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08/16/2016 | Why financial and societal return do not need to be mutually exclusive - Interview with the CEO of Deutsche Börse, Carsten Kengeter

The non-profit sector has an estimated volume of €90 billion. The consulting firm Phineo aims to create transparency in this area and Deutsche Börse is lending the firm its support. FOCUS Online asked Deutsche Börse CEO Carsten Kengeter and Phineo CEO Andreas Rickert how that could work.

 

FOCUS Online: One doesn’t associate Deutsche Börse with common welfare right off the bat. Why are you involved with Phineo, an analysis and consulting firm that is aiming to bring more transparency to what is referred to as the voluntary or community sector?

Carsten Kengeter: Corporate responsibility as we understand it includes sharing how our core business functions – in other words, the organisation of stable and secure markets – with the public. A stock exchange’s social function is to match supply and demand, aligning different interests, something that is also manifest in Phineo’s idea. Transparency plays a key role in a functioning capital market, too. Transferring the benefits of the symbiotic relationship between these two core activities to other areas will hopefully ensure social progress, because modern societies are only successful if they are diverse. This includes, first and foremost, dialogue between a wide variety of stakeholders. Transparency, organisation and efficiency are key to this process.

FOCUS Online: As a service provider, you operate in an entirely different area than non-profit...

Kengeter: In the financial sector, we also have to create a level and transparent playing field and build bridges. The infrastructure we offer markets can be easily transferred to civil society. We create efficient offers so that investors can make sound investment decisions. Before Phineo was started, we were virtually dealing with systemic intransparency in the social investment area. There was a major lack of guidance for all those who wanted to donate funds – in what is a large social sector, comprising more than 600,000 non-profit organisations with different objectives and approaches. We are talking about a volume of around €90 billion. It’s great that there is such broad diversity, but the sector’s high degree of fragmentation and very limited level of exchange between players didn’t help at all.

FOCUS Online: So financial sector instruments are applied to civil society?

Andreas Rickert: In principle yes, but they are tweaked to serve their specific purpose. The aim is to help increase the sector’s impact. It is clearly possible to shape and further strengthen this very multi-faceted market. Phineo has played a pioneering role in this endeavour, creating transparency and bringing more market intelligence to the community sector and also serving as a platform for dialogue to link players from a broad variety of areas. These three elements work for the financial sector and, as we have seen, for the non-profit sector as well. Major social challenges are best mastered when government, civil society and business work together.

FOCUS Online: Please explain that in more detail.

Rickert: Issues lacking transparency are not addressed. For engagement, there needs to be information as well as motivation – at different levels. Firstly, from a helicopter view: where are social challenges and what needs and also deficient areas do they encompass? For example, one such challenge might be extensive support to children and young people in difficult circumstances. And then with the wide array of non-profit organisations it is very difficult for a donor to even find out what effective approaches there are and what specific project is the most suitable for him. Phineo has taken a close look at a variety of topical issues in civil society, ranging from child poverty to climate change. It has analysed around 800 organisations thus far to show how well they work and also to recommend which ones donors can confidently support with funding. This has a public impact.

Kengeter: Phineo has showcased a large number of successful projects, enabling them to make a greater contribution to society. For instance, I am pretty impressed by “Die Arche”, a children’s aid project in large cities. Thanks to Phineo, Die Arche’s Frankfurt-Griesheim location, which also receives support from Deutsche Börse, was presented to a broader public and thus potential investors.

FOCUS Online: What importance do you attach to such social projects and to civil society overall?

Kengeter: The social polarisation which we are currently experiencing leads to disintegration. That can only be harmful. The non-profit sector is an important tool in preventing such disintegration and also in combating social injustices.

FOCUS Online: You can hopefully understand that people do not necessarily associate such a philanthropic mindset with Deutsche Börse.

Kengeter: I can but I think it is wrong. The financial sector was and is very important to society and has always contributed to economic growth and efficiency. I can understand that it is not automatically so perceived. It is important for us to make responsible use of the resources we have. We attempt to do so in our business organisation. Phineo was created with our support back in 2009. Al Gore and David Blood also launched their sustainability fund only a good ten years ago. General awareness of social engagement has fortunately been increasing for some time now. If Phineo helps this area to draw even more attention, that’s a very good thing. This is how I envision social progress.

Rickert: You can also see here, by the way, that it is not only the non-profit sector using approaches taken from business to achieve even greater impact. Civil society’s ethical principles and its innovative strength also impact other sectors.

FOCUS Online: There is a lot of talk about impact investing in this regard. Is there a shift in consciousness based on the idea that investments increasingly ought to be “good”?

Kengeter: There are more and more investors who do not want to limit themselves to only making a profit and then reinvesting it but who want to achieve social impact by making long-term investments. Germany’s impact investment volume to date has been €70 million – the market is in an experimental phase. There is a substantial demand in this area but, for instance, not yet enough investment products and organisations in which to invest. The community dimension of investment and capital in society is not well-known enough.

FOCUS Online: Could you give some examples?

Rickert: There are social companies which employ blind people for breast cancer diagnosis because these individuals have a much more highly developed sensitivity to feel changes in tissue, or companies that refer autistic people to the IT industry because they have high analytical skills. These are examples of bidirectional investment. There is a social impact as people can be placed in the primary job market. At the same time, these companies grow, generating profits that benefit their investors. But we still need to develop new targets as well as financing instruments and investment vehicles in this sector.

FOCUS Online: What is Deutsche Börse’s contribution?

Kengeter: We support this still young market in its development, for example, with our know-how from the Deutsche Börse Venture Network, a programme that brings investors and growth companies together on an Internet-based platform and in event format to prepare the companies to meet capital market requirements. Phineo is currently a kind of scout on a global search for models that can be applied in Germany.

FOCUS Online: Is impact investing an outgrowth of the social market economy?

Kengeter: Today, capital is employed to a much greater extent for social purposes – beyond returns, capital preservation and growth. That’s what it’s about. Ludwig Erhard already recognised that. So it's nothing new – we just need to organise it better.

Venture philanthropy, that is the use of risk capital to support social or environmental projects, is however one such approach that we did not invent. It comes from the USA and we are trying to adapt it for the German market. We have different investment gaps in Germany because the community dimension of investment and capital in German society is not well-known enough. That is too bad and ought to change. I hope the social impact that the non-profit sector is generating will also result in the capital and investment market being seen in a more positive light. This would be an encouraging development for Germany and have a global impact.

Convenience translation of the German interview; first published on focus.de, held by Martina Fietz on August 14.

Econsense

Forum for Sustainable Development of German Business e.V.

econsense is an association of leading, globally active companies and organisations of German business specializing in the area of sustainable development and corporate social responsibility (CSR). Founded in 2000 on the initiative of the Federation of German Industries (BDI), the goal of econsense is to provide a dialogue platform and think tank, with the dual objectives of advancing sustainable development in business and assuming social responsibility.