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  PHOTO BY  DIEGO CAMBIASO  VIA  FLICKR .
PHOTO BY DIEGO CAMBIASO  VIA FLICKR .

Originally posted on nextbillion.net

In late June, the Second Vatican Conference on Impact Investing (VIIC) brought together leaders from the Catholic Church and impact investment communities to discuss the role of impact investing for the poor. Because the Vatican conference occurred during the Extraordinary Year of Mercy established by Pope Francis, the VIIC chose the theme “Making the Year of Mercy a Year of Impact for the Poor.”

The VIIC was a wonderful gathering of bright and interesting people who were there for serious business: As became clear during the course of the conference, everyone attending shared a deep commitment to finding new and better ways to serve the world’s poor.

REALIZING COMMON GROUND

The VIIC comprised two distinct groups: representatives of Catholic Church-affiliated social ministries, who accounted for around 60 percent of the attendees, and impact investors, meaning those who balance the social and environmental impacts of their investments with their financial returns. The first group’s “street cred” on serving the poor is unassailable. Go to any base-of-the-pyramid (BoP) community in the world, and you’ll likely encounter at least one Catholic social ministry.

The impact investors, on the other hand, have a more complicated reputation when it comes to helping those at the base of the pyramid. In fact, Catholic and other faith-based organizations traditionally have viewed the business and financial world with some suspicion – keeping them at arm’s length for fear that the mission of business, which is to make money, is fundamentally incompatible with the mission of the Church social ministries, which is to help the poor.

One main purpose of the VIIC was to help overcome this view, to present evidence and examples of how impact investing and social enterprises can be used to directly benefit the poor. In this effort, the conference was following the lead of Pope Francis. Addressing a gathering of conference participants previously, the pope said this about impact investing: “The logic underlying these innovative forms of intervention is one which acknowledges the ultimate connection between profit and solidarity, the virtuous circle existing between profit and gift.”

The two groups found strong overlap not only in their shared goals of helping the poor, but also in the ways that they measure social impact. Specifically, the IRIS index, which is the catalog of generally accepted performance metrics used by impact investors to measure social, environmental and financial performance, mirrors the beneficial outcomes described by Catholic social ministries.

 

NEW PERSPECTIVES FROM BOTH SIDES

For faith-based social ministries, service to the poor is deeply rooted in both belief and practice. One new perspective I saw emerging at the VIIC was the realization that service to the poor doesn’t have to rely solely on contributed income, meaning donations or charity. And in fact, many Catholic social ministries are already generating earned income and could easily be considered social enterprises.

This realization probably seemed obvious to the impact investors, but it’s still a relatively novel view within the Catholic Church. This is the case even though a pre-conference survey – conducted by VIIC hosts Catholic Relief Services (CRS) and the Pontifical Council for Justice and Peace – found that the VIIC attendees from the church know more about basic business concepts and principles than expected. And it’s the case even in light of the highly successful hospitals, schools, universities and other business organizations that the Catholic Church operates across the globe.

When the impact investors at the VIIC spoke about why they invest in social enterprises, you could almost see the Catholic representatives’ lights of understanding begin to turn on. And when we described that impact investors often are willing to include grants as part of their funding sources, those lights grew brighter.

For instance, I gave a presentation outlining a range of capital sources used by impact investors, aimed at the needs of different types and stages of social enterprises. I described some previous social enterprise participants in the Miller Center for Social Entrepreneurship’s Global Social Benefit Institute (GSBI) programs that had started with grants and, over time, layered on additional forms of soft loans (i.e., loans offering more flexible or lenient terms for repayment than standard loans) and, eventually, equity investments. Examples from Africa, Latin America and Asia described entities initially supported entirely by donors that had transformed into thriving, income-earning social businesses.

For their part, most impact investors had never noticed that numerous social ministries are simply small businesses that are largely donor-supported – which means many are potential social enterprises in disguise. Not all of these social ministries will make the transition from contributed to earned income, but some will. In fact, many of them will.

In addition, impact investors are gaining appreciation for the fact that the Catholic Church has points of presence in poor communities worldwide, with trusted contacts and an understanding of local contexts. These are valuable assets that impact investors can leverage to help achieve the shared goals of lifting more people out of poverty and helping them establish lives of autonomy and dignity.

By the conclusion of the VIIC, both participant groups had seen the other group in a slightly different light. Which is not to say that the work of bridging the gap is done. Far from it. But I see progress along a very promising path. My hope is that if there is a third VIIC, I can bring back reports of continued advancement along that path. In the end, that would be the best possible news for all of us involved in trying to alleviate poverty, and for the world’s poor.

 

John Kohler is executive fellow and  director of impact capital at Santa Clara University’s Miller Center for Social Entrepreneurship.

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