications strategy for key influencers

Getting the messages right is critical to winning this battle. Brendan Cox told the audience that what we often call populism is actually just bigotry and hatred. A huge amount of work is needed to get the balance right between appeasing the dangerous views of some and genuinely listening, acting on the valid concerns of others.

  1. Convening and building broader coalitions

This work is inherently political but to succeed, it has to bring people with it across the normal divides. Organisations that normally wouldn’t take a political stance might do so if everybody was part of it. If More In Common can show that the most hate-filled views aren’t part of the same continuum – that they’re another, far more malevolent force – then they will try to get businesses, civil society, the media and more to stand up against it.

  1. Partnerships

Partnerships will also play a key role. We heard the example of how the Jo Cox Foundation has organised The Great Get Together in partnership with everyone from Oxfam and the Women’s Institute to the Premier League and The Sun. Across the UK, 10 million people are expected to get gather with neighbours on 17-18 June to “be part of a national celebration of what we have in common”. Amazing!

  1. Digital activation

We all know the power of social media. We heard less about this but there are plans to mobilise a ‘base’ of supporters to lead a movement from the bottom up too.

More In Common is new. There was little push back from anyone in the room at Skoll World Forum, few in the room who disagreed and this is arguably the biggest challenge of our lifetimes.

But the group running it are incredible. I was sold.

They are thinking, they seem to be listening and they have concrete plans for what to do next.

It felt like the start of the fight back.

Follow Alex: @alexshsh