China Social Value Investment Report 2016

About ten years ago, I read a book called How to Change the World: The Power of Social Entrepreneurs and New Ideas, with excitement. In the book, the author David Bernstein wrote, “Social entrepreneurs are a group of ideal-driven and creative people, who question the status quo, exploit new opportunities and refuse to give up, in order to rebuild a better world.” At that time, I summarized social entrepreneurship as 3A: Attitude, Approach and Action. A year later, on May 12, 2007, China Social Entrepreneur Foundation (YouChange), initiated by me and entrepreneurs from Mainland China, Taiwan, Hong Kong and Macao, was formally founded. Inspired by social entrepreneurship, we gave it this English name, and it’s called YouChange for short. From then on, YouChange started a journey of finding and supporting China Social entrepreneurs, and over the past nine years, it has had a public welfare expenditure of RMB250 million, independently developed 16 innovative platforms, and funded more than 160 social organizations and social enterprises; it was one of first initiators and practitioners of social impact investment. I am pleased to see that more and more people are actively promoting social impact investment; thanks to their efforts, today we can finally start recording the history created by Chinese social impact investors, who aims to build a better society.

As the saying goes, “When the great way prevails, the world is equally shared by all”. This has been common impact pursuit of human beings since they entered civilized society.

The development of science and technology, and industry and commerce, once provided opportunities for achieving this goal, but we are not very optimistic that, with the surge in material wealth, a lot of social problems have appeared. These problems include not only poverty, disease, social exclusion and other problems related to the basic living security and dignity of vulnerable groups, but also a series of problems seriously threatening human’s subsistence and development, such as polarization between the rich and the poor, environmental pollution, climate change, which are closely related to almost all human beings. In the development of society, human beings have been alienated.

This is a century-old problem. When capital began to rage, many wise men looked for answers to this problem. The government, market and social organizations have also made efforts to solve it, but the effect is small, and the problem is getting worse.

Confined to the recognition of social problems, traditional public benefit activities cannot point to the core of the problems, and some of them have even become the game of the rich, causing new inequality. Corporate social responsibility cannot restrain the impulse of capital-follow-profitability; capital is still desperate to grab profits, from which a large number of social problems are derived. The government hasn’t come up with effective solutions to social problems, and the problems are piling up.

A grim reality lies ahead of us: what should we do?

We think that the only effective way to solve this century-old problem is the cross-border cooperation of the government, market and social organizations, in order to guide good capital to social impact investment and establish a bran-new social ecosystem. Its essence is people-oriented, and pursuing both benefit and righteousness. Only this way can promote social development, and it reflects the original intention of public benefit activities, which is doing things for public benefit.

Social impact is common interests brought by organizations and individuals for all members of society, through the creation of the material and spiritual achievements. Meanwhile, social impact is also an idea, which proposes that all members of society work for the goals of promoting social justice and effective use of resources, and achieving human’s physical and mental health and harmonious coexistence, and regards contribution to society as an ultimate indicator for measuring personal impacts. Social impact investment is to promote the development of social impact, and it’s international called “good capital” or “patient capital”.

The fundamental goal of social impact investment is to promote social change and create social impact, so not all the enterprises claiming to solve social problems are targets of social impact investment.

The targets of social impact investment are enterprises good at finding the roots of social problems and providing some sustainable solutions. YouChange calls them “social innovation-oriented enterprises”.

Compared with “social enterprises”, social innovation-oriented enterprises are not only concerned about the welfare of vulnerable groups, but more concerned about major social issues with publicity (such as food safety, environmental pollution, educational equity and social aging). It also emphasizes building effective innovative mechanisms to systematically solve social problems and enhance human well-being.

It needs to be emphasized that in the past, the social enterprises that investors were concerned about were cross-border combination of social organizations and the market, but because they mainly originated in the social organizations, their scale was not large and their large-scale reproducible ability was weak; in addition, their focuses were limited to traditional charities, so they didn’t get the favor of capital. Social innovation-oriented enterprises are very different from them; because the social issues they are concerned about are significant, with strong publicity, and their commercial impact is also very impressive, it’s entirely possible to break the intuitive cognition on the binary opposition of being “social” and “commercial”.

Nevertheless, in our country, social impact investment has not yet entered the vision of mainstream investment organizations, and the reason is that social impact investment are not targeted at social innovation-oriented enterprises. Meanwhile, due to the lack of quantitative criteria for assessing social goals, social innovation capabilities and executive capabilities of the enterprises to be invested, a large number of investors shrink back. Without clear standards for social impact investment, a joint force to create social impact is hard to be formed.

The maximum incentive for good capital is to help it find social innovation entrepreneurs with the most social impact and commercial return. So when YouChange put forward solutions to this century-old problem, it also developed a set of quantitative criteria for social impact investment, the 3A-Synergy Standards for Social Impact Investment. This set of standards is also a strategic management tool and an evaluation system.

This set of standards emphasizes Aim, Approach and Action, and their coherence, and enables overall investigation on investees, in order to identify social innovation-oriented organizations that can actually solve social problems with innovative solutions and sustainable business models, and provide a quantitative basis for the decision-making of the government, enterprises and investors.

Since YouChange initiated the establishment of Social Value Investment Alliance in 2014, many council members have invested in social innovation-oriented enterprises and projects based on this set of standards. The first spring thunder in the social impact investment market has sounded, and the government, market and social organizations have reached a certain degree of consensus in jointly solving social problems and creating social wealth.

To this end, YouChange, along with the China Development Research Foundation and other organizations, have reviewed the status quo of Chinese social impact investment, looked into the future of Chinese social impact investment, and completed The Report on Chinese Social Impact Investment. Based on human nature and awareness of unexpected development for human’s future, we believe that social impact investment will surely become the mainstream investment orientation of capital.

Wang Ping

Founder of China Social Entrepreneur Foundation (YouChange)

Founding President of Social Value Investment Alliance