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I'm very pleased to be here. In full disclosure, there is something that I have to confess here.

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I hate the term social entrepreneurship.

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It's something that comes from a legacy where, you know, it's like there's entrepreneurship and then there's social.

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I actually believe that these two things are going to be combined more and more

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so that every venture that is set up has to look at what are the environmental,

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social and financial repercussions of what they are doing.

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And tonight, what I'm going to talk about a little bit is the trends.

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Many of you are interested. I assume you're taking this course because of the fact that you're interested in building your businesses.

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And so I'm going to be talking a little bit about some of the trends that are going

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on in terms of new kinds of business models that are addressing these issues.

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But also, what are the big corporations doing? And this title of Beyond CSR is really where things are headed.

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So I'm going to be talking about that. What I plan to do is sort of run through a couple of different points there.

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Please interrupt me at any point in this discussion.

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You know, it's looks very formal, but I really would much rather have you, you know,

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have it be an interactive session if there's something that you want to clarify or don't understand or whatever.

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So be talking about that. How many of you actually go to Oxford?

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Oh, my God, everybody. All right, good. So you're all enrolled.

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And how many of you are MBAs? A couple of numbers.

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Okay, good. So I will tell you a little bit about me that wasn't introduced.

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I basically I sound like a yank.

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I'm actually from Ecuador, from Latin America. Is anybody here from Latin America?

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We're in. But was raised until I was 17 throughout different countries in Latin America.

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Came to the United States to do my degrees.

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My first life, I was an economist at the World Bank. In my second life, I was a public health doctor.

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And now I'm an entrepreneur. So you can go through all of these life changes as well.

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I think that's really important to message to to convey here is that what you study

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doesn't necessarily limit what you're going to go on to do as many of these will.

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We'll talk about the first thing I want to. Do is okay.

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These are the objectives that I'm hoping to accomplish in this session.

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I basically want to review some of the emerging models that entrepreneurial ventures are moving towards,

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that address financial sustainability, as well as social and environmental mission at their core.

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The second thing is I want to talk about how these new ventures are similar or different to charities and mainstream bank.

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We're really seeing a trend of something quite different that is emerging, which is exciting, in fact, given the state of the world.

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The third is to really talk a little bit about what is the special role that these entrepreneurial ventures have in our societies today,

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and then examine some of those models. And then finally, where do these organisations, these ventures, get their capital from,

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given the fact that they are really sitting in between this hybrid position of actually being a Start-Up that's really focussed on changing something,

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about transforming something, about the business model that is creating inequalities or unsatisfactory equilibrium in an environment or in society.

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Where are those people coming from who are going to actually fund these ventures?

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Where can you look for that kind of capital? And then the last one is looking at which I think fascinating.

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What are the emerging trends in mainstream commercial sector that are actually looking at?

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How do we rethink our model across the supply chain, across what we're doing with human resources,

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etc., so that we're actually addressing the complexity of the issues because it's no longer.

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Okay. Just to say, you know what, we're just actually maximising profit for shareholders.

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We really want to look at some of those, some of that stuff.

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On CSR as total greenwash.

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Most of it is total greenwash, but you're beginning to see actually transition in this space, which I think is quite exciting.

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So those are some of the objectives of what I'd like to accomplish tonight.

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I want to start out by by really talking a little bit about some of these new hybrid models,

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which are basically, if you look at the what is the definition of entrepreneurship?

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It is about combining innovation, resourcefulness and opportunity.

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So the entrepreneurs are always looking for opportunities where they can actually step in and

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respond to something that they see as a market failure or a government failure in this case.

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And so these are hybrid ventures that recognise we really have to address a market failure or

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a government failure to and there is a business opportunity here and they do it in a very,

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very business like fashion, which I'll describe. They're not focussed on Let's build the next hospital, let's build the next school.

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They're focussed on what needs to happen to transform the health sector.

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They are, like most entrepreneurs, completely focussed on transforming what exists.

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The problem is that with most of us mere mortals, we don't see those opportunities because to us they're too risky.

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I mean, some of the examples that I'll show you tonight, you'd have to be crazy to actually see this as an opportunity.

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And, you know, several years ago, I wrote a book called The Power of Unreasonable People How Entrepreneurs Create Markets to Change the World.

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And that's really what you're seeing happening, is that these are highly imaginative,

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creative people who have a vision for an opportunity that others of us would see as far too risky.

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And as I said, to sustain their activities in this hybrid space many times, because they're responding to a market failure,

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they need other resources other than just earned income through contracts.

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And so we'll describe some of that. They're cropping up all over the world.

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They are really literally cropping up all over the world.

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I've given you some of the examples here.

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The Eden Project, which I will be highlighting here in the UK.

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Has anybody been to Cornwall to visit the Eden Project? Okay, this is called one of the Eight Wonders of the World.

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We'll talk very quickly about what that model is and why it's transformational.

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Embrace, founded by Jane Chan and co-workers, is basically a response to the fact that in many very poor rural populations,

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when babies are born prematurely, they die because of a lack of incubators.

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And what they have created has been a specific baby warmer, which is using the latest tools and technology and heated through solar, solar power.

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And they are a for profit company and doing very well.

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Waste concern in Bangladesh. Anyway, I could go on,

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but I won't at this point because I want to just give you a little bit of a

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snippet of the Eden Project to tell you about and also show you something from a.

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Founder that has something to say to people. Those of you who are planning business and where he sees business model going.

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But as I said, it's brought more than £1,000,000,000 into the Cornwall economy since its inception and Tim Smith

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was a one time music producer and entrepreneur now and one of the he's just been knighted.

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He hates to be called Sir Tim. You'll see why he's quite irreverent.

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And I'll show you a very quick film clip of of him.

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I mean, here we are. I'm going to do this one rather than all of the other.

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The trouble is, everybody's looking for tips, aren't they,

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about how to run good businesses and the worst people on earth to actually give you any tips about how to run anything.

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Are the people who are actually doing it? Because what happens in real life is that you you describe your life backwards.

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You. I am here. So the reason I got here must have been for purpose, a de facto.

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All these things I did must have led me here. Which is not to bollocks.

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Because. Because the truth is. The truth is real life is about making loads and loads of mistakes, having a couple of lucky breaks along the way.

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And actually, it's usually a razor blade difference between success and failure.

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It really is. I mean, the Eden Project is a case in point.

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Just for those of you who've never been there or know nothing about it, it's a 34 acre clay pit whacking great hole.

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We built the world's greatest conservatories in it. We have a turnover of about £19 million a year.

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We've got 500 odd staff. We've contributed £930 million into the CORNISH economy over the last seven years,

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which is more than double the entire European funding for the whole of the South-West over the same period.

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We're very political. When we built it, we always intended that we should run it as if we were round our kitchen table.

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Because where most people go wrong, where most men go wrong,

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is that they don't realise the common sense you have at your kitchen table gets completely [INAUDIBLE] when you then go to work.

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You have to impress other men and well, is this true?

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I mean, come on with this. With this financial crisis, be with us.

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If we had equal men and women in the boardrooms. Of course not. We know that's true.

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And the other the other the other tips that tip.

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The tip. So you said that was the Eden Project. Okay. And if I'm not to tell you anymore, don't be so mean.

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Come on, visit. But the things the things I've learnt about business are, first of all, distrust.

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Anybody who uses the word centre of excellence out of the box, out of the box, joined up thinking leading edge, cutting edge, bleeding edge.

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Which is when I assume you're too close to the cutting edge and and and make absolutely sure that

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you have nothing to do with anybody who thinks they're capable of thinking the unthinkable.

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You can't think the unthinkable. But what you can do is to sit down next to a kitchen table and realise that some

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of the world's great businesses were actually created around kitchen tables.

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And the reason they created around kitchen tables is you're normally sensible at that point if you want to.

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For those of you watching, don't do that. But for those of you watching at home, check out places like the Griffin Hospital near Boston.

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Yeah, fantastic place. Why is it why did it go from the worst hospital in America to the best hospital in five years?

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You know what they did? Revolutionary.

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They asked all the potential patients who lived around them, what's the hospital they want to visit and built it?

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Why don't we do that sort of stuff? But one of the best schools in the world, the Manchester School in Pittsburgh, the roughest part of Pittsburgh.

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It's a fantastic school because the guy who runs the most inspirational man I've ever seen on a stage,

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he has a motto about running it, which is, If it's good enough for rich folks, it's good enough for poor folks to.

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Wonderful. I think I saw five grown ups cry when he spoke about what happens if you forget to put limits on people

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and actually assume that everybody is capable of fantastic things because people are fantastic things.

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But you actually need. You need to believe it.

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What I learned in the music business before I went into Eton was something really profound, which was to shape my life,

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which was if you love something yourself and you are not a freak, there will be millions and millions and millions and millions of people like you.

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So therefore, the only problem is marketing. Let them know about it.

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We've got a big market. So we'll stop there.

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I highly recommend that you watch on on Tim's Tim's videos.

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He's a profoundly intelligent person. Here's another interesting.

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This is for profit sustainable enterprises.

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The Eden Project basically started out as he tells a wonderful story of how the lottery was giving, I don't know,

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millions of pounds in order for the construction of projects that were going to renovate a certain region.

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And how he applied when the Eden Project was one big clay pit for this project and that, you know,

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he had all the people gathered around him who were really excited about doing this and they even

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bought a fax machine to find out whether they were going to win this this this pot of money or not.

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And he said everybody was standing around. They had given up.

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Many of these people had totally given up their jobs to work with Tim to pursue this crazy vision

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of his of creating this incredible biosphere which houses every plant on the face of the earth.

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And he said when the fax came through, he said there were three categories.

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The first category was category A. We love your project.

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You get the money. The second category was category B, he said.

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We really like a project, but it could do some more work and we'll help you get this done.

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And the third category was Category C, which was, as he says, don't ever darken our door again.

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So he got the fax and it was Category C.

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So he said, What do I do? I'm standing here with all these people and they're all waiting to hear that we've won, that we're going to get this money.

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So he said, that's when I came up with the idea of. The construction of future truths.

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So what he said was he told them, let's call a press conference.

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He didn't say we got the money. He didn't say we didn't get the money. He called a press conference.

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Press came from all over Cornwall.

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He got up there and he said, I want to thank the Millennium Development Commission for their insight for this prize, blah, blah, blah.

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Point was, the Millennium Development Commission was totally confused as to whether they had given him this money or not.

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And that's the way he secured I mean, you can question his ways of doing this, but that's the kind of person we're talking about,

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somebody who takes incredible risks and who does things because of a dream or a vision.

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There are a few of us like that. Now, this is a different kind of model.

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This isn't a hybrid. This is a pure for profit that we're going to be talking about.

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I'm going to show you how these business models are really coming up with new ways of doing business in a way that is, I don't know,

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philosophically positive and fundamentally innovative and also very morally compelling in terms of where people want to go and work.

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So it's a new form of commercial corporation.

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How many of you have heard of Kicks or the B Corps, the B Corps legislation that's now coming through the United States,

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which has been passed in 18 states in the US, which allows what's called the For Benefit Corporation,

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where in the Articles of the Constitution,

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it's not that you are only maximising your shareholder profit and your shareholders agree that you have other commitments there.

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So it's it's quite an interesting and revolutionary concept that's also beginning here in the UK.

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There are a couple of big corporations in the UK, so we're seeing new forms of of corp of corporate constitution and these are fully self-sustaining.

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This is a list of those I want to tell you about, one or two, actually, which are quite fascinating.

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This is a Danish man. Do you think that these things only happen in emerging markets?

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But actually Torkelson was a landscape architect and when his son was five years old, he was diagnosed with autism.

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How many of you are familiar with autism? Okay.

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The problem here with autism is the following. Autism range, there's a whole range.

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So there are those that are mildly autistic, etc. I don't want to get into the clinical aspects of this,

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but and the way that the worker was told by the people who diagnosed the son was Your

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son will never have a normal life and your son will always have problems with work.

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Relationships, probably will not be able to get a job, etc., etc., etc.

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And the picture that I showed you of talking with the dandelion in the background,

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he said, being, you know, a landscape architect, he said, Now, wait a minute.

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Look at the dandelion. The dandelion for many people is a weed.

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But for other people, it's a medicinal plant. How can I change the attitude of society around the autistic, around people that are autistic?

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And what he did was he created a software testing company that employed only autistic people.

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And it was amazing to see, obviously, autistic people have tremendous powers of concentration.

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They're extremely detail oriented, as you can imagine.

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And he basically created it as an I.T. consultancy that became one of the top I.T. consultancy for software testing in Denmark and basically had,

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you know, major companies, major corporations as their clients.

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And he was really making a very decent turnover.

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Now, what ends up happening is, of course, people all over the world that have the situation of where they're dealing with autism realise,

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wow, we could actually change the way people think about autism.

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So here's, you know, a company that's totally reversed the way, you know, the opportunities for some in the autistic spectrum, not all some.

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So there is using opportunity, resourcefulness, seeing an opportunity where any of us would have thought this is just not possible.

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So it's interesting to see how business can really be a mechanism to do this.

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And you're seeing this more and more. And the interesting thing is what happens to the people that work there?

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They no longer see themselves as people with problems.

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They see themselves as specialists because that's what they are and that's how they came up with this term, the specialist people.

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I'll go on to something very, very different, which I can strongly urge you.

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This is, again, a highly profitable venture, business venture that is using business principles,

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market principles, to really transform a situation that is causing problems, which is the following.

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There are tons of materials, as you know, that go straight to landfill, and one of those materials is decommissioned fire hose.

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When a fire hose that firemen use all over the world or wherever it breaks down after years and years and years of service, there is no opportunity.

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There's no way you can do anything with that except to send it to landfill.

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So basically, Cressy Westerling and her partner James ended up identifying this as a huge opportunity.

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And what did they do? They basically said we could completely use this material to compete in the

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luxury market for making bags and wallets and all kinds of very interesting,

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fashionable products. They created something called the Elvis and Christie line, which today is incredibly lucrative.

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And they're competing with, you know, at a much lesser level. But people are really very attracted to this.

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And I'll show you some of the some of the kinds of bags and things that they produce.

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And also show you a little film clip about that.

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And what they do is they give 50% of their profits away to fire brigade, the fire brigade, the UK fire brigade.

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And oftentimes students will go, wait, why would you do that?

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And she said, It's securing my supply line. Besides, I have the greatest marketing army of who doesn't love firemen.

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And so we just have this great marketing, you know, potential of the fire men who are I don't think they're fire women,

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but anyway, they're mostly firemen who are completely sold on us and are giving us all our material.

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They also reclaim other things like coffee, sex, etc. But here are some of the materials, I guarantee you if you go on their website.

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Beautiful stuff. So this is all fire hose.

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It's top stuff inside is made from parachute.

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So parachutes that are no longer usable.

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So everything is what we call now the circular economy, which is reuse, reused, reuse rather than waste, waste, waste.

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And I'll show you a very interesting little presentation that Christie does many times.

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People say, where did you get the money to start this? And she'll tell you where she got the money to start this, which is a lesson in of itself.

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My name is Chrissie and I co-founded Elvis and Chrissie about I think five years ago now.

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We started collecting fire hose in 2005. We make it into beautiful products and then gave half of our profits to charity.

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I think a lot of people think you have to have a lot of money to start a business.

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And we didn't. We had a small, tiny budget and we actually spent about £40 on a rotary cutting tool, which I can show you.

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It's now broken. This was the body of it.

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This was the cutting edge.

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We spent £40 on that to make our first big order of belts, and we used the cash from those belts to invest in other equipment.

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So you don't always need a lot of money. Sometimes you just need a lot of effort and a lot of rolling up your sleeves and getting something done.

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I think the biggest thing you've got to focus on is being unique. You got to look at who you are and you've got to research who that's going to be.

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So find out about your name. Has anybody else used your name?

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We've had this thing on X Factor where Little Mix was originally called Rhythmic X,

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and that was the name of an existing charity which sent a letter to Simon Cowell and he changed the name to Little Mix, which was which was great.

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But get on the Internet, find out about your ID, see if there's anybody else doing it, and then focus on your uniqueness.

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Create a brand identity around what you do, who you are, because the innovation that you bring is what's going to set you apart.

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Don't focus on what other people are doing, but you've got to find out what your competition is like from day one.

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You are your brand and you're your best marketing tool, so you've definitely got to always have something with you to show.

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And I have the iPhone holder so I can take my phone out and show people how it works.

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Ooh, that's so sweet. But if you have a service or another kind of product that you can't carry around

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and get pictures of it on your phone video on your phone video is fantastic.

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One thing that social enterprises tend to be really good at is working with their stakeholders.

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So if you are a stake on the site or if you're putting a stake on another idea,

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then stay involved because those companies and those ideas are actually going to rely on you.

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And it's really valuable to have feedback and people following you and people supporting you.

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We've got a Facebook site. When we get enough Facebook people telling us to design a new product, we go for it.

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We make it. So we really depend on our community. We depend on the charities we work with.

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We depend on the people who supply us with waste. We depend on other people in the ethical fashion industry.

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There's a lot of cooperation and collaboration. We do not exist in a vacuum.

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So you really have to look around you and and take support from everyone.

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So if you have one of these stakes to give, you know, you are a stakeholder in an idea.

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Think about who you want to share your time with. Think about who you want to give ideas to really support those ideas.

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We're reading a blog, I think it was by Solitaire Townsend and she actually highlighted this quote by Aldo Gucci.

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It was about how the the bitterness of poor quality lasts a long time after the sweetness of low price has faded.

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And this really encapsulates everything that we do. We take firehose, which is this incredibly durable, beautiful material,

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and there would be absolutely no point in making it very, very silly design and not having high quality craftsmanship embedded.

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It's got to be good quality. It's got to last forever. There's absolutely no point in doing what we do.

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Interestingly enough, Kristie, I was just at a meeting with with a whole bunch of different investors.

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And have you all heard of Donna Karan, who is like a big fashion industry, like, you know, Pierre Cardin, etc.?

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She got in touch with Cressy and said, I want to carry your whole line in my New York store.

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So, you know, usually these entrepreneurs are scaling very rapidly as well.

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So you're trying to build a business and balancing how do we continue to innovate alongside,

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you know, how do we continue to scale, which many times there is a sacrifice involved there.

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Now, let's go on and talk a little bit about how these organisations that are cropping up

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are quite different from government and quite different from your normal charity.

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As you know,

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the role of government is to also act as a redistribute because there are some people who have money and a lot of people who are left out.

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So government through taxes and other mechanisms often, you know, that's why we collect taxes.

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That's why we, you know, support. And and many times, you know, government can't do enough.

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And that's where charities step in. Charities are really operate in a very distinctive role within our society, very important.

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They are filling that redistributive function for people who have dropped out of the

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system or at the the really do not have the same standard or opportunities as others.

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The difference is with these ventures, they're aiming on actually changing a system, whereas charities like homeless charities like soup kitchens,

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like, you know, people who address violence against women, they're much more how do we help in a palliative way rather than a transformational way?

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How do we help people? They're not they're not really addressing the root causes of the problem.

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They're, you know, scratching away at something, but not really looking at how do we transform the system, albeit they function.

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We could not function without charities. We're not talking about charities.

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We're talking about business models. And how do you use the market to perform functions in certain ways that it hasn't been used to before.

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And so what we've seen as a trend away from the hand out much more to how do we

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facilitate the hand up very much along the lines of helping people help themselves.

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I think we'll see many examples of this as I keep going.

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Another thing is the difference between these guys and activists, you might say, well, Chrissie Westlake is obviously an environmental entrepreneur.

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She's a real activist around yes and no activist or Tim Tams, another one.

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Tim definitely could be labelled as an activist, except there's a very different, different category here.

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Activists are extremely important in a society.

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Again, just like charities, they fulfil a very specific function.

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When governments don't act through the usual mechanisms.

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Social activists are out there saying, Hey, you're not doing your job.

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They're out there protesting.

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They're out there, you know, whether it's Greenpeace or Amnesty International, holding corporations, holding governments to account.

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Okay. The difference between social activists and these entrepreneurs is that entrepreneurs are providing the tool or the solution.

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If you take Muhammad Yunus, who I'm sure you've heard of his connection to Grameen Bank microfinance, Yunus didn't sit there and go,

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you know, banks are unfair to the poor and carry placards around the street saying banks are unfair to the poor.

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He came up with a tool that would actually help the banking industry completely reform the way they did business with the poor.

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So these kinds of entrepreneurs, like all entrepreneurs, are very pragmatic and very solution oriented.

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Mind you, we need the activists, we need the green pieces of the world.

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But that's not the role that these entrepreneurs that I'm talking about play.

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So I wanted to differentiate very much between normal charity that is important activists that are important.

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This is a new kind of actor that's using business models to fulfil different functions.

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What about the difference between mainstream business?

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And I think this is one of the things I think that, you know, for years I was very involved with the World Economic Forum,

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was very interesting to see how even the major CEOs of leading industries, leading companies would go.

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You know, my life is divided between this is where I make my money.

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But what you know, and this is where I do good. We've kind of compartmentalise those.

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And that's where you had the CSR push. Oh, here we're going to make our money over here.

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And then we're going to do stuff around charities and and etc., etc.

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And many times it had nothing to do with their core business. That's changing, although not fast enough.

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But it is changing so that you are beginning to see a coming together of it's not just about dividing because as I'm sure Steven Green,

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who if you've read good value, he was the chair of HSBC and now he's, I believe, a minister of trade in the UK government.

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And basically what he says is compartmentalisation is the curse of mankind.

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Because if we keep bifurcating where we live our lives, this is my public face, it's my private face, and never bringing those fears together.

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We will definitely have, you know, have challenges.

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So the main challenge for mainstream business from his perspective,

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is how do we break down those walls and how do we actually operate in a way that's a whole more holistic and true to ourselves?

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And this is the quote from him. So these are some new ways that we're seeing that business is being done.

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Managing for the long term, not just the short term. We've heard about, you know, the tyranny of the market with those quarterly returns.

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People are beginning to question that. Mainstream companies are beginning to question it.

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And that's where the B Corp came into being, because they were beginning to question that.

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And so how do you balance that between cooperation with many stakeholders and competition, especially in the business space?

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That's another aspect. And you're basically seeing, in fact, premium competitors in pre-market situations collaborating with one another.

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I'll give you a very specific example. We had a roundtable with the main competitors of sports apparel who were being Nike was going to be taken

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to task by Greenpeace for the use of some sort of chemical on the on the shoes that they were using.

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And Nike said, hang on, we're not the only ones that are using this toxic chemical.

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Adidas does, you know, etc., etc., etc. So if you're going to address this issue, we need to address it together.

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And so these competitors came together pretty competitive to sort of lay out a roadmap for how they were going to

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deal with actually doing away with using this particular toxic ingredient in the manufacturing of their footwear.

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And by a certain date. So you're seeing a lot of that kind of cooperation before.

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Pre competitive, I would call it. The other thing, I think that we also are becoming more and more aware of,

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certainly here in the business school and the issue of accounting pushing off all your negative externalities and basically saying,

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oh, we're not going to we're not. We're not going to address the externalities that our product is causing.

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We're just going to in our accounting systems for accounting for, you know, a completely different set of of of profit indicators.

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And now we're having this more and more this idea of full cost accounting.

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How much is your company? How many goods and how many bags or your is your company producing and having that come into a full cost accounting

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mechanism that really talks about the value to society and to your consumers that your company is is providing.

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And so anyways, the whole marketing and branding thing. Now let's look at corporations and charity, just what I said.

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You know, basically the whole trend has been let's put on some, you know, CSR, corporate social responsibility activities onto our mainstream stuff.

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But you know, that's over here and many times, you know, you have banks doing stuff for something that's totally irrelevant to their core business.

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That, as I said, is changing.

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The other role that I think that sustainable enterprises really contribute and and you can see this in many of these areas, all of these areas,

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renewables, microfinance, affordable housing, mobile banking, all of these industries were created by entrepreneurs who saw an opportunity.

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Where business would not go because the risks were way too high in comparison to the profits that could be made.

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They saw it is way too risky. Today, what these enterprises do is they pave the way for mainstream business to come in.

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Now you have mobile banking all over Africa, for example, and highly lucrative.

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You certainly renewable energy was started by entrepreneurs up in Denmark with wind farms and solar energy where mainstream,

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mainstream commercial investment would not go. Now it's an entire industry.

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So that's one of the roles they are harbingers for new business opportunities, new ways of doing things.

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And that actually is one of the reasons why I get really excited about this space.

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I think that one of the differences with mainstream businesses and with these

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enterprises is that mainstream business really looks at the unit of analysis,

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is the company that is the unit of analysis, whereas the unit of analysis in sustainable entrepreneurship is the entire system.

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And basically you'll find many times these these mainstream businesses are saying we need to control what's happening within our company,

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which albeit be yes, that's the usual way of doing business,

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whereas what sustainable enterprises are doing is to really look at the broader picture and to achieve lasting solutions.

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So you're seeing the shift and it's not presenting it in a very black and white way because many mainstream

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businesses I sit on the boards of a couple of publicly listed companies are very much conscious of this shift.

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It's very difficult for them to pivot, however. But it is happening, which is exciting.

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Now we're going to get into where is the money going to come from for this? How many of you have heard of impact investing?

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A couple of you. Okay. What is impact investing? This is a whole new trend.

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There is a great enthusiasm for this idea called impact investing.

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And many of our students who are doing their MBAs here. This is a space that they really want to get into.

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It's the idea of how do you use financial?

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How do you use finance to actually create a financial return for these kinds of ventures,

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but at the same time, ventures that are really doing and generating positive social and environmental returns.

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And many times I hear people going, wait a minute, you know, this is crazy.

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I mean, I'm creating jobs. That's enough for me.

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I mean, I'm creating jobs. That's a big, big deal. Being an entrepreneur.

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Yes, sure. The Mafia creates jobs. And, you know, so does the tobacco industry.

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But so that's not enough. Frankly,

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even though jobs are a great thing and that's why we really want to foster entrepreneurship and man and the growth of companies because of jobs.

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But it's not enough in this space. So at the last G8 meeting.

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This was the hottest topic, according to the economists,

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this impact investing and yet really very small amount of capital that's out there is actually going into these investments.

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We're still in a very nascent stage of a new industry, which is quite interesting.

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The other problem is there's a huge confusion on what is impact investing.

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Some people say, oh, it's actually impact investing is I you know, if I'm supporting a charity, I'm actually making an impact invest.

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Others are going, no, no, no, no. You actually have to have a financial return when you're doing impact investing.

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It's not enough to just give to charity and say, okay, I'm making an impact investment.

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So there's a lot of confusion here. And I'm on the G8.

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One of the task forces in the U.K. at the G8 has asked to look into this particular space,

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which is businesses that are very actively delivering social value,

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and where the investment for that is going to come for or what they call mission locked businesses.

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Social businesses give you a very specific example.

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How many of you heard of daylight in India?

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This is a social business basically created by two Stanford grads who really wanted to focus on how do we lessen the impact from NOx,

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kerosene, etc., that the poor have to use in order to light their homes.

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So they basically this is their achievements.

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They've improved lighting to more than 60 million people at this point, and that's how much money they've saved.

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They had $20 million of investment from a couple of impact investors.

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That's the amount of money that they that that they've actually saved consumers.

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Now, mainstream investors are starting to get into this space saying, hey, you know what?

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There's a financial return here, too, made to be made. And so that is something that has sort of, you know, sparked people's interest.

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And so they this is what they're hoping to do. Which 100 million of the 2 billion users now?

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This is a big business opportunity for an impact investor that wants to get a financial return.

385
00:38:32,980 --> 00:38:39,840
And the financial return I'm talking about here, you know, could be, you know, market rate or just below market rate.

386
00:38:39,850 --> 00:38:44,920
But at this point, they are looking at market rate returns. But there's another one.

387
00:38:45,460 --> 00:38:54,790
This is a case in Brazil. The social South Koreans basically started by a paediatrician and a hospital.

388
00:38:55,300 --> 00:39:01,000
That was the reference hospital for the poorest areas around Rio de Janeiro, the favelas.

389
00:39:01,480 --> 00:39:03,880
And she got very tired. Her name was the record label.

390
00:39:04,210 --> 00:39:11,590
She got very tired of seeing the same kids coming through the door of the hospital with the same disease week after week.

391
00:39:11,860 --> 00:39:17,590
They would you know, they would get the medical attention they needed and then they would be dismissed or sent home.

392
00:39:18,010 --> 00:39:21,460
And she said, you know, this is crazy. These kids, they're nuts.

393
00:39:21,550 --> 00:39:27,310
There's nothing I can do about the situation they're living in because this is caused by poverty.

394
00:39:27,520 --> 00:39:30,370
It's nothing that medicine is going to be able to solve.

395
00:39:30,910 --> 00:39:40,030
So what she did was she quit her job at the hospital and she formed a very strong link with the hospital, but with the rest of society and said,

396
00:39:40,030 --> 00:39:46,059
we're going to address the issues that this child is living in, which usually was the mother had no job.

397
00:39:46,060 --> 00:39:49,180
It was usually a female single headed household.

398
00:39:50,140 --> 00:39:57,820
The housing conditions were terrible. A whole series of things that were causing that illness today that it's been amazing.

399
00:39:57,820 --> 00:40:04,570
She has been she linked closely with the hospital and she basically said, send me the kids that keep coming through your door.

400
00:40:04,990 --> 00:40:08,230
The same kids that keep coming through your door. And those are the kids we're going to work with.

401
00:40:08,650 --> 00:40:14,020
And so what she did was she she and her army of different people coming from these different sectors,

402
00:40:14,020 --> 00:40:19,660
housing, nutrition, etc., would actually work with that mother or the family in terms of.

403
00:40:20,070 --> 00:40:28,080
For a whole year to help her get to a point where she was going to be able to sustain a job, specific skills, etc., etc.

404
00:40:28,470 --> 00:40:33,060
And the recidivism rate in the hospital dropped by 60% today.

405
00:40:33,600 --> 00:40:37,800
She is here today.

406
00:40:38,460 --> 00:40:41,970
It's been replicated in more than 23 centres.

407
00:40:42,240 --> 00:40:47,190
Now, this is really interesting because how many of you have heard of Social Impact Bonds?

408
00:40:47,910 --> 00:40:56,430
The Sims, the famous Sims here, Social Impact Bond is an extremely creative financial instrument that was developed

409
00:40:56,430 --> 00:41:01,680
here in the UK and has attracted tremendous interest in many other countries the US,

410
00:41:02,010 --> 00:41:09,659
Canada, Australia, etc. And the idea is the following There are some ventures that are going to need funding this.

411
00:41:09,660 --> 00:41:14,640
This venture obviously is never going to give anybody a financial return.

412
00:41:14,910 --> 00:41:21,840
It depends on philanthropic philanthropic dollars, but it is saving society a huge amount of money.

413
00:41:22,170 --> 00:41:31,260
It's saving this I mean, it's saving government a huge amount of money. So how can government reward those ventures that are basically addressing huge

414
00:41:31,260 --> 00:41:35,970
market or government failures in a way that helps and support their activities?

415
00:41:36,360 --> 00:41:46,260
And what it does is it creates a bond that you invest in and is dependent on the success of the delivery of,

416
00:41:46,380 --> 00:41:50,730
let's say, in this case, kids who don't keep going through the revolving door.

417
00:41:51,090 --> 00:41:54,360
And so they get to have a certain time frame, a certain horizon.

418
00:41:54,600 --> 00:41:56,790
It is measured by independent evaluators.

419
00:41:57,000 --> 00:42:05,640
There's a experiment going on right now here in the U.K. with prison recidivism, where the people invest in that bond.

420
00:42:05,880 --> 00:42:09,780
It's a long term bond and you get a market rate return.

421
00:42:10,470 --> 00:42:16,320
If certain goals are met. If those goals aren't met, you lose every penny or.

422
00:42:16,440 --> 00:42:23,489
It's a it's a it's a it's a philanthropic donation. So this seems to be have caught on in a way that's interesting.

423
00:42:23,490 --> 00:42:25,800
And that's been called an impact investing.

424
00:42:26,130 --> 00:42:34,920
For me, it's a fancy and very innovative way of doing effective philanthropy, whereas the daylight example is what I would call an impact investing,

425
00:42:34,920 --> 00:42:43,050
where you're actually really generating a financial return and you don't stand to lose your shirt if if certain things aren't mentioned.

426
00:42:43,320 --> 00:42:51,990
But this is a big hot item here in the U.K. just so that, you know, the issue is impact investing is not an asset class.

427
00:42:52,000 --> 00:42:55,770
It's basically a lens that you look at through which investments made.

428
00:42:56,340 --> 00:43:01,979
There are two things that qualify because many times pick up. Any investment I make is an impact investing.

429
00:43:01,980 --> 00:43:06,510
I mean, this is crazy. I mean, so one is the issue of intentionality.

430
00:43:07,500 --> 00:43:14,910
A pharma company obviously does a lot of good. It produces pharmaceuticals that, you know, cure illness, etc.

431
00:43:15,270 --> 00:43:22,290
But the intention isn't from the outset that the intention is to generate returns and obviously to pay for their R&D costs,

432
00:43:22,290 --> 00:43:25,650
etc. They happen to be doing benefit for society.

433
00:43:25,980 --> 00:43:31,650
But from the beginning, the thing that differentiates impact investing is the whole issue of intentionality.

434
00:43:31,890 --> 00:43:36,360
They are actually investing with the very intention of creating that social, environmental return.

435
00:43:36,780 --> 00:43:39,930
And then they are very vigilant about measuring outcomes.

436
00:43:40,290 --> 00:43:45,360
What are the outcomes? What is the impact that these investments are having on the kinds of things that matter to us?

437
00:43:46,290 --> 00:43:49,650
These are still, as I said, this is a really nascent industry.

438
00:43:50,040 --> 00:43:52,490
There are lots of people who want jobs in this industry.

439
00:43:52,500 --> 00:43:59,010
There are not enough jobs in this industry because many times people that go into this, for example, come from the corporate sector.

440
00:43:59,010 --> 00:44:04,260
They've been in the banking sector. You know, they're tired of, you know, being in the banking sector.

441
00:44:04,260 --> 00:44:09,959
They want to do something that they feel is going to be more rewarding. This industry is just getting off the ground.

442
00:44:09,960 --> 00:44:19,170
We'll see where it goes. It's actually quite interesting. One of the ghosts that haunts this whole conversation is, well, what are acceptable returns?

443
00:44:19,170 --> 00:44:22,380
You know, that the jury is still out.

444
00:44:22,710 --> 00:44:27,960
And I think that one of the things, again, to to figure out is that this is a very nice industry.

445
00:44:28,290 --> 00:44:33,960
And, you know, what is if you get if you're investing in something like a delight,

446
00:44:34,740 --> 00:44:39,240
are you actually sacrificing financial returns for the social impact?

447
00:44:39,540 --> 00:44:42,929
Now, this has been a big post that's haunted the conversation.

448
00:44:42,930 --> 00:44:51,690
And interestingly enough, there's this sort of idea that somehow these kinds of impact investments always generate below market rate returns.

449
00:44:51,690 --> 00:44:58,230
But Deutsche Bank did a very, very interesting study where they teased apart different types of quote unquote, impact investing.

450
00:44:58,620 --> 00:45:00,900
And they really looked at these three categories.

451
00:45:01,200 --> 00:45:06,509
And what they found was the third category, which is environmental, social and governance, governance,

452
00:45:06,510 --> 00:45:16,370
investment were actually had higher rate returns with governance as a big part of why that difference was.

453
00:45:16,380 --> 00:45:19,390
So that was a really interesting report the.

454
00:45:20,010 --> 00:45:28,860
It's beginning to come in now. That shows that companies that are really looking at these aspects are actually generating higher market rate returns.

455
00:45:29,430 --> 00:45:35,940
So interestingly enough, where, you know, the problem is we're still looking at what are the best models for impact investing.

456
00:45:35,940 --> 00:45:39,360
Clearly, something like Arena said is not.

457
00:45:39,630 --> 00:45:44,550
But there are other other things that can businesses where you might want to think about.

458
00:45:44,850 --> 00:45:50,370
There is a business that I could develop that could actually really do both or three things,

459
00:45:50,640 --> 00:45:55,920
whether it's the solar lighting or mobile authentication, micro insurance, drinking water,

460
00:45:55,920 --> 00:46:02,370
all of these areas we're just beginning to explore in terms of what are businesses that can do these different aspects

461
00:46:02,370 --> 00:46:11,430
that we're looking for in terms of the role that business functions and how business can really improve our society.

462
00:46:12,210 --> 00:46:15,780
And I want to just highlight something many of you, I'm sure, have heard of microfinance.

463
00:46:15,780 --> 00:46:20,740
Right. Okay. Let me tell you a little bit about the history of Grameen.

464
00:46:20,760 --> 00:46:27,930
Even though microfinance has existed for years before Grameen came, Grameen basically formalised it and sort of universalised the model.

465
00:46:28,230 --> 00:46:35,520
But lending groups have been going on since community started, etc. So don't think that microfinance that Muhammad Yunus just,

466
00:46:35,520 --> 00:46:38,520
you know, came down and gave the model of microfinance been around.

467
00:46:39,060 --> 00:46:48,210
But in 1976, he founded Grameen. 40 years later, the microfinance sector serves millions and millions of people.

468
00:46:49,620 --> 00:46:55,260
And billions of euros or UK pounds or whatever you want to say have been actually investing,

469
00:46:55,280 --> 00:47:00,000
including big pension funds, mainstream investment banks, etc.

470
00:47:00,330 --> 00:47:03,330
Money has flowed into the MFI sector, but.

471
00:47:05,180 --> 00:47:07,340
An awful lot of subsidy was needed.

472
00:47:07,910 --> 00:47:17,120
Basically, look at how much money over 30 years microfinance received in grants from whether it was the Rockefeller Foundation,

473
00:47:17,120 --> 00:47:21,169
the Ford Foundation, etc. It was heavily subsidised.

474
00:47:21,170 --> 00:47:27,200
And it's the same thing in government, by the way. Government heavily subsidises lots of industry, as we well know.

475
00:47:27,500 --> 00:47:35,420
So this issue of subsidy is like the angel investments that's needed to grow a sector, and it's the same thing with anywhere.

476
00:47:36,320 --> 00:47:43,400
So it took a lot of time to build up the microfinance industry and to give it credibility and also to build that ecosystem.

477
00:47:43,640 --> 00:47:49,760
We forget that today in the financial industry, we have a whole ecosystem that supports that industry,

478
00:47:49,940 --> 00:47:53,930
whether it's consultants, whether it's accounting firms, whether it's the legal system.

479
00:47:54,290 --> 00:48:03,049
I mean, a whole host of different things. We don't have that in this industry of, you know, what we're calling sustainable entrepreneurship,

480
00:48:03,050 --> 00:48:12,050
these weird hybrid organisations that are still trying to figure out are we fish or fowl and trying to, you know, find a new way of doing business.

481
00:48:12,410 --> 00:48:15,920
So all of these things, it took time to build that ecosystem.

482
00:48:17,870 --> 00:48:21,810
And during that time, now microfinance is a mainstream sector.

483
00:48:21,830 --> 00:48:25,480
Many banks have, you know, microfinance windows within the bank.

484
00:48:25,510 --> 00:48:33,650
So I wanted to just close by giving you a couple of really interesting insights into where the corporate sector is going.

485
00:48:35,300 --> 00:48:41,660
These are some of the highlights of corporations that are really trying to figure it out.

486
00:48:41,930 --> 00:48:49,969
They're trying to figure out how can we actually transform the way we're doing business so that we are actually

487
00:48:49,970 --> 00:48:59,000
looking at reusing things that are wasted or creating a different way of doing business with our supply chain.

488
00:48:59,300 --> 00:49:05,310
Marks And Spencer, you know, has the plan A or because there's no plan B, they're all trying.

489
00:49:05,330 --> 00:49:12,770
None of them are succeeding completely, but they're really pivoting or trying to pivot their operations in this way.

490
00:49:13,190 --> 00:49:16,790
And interestingly enough, shareholders are rewarding them for that.

491
00:49:17,120 --> 00:49:21,590
Which is interesting at this point. So we'll see where this whole trend goes.

492
00:49:21,830 --> 00:49:32,540
But it is exciting. Look, Waste Management is the largest waste management company in the entire U.S. Do you know that it produces more solar,

493
00:49:32,780 --> 00:49:42,800
more electricity or more power, more energy from solar, from waste than the entire solar energy sector in the United States.

494
00:49:44,120 --> 00:49:47,630
That is a publicly listed company and they are purposely doing they're still looking.

495
00:49:47,930 --> 00:49:52,130
How can we use waste to completely generate and energy?

496
00:49:52,340 --> 00:49:56,480
And and it's a fascinating story what they're doing and they've had to pivot completely.

497
00:49:56,690 --> 00:50:02,570
The CEO of that organisation came in and basically revamped the whole thing with the support of the shareholders.

498
00:50:02,870 --> 00:50:10,309
Sometimes shareholders aren't so crazy in the case of our aren't so excited about it in the case Royal DSM, which is a fascinating couple,

499
00:50:10,310 --> 00:50:15,750
is the biggest producer of vitamins and other kinds of nutrients and nutritional things and its beat

500
00:50:16,120 --> 00:50:23,540
the B to C company and Holland it's a publicly listed company the CEO had to almost sort of say,

501
00:50:23,570 --> 00:50:28,490
I'm stepping down because this is the way I want to go, and if you're not with me, I'm stepping down.

502
00:50:28,670 --> 00:50:35,360
And then the shareholders stepped up and said, okay, let's try it out. So it's not you know, it's it's tension.

503
00:50:35,360 --> 00:50:40,520
It's tension. If you've always been driven by certain things, it's hard to change that model, but it's exciting.

504
00:50:40,970 --> 00:50:45,200
So this is what we call future proofing business.

505
00:50:46,190 --> 00:50:53,600
Lots of different things cropping up. All of these movements around sustainable capitalism, responsible capital in Calgary.

506
00:50:54,110 --> 00:50:55,249
It keeps going and going.

507
00:50:55,250 --> 00:51:04,780
And all of these have different organisations that are big businesses that are part of these little clubs and there's a huge fragmentation of effort.

508
00:51:04,790 --> 00:51:09,079
You see it at the West, you see it in the UN Global Compact. There's just a whole crop.

509
00:51:09,080 --> 00:51:13,360
This is a trend. Every company wants to be on this bandwagon and figure it out.

510
00:51:13,370 --> 00:51:20,940
So I think that they also identify that we've got mega problems and number one, and opportunities.

511
00:51:21,140 --> 00:51:26,630
Yes, the climate change threat gives rise to big opportunities in the clean economy.

512
00:51:27,110 --> 00:51:34,430
We have major resource constraints in terms of rising commodity prices, but there's a huge growth of the middle class around the world.

513
00:51:34,970 --> 00:51:44,900
And then we're basically looking at much more demand on transparency, open innovation, etc., which presents, again, a whole other opportunity there.

514
00:51:46,850 --> 00:51:52,040
And just to conclude, this is why companies realised that they've got to do something.

515
00:51:52,370 --> 00:51:56,150
The world is getting hotter, it's getting scarcer.

516
00:51:56,390 --> 00:51:59,450
I mean, commodities are it's much more transparent.

517
00:51:59,450 --> 00:52:03,350
You can't hide anymore. And it's very unpredictable.

518
00:52:04,440 --> 00:52:09,600
So how does a company actually take advantage of that?

519
00:52:11,040 --> 00:52:14,070
I'll just quickly run through this and let's talk about you.

520
00:52:15,440 --> 00:52:20,839
I actually think there are very few of us that are going to go out and form the

521
00:52:20,840 --> 00:52:23,870
kinds of ventures that I've talked about at the very beginning of this talk.

522
00:52:24,230 --> 00:52:30,710
But there is something that all of us can do, and that's what I believe is we can be entrepreneurs.

523
00:52:30,750 --> 00:52:39,950
And wherever we are, we can be thinking innovatively, from wherever we're working, even within an 800 year old university.

524
00:52:40,550 --> 00:52:51,590
We can be thinking differently. We can think how do we actually contribute to a way of leading and changing a system or a way of of of fixing

525
00:52:51,590 --> 00:52:58,070
things that have perhaps not lived up to the kind of potential that we'd hope in a very rapidly changing world.

526
00:52:58,460 --> 00:53:04,910
So I really believe that the most important thing is to stop focusing as much on entrepreneurship,

527
00:53:05,180 --> 00:53:09,750
which has been very narrowly focussed on new venture creation, which is great.

528
00:53:10,100 --> 00:53:13,190
But I actually think it's a much bigger piece than I think.

529
00:53:13,190 --> 00:53:17,900
As I said, you know, we can actually be entrepreneurial wherever we are.

530
00:53:18,260 --> 00:53:21,500
So with that, our conclusion and just open up to any questions you might have.