1MONITOR INSTITUTE

The Future of

Social Capital Markets

Katherine FultonOctober 2008

A Member of The Monitor GroupA Member of The Monitor Group

2MONITOR INSTITUTE

A convergence of forces

Money seeking diversification

Values driven investors and consumers

Growing inequity and environmental crisis

Track record of early success

Openings for policy change

Talent pushing new careers

Investingfor impact

is now “locked in”

CAN IT

TAKE OFF?

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Impact investing today

Impact investing in 5-10 years?

Will the promise of this moment be realized?Phases of Industry Evolution

Disparate entrepreneurial activities spring up in response to market need or policy incentives

Disruptive innovators may pursue new business models in seemingly mature industries

Characterized by lack of competition except at top end of market

Centers of activity begin to develop

Infrastructure is built that reduces transaction costs and supports a higher volume of activity

Uncoordinated Innovation

Marketplace Building

Growth occurs as mainstream players enter a functioning market

Entities are able to leverage the fixed costs of their previous investments in infrastructure across higher volumes

Organizations may become more specialized

Capturing the Value of the Marketplace

Maturity

Activities reach a relatively steady state and growth rates slow

Some consolidation may occur

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“Yin-Yang” Deals

Financial Return

None

High

Financial Floor

Impact Floor

Solely Profit-Maximizing Investing

Philanthropy

Impact HighNoneNegative

Optimize social or environmental returns with a financial floor

Impact First Investors

Optimize financial returns with an impact floor

Financial First Investors

Segments of Impact Investors

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A convergence of actions

Create industry defining funds as a beacon for how to address specific social issue(s)

Place substantial catalytic, risk-taking capital in mezzanine finance structures

Develop impact investing network

Set the industry standards for social measurement

Lobby for specific policy / regulatory change

CoordinatedLeadership

THAT’S HOW IT COULD TAKE OFF

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All Investing$61.90 Trillion

Negatively Screened Funds + Impact Investing$2.71 Trillion

How Big Could it Be?

Impact Investing in 5–10 years?

U.S. Philanthropy$0.31 Trillion

Impact Investing has the potential to grow to ~1% of total managed assets, which could result in ~$600B of capital

channeled towards social and environmental impact

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"I wouldn't give a nickel for the simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity."

— Albert Einstein