Groundbreaking social investment fund launched

Investors in market-based solutions to social problems can now receive a financial return on their investment, rather than merely a measure of social equity. Believed to be the first funds of their kind in the world, Heart Social Investments are launched today.

Heart Social Investment funds are built around a concept called Blended Value Proposition, offering investors both a financial and social return on investment. On the other hand, the Traditional Value Proposition that most investments are built around, yields economic returns and no social benefit, and traditional private or corporate giving (philanthropy) yields social value with no financial benefit. This means that going forward corporate, private and foundation giving (philanthropy) could earn a financial return, on top of the expected social impact.

The Blended Value Proposition funds achieve the financial (as well as social) return by investing in social enterprises. The core objective of a social enterprise is to promote social and/or environmental gain and it does this through a trade that generates income. As such, there is no difference between them and any other business, as long as social enterprises are sustainable and making money. And social enterprises are therefore not dependent on ongoing handouts, like most NGOs, to have a social / environmental impact.

Heart of Healing, from today re-branded simply as Heart, was established in Cape Town by Peter Shrimpton, an ex-stockbroker and a man who understands not only money markets and commerce but also the need to make social enterprises and NGOs sustainable. Peter has spent the last five years working with NGOs and creating and incubating social enterprises that needed a leg up in terms of the requisite commercial input and counsel.

The business of giving and, in particular, charity has evolved. Peter explains: "It is an outmoded concept to continue simply giving to an organisation - charities now need to be sustainable, they need to generate income through trade."

Social enterprises are fast being lauded internationally as the way to offer a sustainable solution to the world's increasing social and environmental challenges. There are currently no figures tracking the number of social enterprises in South Africa but elsewhere in the world, the market is mushrooming. In the UK there are around 55 000 social enterprises and in the US, where there are around 1.2 million non-profit corporations, the market generated $672 billion last year.

In South Africa, the CSI (corporate social investment) market is valued at around R4-billion and the private donor market is estimated at around R17-billion. As donor fatigue increasingly prevails, it is becoming critical to find ways for people to receive a return on their generosity and on their investment. Now that charities and NGOs - social enterprises - are beginning to earn money, the market can evolve ... into funds like the Heart funds - blended value proposition funds - and so that the market can attract more investment in the future.

"This formalises, in financial terms, what Heart has been doing for some time now", says Peter. "We're taking traditional financial investment models and applying them to the social enterprise space."

Heart has created a holding company for each of the funds. The aim of the funds is to give investors the potential of earning a 10% return. Each Fund is established as a PTY Ltd legal entity by Heart with an investment committee. The central objective of the Funds will be to invest in social enterprises that are helping to bring about positive social and environmental change.

Three Blended Value Proposition Funds are being launched, to incubate, develop and establish social enterprises (just like any other business) at critical stages of their development. For the Heart Seed Fund, a closed fund, the minimum investment for a maximum of 50 investors is R20 000 to raise R1-million. The objective is to incubate a developmental project from concept to market readiness.

Heart aims to raise R5-million for the Heart Venture Fund with two lots of R50 0000 each over two years for a maximum of 50 investors. The focus is to take the social enterprise to market, after completing the Heart Seed Fund incubation process.

And for the Heart Capital Fund, the aim is to raise R30-million over three years - again with R50 000 lots over three years for a maximum of 200 investors. The objective is to fully capacitate the social enterprise.

"In South Africa's financial market where trillions of rands are traded, R36-million is chickenfeed", says Peter, "but we want to prove that it works. We're not going into the financial market to challenge the industry. We're giving them an option they don't have at the moment ... we are challenging the donor market."

Peter adds: "We need to create a capital structure that can drive positive social change. Without it, we will not be able to begin addressing the huge and daunting number of social problems we face right now. Investment in social projects and social enterprises must now earn a return so that the business of giving can be more sustainable."

Heart Social Investments are different from other investment funds linked to a social / environmental cause, because they invest in social enterprises, not corporates being socially responsible.

Find out more information here - http://www.heartofhealing.co.za/index.php?option=com_content&task=view&id=566&Itemid=336