Soros’ Open Society and Economic Development Fund Actions: A look with Sean Hinton
Today we all know that George Soros, his Foundations, Funds, and his other businesses have been targeted in the last couple of years by certain political groups. They have been accused of making money out of the people living in development countries and out of the waves of immigrants that are reaching European’s shores. We also know that this has been proven false many times over.
But let’s dig into the key question then: What are Soros’ Foundations and Funds actually doing?
They are an impact investing organisation and much more. To know more there is no better person to speak about it than Sean Hinton, the Director of the Economic Advancement Program at the Open Society Foundations and CEO of the Soros Economic Development Fund.
The Open Society foundation is the second largest private foundation in the world today, focused on human rights, social justice, democracy, transparency; while the Soros Economic Development Fund, established in 1997, invests in businesses that provide employment, products, and services for under-served populations in countries open to the development of their economic, political, legal, and civic institutions.
Hinton’s background is very diverse – having worked in different kinds
of businesses in Asia, Australia, and Europe – and he knows very well the importance of impact investing. Kimberly Mantia, Impakter Editor-at-large, spoke with Sean Hinton at the 2018 Concordia Summit in New York during United Nations General Assembly.
In the photo: Participants in the Challenging Norms, Powering Economies Initiative supported by the Open Society Foundations Economic Advancement Program. Winners received a cash prize and participated in week-long exchange in Johannesburg, South Africa, for their work in challenging gender norms and women’s economic empowerment. Photo Credits: Open Society Foundations
You had an extraordinary and varied experience: starting out as a musician, you went to Mongolia for seven years and finally entered the business world working for McKinsey Asia in 1995. Can you tell our readers a little about your career path and how you ended up at George Soros’ the Open Society Foundations?
Sean Hinton: I have been lucky to have had an extraordinarily varied career, The only thing that seems to join them is the fact they began with the letter M: I trained as a musician, I went to Mongolia and then worked for McKinsey. I worked in the media industry, in film and television, and then I spent nine years in China working in mining and natural resources. And now, I suppose you could say, I work in Mission investing.
As you can tell from that career path, I’m not a great believer in strategy. I believe that in the complexity of the world we live in today, you can’t sit and make linear predictions and decide paths through things. I think what speaks in our own work, careers, and lives is the need to be deeply rooted and engaged in the issues we’re working on and be aware and sensitive to the possibilities and opportunities that can they lead to.
Right now I’m working on economic development issues that are extremely complex, they are volatile, and they are changing rapidly. There’s a great deal of uncertainty and to operate in those kinds of environments you have to be deeply connected with the people who are affected by and who are closest to the issues that you’re trying to solve. You also have to be aware of the rapidly changing environment and respond and react accordingly.
In the photo: A session in the changemaker workshop; the initiative selected 12 Finalists from over 155 outstanding women’s changemaker organizations across Africa and the Middle East. Photo Credit: Open Society Foundation
You are now in a particularly strong position to actuate Soros’ plan for impact investment since you have two hats. As both director of one of the “Open Society Foundation” programs – The Economic Advancement Program – and as CEO of Soros’ Economic Development Fund you can directly tap into considerable resources. Can you share with us what you have been able to achieve in this position since 2015?
S. H.: We are now investing in a range of areas that are closely linked to the goals of the Foundation: need is not in short supply. We live in a world where every day we are reminded, in a different corner, at a different place, of a vital and challenging issue, whether it is an environmental concern, whether it is political, whether it is something else. There seems to be no end to the economic injustices that we see around the world.
At the Open Society Foundations, we try to engage with issues that will lead to greater social and economic justice. We are not purely focused on jobs and on job creation or on economic development, we are actually trying to focus on forms of economic development that could really lead to social justice and greater equality. We try to focus on those and address investments in areas such as refugees and migrants.
For example, we are funding a series of platforms that provide financing to small and medium enterprises that are run by or employing refugees and migrants and working inside host communities and in the front- line states, for the Syrian refugee crisis.
We have also invested in smallholder farmers: we believe that in agriculture smallholder farmers play a crucial role in an era of large-scale farming. Some 60 % of the people from the most populous parts of the world depend on small farmers that is why we believe they have a huge contribution to make. For them, we have invested in a platform that is like Uber – but for tractors. It mobilizes small mechanized equipment for farmers who own less than an acre of land. We have a whole portfolio of investments that are empowering and enabling small holder farmers to participate in larger economic systems.
We are also just beginning to work on the economic empowerment of women. Women represent 50% of the world’s population and the greatest single economic development and step forward in social justice would be to support women to play their role in every aspect of society and life around the world, and especially in the economic domain.
There’s great work to do on gender equality and employment opportunities. Women, are responsible for domestic work which is unrecognized, unwaged, unprotected and completely invisible to economists and even to calculate GDP. We are working to find ways to invest in platforms for women, whether that is to support, connect, or enable them to work with fair and decent livelihoods.
Could you tell us a little more about the impressive achievement of The Development Fund considering you are investing in really high-risk projects?
S. H.: We think a little differently, perhaps, compared to many impact investors – as we don’t invest for return, we invest for impact. We are in a privileged position that many are not in that we have our funding secured and can focus on having the maximum impact we can. Return is not the purpose of our investments, but what we find is a wide range of risks and a wide range of returns that we can make and we like to think about it in a compartmentalized rather than a completely blended way.
There are some situations where there is a real intersection between the growth of business and its ability to deliver impact. There are impact investments that perform at the same level and sometimes better than traditional investments, but it is simply wishful thinking to imagine that this is true for all impact investing. In some investments we make, we know we will lose money in the early stages, still we are prepared to invest.
We might be investing into something that is essentially a public good, but that is not being funded or supported as a public good
We might as well say that the presence of independent journalists speaking truth to power and being the voice of civic media is a public good or something that we need and want in a healthy functioning and open society. And we are prepared to invest in those voices even if they are unlikely to make a return for now.
In other areas there may be investments we make into businesses that have huge potential for impact, but that are simply not viable in the short term. But they may become so in future, and we are prepared to make such investments when the impact is great enough. There are some investments we make where the risk we accept is greater than what other commercial investors would justify.
We are in a lucky position of being able to make investments in countries that, when we invest, have such significant sort of risk that others would be unlikely to do so. We were able to invest in micro finance platforms in Sierra Leone and Liberia at the height of the Ebola crisis in the sure knowledge that this was a time when other capital was fleeing from the area. And yet that felt like a moment when our capital could be valuable and a support to those people.
In the photo: Sean Hinton at the Concordia Summit 2017 . Photo Credit: Concordia via Flickr
What are your future plans for impact investment? I’m referring to what you called in the talk you gave at Stanford University business school “mission investing” – working on problems that can’t be solved.
S. H.: We are very excited, just like many others are, by the application of some of the emerging technologies that are initially applied for commercial purposes into areas where they can have impact on marginalized people and communities. So we’re excited to be investing in and supporting the development of those technologies into tools that can be used for good, or for social justice. We’re excited as some of those technologies are emerging not only from the global north, but from the global south as well. I don’t think this is a story about the north inventing and the south deploying, I think this is going to be a story about investing in technology and innovation wherever and however it is found.
We are excited to take the next step in the investment commitments that we’re making in the area of refugees and migrants. We have started this work in some areas with that part of the population that is somewhat invisible to the business community. It’s invisible to the investment community, and yet it’s the equivalent population of a major nation.
If we think about it as a global population, people on the move, from those who are refugees to those who are displaced for various reasons, they currently number about 65 million – but this is set to grow upwards of 300-400 million in years to come.
Imagine a nation of 400 million that is invisible to the world’s economy, and to those allocating investment capital, despite being a sizable economy in and of itself. You could think of that as a virtual nation of people around the world that is not being served or represented. And we are working on this challenge actively right now by investing in regions where those refugees and migrants are living, and also investing in businesses that can support them in finding decent jobs and a decent livelihood or to enable them to start their own business, regardless of where they are located. There is an extraordinary sort of entrepreneurial energy from communities that have moved around the world.
We think that a great deal of social and economic good can be created by promoting businesses that provide services, and address the needs of, refugees and migrants. They are not without resources, they trade, they remit, they buy, they create and wherever those activities take place, investing capital can be useful.
How do you feel about the new challenges that has been brought by populist leaders in the world – both in the States and in Europe – ranging from climate change to human rights? In particular, in Hungary Viktor Orban is literally waging war on Soros. Is there any “plan b” for the Open Society Foundation? Is there anything you and your position at the foundations can do to improve the situation?
S. H.: While there are places and people who face the most dire and terrible threats in certain parts of the world, injustice and economic inequality is surprisingly well distributed around the world – by which I mean that there are places, populations, and communities within populations who demand urgent attention in almost every country in the world. Part of the work we do at Open Society and in my fund is trying to address these issues with as deep an understanding of the local context as we can.
One of the unique things about the Open Society Foundation is the way we are trying to address these issues. We are not trying to come up with a tool or trying to apply that tool, we’re really trying to address the problem in a more systemic way.
We have investment capital we can deploy to engage with the private sector, but we are also very conscious of the role of civil society. Most people who have made investments in difficult places and tried to have impact from those investments, acknowledge that those investments fail to achieve their potential, not because of a lack of capital or a failure of the entrepreneur or the idea, but as a result of a failure of policy, or of the role of governments, or due to an insufficiently active or empowered civil society.
When we are investing in areas like refugees, or smallholder farmers we are concerned with supporting the emergence of agricultural cooperatives, or addressing issues of injustice in agricultural policies, as much as we are simply focused on leveraging more investment capital. Money and investment can only get you so far, and we try to focus on the whole system and all the actors within it.
I think one of the most important things we can do, is not to accept the premise that politicians can define our experience alone: there are so many forces at work and actors engaged in such a system. The private sector has a role to play, civil society has a role to play. Governments, especially those illiberal and authoritarian governments, can stifle those other voices, but we try to work with as many as we can in a plural way. That strategy seems well suited to the growing intolerance and the closing space that we see in many parts of the world.