Johann Heep is Social Banking development manager at Erste Group - one of the largest financial services providers in Central and Eastern Europe. He is an expert with long-term experience in the field of micro-finance and social enterprise finance.
In this interview Mr. Heep sheds light on the trends in social investment in the region, the importance of impact measurement and the assessment of the success of the investments made in social enterprises.
On the 17th of March he will be our special guest speaker during the webinar "Investing in social impact" and will share more from his experience in the field.
1. What are the current trends in social investment in the region you work in?
- We can see from the incoming applications for our new quasi equity offering, that there are already more SE having their focus on sustainability and green in the CEE region compared to the socially focused SE. Often you have a mixture of social and sustainability targets as these are very much interlinked and impact each other.
As well we observe that there is a push towards providing alternative financing for SE which include patient capital and higher risk appetites.
2. How investors in SEs can measure the success of their investment?
- Ideally before financial or non-financial support is provided the status quo of the SE impact should be assessed. The investors then together with the SE define concrete social impact goals and connect those to the funding provided (direct and indirect outcomes). During and after the provisioning of funding the impact should be identified and tracked. For example we just finalized our recent Social Banking impact assessment cycle asking more than 1.000 clients what impact our products and services had on their organizations, businesses and beneficiaries.
In terms of commercial success it depends on the provided funding how much and in what way the investments were paid back. In some cases parties agreed that the return of investment is reduced if social impact goals are met or over-achieved. In our case it is quiet easy to assess, if our clients can pay back their loans or quasi-equity it shows that their impact models work and impact was produced.
3. How important is impact assessment for investors and why?
- For impact and philanthropic investors as well for social bankers it is important to track their client’s impact, as shareholders and funders strive for impact and financial returns. Of course there are variants of impact investors, for some it is enough that investments don’t harm the society or environment and others want their investments to pro-actively make the world better while doing business.