Impact Investing with Human Capital: Better than CSR

Saving the planet will take more than money. Current financial investments intended to solve social and environmental problems need to be combined with human capital investments. The private sector has access to one of the most valuable expressions of human capital; employee volunteering. It’s time to expand our thinking. Corporate Social Responsibility is good. Impact investing with human capital is better.

People and Planet: Can the private sector save us?

We are witnessing a radical expansion in the role of the private sector in the social and environmental arenas of our lives. Until a few decades ago, the idea that the private sector would invest more than was needed to ensure compliance and avoid costs related to obvious risk-related activities was novel at best, but more commonly deemed foolhardy if not a breach of contract with shareholders (i.e. Milton Friedman 1970). Yet now we regularly see the private sector moving well ahead of governments on issues such as carbon emissions, gender parity, green supply chains and diversity and inclusion. 

The private sector often gets it wrong

Has the private sector got it right every time? Nope. Not by a long shot. Multiple companies, well known for their award winning corporate responsibility efforts, stand as cautionary tales; BP, Wells Fargo and Volkswagen for starters. Yet the evolution of a progressive social and environmental perspective across large portions of the private sector over the past four decades is not only hopeful but necessary for the future of our planet. But this is not altruism. There are critical business considerations at stake. 

There is a business imperative to try harder

The UN’s Global Compactoutlines these considerations using the UN’s Sustainable Development Goals (SDGs) which “provide an historic opportunity to unite all global stakeholders to end extreme poverty, fight inequality and injustice, and protect our planet”. The section of the website titled How Your Company Can Advance Each of the SDGs offers a rationale for such a leadership role when facing broad social and environmental concerns backed up by research, tools and practical steps.

But is it even possible?

Even if such a widespread leadership role for the private sector is responsible and prudent is it, in fact, possible? Estimates on the annual cost of achieving the SDGs range from about $US3.9 trillion to $US6 trillion. Given the current commitments of governments, and other organizations globally, this leaves a world-wide funding gap in the range of $3 trillion to $5 trillion annually. Given this reality, Ban Ki-moon’s remarks at the at the 2015 UN Private Sector Forum rang with urgency:

“I am counting on the private sector to drive success. Now is the time to mobilize the global business community as never before. The case is clear. Realizing the Sustainable Development Goals will improve the environment for doing business and building markets. Trillions of dollars in public and private funds are to be redirected towards the SDGs, creating huge opportunities for responsible companies to deliver solutions.”

Ban Ki-moon, UN Secretary-General from 2007 to 2016

Is it likely that the private sector will cover this massive funding gap? Is there an additional $US5 trillion in cash to be found to invest in achieving the SDGs on an annual basis? Is this, ironically, even sustainable?

Human capital investments are critical

Although we tend to think of financial capital as the primary, and most important, mechanism represented by the private sector when it comes to community investment, it is likely a distant second compared to human capital. Human capital refers to “the stock of knowledge,  habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value” (Wikipedia). As with other forms of capital, investing in it through education, training, health improvements and other benefits can improve overall performance leading to greater productivity. 

The value of human capital may be difficult to measure but it’s value is undisputed

Few would dispute the importance of human capital as a key asset yet as Leon Kaye wrote for The Guardian;

Determining the actual value of this intangible asset is a difficult nut to crack. In 1978, 80% of a company's value was easy to enumerate because it was mostly tangible assets such as factories and equipment. But now  80%of a company's value  is comprised of intangible assets such as brand value, intellectual property and, of course, people.

Despite the difficulty of measuring intangible assets or which human capital is foremost in value (beyond knowledge, brand, etc.) the importance of human capital is front and center on the world stage. At the World Bank Group’s 2017 Annual Meetings this past October, the World Bank Group President Jim Yong Kim, introduced the Human Capital Project. 

“This year, for the first time, we are including human capital in our measurement of the wealth of nations,” Dr. Kim said. “Human capital is about 65% of the wealth in high-income countries and only 40% in low income countries. We’re helping low income countries overcome this – and there is a sense of urgency – not only because we’re facing several current human capital crises, but also because accelerations in technology will require countries to urgently invest in their people if they hope to compete in the economy of the future (read more here).

How can the private sector invest human capital to save the planet?

There is a growing urgency to deepen our understanding of how investing in people leads to economic growth. This past April, Bill Gates joined Jim Kim and others to underscore the essential role of investing human capital for the future of the planet. Yet there is an immediate question that must be addressed; how may the private sector invest this sizeable and valuable asset as a means to bridge the funding gap facing the planet as we attempt to achieve the SDGs by 2030?

Employee volunteering offers an immediate access to private sector human capital

Employee volunteering has tremendous potential as a key mechanism to access human capital to be a positive vehicle for business involvement in local and international development initiatives. Employee volunteering is an evolution beyond traditional corporate philanthropy and a one-way flow of investment in communities to enable a more dynamic exchange between corporate employees and key stakeholder groups representing community and civil society.

Mobilizing employees to voluntarily take action in communities where they live and work offers company’s multiple entry points to address the SDGs. The voluntary prosocial actions of employees include a massive array of social networks as well as the social capital represented across those networks. This enables businesses to operate beyond an organization-to-issue threshold typically represented in most collective impact projects whereby organizations are viewed as the primary actor in providing solutions. Employee volunteering, when done correctly, emphasizes the potential of mobilizing employees as primary actors, working together with multiple stakeholders and across multiple geographical scales. This approach to mobilizing human capital holds the promise of real progress towards achieving the SDGs.

What’s required is a formal mechanism that can help bring together these global assets across multiple companies in a way that can improve both the impact and the overall value of the asset being invested. This necessitates exploring human capital through the lens of impact investing.

IMPACT2030: An immediate and practical solution to save the planet

IMPACT2030 is the world’s first ever impact investment fund for corporate citizens looking to invest human capital to achieve the SDGs. This is an exciting concept, without which, the potential value of human capital investments may not be fully realized in the global effort to achieve the SDGs. 

What is impact investing?

Well before the highly popularized term ‘shared value, Jed Emerson advocated for a blended value approach to investment so that both the community and the investor would receive a meaningful return on the investment. Over the past twenty years, the term ‘impact investing’ has come to mean “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return (GIIN). According to GIIN, the $22 billion investments of 2016 by just 200 self-identified impact investors will explode by more than 20% to $25.9 billion in 2017 (read the report here).

How is IMPACT2030 an impact investment fund?

1.    It is impact investment. The goal of IMPACT2030 is to create an attractive return for investors while at the same time achieving meaningful social and environmental impact in the communities where those investments occur.

2.    It is a fund with investors. Unlike most other impact investment funds, IMPACT2030 represents corporate citizens. In fact, some of the largest corporate citizens on the planet are pooling their human resources in order to realize a greater investment than would be possible on their own.

3.    The fund invests human capital rather than financial capital. As has already been pointed out, the potential return on the investment in and through human capital is widely becoming understood as the only way to achieve the SDGs by 2030. The combined workforce of the IMPACT2030 investors is about 7 million people. The potential value of this impact investment fund easily dwarfs the value of any other impact investment fund today.

4.    The fund uses the SDGs as a ‘universal exchange rate’. Given the variety of industries, economies and nationalities represented in IMPACT2030, the SDGs not only provide a unified vision and shared objectives, they also represent the potential for meaningful conversion of value across those same variables. Similar to the ability to convert currencies into other currencies using foreign exchange rates, the SDGs may act as a globally accepted valuation mechanism for all types of human capital investments.

5.    The human capital investments are voluntary. The key to ensuring a high quality of human capital investments is by committing to invest only through the voluntary actions of employees. This means that the private sector cannot dictate employees contribute discretionary time to achieving the SDGs. All human capital contributions must be made by means of employee volunteering activities. 

What are the benefits to corporate citizens in joining the IMPACT2030 human capital impact investment fund?

1.    Access to human capital assets. One of the difficulties companies around the world have is access to the incredible value of human capital. Especially when it is on voluntary basis. While there are lots of reasons why ‘voluntary participation’ is far more valuable than required participation, it is exponentially harder to make happen. Realized Worth, as a Founding Partner of IMPACT2030 regularly offers insight, workshops and other forms of support to IMPACT2030 Partners and Stakeholders to ensure they are able to mobilize a greater number of employees on a voluntary basis throughout the year.

2.    Regional priorities.Although a company may have operations in thousands of locations around the world It remains incredibly difficult for managers responsible for employee volunteering to best understand how to invest in regionally relevant ways that still generate universal value to the brand. By working at a hyper-regional level across the globe through ‘Regional Voice Leads’, IMPACT2030 is able to offer unparalleled insight for optimal impact investment of human capital. For example, Angela Parker and I just returned from meetings in Dubai about how best to align employee volunteering efforts with regional priorities in order to offer sustainable solutions across the Arab world. With support from the RW Institute, an alliance of 48 companies across the UAE are looking to generate the a significant social and business return on their voluntary human capital investments. Watch for our upcoming blog for more details on this project.

3.    Measuring the return on the investment. Obviously, as with impact investment more broadly speaking (as reported by Calvert Impact Capital) better data on financial performance is the number one desire of impact investors. Simply put, measurement is hard. With the new frontier of the intangible asset of human capital, this kind of measurement becomes exponentially more difficult. IMPACT2030 is working on a multi-faceted approach with its partners to design a framework that will offer key insights as to the value of the human capital investment as well as a meaningful return for both the communities and the companies.

Join the IMPACT2030 Human Capital Investment Fund

Save People and Planet with Us

This unique and historic impact investment fund represents a tremendous opportunity to help achieve the UN’s Sustainable Development Goals through employee volunteering. Tim Mohin, the CEO of the Global Reporting Initiative states:

“At a time when the revenues of large companies exceed the GDP of many countries and supply chains stretch around the world, the private sector plays a vital role in achieving the Sustainable Development Goals (SDGs).”

Consider the following action steps:

1. Partner with IMPACT2030 and invest the human capital of your company together with us to achieve the Sustainable Development Goals. Here are some of the regions we are actively pursuing impact investments of voluntary human capital of the IMPACT2030 partners:

• Dubai, The United Arab Emirates (and broader Arab world)
• Colombia (read about the investment project here)
• India
• New Zealand
• Shanghai, China
• Atlantic Canada
• Orange County, California, USA
• Los Angeles, Califorina, USA
• San Francisco, California, USA
• San Jose, California, USA

2. Invite your local leaders of community investment or CSR to attend an IMPACT2030 Regional Voice Forum and invest with us for a better return. Email Sabrina Viva, [email protected], to find out where the upcoming Regional Leadership Forums will occur.

3. Find out more about IMPACT2030 on the website. Contact the interim CEO of IMPACT2030, Sue Stephenson, [email protected], for more details on how to participate in this historic moment.

4. Learn about the RW Institute and how we are shaping the future of corporate citizenship. Our Leadership Council represents the required diversity of people, expertise and professions to provide solutions to what many see as 'unsolvable problems'.

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Realized Worth specializes in employee volunteer training, volunteer program design, and employee engagement. Realized Worth is the first company in the CSR field to offer a customizable training technology solution focused on Transformative Volunteering. Call us to discuss opportunities for your company (855-926-4678), or shoot us an email. You can also reach out to us on Facebook and Twitter.

The RW Institute (RWI) is a think tank shaping the future of corporate community investment. The RWI vision is to create a powerful movement of volunteer leaders working in communities across the world to address our most intractable problems.

IMPACT2030 Is a private sector-led initiative, in collaboration with the United Nations, social and public sectors, and academia, with the unique mission to activate human capital investments through employee volunteer programs to advance the achievement of the UN Sustainable Development Goals (SDGs).