Transforming investment into impact: mechanisms for funding social innovation in Sustainable Consumption and Production World Resources Forum – Davos, Switzerland Tuesday, 13 October 2015, 12:30-14:20 Presentation by Angel Versetti, WRF As part of UNEP 10YFP / WRF Joint Workshop From Investment to Impact: Social Innovation for Sustainable Consumption and Production (SCP)

Plan 2  Introduction to Social Innovation  Existing financing mechanisms for social innovation and SCP  Opportunities and benefits  Challenges and barriers  IBIS: Igniting Business Investments in Sustainable Lifestyles – solution for SCP

What is Social Innovation? 3  “New ideas that work in meeting social needs” (Oxford)  “A novel solution to a social problem that is more effective, efficient, sustainable, or just than current solutions. The value created accrues primarily to society rather than to private individuals.” (Stanford)  Creating new modes of societal interactions

Stages of Social Innovation 4 1) Prompts, inspirations and diagnoses 2) Proposals and ideas 3) Prototyping and pilots 4) Sustaining 5) Scaling and diffusion 6) Systemic change Source: Center of American Progress, 2012

Sub-Areas of Social Innovation 5 Social Entrepreneurship Sustainable Design Open Source Technology Inclusive Public Policy Cities and Urban Development Social Movements Lifecycle Thinking Community Development Anything Else?

Existing Financing Mechanisms 6  Impact / Mission-Driven Investments  CSR departments of corporations  Community VC Funds with social mission  Specialist lenders for social innovation  Unlike charity these investments expect a return, social/environmental and monetary  Smaller profitability tolerated, if measurable positive impact on society achieved

Focal Points for SCP Investments 7  Tendency of corporate and financial sector to invest into sector they operate / have expertise in  capacity building, technology and best practices transfer:  Evaluation systems for firms’ value chains to identify hotspots where investment in SCP will create largest impact  Socio-environmental footprint comparison by brand / product  Investing upstream (extracting raw materials) or downstream (packaging waste recycling)

Opportunities and Benefits 8  positive impact on society achieved Source: McKinsey Global Survey, 2014

Benefits of Investment in SCP: Case-studies from Private Industry 9  Hewlett-Packard (HP) Company connected customer interest in SCP to over $24 billion in revenues in 2014 alone  General Electric reaped $25 billion in revenues in 2012 from investment of just 2$ billion into eco-and energy-efficiency programs (grew at twice the average speed)  The Clorox Company reported average cost savings from improved resource-efficiency of $15 million per year, after integrating SCP in their supply chains

Benefits of Investment in SCP: Case-study from Financial Sector 10  McKinsey SRP Global Earnings Report 2014: “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high- sustainability companies would have grown to $22.60 by the end of 2010, compared with $15.40 for the portfolio of low-sustainability companies”  Better return on assets and on equity for portfolios with sustainable companies

Challenges and Barriers 11 Opposition of senior management to uncertainty & risks Additional reviews needed; short-term profits preferred; SCP is new Lack of metrics to measure sustainability or social innovation Impact on revenues and profits? Value earned? Lack of Incentives for Financial Sector 78% of investors do not consider ESG; <1% investments are ESG-driven

Challenges and Barriers 12 Lack of appropriate infrastructure to invest into social innovation Few theoretical/political/societal underpinnings compared to standard Higher costs of due diligence with lower returns on investment More time and effort to assess (business/society); lower ROI Running a sustainable or social business is still much less profitable than doing “business as usual”: Costs of SCP higher; more knowledge/technology needed; 3-5% ROI (?)

IBIS: Igniting Business Investments in Sustainable Lifestyles 13  WRF-led 10-Year-Framework-Programme Candidate Flagship Project Proposal

14 Funding Knowledge Sustainable Businesses Investors

I. Database for financing for Sustainable Businesses Criteria for investment Multilingual Training on Drafting a Business Plan, Pitch, Investment Proposal II. Direct Investment Platforms Regional Approach, Global Model Showcasing of Sustainable SMEs Crowdfunding and Crowdsourcing III. Knowledge Bank for SCP Consultancy for Scaling Up Mainstreaming Investments into SCP Adoption of SCP practices by larger corporations IBIS: Online/Offline | Financing/Learning

16 Funding Knowledge Sustainable Businesses Investors

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