Interview with Sean Hinton, Director of the Open Society Economic Advancement Program and CEO of the Soros Economic Development Fund

Sean Hinton1

Sean Hinton, Director of the Open Society Economic Advancement Program and CEO of the Soros Economic Development Fund , will give the keynote speech at EVPA Annual Conference in Oslo.

Can you share with us how you approach impact investing at the Open Society Foundations (OSF)?

The Economic Advancement Program at the Open Society Foundations integrates both grants and impact investment capital, alongside our policy advocacy and stakeholder engagement work. On the impact investment side, we deploy a range of debt and equity capital into social impact ventures for the primary purpose of social impact where the private sector can play a role in addressing particular problems. But we recognise that private capital is rarely the only, or even the most important, constraint in addressing social and economic injustice. So, like our colleagues across the Foundations, we also deploy grant capital in various forms.

How do you see the development of the programme in the future?

Right now we are focused on a series of particular issues of concern to our Foundations. Two core themes for us are the economic advancement of refugees, migrants and host communities; and bolstering the ability of smallholder farmers to shape local agricultural systems and defend their rights. We are learning more about how to integrate and channel the role of the private sector in these contexts.

Across our work, we want to do two things. Firstly, we want to learn how to better integrate, to mobilise the private sector alongside government, and civil society. We want to get better at addressing problems by working systemically and by involving multiple stakeholders. That is more complex than just applying capital. When you work in a functioning market, you can specialise, but in many of the issues we are addressing, the commercial market is not functioning. We have to be able to address the role of all the stakeholders and that involves a different form of capital and working out how to get multiple players to collaborate.

We are interested in integrating investment with other forms of intervention, and communicating about and growing the scale of the funds that are deeply focused on impact, an aspect where EVPA and other actors are already playing a role.    

So far, what have been the main challenges you have encountered in your work?

One of the real problems in trying to address the problems of marginalised communities is that there is relatively little deal-flow in this sector. That is very challenging. A year ago, when George Soros announced the 500 million dollar earmark to invest in businesses that serve the needs of refugees and migrants, we hoped we would have many opportunities to deploy that capital, and to make those investments. But actually there are few business that focus on serving the needs of those communities.

 What does the next generation in impact investing needs to do?

We are going to need social entrepreneurs who are prepared to support others and not just to start new things. One of the things that I observe  is that we are always presented with business plans and with proposals from people that want to try something new. But I hear little from people who want to support other ventures that are already working. I believe we have a culture of individualism in the private sector that does not work so effectively. I see a fragmentation, I see lots of people starting new things, and actually there is a great opportunity to collaborate and cooperate and support existing ventures to grow and develop.   

 What will we need to close the gap between social justice and economic development?

I don't think it's a gap, but an intersection. Some forms of economic development are more conducive to social justice and some aren't. I think that we have to acknowledge that economic development for its own sake does not produce the outcomes we hope it will. Therefore, we have to be intentional and deliberate about the forms of economic development that we want. For example, we are very interested in how different ownership models of companies can affect how the company operates, and  the different social justice outcomes that may result.

Different forms of participation in the ownership of businesses might lead to better outcomes for society. We are interested in those forms of economic development that are more likely to lead to social justice.

 How do you see the impact investing industry developing in the future?

I think it's at a bit of a fork in the road. We have made incredible progress in raising awareness of the potential for business, and particular for investment in business to be a source of social good. As this scales to the next level, we could go down one of two paths. On one path, the primary focus is on increasing the impact of the capital. On the other path, the primary focus is on the scale of the capital directed towards impact. My fear about the second path is that it can be achieved by a lowering of the standards of what is considered to be impact.

Let’s take the example of the response of the investment community to the challenges of climate change. The first response was to sort of ignore it. It was seen as a short term crisis here and there, but it was not seen as a major trend. The second response was to deal with it as an issue for corporate social responsibility. People painted their logo green, they did small recycling efforts. After this, lots of money was flooding into green funds, green tech and clean tech. The focus was not on substantive change that would really have an impact on the environment. It was a very shallow and simplistic understanding of the trend. Only now that people have recognised this is a global macro trend, we are focused on using substantive investments. Investors are emerging to have a really deep understanding of the importance of how one can have significant impact on this issue.

We are at risk of the same trend when we think about social impact. There is a fork in the road  where more money comes and we "mainstream" impact investing by putting an impact label on investments that are taking place in any case.  

How can EVPA contribute to lower that risk?

I think EVPA can do that by selectively bringing together the best of venture investing and the private sector, alongside the best of philanthropy. Selection is important here. EVPA can be very helpful in making sure that when we bring tools and skills from the private sector into philanthropy, we’re combining the best bits and not ending up imitating the form without any of the functionality. 

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