The Pontifical Council for Justice and Peace (PCJP), Catholic Relief Services, and the Mendoza College of Business, University of Notre Dame convened a two-day Impact Investing symposium at The Vatican on June 16-17, 2014. John Kohler, Director of Impact Capital at Santa Clara University’s Center for Science, Technology, and Society offers his reflections on the event.
Pope Francis is the real deal.
In mid-June, I had the distinct pleasure to join a unique 2-day session on impact investing that was hosted by the Vatican. As one would expect, the generative question posed was: “How might the church use or promote impact investing to serve the poor?” What made it unique were the recent writings and pronouncements Pope Francis has made to encourage the use of capital to lift up the poor. Now, for the first time, there is direct acknowledgement and support from the Papacy for those involved in impact investing globally.
Two weeks before we arrived Pope Francis sacked the entire board of the Financial Information Authority (AIF), the financial watchdog of the Vatican Bank, and replaced them with an international group of experts, including a woman. It’s clear that Francis is a man with the courage to enact change. He is intent on using the Church’s position, presence and energies to serve the poor. Impact investing is one of those ways.
Impact investing employs private capital to achieve measurable social and environmental impact, often in underserved communities. While some monetary return is expected, the end goal is a more vibrant community, abundant with opportunities for sustainable, satisfactory livelihoods. At the conference, we explored specific examples of how impact investing aligns with the Church’s mission to serve the poor and used them as points of discussion and discernment.
Part of my contribution were a few observations from the field:
· For micro-enterprises, the mom-and-pop shops that are the critical tendrils of commerce in poor communities, access to capital remains stubbornly difficult or far too expensive.
· Involvement by local banks requires a pledge of substantial assets (which the poor do not have).
· Businesses need ‘capacity development’, a strengthening of their business model, at every stage of the lifecycle, from idea conception to successful execution to spreading and scaling the model.
· Equity exits, (the ability to sell investor shares in a company for a financial return) are difficult to achieve in base-of-pyramid markets.
· It is wise to focus on financial inclusion for women based businesses, since research from Goldman Sachs finds that women are 80% likely to bolster her community with the additional revenue, as compared with men at 30%.
I ended my presentation by showing the following photo (below). In it you can see a woman in a poor community parenting her children. Notice the flower in her hair and in the little girls’. While the backdrop depicts their dismal economic condition, what is strikingly evident is the dignity that these poor people possess. In the main, the poor are not asking for our handout - they are simply asking for the tools to earn a dignified living – the same tools, financial or otherwise, that we have used to build our societies.
In Rome, our discussions navigated in the right direction, but that we have a long way to go. One point I was guided to is the immense complexity of the Catholic Church and how difficult it is to take unified action. There are numerous religious orders—Jesuits, Franciscans, Dominicans, Benedictines—each with their own priorities, approach, and culture. Yet, it’s important not to hide behind the complexity. Even though impact investing is a bold new concept and still somewhat unproven, we must continue to make strides towards discovering new financial tools to work on behalf of the marginalized.
It seems so evident that the Church’s funds should go to those that need it most and in the most sustainable way possible, that in the days that followed, I wrestled with the questions: Why the Church is just now addressing this issue. Why are they so late to the game?
The answer awoke me at three in the morning.
We are the Church. We are already in the game. This little pocket of activity at Santa Clara University is the Church in action. Let’s continue leading the way.