OECD DAC Roundtable: Accelerating Entrepreneurship and the Development of an Innovation Ecosystem Through Impact Investment and Exploring the Fourth Sector
June 19, 2018
OECD Headquarters | Paris
19 June 2018
Objective: The purpose of this roundtable is to enhance the shared understanding and knowledge on how DAC Members can support the deliverance of systemic change and accelerate entrepreneurship and innovation ecosystem development, exploring fourth sector development and impact investing.
Many of the social, environmental, and economic challenges we face are downstream consequences of outmoded economic systems and organisational models whose roots date back to the industrial age. The scale, urgency and complexity of these challenges demand a fundamental upgrade to our way of working.
Over the past few decades, we have seen many for-profit companies broadening their purpose to pursue social and environmental aims, while many nonprofits and governmental organizations have adopted market-based approaches to advance their goals.
Fourth Sector Development
A rapidly growing movement of “for-benefit” enterprises around the world have been leveraging the power of business to solve social and environmental problems. These pioneering for-benefits are challenging the traditional boundaries that separate the public, private, and non-profit sectors, giving rise to a new, fourth sector of the economy. Though still quite nascent, a supportive ecosystem around this fourth sector has also been emerging in recent decades, with innovations in finance, metrics, policy, education, and more.
With more than ten million startup for-benefit enterprises launched globally each year and countless traditional businesses adopting for-benefit principles, a wave of innovation and entrepreneurship is being unleashed that can deliver scalable solutions to pressing global challenges. Its growth accelerates a transition toward more inclusive, sustainable, and resilient economies. However, to realize the potential of this movement, further work needs to be done to strengthen the fourth sector’s supportive ecosystem. To succeed at delivering on both their commercial and impact objectives, for-benefit enterprises need access to financial markets that seek positive social and environmental impacts, enabling policy and regulatory environments, integrated assessment and reporting standards and tools, specialized technical and legal assistance and training offerings, and more. In short, the mechanisms that make a market function.
The rise of Impact Investing, Sustainable Business, Corporate Social Responsibility, Public Benefit Corporations, Social Enterprise, Venture Philanthropy, Conscious Capitalism, and Integrated Reporting are but a few examples of these trends.
Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Development finance institutions, pension funds and foundations are playing leading roles in the development of impact investing, and donor country governments are increasingly interested to stimulate this with focus on developing countries.
To advance inclusive, sustainable growth and achieve the SDGs by 2030, trillions of dollars of investments will need to be made into enterprises across the world that can deliver market-based solutions across a wide range of social, environmental, and economic problems. This requires going beyond financing to bring about new innovative solutions to achieve intended development outcomes—and not generate counterproductive harmful externalities in the process.
Under the theme of “Increasing development finance and working with the private sector”, this roundtable is part of a series of seminars hosted and co-hosted by the DAC Chair to stimulate discussion and action around the reform of the DAC, seeking to gather leading development actors to share experiences and explore new approaches in development co-operation. Achieving the SDGs will require increased access to finance for development purposes in most countries as well as innovative new approaches to addressing social, environmental and economic challenges in developing countries. Official Development Assistance (ODA) is increasing but will never be sufficient to cover the SDG funding gap. While increasing domestic resource mobilisation is a key component, donor countries must also stimulate private and other resources to support the development of less developed countries.
How can donors support and accelerate entrepreneurship and innovation ecosystem development in partner countries? How can donors ensure investment has development impact? What are the successful practices that currently exist in member countries and how can they be scaled up? Where are the restraints and what needs to change to realize the potential of these new trends?