Sustainable Finance Geneva Bertrand Gacon President Sustainable Finance Geneva

April 2012

The role of capital: thinking beyond INVESTMENTS DONATIONS Financial returns only Commercial activity Traditional business ? Social impact only Grant-making activity NGOs / Charities Financial first Impact first BLENDED RETURNS ! What is capital? First and foremost, capital is a ressource. And in my view, it is one of the most wasted ressource of our time. This is not just because we are using capital to finance projects or goods whose usefulness is doubtful. In fact, we waste capital because we have a very bifurcated and mono-dimensional view on how to use it. Either we use capital as an investment, and it usually goes - under the form of debt or equity - to businesses having a commercial activity. When we do that, we tend to seek only one result out of our capital: financial returns. Our at least, this is what do the greedy and immoral investors. Or we use capital as a donation to support the work of NGOs and charities that are running social or environmental projects. When we do that, we have one single objective: maximising social impact. Obviously, using capital for such a good reason is the very noble thing to do. Well in my view both ways of using capital are wasteful. Because both ways are reducing capital to one single dimension: profit only for investors, impact only for donors. Very often you hear people saying: the business of business is business. Philanthropy is on one side. Profits on the other side. Don’t mix everything up. Why not? Why not trying to mix things up and achieve blended retrurns from the powerful ressource that is capital? Capital is by nature a multi-dimensional resource and every time you use it for only one reason, you are wasting that ressource. You are missing opportunities. And this not only true for the bad investors. It is also true for the good donors, too. Let me take an analogy that I am sure will make sense to this audience: forest. You all know much better than me that forest – just like capital - is also a milti-dimensional ressource. It can be used for water filtration, carbon sequestration, biodiversity habitat, fruit and wood production, medicinal research, etc. Every time we try to reduce forest to only one dimension, we are missing opportunities to make the most out of that resource : protecting nature, preserving health and creating jobs, for instance. Well, for capital it is just the same thing: we must end that bifurcated approach. After all, very often the evil investor and the angel donor happen to be the very same person using the same ressource. Instead of viewing companies and NGOs as two separate boxes, we should consider the capital space as a continuum between financial first organisations on one end, and impact first organisations on the other end of that spectrum. With that continuum, the difference between two types of organisation is a question of degrees rather than a question of nature. And what is really interesting with that continnum is the space between those two ends that an increasing number of capital owners are now exploring and using.

CSR-conscious business Mainstream investments The space in between CSR-conscious business Commercial activity with social benefits Social business Social benefits with commercial activity Impact first Financial returns only Social impact only Grant-making activity Commercial activity Financial first Traditional business NGOs / Charities BLENDED RETURNS ! ? Don’t do any harm ! Large corporations Publicly listed High volume, small impact Do some good ! SMEs Privately owned High impact, small volume Mainstream investments SRI investments Impact Investing Philanthropy Let’s now zoom into that “space in between” to see what exactly are those blended-value organisations and how capital owners are now moving to multi-dimensional capital. 2 different movement have happened almost simultaneously : 1. The first one came from traditional investors that now want their investments to integrate that extra-dimension. They are targetting CSR-conscious companies that make genuine efforts to change the way they run their business and interact with society and nature. They are not changing their core traditional business, but are making sure it is done in a sustainable way. This is what I would call a “commercial activity with social benefits”. 2. The second movement came from traditional donors that wanted to use the power of markets to scale-up their programs and create a financially self-sustainable model. They have created social businesses woth primary mission is to solve a social or environmental issue, but do so through a market-based approach. They create jobs, pay taxes, have competitors, an so on. This model is based on what I would call “social benefits with commercial activity”. The different origin of those two movements explain that they rely on fairly different types of organisations: Large corportations vs SMEs Publically listed companies vs privately owned International vs local Volume vs Impact Danone and Chenelet are two examples

Why Sustainable Finance? Use capital at its full potential Enter the third dimension of investing Use the power of markets to solve the world’s most pressing challenges Make the economy part of the solution, not part of the problem Seize new investment opportunities Solving the world’s many problems is the biggest market ! The most responsible companies are outperforming their peers over the long term Protect against risks Understand what you are investing in Anticipate the changes that will make tomorrows leaders/losers Decorelate from traditional markets Align you investments with your values

Why Switzerland? A unique blend of financial and social expertise A world leading center in wealth management A hub for NGOs and International Organisations A long humanitarian tradition and financial history Decades of innovation in Sustainable Finance Microfinance investment market was born here First Sustainable Asset Manager was created in Switzerland First Sustainability Index was designed and launched here First Foundation for Responsible Investment was born in Geneva A world leader in Sustainable Finance The home of many international leaders in Sustainable Finance, including UNPRI World’s n°1 for microfinance, with almost 30% market share Highest number of foundations per capita in the world Highest subscription rate for SRI products from individual investors