[CivilSoc] Fwd: A new global social investment marketplace?

[Maryellen Lewis]

GLOBAL INVESTING:
More to charity investing than faith and hope:
A new exchange aims to allow better evaluation of projects
Financial Times; Feb 6, 2002
By ALISON BEARD
At last year's World Economic Forum in Davos, a panel discussion on social 
entrepreneurship highlighted a serious problem: charitable projects were 
going unfunded not because of a lack of willing investors but because 
investors could not find or properly evaluate them.
The non-profit world needed a mechanism for rating charities and presenting 
their initiatives and funding needs to a large group of social investors.
A year later, at this year's WEF in New York, investors got just what they 
asked for. The Global Exchange for Social Investment (Gexsi) was introduced 
to 70 leading donors, including Michael Dell and George Soros, at a private 
lunch on Monday.
The exchange, which is in its pilot stage, was offered in two forms - a 
thick, red catalogue and a website, www.gexsi.org. Both give information on 
88 projects from 11 organisations which were accredited by Bain & Company 
over the last few months.
Bain worked with the Schwab Foundation for Social Entreprenuership and a 
consortium including the Soros Foundation, Deutsche Bank, the accountant 
PwC, Foursome Investments and the Endeavor and Ashoka charities on the project.
The charity groups were measured against strict financial, organisational, 
and portfolio criteria, gleaned from interviews with the social investing 
community. Projects were then categorised by geographical location, the 
social problem being tackled and the type and number of people helped.
"If I'm a donor, how do I know which (charities) are good and which ones 
aren't?" said Pamela Hartigan, managing director of the Schwab Foundation. 
"There has been a hesitancy by non-profits to equate themselves with big 
business, but more and more they are realising that . . . there need to be 
mechanisms for quality assurance and transparency."
Whether donors are making grants, offering low-interest loans or taking 
equity stakes, "there is a lot of responsibility in giving money," she 
added. "It's not philanthropy, it's an investment."
Gexsi is designed to help not only investors, by covering their due 
diligence, but also charitable organisations, particularly ones with 
smaller projects in more obscure areas that do not have time or money to 
market themselves and raise funds.
"Corporate social giving in the US increased 17 per cent (in 2000) but only 
1.3 per cent of the money went outside the US," Ms Hartigan explained. 
"Most donors think about their local community. If they try to go global, 
they're hopeless."
Local investments continue to be important, but "we learned from September 
11 that we really need to look beyond our own backyard", she added.
Gexsi-listed initiatives include the Afghanistan Private Enterprise 
Program, which is seeking Dollars 1.5m to introduce Afghani farmers to 
commercial markets, and the Nonprofit Recovery Fund, a group that wants to 
raise Dollars 30m to help New York community organisations recover from the 
drop-off in non-disaster-related giving following September 11. Other 
projects address substance abuse in Russia and child welfare in the Caribbean.
With support, Gexsi could broaden in scope, incorporating thousands of 
projects from hundreds of groups, provided they pass the accreditation 
process, Ms Hartigan said. Twelve organisations lobbied to include the 
pilot exchange, and 11 qualified.
"They had to open all their books," said Henrik Naujoks, vice-president at 
Bain, which conducted the initial round of accreditation. "We took two days 
(with each). And for the one that was turned down . . . it becomes a 
coaching mechanism."
In the future, an internal but independent board at Gexsi or even an 
outside ratings agency, such as Moody's or Standard & Poor's, would conduct 
the evaluations, Ms Hartigan said.
Eventually, the market could be split into different segments, and 
investments such as loans or equity stakes could even be traded.
All this growth will cost money, however. On Monday, Klaus Schwab and Ms 
Soros told the luncheon attendees that it would take Dollars 1m to Dollars 
2m to keep Gexsi going.
The response - to the concept as well as the plea for funding - was 
positive, Ms Hartigan said:
"People were realising how it could benefit them," she said.
"If I'm a company and I want to motivate my staff, maybe I can tell them to 
go to (the Gexsi) website and pick out the projects that they want me to 
support."
Copyright: The Financial Times Limited 1995-1998