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Capital Cohabitation

Page history last edited by lauren_bergeson@mba.berkeley.edu 11 years, 7 months ago

Capital Cohabitation

 

FAQs

  

What is social capital and what are the social capital markets?

 

Please refer to general lingo page.

 

In what ways have capital markets failed to support investing in social value?

 

In general, capital markets can support any variety of for-profit enterprises, but when it comes to investing in social value, there have traditionally been only grants or loans, with few options for creating real capital investment to expand ventures that aren’t clearly creating either social or economic value.  This lack of instruments inhibits managers pursuing blended value, whether in mainstream corporations, emerging for-profit social ventures, or social purpose enterprises attempting to scale their ventures.

 

What are some of the investment vehicles in social capital markets?

 

These cover the spectrum of market rate capital (socially-screened funds like Calvert and Domini), near market rate capital (social and community development venture capital) to capital that does not yield a return (strategic philanthropy and traditional grantmaking).

 

 

          INSTRUMENTS OF THE SOCIAL CAPITAL MARKET

Type of Instrument*

PRIs

Grants

Debt

Equity

Cost of capital

3-5%

0%

8-10%

ROI – variable rates

Board/Investor role

No

No

Maybe

Yes

Available for housing

Yes

Yes

Yes

Yes

Available for nonprofit business

Very limited

Yes

Very limited

No

Appropriate mix

15%

15%

20%

50%

Present mix

0%

90%

10%

0%

 

Please refer to Key Terms and Definitions page for explanations of type of instrument.

 

What are the market inefficiencies of the growing social capital market?

 

Like other markets, the social capital market requires efficiency, transparency, and measurable outcomes for sustained growth.  There are primary inefficiencies within the social capital market:

  • High transaction costs
  • Lack of adequate information flow
  • Lack of market responsiveness
  • Lack of connection between organizational performance and capital allocation
  • Lack of common standards and definitions
  • Lack of intermediation
  • Lack of common understanding of relation between risk and various returns

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