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 make money. 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, describes itself as a social investment organisation. It 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 Blended Value Proposition ones, 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.
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Additional information - background to Heart and its brand:
Heart is a Section 21 Company (non-profit organisation) based in South Africa.
Heart’s vision: Together, transforming quality of life by creating, incubating and establishing social enterprises that work long term.
What Heart does: It is Heart’s vision and vocation to bring about social transformation by creating sustainable social enterprises i.e. market-based solutions to social problems. Heart is the nexus between social entrepreneurs needing capital and support to develop their social enterprises, and social investors seeking financial and social returns. In 2009, Heart CEO and Founder Peter Shrimpton received the first emerging social entrepreneur of the year award by SASE (Southern African Social Entrepreneurs), in recognition of Heart’s work around incubating social enterprises.
Why Heart does it: We need to find sustainable solutions to the social and environmental challenges that are escalating at alarming rates in South Africa and globally. Social enterprise is proving to be the answer.
Heart’s brand: Heart has changed its name from The Heart of Healing to Heart, to reflect its evolution as a business. At inception five years ago, Heart was involved in hospital work – hence the ‘Healing’ connotation. Today, heart works across a number of social and environmental challenges and needed a name that is more versatile and which has greater marketing potential.
Heart is all about 'enterprising social transformation' as reflected in its vision. The name, Heart, says a lot about the organisation. Heart’s consciousness, passion and compassion to transform quality of life for the better. Heart is about tapping into the bigness and openness of their hearts, and hearts around the world.
Zoom Advertising, the first advertising agency in South Africa to offset their carbon footprint, has partnered with Heart as a pro bono client, generously developing the brand and all related communications. Zoom coined Heart’s new descriptor of 'social investments for life,' capturing what Heart does succinctly and memorably. Their heart icon design resembles a seed, because Heart's approach is to incubate fledgling social enterprises. The contemporary iconic branding is energetic, yet grounded, in its deep orange and grey, and together with the descriptor captures what differentiates Heart - an enterprising approach to social transformation.