New Frontiers of Philanthropy: THE REVOLUTION IN SOCIAL PURPOSE FINANCE

Dr. Lester M. Salamon

Johns Hopkins University

Our Future Foundation and Moscow School of Management SKOLKOVO│ Sept. 21, 2016

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

PHILANTHROPY’S BIG BANG

v  Beyond grants v  Beyond bequests v  Beyond foundations v  Beyond cash

THE REVOLUTION IN SOCIAL PURPOSE FINANCE

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

PHILANTHROPY = The mobilization of private resources for social and environmental purposes

TRADITIONAL PHILANTHROPY NEW FRONTIERS OF PHILANTHROPY

Multiple Investment funds

Investment capital Diverse financial instruments/capital tranches

Social ventures

Social + financial return

Expanded leverage

Foundations, Individuals

Operating income

Grants

Nonprofits

Social return

Limited leverage

Output Focus Outcome focus/ metrics

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

NEW FRONTIERS OF PHILANTHROPY PARADIGM

NEW FINANCIAL ACTORS

NEW TOOLS

BENEFICIARIES

NEW AGENTS

NEW SOURCES OF FUNDS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

NEW FRONTIERS OF PHILANTHROPY ECOSYSTEM

DEMAND FACTORS: •  The New Inferno •  Tapped-out Government and Charity •  Rise of Social Entrepreneurs •  Growing need for capital

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

WHY?

→ Operating revenue

→  Investment capital • Hard •  Soft

NONPROFIT FISCAL GAP

5%

3%

4%

9%

99% 46%

55%

55%

55%

53%

41%

36%

53%

39%

36%

32%

58%

91%

94%

87%

63%

62%

45%

39%

Pension funds

Insurance companies

Credit unions/S&Ls

Venture philanthropists

Government

Commercial banks

Foundations

Individual donors

Fairly or extremely difficult to access

Not known

DIFFICULTY OF ACCESSING INVESTMENT CAPITAL, BY SOURCE

CAPITAL CONSTRAINED

DEMAND FACTORS: •  The New Inferno •  Tapped-out Government and Charity •  Rise of Social Entrepreneurs •  Growing need for capital

SUPPLY FACTORS: •  Early Responders •  New Concepts: Fortune at the Bottom of the Pyramid •  New Players/ New Mindsets: Philanthrocapitalists •  Financial crisis and tepid capital markets •  Infrastructure and Technology SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

WHY?

“…the definitive chronicle of the innovations that are infusing new life into the well-intentioned but often-staid world of philanthropy.”

~ Mario Marino, Venture Philanthropy Partners

“…a roadmap to the significant revolution underway…in the worlds of philanthropy and social investment.”

Available now at: bit.ly/NFPSalamon or oup.com.

IS YOUR FOUNDATION READY FOR THE NEW FRONTIERS OF PHILANTHROPY?

“An accessible overview of the new actors and tools reshaping philanthropy and social investment with recommendations for overcoming the challenges they still face.” ~ Rip Rapson, Kresge Foundation

Available now at: bit.ly/LfGSalamon or oup.com.

IS YOUR FOUNDATION READY FOR THE NEW FRONTIERS OF PHILANTHROPY?

Secondary Markets

Securitization

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

Loans / Credit Enhancements

Equity Investments

Social Impact Bonds Insurance

Bonds

Social Investing & Purchasing

Prizes, Crowd-sourcing

TYPES OF TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

ACTORS / TOOLS

Secondary Markets

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

ACTORS / TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

Secondary Markets

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

ACTORS / TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

Secondary Markets

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

ACTORS / TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

Secondary Markets

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Phil. Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

ACTORS / TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

Ø  Break down “Chinese Wall” between investment / program

Ø  Tap asset base for mission

Ø  Beyond grants—alternative tools

Ø  Beyond PRIs

FOUNDATIONS AS PHILANTHROPIC BANKS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

Secondary Markets

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

ACTORS / TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

*Assetsnotavailableforsomefounda3ons**IncludesBolivia,Chile,Morocco,Peru,andUruguay

COUNTRY FOUNDATIONS NUMBER %

Austria 33 6.1% Belgium 1 0.2% Brazil 3 0.6% Canada 1 0.2% Czech Republic 73 13.5% Germany 29 5.4% Hungary 1 0.2% Italy 103 19.1% Netherlands 1 0.2% New Zealand 36 6.7% Norway 4 0.7% Poland 4 0.7% Slovakia 2 0.4% Sweden 35 6.5% United Kingdom 9 1.7% United States 199 36.9% Other* 5 0.9%

Total cases: 559

Total assets: US$155bn / €134bn

Source: Lester M Salamon and Associates, Philanthropication Thru Privatization: Building Assets for Social Progress, March 2014. Available at: bit.ly/PtPSalamon

PHILANTHROPICATION THRU PRIVATIZATION (PtP)

ASSET CAN TAKE ANY OF 6 FORMS I.   State-owned enterprise II.   Other state-owned asset III.   Flow of proceeds owed to state IV.   Debt swap V.   Quasi-govt’l organization (e.g. nonprofit) VI.   Stolen or Stranded Assets

6 TYPES OF PtP ACTIONS

SOURCE: Lester M Salamon and Associates, Philanthropication Thru Privatization: Building Assets for Social Progress, March 2014. Available at: bit.ly/PtPSalamon

Secondary Markets

Securitization

TYPES OF ACTORS Capital

Aggregators

Enterprise Brokers

Quasi-Public Investment

Funds

Social Stock Exchanges

Foundations as Philanthropic

Banks

Capacity Builders

Conversion Foundations

Online Portals

Funding Collaboratives

Corp-Originated Charitable

Funds

Loans / Credit Enhancements

Equity Investments

Social Impact Bonds Insurance

Bonds

Social Investing & Purchasing

Prizes, Crowd-sourcing

TYPES OF TOOLS

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

ACTORS / TOOLS

Securitization Loans / Credit Enhancements

Equity Investments

Micro Insurance

Social Impact Bonds

Bonds

Social Investing & Purchasing

Prizes, Crowd-sourcing

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

ACTORS / TOOLS

TYPES OF TOOLS

Securitization Loans / Credit Enhancements

Equity Investments

Micro- Insurance

Social Impact

Bonds

Bonds

Social Investing & Purchasing

Prizes, Crowd-sourcing

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

ACTORS / TOOLS

TYPES OF TOOLS

Ø  No good deed goes unpunished

Ø  The social-impact measurement conundrum

Ø  Still a boutique business

Ø  The pesky issue of deal flow

Ø  Getting beyond comforting assumptions

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

REMAINING OBSTACLES

ü VISUALIZE

ü PUBLICIZE

ü INCENTIVIZE

ü CAPACITIZE

ü ACTUALIZE SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

NEXT STEPS

ü NEW PARTNERS

ü NEW FINANCIAL MECHANISMS

ü NEW SKILL REQUIREMENTS

ü NEW AUTHORITIES?

SOURCE: Lester M Salamon, Ed., The New Frontiers of Philanthropy (New York: Oxford University Press, 2014).

IMPLICATIONS FOR FOUNDATIONS & GOVERNMENTS

Now available at:

bit.ly/LfGSalamon bit.ly/NFPSalamon oup.com

ARE YOU READY FOR THE NEW FRONTIERS OF PHILANTHROPY?

LESTER M. SALAMON lsalamon@jhu.edu

NEW FRONTIERS OF PHILANTHROPY: FURTHER INFORMATION

website: ccss.jhu.edu twitter: @jhuccss