Social Investing


The finance industry is going through dramatic changes these days as we know. What is clear is that all financial institutions need to have a more long-term and more sustainbale approach to their business.

One area which is growing quite rapidly is social investing, i e investing in projects where the primary benefit is of social nature and the financial return is secondary. There is nothing wrong with a good financial return on investment of course, but projects with the primary focus to reduce proverty, increase health in the poorest countries and the like, cannot and should not be expected to give the same financial returns as business in more mature markets.  And this goes for social business in all markets. It’s the definition of social business.

But social business is very different from financial aid or charities. In social business we still looking for a business plan which should have the potential of becoming self-sustaining and give some financial return. Since the objective is still a profitable business, the means for selecting projects and controlling social business is very different from aid or purely philantropic projects.  Today I had a meeting with Voxtra, a Norwegian social investor. They are currently looking for social business projects in India and East Africa with a good potential for scaling up. If you have any tips, please let me know!

Cheers, Niclas

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2 Comments

  1. Tom Awtry
    Posted February 20, 2009 at 2:21 pm | Permalink

    Europe and the United States were winning the globalization race until 2008, as master bankers handling the export earnings of other states.

    The flip side of the equation is that the United States and Europe gained cash but lost their bread-and-butter capability – manufacturing.

    http://ourcountryspresident.wordpress.com/2009/02/20/we-talked-globalization-when-we-should-have-talked-hometown/

    • Posted February 20, 2009 at 3:19 pm | Permalink

      Tom, I don’t agree. Sure, there has been a huge export of manufacturing to China. But the view “China has enjoyed the fruits of globalization and trade liberalization enough” I find absurd. China is, per capita, still a very poor country compared to the US. And what has happened over the last 10 years is that ousourcing has continually been looking for cheaper markets, which is the reason why production growth now is not along the coastline in China, but rather in much poorer mainland China or in Vietnam and other countries.

      The point with globalization is that we are all winning. Not just US or China. Globalization is a way of optimising business by always looking for the best resources at the lowest cost. This increases efficiency which benefits all. Cost can be lowered in many ways. Cheaper labor is only one. Closed markets that have not been exposed to international competition and optimisation have typically become very inefficient. This is what happened in Eastern Europe before the iron curtain fell, which eradicated more or less all Eastern European industries because they were too inefficient.

      Besides, manufacturing is one type of job. There are many types of jobs that can grow in a market. In mature markets typically the services sector grows more rapidly than industrial jobs. There have also been several studies showing that it is actually a relatively small share of the total jobs that is possible to outsource to overseas markets.

      Globalisation will have to be optimised differently, taking into account external costs of natural resources, but the solution is not one-eyed protectionism.

      Cheers,
      Niclas


One Trackback

  1. By MK on May 28, 2009 at 4:21 pm

    MK…

    Wow , you learn something new everyday!…

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