Social Investing Is Still Tough, Says Gates Foundation Official

San Francisco

American society has a capital-allocation problem, Julie Sunderland, senior program investment officer at the Bill & Melinda Gates Foundation, told participants here at the Social Capital Markets conference.

On the one hand, huge pools of money in the private capital markets are ruthlessly invested to maximize profit, she said. At the same time, public resources are dwindling.

“In this room, we find ourselves between those two spheres, which is both an exciting and a daunting place to be,” said Ms. Sunderland.

Even though the Gates Foundation is still at the beginning of its effort to put $400-million in investments that help advance the same goals as its grant making, the foundation is excited by the possibilities social investing offers, she said.

“If we can leverage our philanthropic capital to attract socially conscious investors and build a cadre of really compelling bottom-of-the-pyramid businesses and investment products, maybe we can address the problem of capital allocation and build a market for socially oriented businesses,” Ms. Sunderland told the audience.

But the foundation is also realistic about just how difficult social investing continues to be, she said.

The Gates foundation has thought about investing alongside venture capitalists in companies that develop health technologies that have applications in both the developed and the developing world.

That prospect gets the venture capitalists excited, as well as officials at the foundation, but the reality is those deals are extremely hard to put together, said Ms. Sunderland. She pointed out that this is despite the fact that foundations are designed to forgo financial return in exchange for social benefit.

“If we are confused, imagine our colleagues over at JPMorgan Chase, who are trying to convince their private clients to invest in social-impact investing,” she said. “Imagine how difficult that must be.”

What’s more, it’s been difficult to find investments the foundation has confidence can deliver the financial and social returns fund managers are promising.

Ms. Sunderland told conference participants that her team had received at least 10 proposals over the past year for investment funds focusing on agriculture in Africa. She said she was sure the funds were designed by smart, well-intentioned people with great ideas.

But, said Ms. Sunderland, “the problem is good intentions and ideas are not enough if I have to stand up in front of Bill Gates and answer the questions that you would expect from one of the toughest business minds of our generation.”