Sep 022009

Social Capital Markets 2009
The SoCap conference is on, on my final few days in San Francisco. I’m here with an as-usual probably unusual perspective, as a for-profit worker in innovation but with a passion for development and social media.

There’s been, so far, a few interesting themes coming out, the first of which is Common Good investing.

Selling up without selling out
My first conference session was called “Selling up without selling out”, which addressed how companies like Ben & Jerry’s, Tom’s of Maine, or The Body Shop sell up to larger PE funds or trade sales and how to keep your social mission.

In true conference fashion, there was very little discussion of actual strategies. It seemed to boil down to:

  • Have a good relationship with the CSR people in the acquiring organisation (or, failing that, another power broker who has a remit or passion to keep your social mission alive)
  • Get acquired by the right person (who believes in your mission), i.e., a fund like Calvert or Satori Capital.
  • Don’t get acquired – build your business to succeed and generate cash (from Better World Books)

Socially Responsible Investing: 1995-2005(ish)
One of the most interesting things, however, was the closing remarks that Terry Mollner from Calvert made. He talked about the first tranche of socially responsible investing (a term he says should be falling by the wayside shortly).

Socially responsible investing is the next evolution from the no-sin funds– i.e., no guns, alcohol, or tobacco, which your financial advisor might have structured for you due to your personal or religious beliefs. It’s a well-structured, easy to understand, and exclusive– broadly, a list of companies or practises that are excluded from investment. The exclusive nature hearkens back to an us-vs.-them mentality– we (the enlightened few) are trying to change the world while them (profiteering corporate managers) are trying to amass all the wealth at the expense of anything.

These days are, from a certain perspective, over.

Common Good Investing
The new model is harder to define and understand, and it’s related to the shift to constant learning, that I’ve talked about before. There’s no good-housekeeping seal that shows that you are a good business. This person wants organic. That person wants Fair Trade. That person wants Local. Another wants pro-poor. Another is concerned with the environment. An awful lot of people just want to know that they’re doing the right thing, whatever the right thing is, but they aren’t sure which of the above is better.

In the UK, we’ve seen a shift to ethical branding– at the first Oxford Business and Environment Summit, which I co-founded, Ella Heeks, the marketing manager for Able & Cole talked about how they had carefully crafted their brand to be constantly on the leading edge of what it means to be doing good, so that their customers can trust that, when they shop A&C, they are getting low-carbon, organic, or whatever it is that they want to care about but don’t have the bandwidth to keep up with, because their learning capacity is being stressed by everything else. this is a great example of a brand helping people to learn (and A&C puts leaflets in with their vegetables telling you why this cabbage is good– it’s local, organic, sustainable, fair-waged, or whatever).

All of this makes responsible investing more tricky– it’s easy to say that one wants to invest in social enterprise, but we know that businesses that lead towards a more sustainable society in a broad sense– by doing simple things like pension plans, taking care of their workers, working towards their communities, or anything else, outperform similar businesses who don’t. Employee turnover has a cost. So do lawsuits. Happy workers are more productive.

Finding those businesses don’t lend themselves to a stock screen on your bloomberg machine, unfortunately. There are a few groups like the B Corp who are trying to make a list of things that companies should do, but doesn’t lend itself to what you care about.

The trick, it seems to me, is to investigate companies not just on their practises, but to see if they practice what they preach, and what their strategy is. In your company, make sure that your strategic priorities do include exactly what nonfinancial external effects you actually want to see from your business.