Panel, Conference Presentation
The Rise of Social Capital Markets: How Will They Change the World?
Milken InstituteAlex Friedman, Ron Cordes, Rush Ramsey, Bobby Turner, Gene Case, Mark Rowan, Shari Berenbach, Eva
- Impact investing is projected to evolve from its current small growth rate into a trillion-dollar asset class, potentially drawing from the existing $600 billion to $700 billion foundation corpus, with a goal of mobilizing $1 trillion to significantly alter global dynamics.
- The market is expected to reach a tipping point within 20 years as the "old guard" retires and is replaced by Millennials and Gen Z, where 64% prioritize making the world better, 84% trust corporations over politicians, and 56% of Gen Y/Z would accept a pay cut for positive social impact.
- Infrastructure gaps currently inhibit growth despite supply and demand, specifically lacking traditional connectors like banks and brokerages, with microfinanced debt identified as the first asset class likely to become available to the public via ETFs with $500 to $1,000 minimums.
- Key plans include developing specific products for individual investment, such as social impact bonds, exchange-traded funds, and educational initiatives like the Canyon Agassi funds, which successfully raised $600 million in four years and $1 billion for a third fund after initial profitability proved the model.
- Risks involve a significant gap between the perceived high risk of unfamiliar investments like inner-city charter schools and their actual lower risk, alongside the critical threat that failure to meet specific targets, such as generating 25,000 school seats in five years, could prevent future capital raising.
- Consumer behavior is shifting, with 27% starting to support brands and 30% stopping support due to ethical practices in the past year, while institutional capital may enter if the perceived risk of the status quo, such as non-education reform, is priced as too painful.
- Future market growth depends on demonstrating that wealth creation and social change are not mutually exclusive, with potential acceleration if the SEC requires social responsibility disclosures or if traditional fee structures incorporate social metrics.