Making your money count: The Case for Community Investing and Social Venture Capital

For several investors today investing responsibly has become a de facto mantra. Further some investors are interested in investing in ways that are socially responsible – i.e, the creation of some social and environmental impact. Investing to reduce poverty in the developing world has also gained considerable traction in recent years. But how do these conscious investors track their investment dollars to ensure that they fulfill their intensions? Socially Responsible Investing (SRI) provides the answer, say authors Jon Daigle, Carrie Hall, Rania Jamal, et al., in their article “Poverty Alleviation through Socially Responsible Investment: Case Studies of Community Investing and Social Venture Capital,” In their article the authors point to four methods of engaging in SRI – screening, shareholder advocacy, community investing and social venture capital.

The paper theorizes that two methods in particular – community investing and social venture capital – have the greatest potential for poverty alleviation. This is carried out by taking a closer look at the working of three socially-oriented funds and one fund recipient, the paper evaluates the scale of poverty reduction.

While the study demonstrates the effectiveness of both models, it also points to two factors instrumental in their success. The first factor highlighted is the extension of technical assistance along with financial assistance as a way to target individuals belonging to disadvantaged groups. The second factor brought out through the study is existence of strong ethical commitment towards the social cause within the management.

Read the entire article here.