*{Creating a Global Exchange for Social Investment [http://www.weforum.org/site/knowledgenavigator.nsf/Content/Creating%20a%20Global%20Exchange%20for%20Social%20Investment?open&topic_id=300350000&theme_id=300]

            03.02.2002

            Annual Meeting 2002}

            *partie=titre Putting Order into the Market for Social Entrepreneurship *partie=nil

            Do social entrepreneurs need their own capital exchange? GEXSI, The Global Exchange for Social Investment, aims at providing a transparent exchange market to connect social investors to projects with the aid of "intermediaries" who can provide the necessary background knowledge and due diligence that is expected when private companies go public. GEXSI was initiated by the Schwab Foundation for Social Entrepreneurship, and grew out of an ad hoc consortium created in September 2001 that includes the Open Society Institute, PricewaterhouseCoopers, Foursome Investments, Deutsche Bank, Bain & Company and the Schwab Foundation. Ashoka and Endeavor joined shortly thereafter. In the last nine months, Bain & Company has certified eleven intermediaries, including the Open Society Institute.

            Mark H. Daniell, Managing Director, Bain & Company, Singapore, told a packed room that much of the preliminary work has been done. "We think we have something implementable," he said. "This is as close to a go-no go situation as you can get in a workshop." But he added, "it will only work if it is right, if it is efficient, transparent and adds value." 

            Stewart Paperin, Executive Vice-President, Open Society Institute, USA, a GEXSI intermediary, said that the idea had immediate appeal. "We saw this as a way to address a classically inefficient market," he explained. "There are a large number of people who need to invest, but can’t find the information they need to make a decision or to do the due diligence required. The role of the intermediary is to understand investor appetite and the project profile and to bring the two together." Paperin explained that frustrated investors used to rely on UNICEF to look for worthwhile projects in developing countries but that limited the field to one organization’s point of view. "You may want to have an array of choices," he noted, "and certifying 11 intermediaries is considerably easier than certifying 5,000 individual projects." Certification of the intermediaries involves 11 metrics and demands a score of at least 3 out of a possible 5 points. Issues that are examined include the intermediary’s understanding of the mission concept and the provisions for feedback in the organization. Because the intermediaries are not-for-profit, their transaction costs will be kept low. Paperin said that the Open Society Institute is aiming at around 1% of the total. 

            By extending the intermediary’s credibility to a social entrepreneurial project, GEXSI expects to dramatically bolster investor confidence and substantially increase the pool of capital accessible to social projects. At the same time, GEXSI demands a degree of transparency that most social entrepreneurs have not had to face until now. Paperin explained that it will demand the same sort of transparency that private companies face when they go public. "The certification hurdle," observed Clara Miller, President, Nonprofit Finance Fund, USA, "is: do you attempt to evaluate what you do? We hold our own feet to the fire." 

            A major risk is that if it does not succeed in adding value, GEXSI could end up merely adding another layer of bureaucracy that further distances entrepreneurs from funding. Critics also worried that the selection process might lead to a situation in which funding went to the best presenters rather than the best social innovators. That point is important because likely investors tend to be in the US and other northern industrial countries, while the most demanding social projects tend to be in the developing countries of the south. Paperin suggested that a board of governors could be relied on to review projects that had been systematically shut out by the intermediaries. The crucial question is whether GEXSI really does succeed in expanding the flow of capital available to social entrepreneurs. "If this doesn’t expand the supply," said a workshop participant, "it will increase the competition.                   

                  *{Contributors:       Berman Melissa
                  Canale Shaw
                  Daniell Mark H.
                  Emerson Jed
                  Engelhorn Kurt
                  Hassenfeld Alan G.
                  Hayday Malcolm
                  Johnston Alistair D.K.
                  Kurtzman Joel A.
                  Lindahl Göran
                  Meirelles Henrique
                  Miller Clara
                  Oboh Godwin A. T.
                  Odier Patrick
                  Otero Maria
                  Paperin Stewart
                  Rottenberg Linda
                  Sandor Richard
                  Smith Lisa
                  Stonesifer Patricia Q.
                  Witting William N.
                  Yunus Muhammad}