Much has been discussed and debated regarding how to increase capital flows in support of vital social and environmental challenges and opportunities. This debate has become even more pressing considering the current global financial crisis. It is clear that the world lacks the philanthropic capital needed to solve the vital challenges our global community faces.
What can we do to solve this funding gap? Private capital market mechanisms can provide incentives for mainstream investors to fund various social and environmental sectors. In the social sphere, these sectors include microfinance, community investment and CDFI’s, and the LOHAS sector, among others. On the environmental side, private investments can and should flow to areas such as conservation finance, sustainable water solutions, terrestrial and marine ecosystem services, and sustainable fisheries and agriculture,.
Microfinance and community investment have been able to raise billions of dollars through private capital market mechanisms, albeit still not in sufficient amounts. The carbon markets are seeing dramatic increases in capital because of current and pending climate change regulation, and the wetland and conservation banking markets have also benefited from the Clean Water Act and Endandgered Species Act. However, the environmental markets are still only at the brink of their potential.
I wrote in an Ecosystem Marketplace article (http://ecosystemmarketplace.com/pages/article.opinion.php?component_id=6652&component_version_id=9948&language_id=12) suggesting that the social and environmental communities should view social as well as conservation finance similar to how the institutional investment community looks at other asset classes: underlying assets and cash flows.
When I speak of the mainstream investment community, I am referring to the growing number of patient capital investors focused on double and triple bottom line returns – not speculators. As a result of the recent crisis’s capital markets turmoil, popped bubbles, higher risk aversion, and lower predicted returns have changed what investors perceive as “market rate returns”. The current economic climate has actually opened up the opportunity for the 3%-7% annual returns from investments in the social and environmental markets to present themselves as more attractive than they were the past, when compared mainstream investments.
Below is a list of the various financial structures being created to more effectively support and monetize the social and environmental markets:
– Social Enterprise Royalty Trust Securities (SERTS), in which social enterprises pay out a portion of their revenues as a dividend to their shareholders.
– Low Profit Social Limited Liability Corporation, or, L3C company, where PRI and market rate return investors can invest in and support social enterprises, and in which cash flow and returns are distributed according to the investors’ interests.
– Water Footprint Credits & Water Restoration Certificates support various water usage and restoration projects globally.
– Stormwater Runoff Credits support the reduction of impervious surfaces to reduce stormwater pollution.
– Marine Impact Credits support marine protected areas and various estuary and marine conservation and fisheries projects.
– Community Quota Entities support local sustainable fishing communities.
The above structures can provide diversified double and triple bottom line market rates of return to investors. Mission Markets Inc., an electronic marketplace for the environmental and social capital markets, supports these markets by helping to scale the various social and environmental sectors as viable investments. Please visit http://www.missionmarkets.com/.
An overview of our marketplace:
– Social Capital Markets – L3C’s, B-Corporations, Microfinance, Community Development Financial Institutions (CDFI’s), NGO’s, LOHAS Sector
– Environmental Markets – Ecosystem Services & Conservation Finance, Renewable Energy, Sustainable Fisheries, Sustainable Water Solutions, Stormwater Management, Sustainable Agriculture
Our Products & Services
– Capital Raising for Social & Environmental Enterprises, Environmental & Renewable Energy Projects, MIV’s, Water Banks, through debt, equity, and credits
– Secondary Liquidity & Transactions for Private Debt, Shares, Environmental Notes & Credits, Transferable Development Rights
– Public/Private Partnering for Financing Fisheries and Conservation Investment Opportunities
– Innovative Environmental Financing Structures Including Carbon Notes, Renewable Energy Notes, Biodiversity Notes
– Transaction Data, Research and Market News Aggregation for the Social & Environmental Capital Markets
– Creation of Pilot Programs for Catch Shares and Marine Impact and Water Usage Credits
– Metrics Quantifying Environmental & Social Performance and Return on Investment
– Stringent Screening and Certification Standards for Social Enterprises and Environmental Projects
– Michael Van Patten