Social finance includes a full range of investment strategies and solutions across asset classes that can provide an array of risk-adjusted returns tailored to investor intent. From understanding the role of Environmental & Social Governance (ESG) factors in managing investor risk to creating innovative blended finance and pay-for-performance approaches that help crowd-in new investments into underserved markets, Deloitte is a thought-leader and strategic partner in helping clients leverage and deploy capital consistent with their mission-related imperatives and financial return expectations.
Specifically Deloitte engages in strategy, innovation, metrics and eminence in:
- Innovative finance and domestic resource mobilization strategies
- ESG and socially responsible investing
- Social Impact Bonds and pay-for-performance
- Impact Investing
- Blended Finance
- Alternative Financing Vehicles for Non-Profits
Despite the unprecedented growth in ESG and impact investing and the flurry of innovation in blended finance instruments, investment strategies and metrics, Deloitte recognizes that many approaches remain unchartered and many innovations remain untested. The seminal report From the Margins to the Mainstream, authored by the World Economic Forum and supported by Deloitte, uncovered challenges including: the maturing nature of the ecosystem; the limited number of investable opportunities; the misalignment with existing asset allocation frameworks; and the complexity that quickly emerges when investors and companies are asked to manage for a “double or triple bottom line”.
While the market continues to evolve, many of these challenges remain true today. The sustainable pipeline of viable deals remains elusive for many complicated in part by changing investor expectations. The first wave of blended finance and pay-for-performance solutions have not scaled and a second generation of instruments is being created with great, but untested potential. Investors are redefining and/or refining their perspectives on impact and intentionality while taking stock of new policy directives both domestically and internationally. And lastly, the public, philanthropic and social sectors are looking for new ways to incentivize and leverage private capital for social impact at scale through blended finance, pay-for-performance and other means. Recently, based on work with the World Economic Forum, Deloitte published Blended Finance in the National Planning Process, authored by John Mennel, Robert de Jongh and March K Bishop. It considers what actions the public sector needs to take in order to successfully leverage this private capital.
Adaptive strategies and design
Strategic advisory for investors, development finance institutions, intermediaries and field-builders
Successful strategies clearly articulate the investor’s goals and priorities, account for ground realities of today’s impact enterprise landscape, and anticipate future growth and evolution within the ecosystem. Having worked with some of the leading players in the Impact Investing field, Deloitte member firms’ practitioners offer strategic advisory services designed to help clients establish winning strategic roadmaps and achieve financial and societal leadership in a rapidly evolving field.
Stories from the field
A leading multilateral development agency hired Deloitte to develop a new, and innovative infrastructure investment vehicle that would allow it to deliver on its near-term strategic priorities while advancing the sustainable development goals. The team developed an investment thesis and strategy aligned to its mission objectives, a governance structure and operating model, a measuring impact framework, go to market plan, and socialization materials critical to leveraging both internal and external support.
Financing mechanisms and structures, including social impact bonds
Successful financing mechanisms match investors with different “risk-return-impact” appetites to impact investing opportunities. Steeped in practical insight into what it takes to launch innovative financial instruments, the Deloitte member firms help design and launch products that align with clients’ impact investment objectives. Innovative financing mechanisms include payment for success: products that incentivize innovation and allow governments to pay only if the initiative is successful.
Stories from the field
A UK organization that delivers programs to provide at-risk young people with work, education, and training wanted to develop a SIB in the education sector in Glasgow. Deloitte UK conducted a feasibility study calculating the true economic cost of exclusion and truancy in England, Wales and Scotland. Deloitte UK’s ongoing work with the organization to develop an education SIB is an example of the firm’s efforts to develop workable SIBs. The initiative with the organization is only one of many SIB initiatives that Deloitte is supporting globally, across developed and emerging markets.
Today forward-thinking companies are jumping at the opportunity to develop business solutions that supercharge growth and improve social outcomes, breaking the traditional trade-off between financial and social gain. While some global companies are satisfied with maintaining a “license to operate,” others view market-based solutions to global challenges as evidence of their “license to innovate.” For this research, Deloitte’s Social Finance team collaborated with the World Business Council for Sustainable Development (WBCSD) to explore both the reasons behind this trend and strategies for how companies can bring innovative—and impactful—new offerings to market.
Performance measurement, reporting and analytics support
Recognized performance measurement and reporting standards allow an organization to report on its impact, return, and risk profile. If designed well, they also enable better management decision making and promote transparency and increased confidence in the information disclosed to the market. Leveraging deep experience with global financial and non-financial standards setters and ratings organizations, as well as with corporations seeking “impact transparency”, the Deloitte member firms support clients in implementing rigorous, yet practical impact evaluation and reporting practices.
Stories from the field
A key impediment to new capital flowing into the impact investing marketplace has been the lack of tools and metrics through which to assess, benchmark, and report impact. It has been difficult for investors to compare investment opportunities across markets, industries, and impact areas using comparable, transparent, and independently verified tools. Deloitte is a pioneer funder of B Lab’s GIIRS and serves as the preferred provider for third-party desk and on-site reviews for companies and funds seeking a GIIRS rating. In addition, a Monitor Deloitte team helped develop a roadmap that would help a field-builder scale and “mainstream” its activities alongside a quickly evolving global impact investing market.
Strengthening the social finance ecosystem
Successful ecosystem efforts are often the result of multiple, parallel interventions where players from across sectors work together to facilitate, stimulate, and even enforce action. Learning from “aligned action” engagements across a host of issue areas and geographies, the Deloitte member firms can help individual clients and client consortia agree to and deliver on a common mandate and action agenda, including by leveraging proprietary crowdsourcing technologies to assure the most effective convergence of actors and solutions. Services range from strategy formulation, to meeting facilitation, research, and project management support.
Stories from the field
Given the highly evolving nature of the social finance industry, there is a need to have a strong and supportive ecosystem. Other than research studies, the team has supported initiatives focused on enhancing transparency and reporting practices worldwide as well as a range of convenings focused on rallying practitioners around ways to enhance the impact investing ecosystem. Efforts include support related to:
Enhancing Transparency and Reporting Practices
Deloitte’s experience in sustainability and leadership in advancing financial and non-financial reporting led to an invitation from a consortium of field-builders, to help build a “FASB and GAAP equivalent” for impact investing.
Facilitating CDFI Aligned Action
Alongside a leading foundation, our team has supported a series of impact investing conferences and meetings to bring together leading players, identify challenges in the sector, and develop strategies to address them through collaboration. Deloitte U.S. has also provided targeted support to bringing the US impact investing community and Community Development Finance Institutions (CDFIs) closer together.
Helping the Private Sector Engage with the SDGs
Deloitte’s experience in inclusive business and impact investing led to the commissioning of a report with the UNDP focused on how to develop a company’s value proposition in the context of the Sustainable Development Goals based on their degree of “social impact” maturity.