I recently collaborated on a white paper with colleagues from the Calvert Social Investment Foundation, a pioneer in social investing, and McKinsey and Company, the large corporate consultancy that has an ambitious goal: to make sense of the Social Capital Landscape.

Our goal is to define a common language. We began by bringing in definitions from the traditional capital markets and mixing them with language and metrics from the non profit world in what we hope will become, as our thesis evolves, a coherent picture.

Our thesis is here, and we presented it as a work in progress to the more than 635 people who attended the recent Social Capital Markets conference at Ft. Mason in San Francisco. To get the people at Socap08 involved and to see if we were on the right track, we turned the target graphic (zeroing in from relief to recovery to development to systemic change in the “bullseye”) into a grid, then printed it out 30 feet wide on the wall. Every registered attendee had three small adhesive name tags, a red one for their primary interest and two black ones.

Nearly 400 people literally “put themselves on the map” during the course of the event, saying they were involved in health care and development, or housing and systemic change. The readiness of people to put themselves on the map, and the natural sector-focused groupings that arose from the exercise and other context building tools we provided at the conference makes us think we are indeed on the right track; people do want a landscape to the area of social investing and are eager to put themselves “on the map” and talk with their “neighbors” in contiguous industry/impact sectors and relevant asset classes.  All of that self-reported contextual information is being turned into an online database that should be available soon.

One thing that became clear, literally at first glance, however, is that almost no one put themselves on the map at the outer ring of relief. Partly, I think that is because we limited that category too much; we said it only included things like responses to “a natural disaster or human security crisis.” In the paper itself, we said that included things like soup kitchens and domestic abuse hotlines, but the example on the grid on the wall had fewer examples, and included things like tsunami relief. Even if we had been clearer, however, I think that at a conference like Socap focusing on ways to invest with a positive social impact, areas like relief will be under represented.

If that is going to be the case, I think it’s important to state clearly that there is no hierarchy of virtue. Even though systemic change creates lasting results and creates multipliers, it is not by nature superior to relief. If the relief aid isn’t provided in a timely and effective manner, then the community won’t be intact for recovery, development or systemic change efforts.  All of these types of social impact are necessary and important.

Asking that qualitative question of whether relief is less valuable than systemic changes brings up the issue of impact metrics; one of the noisiest and most contentious areas and one I have tried for the most part to stay out of. Two things have changed my perspective; new money has come into the social capital market; more than 400 of the 635 people who attended Socap08 registered after Lehman Brothers went under; they were interested in a new kind of capital market that includes the traditional investment criteria of risk and return but they also wanted to include the third dimension of social impact as they made their decisions. New investors, even the new money trickling in during the current financial crisis, demand a way to evaluate the return on their impact. So the metrics field will no longer be the domain of squabbling insiders jealous of their terms and yardsticks. It will have to get real, because capital flows in and out of the market will demand it.

I have some ideas for the kind of metrics required: metrics that do no harm, and that create more value than they cost.

In addition, it is not appropriate to apply a systemic change metric to an effort that is properly in the relief area. To ask people running a soup kitchen to document the root cause of homelessness is to apply a systemic metric to a relief question. The result is less money devoted to mission, and a distraction to the people who know their first priority is to feed the people who come in off the street. If more metrics equal less lasagna in the bellies of hungry people, then it’s a metric that does harm.

One of the virtues of San Francisco’s huge homeless population is that you can easily see where homelessness fits in at every point on the social impact target map. Soup kitchens and needle exchange/shower facilities and shelters are in the relief sector; they are just about meeting today’s needs.

Transitional and group housing moves to the recovery space.  The job training programs like the Chef’s program, which leads formerly homeless people into careers as cooks, could be classified as development, as could some of the low income housing initiatives. Systemic change efforts are harder and by their nature take longer and involve coordination across multiple stakeholder groups, but they exist as well.

The takeaway? Just because a new capital market is arising, where investors are learning to put their money into social enterprises that can deliver scalable social impact, create systemic level change, and return capital, does not mean that investing is the answer to all social problems.

Philanthropy and public sector support will have a continuing and increasingly coordinated role to play as the social capital market evolves. The problems in the relief sector are not going away and capital that asks for a financial return may not often be the answer in that sector.

Giving still matters and is not going away. Feeding people at a soup kitchen today is still a good thing to do. And that is likely to be true for the foreseeable future.

Metrics will matter as the social capital market forms. They need to be metrics that do no harm and that provide more value than they cost.

imageKevin Jones is a cofounding principal of Good Capital, an investment firm that accelerates the flow of capital to enterprises that use market forces to create large-scale social change. Jones is a successful serial entrepreneur, angel investor, and cofounder of Social Capital Markets, the groundbreaking conference on social venture investing.