Shiller has a point when he states that “finance is a functional science in that it exists to support other goals – those of the society.” Finance is necessary to build real estate, airports, bridges or provide student loans.
Social Finance takes this idea to the next level. Social Finance asks how can we best finance the creation of social value. People have already developed a complete ecosystem around the provision of capital. The following illustrations shows the institutions in the traditional capital markets and the institutions which were formed in the social capital market.
At the core of the social capital market are social enterprises. In the definition used by the European Commission social enterprise means an undertaking which has as its primary objective the achievement of measurable, positive social impacts rather than generating profit for its owners, members and shareholders and uses its profits first and foremost to achieve its primary objective.
Social enterprises have access to a wide of financing instruments and there has been some increased activity by foundations as well as Venture Philanthropy or Social Venture Funds.