Sunday, October 19, 2008

Can social capital markets move from niche to core?

The 700+ participants in this week’s first of its kind Social Capital Markets conference think so. Session summaries are available here. Social Capital Markets tend to denote markets and economic transactions where not only financial but also social and environmental aspects are of concern.

Right now there are three significant factors impacting the development of social capital markets:

First, the current failure of traditional capital markets models. We are in a moment of refashioning the global economy and the values and principles of social capital markets are being demanded: accountability, transparency, sustainability and governance. Social capital markets companies have a great opportunity to step in and help build the new world economic order.

Second, a broad social consciousness has developed. It started with Al Gore, Paul Hawken and others. Like all human behavior, economics is another area where deep awareness about the social and environmental impact of actions is necessary and increasingly available. Further, there is the idea of using the principles of business and economics as a tool for change; getting developing world populations actively involved as entrepreneurs receiving microloans has been vastly more successful in alleviating poverty than 30 years of foreign aid programs.

Third, the tools are now in place for realizing social capital markets. Web-based marketplace platforms and offerings are available for all manner of social economic transactions including investing (SRI public equity, social venture capital, debt, loans, microfinance, real estate and prediction markets), philanthropy (from donations to mission-related investments), purchasing (goods and services marketplaces) and income generating (jobs, projects and ideas marketplaces). Granular attribute selection can be used to allocate capital which makes transactions more empowering for all participating parties.

In summary, the three factors driving the next stage of Social Capital Markets, new models for rebuilding traditional capital markets, the development of a broad social consciousness in support of green markets and the tools to execute and monitor these transactions, could help the area evolve from niche to core.

The true moment of progress could come when Social Capital Markets are no longer distinct from traditional capital markets but are rather merely a feature or attribute of all capital markets.

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