Moving Ahead Together:Implications of Blended Value

For the Future of Our Work

Jed Emerson, Copyright 2004

Parts of a Common Journey…

Social Enterprise

SustainableDevelopment

Philanthropy(Venture Philanthropy,

Strategic Philanthropy, etc.)Social Investing

CorporateSocial ResponsibilityValue Maximization

TraditionalFor-ProfitCompanies

+1

-1

+1-1

FinancialInvestments &

Numeric Returns

Social CapitalInvestments

& Social Returns

A Zero-Sum Dissonance:The Traditional Value Proposition

Quad A Quad B

Quad DQuad C

Economic Value

Social Value

Michael Porter:

In this corporate competitive context, thecompany s social initiatives or its

philanthropy can have great impact. Not onlyfor the company, but also for the local society

I used to see this area of corporate socialperformance as the last thing on my agenda ten

years ago, but now I agree that social andeconomic issues are intertwined

--European Business Forum, Issue 15, Autumn, 2003

Social

Environmental

Values &Systems

Economic

Externaldrivingforces

Internaldrivingforces

A strong commitment to Business Principles andSD

RenewableBusiness$0.5b

Carboncosting

H2Business

Texaco

Wind

Malampaya

DJSI

Financialroadmap

Solargrowth

ShellReport

GHGtargets

BrentSparRe-used

ChildLabourAward

Shell Foundation$250m

ISOCert.

K11

Communitydevelopment in Nigeria

C.ChairDiversity Target

VentingTarget

Diversitytarget

FlaringTarget

1995 2010 +2000 2005

Implications For How We Think About:

n The Nature of The Firmn Capital Investment

(Market-rate, Concessionary, Philanthropic)n Tracking Performancen Development and Dissemination of ICn How We Organize Our Work and “Field(s)”

The Nature of The Firm

n From Value Creation perspective, there is nodifference between FP + NP.

n Currently, NPs under-perform economically;FPs under-perform socially/environmentally.

n Focus must be upon form, function andleveraged relationships that maximize totalvalue—not issues of corporate structure.

Capital Investment(Market-rate, Concessionary, Philanthropic)

n “Objective” economic capital marketprocess viewed as lodged within socialand environmental context.

n Capital Markets will seek “highest andbest use” of capital…

n But in pursuit of full, blended value.n Diverse Investors take complimentary

positions in pursuit of multiple returns andgeneration of full, blended value.

Core Elements of Foundation Asset Management

1. Asset Alignment2. Strategic Grantmaking Practice3. Engagement, Transparency, Accountability

to Relevant Stakeholders4. Development/Dissemination of IC5. Active Education, Policy Development and

Advocacy6. Leverage of Environmental Value

Unified Investment Strategy Capital Allocation

Grant(Program)

AvailableCapital

Grant(Infrastructure) Grant

(Research andDevelopment,Seed Funding)

RecoverableGrants +

PRIs

FROI Risk Boundary

RiskFree Rate

TreasuryNote

6% FROI

TraditionalDiversifiedInvestmentportfolio

EquityLinked

ZeroCouponBond

With SRIIndex

Options

VC FundOr AngelInvesting

PrivateEquityInvesting

SociallyResponsibleAngel andSocialVentureCapitalFundInvesting

SROI Risk Boundary

A Unified Investment Portfolio

Tracking Performance

n Financial return analysis, “evaluation” ofnonprofit social impacts, and double/triplebottom-line frameworks are all needed toexplore various components of capitalperformance and value creation—but there is one bottom-line, a bottom-linereflecting a single, non-divisible blendedvalue proposition.

Tracking Performance

n Documentation of non-financialperformance will migrate from “externalreporting” to internal, integrated MIS.

n Organizations (whether firms or investorgroups) that are “built to last” view NewMetrics as critical to firm management andmaximizing value of both the venture itselfand strategic partnerships.

Development and Dissemination of IC

n Future Knowledge will emerge from between thesilos and not within.

n Knowledge will develop based out of practiceinformed by reflection and history.

n Academic institutions will increasingly cultivateIntellectual Capital driven by a commitment tointellectual curiosity and academic inquiry—

not donor development.

How We Organize Our Work and “Field(s)”

n The emergence of Value Networks will drive theorganization of our work and structure our fieldsof practice.

n These Networks will be both spontaneous andfacilitated—but they will be driven by mutualpursuit of common challenges in structuringcapital, advancing New Metrics and leveragingdiverse resources to assure maximum impact.

Blended Value ProcessOverview of Blended Value Map

Practitioners(CEO s, Managers,

Social Entrepreneurs,)

Corporate SocialResponsibility (CSR)

Social Enterprise

Investors

Strategic/EffectivePhilanthropy

Social Investing Socially Responsible

Investing (SRI)

Social Investing Community & DoubleBottom Line Investing

Topics

ResourceOrganizations

Initiatives

LeadershipExamples

Areas to Explore

OrganizationalCapacity

CapitalQuestions

SustainableDevelopment

Regulatory,Policy and Tax

Code

Resources (Books,Articles, Websites)

Issues UnderDiscussion

Cross-CuttingIssues

Measurementand Metrics(Non-profits

& CSR)

Implications

Infrastructure

Creation of ValueNetworks to Leverage

Cross-SiloCollaboration

Blended Value ProcessTheory of Change Overview

Value networkingacross the silos of:Corporate Social

ResponsibilitySocial EnterpriseSocial InvestingStrategic/Effective

PhilanthropySustainable

Development

Around the cross-cutting issues of:

CapitalMetricsLeadership &

OrganizationalCapacity

GovernmentPolicy/Regulation/Tax Code

Increasedeconomicreturn andsocial/environmentalimpacts farbeyond thepotential ofincrementalefforts ofexistingorganizations.

Emerging BlendedValue PracticesLead to:

Supporting GovernmentPolicy/Regulation/Tax

Code

Improved Leadershipand Organization al

Development

Increased Capital intoBlended ValueOrganizations

and

Increased Effectivenessof that Capital

Evolution andApplication of More

Effective New Metrics

More Efficient SocialCapital Markets

Interim Points Toward the Future…

n An Expanded Vision Grounded in Pursuitof Total, Blended Value for Both IndividualInvestor and Shared Community Benefit

n A Commitment to Working TogetherThrough Value Networks That BuildConnections and Leverage Total Assets

n A Dynamic Platform of Support for theDevelopment of “The Field” as a Whole

A Final Thought…

"Every company has a diagram of theuniverse in which they're the center. That'snever true. We're all a node in a mesh."

Douglas Busch, CIO of Intel Corp

And Two Final Perspectives onThe Way Ahead…

For more information…

n Please see The Blended Value Map:Tracking the Intersects and Opportunitiesof Economic, Social and Environmental

Value Creation as well as the supportingannotated bibliography and other

documents available atwww.blendedvalue.org

Graphic creditsn The graphic of a fractal is taken from a web site maintained by Uwe

Krueger: http://i30www.ira.uka.de/~ukrueger/fractals/html/b5a.htmland I would like to thank him for posting it for public use.

n Fractals may be thought of as graphic representations ofmathematical formulas which have “high degrees of self-similarity.”They are “finite areas bounded by infinite lines”…For more on this,please see: http://www.jracademy.com/~jtucek/math/fractals.html

n The graphic of a photo taken from the Hubble Space Telescope isfrom the NASA web site.

n Other graphics in this presentation are from reports, articles andpresentations made by Jed Emerson and the staff of the BlendedValue Map Process.