no financial return

1. Social Capital for Sanitation “It is time for Change”Arthur Wood – VP, Social Financial Services, Ashokaawood@ashoka.org

2. “The coming Social Finance Crunch – “Population aging is a worldwide phenomenon that will affect all G-7 countries”

3. There is simply not enough money in the current paradigm– “Population aging will be a key challenge facing the G7 economies over the coming decades”

4. There is a double whammy coming “The projected decline in the employment-to-population ratio will gradually become a hindrance to growth in living standards beyond 2010”

5. The Spectrum of Social Capital Investment - created in 1888 / 1944 – “essentially pre modern capitalism” – the Gap no financial return below market return market return Low risk Programme-related investments Mainstream “For Profit” Investments Investment plus Social Responsible Investment circa $4trn Corporate Engagement incl CSR NO INDIVIDUAL OR SYSTEM MECHANISMS – THE GAP Grants $400bn 50% Venture philanthropy High risk ”

6. Value Chain Financing – Sanitation no financial return below market return market return Legal Process – ie L3C / CIC Scale (GAVI) & Synthetic Profit (Corporate incentive) Investment Plus Programme Related Investment Mainstream Investments Grants Recoverable Grants Increase the credit quality of social capital markets ie. Leveraging - Microfinance / DB Eye fund model Incentivising Innovation / Collaboration at the bottom of the pyramid – Social Entrepreneurship Financing Mechanisms incentivising Community and Corporates Carbon / Vouchers / Fertiliser / Power Enables a Range of Financing options; incentivising corporates, banks, civil society;integrating “ for profit” and “not for profit” players Based on “Foundations and Social Investment” Margaret Bolton 2005 and Bates Wells & Braithwaite

7. Why is Sanitation such an opportunity ? Political Will – The IYS 2008 - Call by Brown / Moon to end of Silo’s A moral imperative “Adequate Sanitation is the most effective public health intervention the international community has at its disposal.” Lancet – 11 / 07 Metrics, Single Data Set and Audit Mechanism in place - Clear Cost Benefit Analysis – WHO,UNICEF, DFID,WSP You can Identify the Community / Distribution chain – WSSCC, SuSanna Not enough Money - $500m vs. $8bn per year for ten years It is however a business opportunity – a size to attract Structurally the status quo is not going to be bailed out – GAVI ? Banks looking for markets in real scale Path-finding for other MDG Financing Structures

8. Participation WSSCC, UNICEF, WHO, WSP, OPIC, SuSanna, IFAD, Deutsche Bank x2, UBS, Legal Group –(Caplin Drysdale, Gibson Dumm, Latham’s, Linklaters, Bates, Morrison), Acumen, L3C Advisors, Environtrade, Ashoka 10/40 Fellows incl WTO, Keystone, SROI – we welcome partners Open Supply Side Model – www.changemakers.net - 250 ideas UN Foundation (GWC) Funding Competitive / Collaborative – Sanitation supported by CNN, Coke, Hilton Foundation and Morgan Stanley Facility Not Fund Different banks / Organisations – with different proposals on the Value chain Inclusive, Leverages Different Financial Players / Concepts Via Banks - Links into other core funders – ADB, IADB Wider range of Investment opportunities – ultimately integrated To many different constituencies including the corporate sector Identifying a Single Language and Single platform - Integrating Social and Financial Profiling World Sanitation Financing Facility

9. QUALATITIVE PLATFORM >> A MECHANISM DEFINING WHAT IS EFFECTIVE TO THE CORPORATE / BANKING WORLD PHASE 1 – Completed in March - http://www.changemakers.net/en-us/competition/waterandsanitation PHASE 2 – Open Model Update with involvement of key Players QUANTATIVE PLATFORM >> A MECHANISM DEFINING WHAT THE SOCIAL SECTOR HAS TO DO TO GAIN ACCESS TO CAPITAL MARKETS Commenced this week with OPIC, UBS, Deutsche Bank, WSP, Keystone, SROI, Ashoka, Acumen, U of Geneva – combining the best of Top Down and Bottom up models – with Feedback Mechanisms and Audit Mechanism NEXT STEPS – SINGLE PLATFORM / SINGLE LANGUAGE

10. SIX GLOBAL BUSINESS LINES TO SOLVE THE SANITATION ISSUE (may be others) 1 - Municipal Financing ;2 - Public Toilets; 3 - Mortgage / Housing 4 - Small Entrepreneurs; 5 - Methane / Carbon / Energy; 6 – Fertilizer >> SCALING - Three Tier Corporate Engagement – Primary (i.e. Toilet Manufactures, Secondary (Soap), Tertiary (Companies with an Opportunity Cost – Capture the Value of the Social Externalities) >> COLLABORATION Social Entrepreneurs, Corporate , Social Sector The New Legal Paradigms >> L3C and CIC and New Intermediaries >> ENGAGEMENT of the Banks – The need for Banking Skills!! >> Are we part of a broader solution >> Water, Climate and Sanitation MECHANISM TO ENGAGE ALL PLAYERS IN SCALE Looked at as a Business Problem

11. PHASE 1 WORK ON PLATFORM – QUALATIVE & QUANTATIVE PLATFORM – UNIVERSITY OF GENEVA CREATION OF A GOOGLE WORKING GROUP – SHARE MODELS DESIGN BOTTOM UP FEEDBACK SYSTEM WITH KEYSTONE AND SROI – YOUR ENGAGEMENT NEEDED INDEED CRUCIAL >> CONSUMERS ARE SEPARATE FROM FINANCIERS WORK WITH WSP TO VERIFY FINANCIAL MODELS AND PROCESS AND MARRY TO TOP DOWN IF I AM A SOCIAL SECTOR ORGANISATION / CORPORATE - WHAT ARE THE NEXT PRACTICAL STEPS NOW

12. PHASE TWO APPLY TO BUSINESS LINES ACROSS ALL POTENTIAL RETURNS > CAPACITY @ -100% to FOR PROFIT MODELS – DESIGN TEMPLATE >> WHERE DOES YOUR EXPERTISE FIT? >> NOT JUST SILVER BULLETS BUT THE MAGAZINE OF SOLUTIONS – NOV 2007 PM –GORDON BROWN AND UN SEC GEN - BAN KI MOON –“AN END TO SILOS” PHASE THREE >> INTEGRATED REINFORCING ASKS CREATING A COLLABORATIVE MARKET CAPABLE OF SCALING >> NOT JUST AT “FOR PROFIT” (+5%) AND “NOT FOR PROFIT” (-100%) BUT ALL INVESTORS AND INVESTMENT POSITIONS TO ADDRESS SANITATION HOW DOES FINANCE CHANGE THE INCENTIVES FOR ALL THE PLAYERS >> A SYSTEM THAT REINFORCES COLLABORATION BETWEEN ALL THE PLAYERS IN MOVING A MARKET TO SCALE NOT FRAGMENTATION THE SYSTEM CAN BE CHANGED IN SANITATION A NEW PARADIGM - “IT IS TIME FOR CHANGE”

13. “If we are prepared to use these kinds of (tax / legislative) incentives to enable business entrepreneurs to tap capital markets for the betterment of the economy, why would we not provide similar incentives to social entrepreneurs as they seek to tap capital markets for the betterment of society. Financial experts ought to be developing new cutting edge instruments to make funding available to social entrepreneurs Tax experts ought to be thinking about mechanisms that can support social enterprise in a meaningful way. Legislators should encourage an environment that allows foundations to become more imaginative in support of social enterprise”. WHAT DO I DO IF I AM A BANK OR GOVERNMENT ?Paul Martin - Former PM of Canada “The question I would put to you is quite simple” – Nov 2007

14. SUMMARY THE IMPORTANCE OF COLLABORATION AND SCALE • To solve the problems of Sanitation on a systemic basis requires: • Governments to change legislation – Tax treatment and Legal structures >> CIC, L3C • Empower the bottom of the Pyramid • Collaboration from the Social sector / NGO’s • Foundations / Donors – Leverage - HOW to draw in more Private capital - LEVERAGE THE 100% NOT ALLOCATE 5% • Corporates to engage in “for profit” for social impact • Banks bringing their skills to bear along the whole Value Chain • Creation / Evolving of Intermediaries to create Collaborative behaviour and Safeguard the Sector