Moving from Traditional Philanthropy to Strategic Social Investment

Date

November 23, 2018

4 min read

Summary Points:

  • In India, the mandatory CSR policy has accelerated corporate giving, leading to more investment in the social sector.
  • By impact investing, donors/investors make financial return which helps them recycle their capital to make a very strong impact.
  • India is the impact investing capital of the world and there are terrific opportunities for both social impact and financial returns across a variety of sectors.
  1. How has philanthropy changed in India in the recent years?

    Philanthropy has changed significantly in recent years. A few key changes are: 1) the corporate social responsibility (CSR) requirement as part of the 2013 Companies Act that requires most corporates to give 2% of their profits to charities, 2) more Indians have become increasingly wealthy and also aged – two trends that will generally push people to more giving and 3) technology has made it easier to make donations with the click of button.

  2. Why should we move from plain grant making to strategic social investing with the new
    financial tools?

    I do think there is a large opportunity to make a big impact through impact investing. Many social businesses have both proven to have a very strong social impact and to provide attractive financial returns to investors. By making a financial return, or at least getting their money back, investors/donors are able to recycle their capital to make a very strong impact. At the same time all social problems cannot be solved by profitable business models, so philanthropy and non-profits are still very critical.

  3. While moving from grant making to social investing, what are the legal and governance issues
    that need to be addressed by organizations?

    A social business typically establishes itself as a private limited company, whereas non-profits are often trusts, societies or section 8 companies. Corporate governance standards are typically highest in for profit companies. Investors, especially institutional investors, typically takes seats on the board of directors of companies and insist on high corporate governance standards which would include independent directors and highly regarded auditors.

  4. What are the challenges faced while making the shift to strategic social investment?

    Strategic social investors typically will start focusing on the financial returns offered by the investment in addition to the social impact. While it is easier to calculate a financial return than a social impact return, it is often difficult to predict future cash flows and financial returns. It is also critical to consider who else is investing in the social business alongside you. These investors will have their own objectives and timelines, and it is critical that all stakeholders (management, team, clients, shareholders, etc) are aligned.

  5. What are the opportunities that are available in India for strategic social investment?

    The opportunities are plentiful. India is the impact investing capital of the world. There are terrific opportunities for both social impact and financial returns across a variety of sectors including education, health care, women empowerment, financial inclusion, sanitation, water, renewable energy, agriculture and many other sectors. These opportunities also range from less than Rs. crore to hundreds of crore.


About Author
Eric Savage
Eric Savage Co-Founder & CEO Unitus Capital

Eric Savage is the Co-Founder & CEO of Unitus Capital (UC). Eric moved to India in 2007 to help set up UC, an impact focused investment bank, and has led the company in raising almost US$2 billion for various impact businesses. He has had the privilege of working with many innovative companies that do life changing work in the fields of financial inclusion, affordable health care, renewable energy, affordable education, women empowerment, and agriculture. Unitus Capital has been ranked the #1 Indian investment bank by Venture Intelligence in for the past four years. Previously, Eric ran Citigroup’s Asian investment banking franchise in the power and infrastructure sectors, and helped secure and execute multiple landmark equity, debt and M&A transactions, totaling many billions of dollars. Eric was based in NYC and Hong Kong for 14 years with Citigroup/Salomon Brothers. Eric also headed Salomon’s utilities sector equity research and was selected to Institutional Investors’ All-Asia research team.

Eric is a graduate (cum laude) of Duke University and Harvard’s Kennedy School, where he received the Lucius N. Littauer Fellow Award, the program’s top honor. Eric serves on the boards of a number of leading companies, funds and educational institutions. In 2014, Eric was named Indian Expat Entrepreneur of the Year by Expat Entrepreneurs Circle, and, in 2016, was awarded the Indira Gandhi Sadbhawana Award for his contributions to the impact investing sector. He is a highly sought after speaker, particularly in the impact investing world. Eric is a Fellow of the inaugural class of the Aspen Institute’s Finance Leaders Fellowship Program.