All Things Impact.

exploring how we finance social good

All Things Impact for March 17: why do foundations give so much money to Wall Street?

Brian WalshComment

Here are four items worth your time:

1. Responsible Investing: $5 trillion asset manager BlackRock vows new pressure on climate change & board diversity

Larry Fink, CEO of the world's largest asset manager, the $5.1 trillion (with a 't') BlackRock, wrote an open letter back in January to the companies in which it invests (which is nearly every publicly-listed company):

"BlackRock engages with companies from the perspective of a long-term shareholder. Since many of our clients’ holdings result from index-linked investments – which we cannot sell as long as those securities remain in an index – our clients are the definitive long-term investors. As a fiduciary acting on behalf of these clients, BlackRock takes corporate governance particularly seriously and engages with our voice, and with our vote, on matters that can influence the long-term value of firms. With the continued growth of index investing, including the use of ETFs by active managers, advocacy and engagement have become even more important for protecting the long-term interests of investors.

As we seek to build long-term value for our clients through engagement, our aim is not to micromanage a company’s operations. Instead, our primary focus is to ensure board accountability for creating long-term value....

Environmental, social, and governance (ESG) factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects."

This week, BlackRock announced that it will "put new pressure on companies to explain themselves on issues including how climate change could affect their business as well as boardroom diversity," as Ross Kerber reports in Reuters

"Michelle Edkins, set to oversee the outreach effort as head of a 30-person team, said BlackRock might want to hear from companies about how they are assessing the risk that climate change may pose to their operations...

BlackRock stopped short of pledging to vote more often against companies' management. It said it still prefers private meetings with executives and casts critical proxy votes only as a last straw.

"We can't micromanage," Edkins said...

BlackRock also said it will look to understand how companies are working to increase boardroom diversity, such as adding more women. 

"Diverse boards, including but not limited to diversity of expertise, experience, age, race and gender, make better decisions," BlackRock said in the documents...

"A guy from Yale and a guy from Harvard does not count as diversity," Edkins said.

BlackRock's guidance marks the latest investor call for corporate executives to pay more attention to matters to which they might have given little thought in the past."

 

2. Impact Investing: Heron Foundation's lessons on aligning 100% of assets to mission

Writing in the Stanford Social Innovation Review, F.B Heron Foundation President Clara Miller reflects on her organization's success in beating their own deadline to align 100% of their assets towards their mission. That means that instead of having a separate team managing the roughly $300 million endowment for maximum financial returns and another team managing an annual payout of 5% from the endowment's returns in the form of grants to nonprofits, there would be one capital deployment team managing the full spectrum of resources - endowment capital and grant capital alike. All of these investments and grants would be aligned to the organization's mission: "to help people and communities help themselves out of poverty." 

Here are a few of Clara's lessons learned:

  • "When we determined to invest our entire endowment in alignment with mission, we chose to take the “enterprise view” of our portfolio. In other words, we looked underneath the traditional “asset allocation” view—equities (stock), debt (bonds), real assets, alternatives, and so on—to get visibility into the enterprises and projects that give these assets value. This practice has been labor intensive, but has sharply improved the integrity of the underwriting and monitoring of our holdings. As a result, we will be more aware of our whole impact picture going forward.
  • We continue to see evidence that the legal form of an organization is relevant to but not determinative of its ability to have a positive social impact. Nonprofits are not always more impactful than for-profits; nor is the opposite true. Performance beats intention every time, whatever the tax status, and that will guide us going forward...
  • We have come to use the concept of “net contribution” of an enterprise as the basis for developing measures of its social and financial performance together, over time. Net Contribution is the idea that enterprises aren’t absolutely “good” or “bad,” but that they extract from and contribute to shared environmental, social, civic, and other forms of societal capital in varying ways over time. From our perspective, we anticipate using these data to evaluate how each enterprise or fund in our holdings contributes to or detracts from our mission of helping people and communities help themselves out of poverty. We believe the net contribution approach allows for comparability to peers, meaningful benchmarking, and variability of results over time. Admittedly, applying this concept to our whole portfolio for monitoring purposes will take some work—not only by us, but also our partners."

 

3. Effective Philanthropy: why do foundations give so much money to Wall Street?

Wall Street makes money by charging fees. Warren Buffett, perhaps the best living investor, offers sage advice in his most recent annual letter to his investors

"When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds....

Foundations in the US are legally obligated to deploy at least 5% of their assets each year in the form of grants to nonprofit organizations. This comes to about $60 billion in annual giving, and between the Foundation Center and GuideStar, we have some (rough) sense for how this pool of money is deployed.

But we really don't know what is happening to the much larger pool of money that foundations control - the nearly $865 billion in assets in their endowments. After all, it is the income from these assets that generally fund the grantmaking that foundations do. But as Marc Gunther discovers out in this illuminating post in Nonprofit Chronicles, foundations are not required to report on the performance of their endowments, and from what data is available, it appears quite likely that many foundations ignore Warren Buffett's simple advice. They decide to overpay their asset managers for what amounts to mediocre performance. In other words, they give too much money to Wall Street, in the form of fees for managing those large endowment assets.

"America’s big foundations spend vast sums of money to buy investment advice. They’re getting little, if anything, of value in return.

Their own investment offices, and the Wall Street banks, hedge funds, private equity firms and consultants they hire, when taken together, deliver investment returns that lag behind market indexes, all evidence indicates.

These foundations would do better to call an 800 number at Vanguard or Schwab and buy a diversified set of low-cost index funds...

Why...do foundations continue to pay high salaries and high fees in the pursuit of market-beating returns, when so many fail?

They should know better. It’s no secret that passive approaches to investing outperform most active money managers, once fees and trading costs are taking into account....

The bottom line: America’s foundations, as a group, are taking money that could be devoted to their programs – to alleviate global poverty, to improve education, to support medical research or promote the arts — and transferring it to wealthy asset managers. They should know better, and they do."

 

4. Wildcard: history has lessons on how to combat inequality, but they aren't pretty

The Economist reviewed Stanford historian Walter Scheidel's latest book, The Great Leveller: Violence and the History of Inequality from the Stone Age to the Twenty-First Century:

"Having assembled a huge range of scholarly literature to produce a survey that starts in the Stone Age, [Scheidel finds that inequality within countries is almost always either high or rising, thanks to the ways that political and economic power buttress each other and both pass down generations. It does not, as some have suggested, carry within it the seeds of its own demise.

Only four things, Mr Scheidel argues, cause large-scale levelling. Epidemics and pandemics can do it, as the Black Death did when it changed the relative values of land and labour in late medieval Europe. So can the complete collapse of whole states and economic systems, as at the end of the Tang dynasty in China and the disintegration of the western Roman Empire. When everyone is pauperised, the rich lose most. Total revolution, of the Russian or Chinese sort, fits the bill. So does the 20th-century sibling of such revolutions: the war of mass-mobilisation.

And that is about it. Financial crises increase inequality as often as they decrease it. Political reforms are mostly ineffectual, in part because they are often aimed at the balance of power between the straightforwardly wealthy and the politically powerful, rather than the lot of the have-nots. Land reform, debt relief and the emancipation of slaves will not necessarily buck the trend much, though their chances of doing so a bit increase if they are violent. But violence does not in itself lead to greater equality, except on a massive scale. “Most popular unrest in history”, Mr Scheidel writes, “failed to equalise at all.”

 

 Items of Note

  • ImpactAlpha's daily newsletter (now coming out in the mornings), has fast become a must-read for those in the space. (Disclosure: Liquidnet is an investor in ImpactAlpha through our Liquidnet Impact Fund, a donor advised fund managed by ImpactAssets. I'm an advisor to the company and co-host its ROI podcast. So I'm biased. But it's still a really good newsletter!)
  • Missed The Economist's conference on mainstreaming impact investing? Most of the videos from the sessions have been posted here
  • Open Philanthropy Project offers giving recommendations in response to Trump actions
  • ImpactAssets50 updated with new impact investing funds
  • Lucy Bernholz's must-read annual industry forecast "Blueprint 2017: Philanthropy & the Social Economy
  • The Stanford Social Innovation Review's Winter Issue has a full debate on how investors can (and cannot) create social value

 

Job Postings 


Upcoming Events 

March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 23-24 Impact Investing World Forum (London) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 8 MIINT: MBA Impact Investing Network & Training finals at Wharton (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
April 19-20 Step Into Impact - Kellogg Executive Education (Evanston, IL) Impact Investing
April 25-26 Impact Capitalism Summit (Chicago) Impact Investing
May 9-10 Shared Value Summit (NYC) CSR
May 10-12 US SIF Annual Conference (Chicago) Impact Investing
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
June 5 (NYC), June 13 (SF), Sept 12 (DC) Series of events as Nonprofit Finance Fund & Federal Reserve Bank of San Francisco launch new book on Investing in Results
Sept 19-21 CHANGE Philanthropy Unity Summit (New Orleans) Effective Philanthropy
Setp 28-29 TBLI Nordic 2017 (Stockholm) Responsible Investing
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 15-17 Exponoent Philanthropy CONNECT Conference (Denver) Effective Philanthropy
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR


That’s it for this week. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog, which just needs a little push).  

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for March 3: Anti-Gay "High Impact Investing" Demonstrates that Impact is in the Eye of the Beholder

Brian WalshComment

Hi Friends,

Instead of four items this week, I present one longer story that raises an important issue. Please send me your feedback and reactions.

Is “Biblically Responsible” Responsible Investing?

Over centuries, capitalism has settled on commonly-agreed-upon ways to measure, report, and predict the financial performance of companies. But the ability to measure, report, and predict the non-financial performance - the "impact" of companies - is still in its infancy.

One of the challenges with the "ESG / Responsible / Socially Responsible / Sustainable / Social / Ethical / Values Aligned / Impact Investing" space (besides the enormous confusion on just what to call it) is the fact that ultimately "impact" is in the eye of the beholder. 

In the capital markets, there are three key actors:

  • Asset owners: people (like you and me) who give their money to professionals to manage on their behalf
  • Asset stewards: people overseeing money on behalf of an organization (like a pension fund or an insurance company or a university endowment)
  • Asset mana gers: professionals who invest money on behalf of asset owners and asset stewards

Many asset managers are reluctant to invest based on their own personal values, lest they jeopardize their fiduciary duty to prudently maximize financial returns for asset owners & stewards. Fair enough. But subjective personal values necessarily inform how one defines non-financial impact.

So whose values? 

This brings us to Inspire Investing, a California-based asset manager that seems, with a website featuring clean design and inspiring stock photos, like any other "responsible investing" firm. The landing page welcomes visitors with the headline: "Good values and good returns are not mutually exclusive. Join the low cost, high impact investing revolution."

As the Financial Times reports, this week the firm launched two new investment funds "aimed at conservative evangelical Christians that explicitly exclude companies that participate in or support the lesbian, gay, bisexual or transgender “lifestyle”:

"[These two funds] appear to be the first to explicitly screen out stocks of companies that support LGBT rights, alongside businesses involved in abortion, gambling, alcohol, pornography and terrorism...

Mark Snyder, a spokesman for the Equality Federation, a LGBT rights organisation, was sceptical that interest would be so strong.

“This is out of step with mainstream America, which has embraced non-discriminatory policies and fairness,” Mr Snyder said. “When organisations and fringe activists have attempted to boycott organisations that support LGBT rights it has tended to be ineffective, so I think it probably won’t garner much interest.”

...The corporate world has increasingly embraced the LGBT cause, with companies such as Apple and Goldman Sachs among the biggest supporters of more inclusionary policies, LGBT rights organisations and events like the annual Gay Pride Parade in New York.

As a result they and many others may be excluded from the [new Inspire investment funds]. “Business has been leading the way,” Mr Snyder said. “I feel very confident that the business community is on the side of equality and fairness.”

Inspire is a small investment company based in California focused on “Biblically Responsible Investing” [BRI], a subset of socially responsible investing, which Mr Netzly said “mostly caters to liberal values”.

The company uses a scoring system it calls the Inspire Impact Score to grade companies and select them for inclusion in its underlying BRI index and the ETFs [investment funds] a methodology that removes any companies with “any degree of participation” in activities that “do not align with biblical values”...

Inspire donates half its profits to charities, including those supporting Syrian refugees and clean water initiatives in Africa, but its screens exclude companies like Apple, Starbucks and others that “take a hardline, activist line” on gay rights, according to Mr Netzly.

“BRI is an investing approach that seeks to ensure that a Christian is investing in a way that is consistent with the moral standards of the Bible . . . BRI products, through their excluding, engaging and endorsing activities, help Christian investors maintain their integrity and responsibility to biblical stewardship while actively investing in the stock market,” the company’s website says."

According to the New York Times:

"Shares of Berkshire Hathaway, whose chief executive, Warren E. Buffett, has been a major donor to Planned Parenthood, would not make the cut, [he said. Nor would Apple, Mr. Netzly said, claiming that pornography can be purchased through iTunes. (An Apple spokesman said pornography is not permitted.)

Companies like Amazon that have publicly supported gay marriage also would not pass muster. “Any company that takes a hard-line approach” to the issue would not pass the test, Mr. Netzly said.

On the other hand, shares of Tesla Motors and Under Armour would."



Actors in the capital markets are diverse, and they do not all share the same values, except, arguably, maximizing financial return. There isn't widespread agreement around what constitutes positive impact. Your values may differ from mine. So an asset manager could provide an investment product for asset owners & stewards that aligns with anti-gay values and a different asset manager could provide a product aligned with pro-gay values, and both can claim that they are "values aligned" responsible investing.

Ultimately, responsible investing represents a seismic shift from investing based on universal values (financial performance) to investing based on non-universal values. Unless we share universal values (are Apple's gay-friendly policies good or bad?), the growth of responsible investing requires asset owners & stewards to articulate their own values and instruct their asset managers to invest according to these values. Responsible investing implies a merger of the marketplace for capital with the marketplace of ideas.

Whose ideas will win out?
 

Items of Note

 
Job Postings 


Upcoming Events 

March 14-15 Confluence Philanthropy Practitioners Gathering (New Orleans, LA) Impact Investing
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 23-24 Impact Investing World Forum (London) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
April 25-26 Impact Capitalism Summit (Chicago) Impact Investing
May 9-10 Shared Value Summit (NYC) CSR
May 10-12 US SIF Annual Conference (Chicago) Impact Investing
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Sept 19-21 CHANGE Philanthropy Unity Summit (New Orleans) Effective Philanthropy
Setp 28-29 TBLI Nordic 2017 (Stockholm) Responsible Investing
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 15-17 Exponoent Philanthropy CONNECT Conference (Denver) Effective Philanthropy
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog protecting a little lamb).  

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for Feb 24: A "Banana Republic Approach" to Corporate Governance

Brian WalshComment

Hi Friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: A "Banana Republic Approach" to Corporate Governance
I'm young enough to occasionally use Snapchat and old enough to still be confused by it. The app's parent company, Snap, plans an initial public offering (potentially valuing the less-than-six-years-old company at $18.5 billion), though it is gathering a lot of attention for being the first public offering in the US to issue shares with no voting rights at all.

Writing in the Financial Times, John Plender uses Snap's decision as a jumping-off point for perhaps the best article encapsulating the issues surrounding corporate governance (the "G" in "ESG" investing) I have ever read:

"By any standard Snap’s governance arrangements are flawed and its directors minimally accountable. Anne Simpson, a leading governance expert at the California pension fund Calpers, dubs this “a banana republic approach” to corporate governance.

Yet the decision to prevent outside shareholders from exercising control rights over the company is also symptomatic of a deeper problem with modern corporate governance, as are the tiered voting structures that prevail at other tech companies such as Google, Facebook and Alibaba. Modern corporate governance practice sits uncomfortably with the business models employed in the more advanced sectors of the global economy. Taken together with changes in the structure of ownership, this has drastically weakened the accountability of management to shareholders.

 

The big question...turns on how the spoils of the capitalist system are shared. Today’s governance codes are rooted in a 19th century concept of the corporation, where the shareholder-capitalist is seen as the key stakeholder and risk-taker in the system. The implicit assumption is that the shareholder is entitled to the residual profits and net assets of the company after the claims of labour and all the other creditors have been met.

This view of the limited liability company made sense in the 19th century, when capital was scarce and labour cheap and plentiful....Shareholders could vote at the annual general meeting on issues such as the election of directors, while other stakeholders could not. Whether this is appropriate today when the world is awash with savings and finance capital is abundant — witness low or negative real interest rates in global bond markets — is moot. The real driver of high growth in the economy is increasingly human capital....

Poor management accountability in the tech sector coincides with another weakening of governance arising from changes in the structure of ownership. The number of investors willing or able to monitor, engage and hold management to account is dwindling...the great majority of intermediary investors lack the financial incentive to monitor and engage with managers...

[I]n much of the world the system remains overdependent on a shrinking band of shareholders whose willingness and ability to hold management to account is questionable — or, as in the case of Snap, who are forcibly excluded from any stewardship role."

BloombergView's Matt Levine reacts to this article and picks up this issue:

"Is it bad for a company to have a dual-class share structure that concentrates power in its chief executive officer? Yes, if that CEO makes worse decisions than an empowered group of public shareholders. And no, if the CEO makes better decisions. I suppose it is hard to know in advance, but it is hard to know lots of things in advance, and the whole job of investing is making predictions about what a company will do in the future...

Snap and other tech companies don't represent a governance vacuum. They'll be governed. They just represent a shift in governance: They'll be run by entrepreneurs rather than shareholders, because the bargaining power has shifted in the entrepreneurs' favor, and because the entrepreneurs' contributions to the company are relatively more important than the shareholders'."


2. Impact Investing: #impinv's Woman in Trump's White House
Dennis Price of ImpactAlpha reports:

"Whither social-impact investment in the Trump administration may depend on Dina Powell, the former Goldman Sachs executive who was named, with Ivanka Trump’s help, assistant to the president and senior counselor for economic initiatives....

Powell, according to Politico, has helped stock the guest lists for Ivanka’s dinner parties on women in the workplace and joined the First Daughter in a meeting with Priscilla Chan, co-founder with her husband and Facebook founder Mark Zuckerberg, of the Chan-Zuckerberg Initiative.

At Goldman, the Egyptian-born executive, who also served in the Bush administration, managed the $4 billion impact investing portfolio and the firm’s foundation.

She helped parlay Goldman’s $50 million commitment to 10,000 Women into $600 million from the World Bank, OPIC and others to provide women entrepreneurs in developing countries with education, capital and mentors."
 

3. Effective Philanthropy: Adapting Philanthropy for the Trump Era

Writing in the Chronicle of Philanthropy, foundation leader Pamela David argues that in the era of Trump, foundations need to change how they operate:

"We have become accustomed in philanthropy to being measured and careful and thoughtful. We have hired brilliant staff and consultants to craft programs and strategies and put them in place. We have gathered evidence that our programs work and jettisoned those that don’t.

But smart as we are, we have not yet broken out of the need to each have our own strategy, our own processes, our own self-imposed silos. Foundations remain risk-averse, and too far removed from the urgency many of our grantees and constituents face or the accountability they deserve...

[T]his new reality requires us to look at our own assumptions and grant-making practices and see what we may have to change to stay relevant and effective...

Here are some steps all of us can take right away:

Create funds dedicated to rapid response.
We need to have money ready to deploy quickly for those on the front lines...If we work smartly and together, our individual contributions for rapid response need not be large. But we cannot subject them to our normal grant-making processes and timing.

Providing general operating funds that allow grantees flexibility gives stretched nonprofits the ability to navigate in this rapidly changing environment. 

Expand investments in nonprofit and community leadership.

We’re now engaged in a long-term struggle for the soul of our country: for democratic practice, for democratic institutions, for diversity, equity, and inclusion. That struggle needs great leaders with the skills and resilience to endure the twists and turns in front of us. They need to connect to each other, build off each other’s strengths, and link issues, movements, and people.

Do more to build the network of progressive communities of faith.

The new landscape demands a conversation about values, about morality, about civic responsibility and accountability to each other. Progressive faith communities are well-positioned to lead that conversation with great credibility and resonance...

We are called by these times to engage in different and new ways, even if it causes us discomfort. Business must be anything but usual going forward."


4. Wildcard: Automation and the Future of Jobs - Be Worried
Writing in BloombergView, economist Tyler Cowen looks to history to raise concerns about our current period of economic transition:

“Why should it be different this time?” That’s the most common response I hear when I raise concerns about automation and the future of jobs, and it’s a pretty simple rejoinder. The Western world managed the shift out of agricultural jobs into industry, and continued to see economic growth. So will not the jobs being displaced now by automation and artificial intelligence lead to new jobs elsewhere in a broadly similar and beneficial manner? Will not the former truck drivers, displaced by self-driving vehicles, find work caring for the elderly or maybe fixing or programming the new modes of transport?

As economics, that may well be correct, but as history it’s missing some central problems. The shift out of agricultural jobs, while eventually a boon for virtually all of humanity, brought significant problems along the way. This time probably won’t be different, and that’s exactly why we should be concerned...

[An economic historian estimates that] English real wages may have fallen about 10 percent from 1770 to 1810...[and] it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all.

If we imagine the contemporary U.S. experiencing similar wage patterns, most of us would expect political trouble, and hardly anyone would call that a successful transition. Yet that may be the track we are on. Median household income is down since 1999, and by some accounts median male wages were higher in 1969 than today... 

The early to mid-19th century saw the rise of socialist ideologies, largely as a response to economic disruptions... [Karl Marx] failed to see the long-run ability of capitalism to raise living standards significantly, but he understood and vividly described the transition costs and the economic volatility.

Western economies later turned to variants of the social welfare state, but along the way the intellectual currents of the 19th century produced a lot of overreaction in other, more destructive directions...

The shift of jobs away from agriculture also poisoned economic policy...Farms as a share of total employment are quite small (about 2 percent), but farmers as an interest group have not gone away, even hundreds of years after agricultural employment started to decline.

It is possible a similar logic may play out with the jobs that will be rendered obsolete by automation. That is, we may decide to subsidize and protect those jobs for centuries to come, to the detriment of long-run economic growth."


5. Items of Note


6. Job Postings


7. Upcoming Events

March 14-15 Confluence Philanthropy Practitioners Gathering (New Orleans, LA) Impact Investing
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 23-24 Impact Investing World Forum (London) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
April 25-26 Impact Capitalism Summit (Chicago) Impact Investing
May 9-10 Shared Value Summit (NYC) CSR
May 10-12 US SIF Annual Conference (Chicago) Impact Investing
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Setp 28-29 TBLI Nordic 2017 (Stockholm) Responsible Investing
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this bat enjoying some watermelon).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for Feb 17: Robo Advisors for Good; Fossil Fuels are 'Legacy'; Funders are Like Teenagers; When Facts Fail

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible investing: Building Portfolios Tailored to Investors' Values
I'm very interested in the intersection of two mega-trends: the rise of robots in managing capital, and the rise in demand from capital owners (people who have money to invest) for investments that align to their values. Simone Foxman writes in BloombergBusinessweek about OpenInvest, one of the new startups operating in this "robo advisor for good" space:

"For many people, passively managed index funds have a powerful appeal: Buy one fund and be done. The 3,500-company Vanguard Total Stock Market Index Fund, for example, beats most funds in its category by owning essentially everything. But everything can also be a problem for those who want to put their money only into companies that are consistent with their values... 

There have long been mutual funds that include social factors among their stock-selection criteria. The difference is that OpenInvest allows customization. Similar to so-called robo-advisers Wealthfront and Betterment, OpenInvest allows users with at least $3,000 to invest to pick a mix of stocks and bonds based on their age and comfort with risk. The portfolio is periodically updated and rebalanced to stay on track.

But instead of buying stocks through index funds, as the other robos do, OpenInvest uses individual stocks. Users click through a series of menus to create an “issue profile,” checking boxes to select investment themes—such as gender equality or reduced carbon emissions—as well as groups of companies to exclude. The preset screens lean left. Users can nix weapons manufacturers, tobacco companies, and even those whose executives have backed Donald Trump.

Based on those preferences, OpenInvest creates a basket of more than 60 stocks that both jibes with its customers’ wishes and should, the company says, track the broader market. It balances factors such as size, sector, and each stock’s sensitivity to the market’s ups and downs. OpenInvest says it’s still passive because beating the market isn’t a goal."

Here is my running list of other "robo advisors for good" (know of more? please let me know):


2. Impact Investing: the Great Energy Transition
Writing in Medium, my friend David Bank, Founder and Editor in Chief of ImpactAlpha, writes about the massive transition underway in the energy sector, arguing that "renewables are no longer 'alternative' and fossil fuels are 'legacy'":

"[A]s the energy story becomes, solidly, a technology story, policy is no longer the driver. Instead, renewable energy is showing the same kind of network effects, increasing returns to scale and virtuous circles that have powered the tech revolution...With 60 percent of new utility-scale electricity generation in 2016 coming from wind and solar resources, renewable are no longer ‘alternative.’ Rather, fossil fuels are increasingly ‘legacy.’...

It will be a lumpy transition, to be sure...

The real signal to watch is the oil companies’ “capex” or capital expenditure budgets for drilling and production, where they reveal what they really think about future prospects....It’s not just activist college campuses that are divesting from the fossil-fuel economy. It’s the fossil-fuel producers themselves.

When the history of the 21st century is written, we’ll see that by 2017 the inflection point in the global energy rebuild had already occurred. We’ll see the new energy economy was just the next stage of the the larger technology transformation obviously well underway.

We’ll see that the energy revolution of the next 20 years looked a lot like the Internet revolution of the last 20 years...

This is no longer just about values-driven investing, important as that is for pointing our money toward the kind of future we are hoping to live in. Values are a weak lever to pull. Pension and sovereign wealth funds, are not much interested in aspirational, wishful thinking or, even worse, do-gooder advocacy.

Such big asset owners — those with assets of, say, more than $100 billion or so — are interested in risk. They are so broadly diversified that they “own the market,” if not the world. Forces that affect the market, up or down, will inevitably hit their portfolios. Unlike a day trader, they can’t just make bets on individuals winners and losers. And they can’t duck the coming dislocations. Social unrest, political instability, environmental catastrophes, wars — bad for long-term asset values. Owning the world means institutional asset owners have a stake in its viability. For such “universal owners,” there are no externalities, positive or negative."


3. Effective Philanthropy: Funders are Like Teenagers - They Learn From Their Peers
According to the Foundation Center, there are over 86,000 foundations in the US, with $715 billion in assets and $52 billion in annual giving. Do the people who help allocate that $52 billion - the board members and staff of large foundations - use knowledge to inform and improve their work? If so, how do they acquire that knowledge?

Those are some of the questions that the Effective Philanthropy Group at the Hewlett Foundation set out to answer. Writing in SSIR about their new research, my friends Fay Twersky and Lindsay Louie found that "knowledge does indeed influence funders’ practice. Funders primarily use it to question or affirm current practice, and to compare their foundation to the field." They found that funders are actually much like teenagers, whose primary source for knowledge is peers.

"Funders’ primary source for knowledge is peers and colleagues (92 percent), followed by conferences, email/newsletters [ahem], and grantee interactions. It is crucial for knowledge producers to understand that peers and colleagues play a central role in information sharing, because it means research findings are likely filtered and interpreted as they move from peer to peer. Over time, this could lead to the misinterpretation of research or shifts in emphasis. Knowledge producers and disseminators should also keep in mind that people may actually use and cite something in their work without necessarily reading the original source material(s).

Other key findings:

  • Curation is important. ("[F]oundation staff feel overwhelmed by the volume of information coming at them, regardless of whether or not they “opted-in” to receive it. Similarly, foundation boards say they face their own firehose of information and generally look to staff to curate knowledge about philanthropic practice; it rarely reaches them directly.")
  • Grantees are an important source of knowledge. ("[W]hile power dynamics between funders and grantees may sometimes inhibit candor, it’s clear that many funders recognize grantees’ valuable expertise. Nonprofit leaders have the ears of their funders, and can influence a funder’s thinking and decision-making.")
  • There are no ubiquitous trusted sources. ("[T]rust in and loyalty to specific knowledge producers and disseminators seemed relatively low. No specific knowledge producer was cited as a trusted source by substantially more than 25 percent of respondents.")
  • Knowledge alone is insufficient for making practice change. ("[F]or a knowledge product to catalyze or contribute to change, it must be part of a larger process that includes trust, accessibility, peer support, organizational readiness, and leadership support and interest. Change is a complex process, and knowledge is but one piece of the puzzle. Knowledge can spark or help catalyze change, but it’s rarely sufficient on its own.")


4. Wildcard: How to Convince Someone When Facts Fail
Writing in Scientific American, Michael Sherman writes about the psychological concepts of cognitive dissonance and the backfire effect:

"Have you ever noticed that when you present people with facts that are contrary to their deepest held beliefs they always change their minds? Me neither. In fact, people seem to double down on their beliefs in the teeth of overwhelming evidence against them. The reason is related to the worldview perceived to be under threat by the conflicting data...

In the classic 1956 book When Prophecy Fails, psychologist Leon Festinger and his co-authors described what happened to a UFO cult when the mother ship failed to arrive at the appointed time. Instead of admitting error, “members of the group sought frantically to convince the world of their beliefs,” and they made “a series of desperate attempts to erase their rankling dissonance by making prediction after prediction in the hope that one would come true.” Festinger called this cognitive dissonance, or the uncomfortable tension that comes from holding two conflicting thoughts simultaneously....

[P]eople spin-doctor facts to fit preconceived beliefs to reduce dissonance....

In a series of experiments...researchers identify a related factor they call the backfire effect 'in which corrections actually increase misperceptions among the group in question.' Why? 'Because it threatens their worldview or self-concept.'

If corrective facts only make matters worse, what can we do to convince people of the error of their beliefs? From my experience, 
1. keep emotions out of the exchange, 
2. discuss, don't attack (no ad hominem and no ad Hitlerum), 
3. listen carefully and try to articulate the other position accurately, 
4. show respect, 
5. acknowledge that you understand why someone might hold that opinion, and
6. try to show how changing facts does not necessarily mean changing worldviews.


5. Items of Note


6. Job Postings


7. Upcoming Events
Feb 24 Yale Philanthropy Conference (New Haven, CT) Effective Philanthropy
March 14-15 Confluence Philanthropy Practitioners Gathering (New Orleans, LA) Impact Investing
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 23-24 Impact Investing World Forum (London) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
April 25-26 Impact Capitalism Summit (Chicago) Impact Investing
May 9-10 Shared Value Summit (NYC) CSR
May 10-12 US SIF Annual Conference (Chicago) Impact Investing
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Setp 28-29 TBLI Nordic 2017 (Stockholm) Responsible Investing
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this cat and dog learning how to live in peace).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for Feb 10: Proof that Managing for the Long Term Pays Off; Impact in the Era of Trump; Scrutiny of Big Philanthropy; Lessons on Surviving a Populist

Brian WalshComment

Hi friends,

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible investing: Finally, Proof That Managing for the Long Term Pays Off
New research by McKinsey Global Institute and FCLT Global found that companies that operate with a true long-term mindset have consistently outperformed their industry peers since 2001 across almost every financial measure that matters.

As reported in the Harvard Business Review, "Companies deliver superior results when executives manage for long-term value creation and resist pressure from analysts and investors to focus excessively on meeting Wall Street’s quarterly earnings expectations. This has long seemed intuitively true to us...And yet we have not had the comprehensive data needed to quantify the payoff from managing for the long term — until now."

longterm.png
"The differences were dramatic. Among the firms we identified as focused on the long term, average revenue and earnings growth were 47% and 36% higher, respectively, by 2014, and market capitalization grew faster as well. The returns to society and the overall economy were equally impressive. By our measures, companies that were managed for the long term added nearly 12,000 more jobs on average than their peers from 2001 to 2015. We calculate that U.S. GDP over the past decade might well have grown by an additional $1 trillion if the whole economy had performed at the level our long-term stalwarts delivered — and generated more than five million additional jobs over this period...

The key message from this research is not only that the rewards from managing for the long term are enormous; it’s also that, despite strong countervailing pressures, real change is possible. The proof lies in a small but significant subset of our long-term outperformers — 14%, to be precise — that didn’t start out in that category. Initially, these companies scored on the short-term end of our index. But over the course of the 15-year period we measured, leaders at the companies in this cohort managed to shift their corporations’ behavior sufficiently to move into the long-term category."


2. Impact Investing: 10 years after the term "Impact Investing" was coined, does it even matter in the era of Trump? 
Antony Bugg-Levine, CEO of the Nonprofit Finance Fund (and convener of a group of people who coined the term "impact investing" back in 2007), recently asked of his connections on LinkedIn: “Given what is happening around us, I’m wondering myself why making impact investments is the best social contribution we can make with our professional skills and time? How would the impact investors reading this answer that?”

His question received thousands of views and plenty of comments. He then wrote a thoughtful response on ImpactAlpha:  "The takeaway: Yes, more than ever."

He goes on:

"There has always been hate and fear of the other that shows up as racism, sexism, and xenophobia. But the Trump and Brexit forces tapped into a sense of hopelessness and an anger over the selfishness that has fueled growing inequality. In the long-term, we need to provide hope and a new narrative of common purpose.
Impact investing can do both. When we coined the term in 2007, we intentionally embraced its dual meaning. We saw that impact investments could both:
1.     Unlock capital for impact
2.     Impact the investing system
...And when all of us make the case that investors can and should consider the social impact of their investments and not just the financial return, we offer an alternative to the narrative of selfishness that says we should only use investments to secure our own interests.
There is a real danger that impact investing will only makes rich people feel good about their unequal share of wealth. But if we do it well, and remember our purpose, then we will bolster the forces allayed against selfishness who argue that we should consider how our investments, along with all our actions, impact others.
For now, you’ll still find me at the march carrying my poster or on hold with my Senator’s office when necessary. But then I’ll be back at the office, privileged to know that our work matters.
Because in the long term, impact investors can provide hope and counter selfishness and by doing so chip away at the edges of the hopelessness and hate that is taking all of us to the brink."

 

3. Effective Philanthropy: Big Philanthropists Increasingly Face Scrutiny and Criticism
Writing in the Chronicle of Philanthropy, Drew Lindsay writes about how, in a time of rising income inequality rivaling the Gilded Age, some big philanthropic gifts are being viewed "through a new, more skeptical prism." He asks, "is that charity easing inequality or exacerbating it?"

"By and large, big philanthropists are feted as heroes, even saints. But lately it seems like there’s always someone eager to challenge their motives or question their priorities, often in venomous terms. The debate is about more than whether gifts to wealthy institutions like Stanford fritter away philanthropic dollars and, via the charitable deduction, rob government of dollars that might do good in society broadly. Critics also charge that philanthropists are using their gifts to get their way in public policy and civic affairs...
To some, big philanthropists today represent the same threat to democracy that Mr. Carnegie and Mr. Rockefeller posed. Their gifts give them power to bypass democratic channels and impose their policy ideas, critics worry — and that power, they say, is earned not through the merits of their ideas but through the force of their cash.
Today’s generation of philanthropists is certainly moving fast and using big dollars to encourage change through government. About two-thirds of Giving Pledge signers, who have promised to devote at least half their fortunes to philanthropy, are committed to policy work, according to research by Duke University political scientist Kristin Goss. Mr. Zuckerberg and Ms. Chan recently hired former top campaign aides to Presidents Obama and George W. Bush to guide their policy and advocacy efforts..

[T]he critique extends beyond a few individuals to big philanthropists as a class. "There’s simply too much power in one group of givers," says Mr. Collins, of the Institute for Policy Studies. Its "Gilded Giving" study showed a growing imbalance in philanthropy, with gifts from the rich soaring and donations from middle- and lower-income households dwindling...
Others will argue that aggressive, activist big philanthropy is exactly what’s needed now. Government is weak, if not inept, they contend, and private money can be used to experiment and take risks.
"Thank God for folks like the Gates Foundation," says David Salomon, a New York investment adviser and philanthropist...Big donors like the Gateses, he says, are often successful people who are smart, creative, and innovative. "We’d be blessed to have as many people like that helping with the country’s problems as we can," he says.


4. Wildcard: "In Venezuela, we couldn’t stop Chávez. Don’t make the same mistakes we did."
Writing in The Washington Post, Andrés Miguel Rondón offers advice to Americans on how to deal with Trump, based on his experience living under the populist Venezuelan leader Hugo Chavez:

"The recipe for populism is universal. Find a wound common to many, find someone to blame for it, and make up a good story to tell. Mix it all together. Tell the wounded you know how they feel. That you found the bad guys. Label them: the minorities, the politicians, the businessmen. Caricature them. As vermin, evil masterminds, haters and losers, you name it. Then paint yourself as the savior. Capture the people’s imagination. Forget about policies and plans, just enrapture them with a tale. One that starts with anger and ends in vengeance. A vengeance they can participate in.
That’s how it becomes a movement. There’s something soothing in all that anger. Populism is built on the irresistible allure of simplicity. The narcotic of the simple answer to an intractable question. The problem is now made simple.
The problem is you...
 
  • Don’t forget who the enemy is.
Populism can survive only amid polarization. It works through the unending vilification of a cartoonish enemy. Never forget that you’re that enemy. Trump needs you to be the enemy, just like all religions need a demon. A scapegoat. “But facts!” you’ll say, missing the point entirely.
What makes you the enemy? It’s very simple to a populist: If you’re not a victim, you’re a culprit.
 
  • Show no contempt.
Don’t feed polarization, disarm it. This means leaving the theater of injured decency behind...
The worst you can do is bundle moderates and extremists together and think that America is divided between racists and liberals. That’s the textbook definition of polarization. We thought our country was split between treacherous oligarchs and Chávez’s uneducated, gullible base. The only one who benefited was Chávez.
 
  • Don’t try to force him out.
The people on the other side — and crucially, independents — will rebel against you if you look like you’re losing your mind. You will have proved yourself to be the very thing you’re claiming to be fighting against: an enemy of democracy. And all the while you’re giving the populist and his followers enough rhetorical fuel to rightly call you a saboteur, an unpatriotic schemer, for years to come.
 
  • Find a counterargument. (No, not the one you think.)
Don’t waste your time trying to prove that this grand idea is better than that one. Ditch all the big words. The problem, remember, is not the message but the messenger. It’s not that Trump supporters are too stupid to see right from wrong, it’s that you’re more valuable to them as an enemy than as a compatriot. Your challenge is to prove that you belong in the same tribe as them — that you are American in exactly the same way they are...

Recognize that you’re the enemy Trump requires. Show concern, not contempt, for the wounds of those who brought him to power. By all means, be patient with democracy and struggle relentlessly to free yourself from the shackles of the caricature the populists have drawn of you.
It’s a tall order. But the alternative is worse. Trust me.


5. Items of Note


7. Job Postings


8. Upcoming Events
Feb 15 The Economist: Mainstreaming Purpose-Driven Finance (NYC) Impact Investing
Feb 24 Yale Philanthropy Conference (New Haven, CT) Effective Philanthropy
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
May 9-10 Shared Value Summit (NYC) CSR
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like these dogs wagging their tails in unison).


Until next time, thanks for reading!
Brian
 

All Things Impact for Jan 23: women & corporate governance; diet gurus & chocolate cake; aggravating funders; why elites rule

Brian WalshComment

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible investing: Women Dominate in Corporate Governance
Finance is traditionally characterized as an old boys club, but The New York Times reports on “a rare corner of finance where women dominate” – the corporate governance practices at large intuitional investment firms:

“Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds — deciding which way to vote on the directors of a company board. They make decisions on behalf of teachers, government workers, doctors and most people in the United States who have a 401(k). The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times. Those investors oversee $14 trillion in assets.
 
Corporate governance is playing a growing role within the broader ecosystem of corporate America. Each spring, publicly traded companies hold shareholder meetings and outline business strategy for the coming year. Shareholders like BlackRock, T. Rowe Price and State Street vote on corporate strategy and issues including company board appointments and compensation.
 
Their votes can go a long way, given the huge stakes these institutions control in United States companies. BlackRock holds a stake greater than 5 percent in 75 of the 100 largest companies, according to data compiled by Jerry Davis, a professor at the University of Michigan Ross School of Business. State Street has more than than 5 percent of 23 of the largest companies, while Capital Group owns more than 5 percent of 20 of the biggest companies.”

But are they having an impact?

“That power, however, is rarely wielded to confront companies. Most of the time, these huge institutional investors choose to vote with management…
 
Efforts by mutual funds to change the behavior of a company by using the power of a proxy vote is a fairly recent phenomenon. For decades, powerful institutional investors automatically rubber-stamped the decisions of corporate management and boards. At the same, many top executives paid little attention to the concerns of their shareholders….
 
Nick Dawson, a co-founder of Proxy Insight, said that while investors treat issues related to environmental, social and governance policies, known in industry parlance as E.S.G., very seriously, “there is a clear preference for behind-the-scenes engagement on these issues.” “Asset managers prefer to ensure that management teams are capable of dealing with E.S.G. issues in-house, rather than by applying external pressure,” he said….
 
There is concern that on the subject of gender, women are less likely to push for greater diversity. Some women in high-power corporate governance positions said that they preferred not to bring up gender as an issue in discussions with management on concern they will be perceived to have an agenda.”


2. Impact Investing: Diet gurus promising weight loss & limitless chocolate cake
Writing in NextBillion, Greg Neichin and Diane Isenberg argue that as far as impact investing goes, deep social impact requires financial concessions. They pick up the argument recently laid out by the Omidyar Network in the Stanford Social Innovation Review, arguing against “hyperbolic, content-free puff pieces all heralding that the impact investment industry has gone ‘mainstream’”: 

"Those of us actively allocating capital to fragile enterprises in developing markets recognize that those people who promise comfortable market-rate returns while solving global poverty are the equivalent of diet gurus promising that one can lose weight while eating limitless amounts of chocolate cake. As former Omidyar Network India Managing Director Jayant Sinha (now Indian minister of civil aviation) said on stage at the recent India Impact Investing Conclave, “Do not kid yourself that this is commercial investing, you are here to deliver impact.”
 
Yes, we certainly acknowledge that there are numerous ESG-oriented public equity and bond funds, as well as U.S. and European focused private equity and credit portfolios geared toward generally responsible and beneficial companies that are delivering perfectly solid returns. We get it. We are investors in many of them. If that is the entirety of your intended scope of impact, then mission accomplished.
 
However, for those with the flexibility and fiduciary responsibility to pursue direct impact in truly marginalized and underserved regions and communities, it’s necessary to grapple with the reality that these contexts often require concessionary rates of return, an appetite for a range of risks (geopolitical, currency, security, etc.), as well as a need for creative structures and patient timelines. We find it unhelpful when advisors, fund managers and even asset owners declare that you can have it all, when the reality is that it depends on what “it” is….
 
There is a big crowd on the side of the return continuum seeking a feel-good, low-risk way of earning an invitation to speak at the next GIIN or SOCAP conference. There are far fewer willing to swim in the deep end of the risk continuum.”


3. Effective Philanthropy: Are you an aggravating funder? A new checklist helps you find out
Nonprofit leader Vu Le, writing in his “Nonprofit with Balls” blog (don’t worry; it’s a reference to the multiple balls that nonprofit leaders have to juggle) crowdsourced a list of hundreds of things that funders do that get on people’s nerves, condensing them into the “Funding Logistics Aggravation, Incomprehensibility, and Laughability (FLAIL) Index…a list of things that make us want to punch a wall, scratch our heads in bewilderment, or crack up laughing. Or drink.”
 
Here are a selection:

  • You are not clear on what you will fund and what you won’t (+1 point). Have a list of what you do fund, and what you do NOT fund.
  • You don’t fund existing programs (+5 point). Really, it needs to be “innovative”? How about you fund programs that “work”?
  • You don’t fund “staff salaries.” (+5 points). Really? Who do you even think is running the programs, much less writing this grant proposal?!
  • You process takes longer than it takes to conceive and give birth to a baby (+5 point). If your LOI plus proposal plus site visit takes longer than for the average couple to make a human being, it’s too long.
  • You ask for an entirely new proposal for renewal grants (+1 point). This org has been with you for a year or two or three. Why ask them to jump through the hoops again? Just ask for an update.
  • You ask for the board chair’s signature, or board members’ signature (+5 point). Some of us have board chairs who are difficult to track down. I promise, no one is going around pretending to be us and writing grant proposals on our behalf.
  • You send paper applications and require nonprofits to fill them out (+5 point). We don’t have typewriters! Verily!
  • You require ridiculous stuff like “a stamp of the common seal of the organization” (+1 point)
  • You don’t offer to show all the questions up front (+5 point). It is irritating to have to fill out each page before being able to see the next questions.
  • You ask for extensive info for small amounts of money (10-page narrative for 5K?) (+5 point)
  • You ask the same questions three or four different times (+5 point). “What are your goals?” “What does it look like if you are successful?” “What do you hope to achieve with this funding?” Argh!!
  • You force applicants to fill out your own budget form (+10). We all have our own budget formats, and we spend way too much time translating it across 20 different funders who each has a different budget template. Please stop the madness and just accept our format!
  • You ask for a 5-year budget (+5 point). Considering the volatility of this sector, many of us can barely project one year out. We’ll project 3 or 5 years out if you ask, but just know that it’ll likely change.
  • You punish nonprofits for having too much in reserve (+1 point)
  • You punish nonprofits for having too little in reserve (+1 point)
  • You ask the sustainability question (+5 point). As I wrote earlier, the answer to the question “How will you fund this program when our support runs out” will always be a euphemism for “We will leave you alone and bother other people,” so there’s no point asking it.
  • You require excessive reports (+1 point). Do you really need quarterly reports for a 5K grant?


4. Wildcard: From foxes to lions: why the elites always rule
Writing in NewStatesmen, Hugo Drochon revisits the early 1900s Italian economist Vilfredo Pareto’s thesis that “elites always rule.”
 

“There is always the domination of the minority over the majority. And history is just the story of one elite replacing another. This is what he called the “circulation of elites”. When the current elite starts to decline, it is challenged and makes way for another. Pareto thought that this came about in two ways: either through assimilation, the new elite merging with elements of the old, or through revolution, the new elite wiping out the old. He used the metaphor of a river to make his point. Most of the time, the river flows continuously, smoothly incorporating its tributaries, but sometimes, after a storm, it floods and breaks its banks.
 
Drawing on his Italian predecessor Machiavelli, Pareto identified two types of elite rulers. The first, whom he called the “foxes”, are those who dominate mainly through combinazioni (“combination”): deceit, cunning, manipulation and co-optation. Their rule is characterised by decentralisation, plurality and scepticism, and they are uneasy with the use of force. “Lions”, on the other hand, are more conservative. They emphasise unity, homogeneity, established ways, the established faith, and rule through small, centralised and hierarchical bureaucracies, and they are far more at ease with the use of force than the devious foxes. History is the slow swing of the pendulum from one type of elite to the other, from foxes to lions and back again.
 
The relevance of Pareto’s theories to the world today is clear. After a period of foxes in power, the lions are back with renewed vigour. Donald Trump, as his behaviour during the US presidential campaign confirmed, is perfectly at ease with the use of intimidation and violence. He claimed that he wants to have a wall built between the United States and Mexico. His mooted economic policies are largely based on protectionism and tariffs. Regardless of his dubious personal ethics – a classic separation between the elite and the people – he stands for the traditional (white) American way of life and religion.
 
This is in stark contrast to the Obama administration and the Cameron government, both of which, compared to what has come since the votes for Trump and Brexit, were relatively open and liberal. Pareto’s schema goes beyond the left/right divide; the whole point of his Systèmes socialistes was to demonstrate that Marxism, as a secular religion, signalled a return to faith, and thus the return of the lions in politics.
 
In today’s context, the foxes are the forces of globalisation and liberalism – in the positive sense of developing an open, inter­connected and tolerant world; and in the negative sense of neoliberalism and the dehumanising extension of an economic calculus to all aspects of human life. The lions represent the reaction, centring themselves in the community, to which they may be more attentive, but bringing increased xenophobia, intolerance and conservatism. For Pareto, the lions and foxes are two different types of rule, both with strengths and weaknesses. Yet the elite is always composed of the two elements. The question is: which one dominates at any given time?”


5. Items of Note


6. Robo Advisors for Good
As previously noted, two long-term trends I'm tracking are the rise of so-called "robo-advisors" (low-fee online wealth management companies which use automation and algorithms instead of an army of humans to manage and efficiently balance investment portfolios) and the increasing demand from asset owners for impact/responsible/sustainable investment products.

There are now several companies trying to operate at this intersection, and I’m tracking them here (without making any claims on their quality). Thanks to those who sent in several more this past week. Know of others? Please let me know.


7. Job Postings


8. Upcoming Events
Feb 7-8 Data on Purpose (Stanford University) Effective Philanthropy
Feb 9: Case Studies Through a New Energy Lens (Columbia University) Impact Investing
Feb 15 The Economist: Mainstreaming Purpose-Driven Finance (NYC) Impact Investing
Feb 24 Yale Philanthropy Conference (New Haven, CT) Effective Philanthropy
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) Effective Philanthropy


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog sheepishly trying to retrieve his cat-adjacent toy).


Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for January 13: robo-advisors + impact; nonprofit resilience in the Trump era; “Giving Pledge 2.0”

Brian WalshComment

Hi friends,

Happy New Year!  Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible investing: robo-advisors + sustainable investing products = future of wealth management?

Two long-term trends I'm tracking are the rise of so-called "robo-advisors" (low-fee online wealth management companies which use automation and algorithms instead of an army of humans to manage and efficiently balance investment portfolios) and the increasing demand from asset owners for impact/responsible/sustainable investment products.

There are now several companies trying to operate at this intersection, and I’m going to begin tracking them here:

Know of others? Please let me know.
 

2. Impact Investing: "hard-nosed financial giants want to make money"
The Economist reports from the Global Impact Investing Network’s conference in Amsterdam late last year:

“In the past two years BlackRock, the world’s biggest asset manager, launched a new division called “Impact”; Goldman Sachs, an investment bank, acquired an impact-investment firm, Imprint Capital; and two American private-equity firms, Bain Capital and TPG, launched impact funds. The main driver of all this activity is investor demand. Deborah Winshel, boss of BlackRock Impact, points to the transfer of wealth to women and the young, whose investment goals, she says, transcend mere financial returns. Among institutions, sources of demand have moved beyond charitable foundations to hard-bitten pension funds and insurers.

Definitional squabbles still plague the impact community….The industry is also held back by a restricted choice of asset classes, and by the limited scale of investment opportunities. According to a survey by the Global Impact Investing Network…investors were managing $36bn in impact investments in 2015. But the median size of investment remained just $12m…

Cynics may still dismiss impact investing as faddish window-dressing. Of Zurich’s $250bn-plus in assets under management, only $7bn-worth are classified as impact investments. At Goldman’s asset-management arm, impact and ESG-integrated investments combined only make up $6.7bn out of a total $1.35trn in assets under management.

But that is to ignore the scale and progress that large institutional investors have brought to impact investing. Although $7bn is a tiny slice of Goldman’s portfolio, it is huge compared with the investments of even well-established impact specialists, such as LeapFrog, whose commitments total around $1bn. And the entry of hard-nosed financial giants sends an important message about impact investing: that they see it as profitable for themselves and their clients. It is not enough to make investors feel good about themselves; they also want to make money.”

 

3. Effective Philanthropy:  Four Steps for Building Nonprofit Resilience in the Trump Era
Writing in the Chronicle of Philanthropy, my friend and former colleague Tom Watson opines that in the Trump era, “the key to nonprofit action is to build resilience — our collective ability to adapt and plan and collaborate over the next year — instead of reacting in the short term.”

He goes on:

"1. Review your case for support and action.

We all rely on case statements to form the bedrock of our message for activism, marketing, and fundraising. It’s the language that describes our work, our goals, and our impact. But is that language calibrated for an American society that’s now facing the threat of upheaval greater than at any time since the depths of the Great Depression? In most cases, I’d say no.

Smart nonprofit leaders will review their case statements early in 2017 and make sure that they accurately reflect not only the organization’s programs and goals but the changing atmosphere…

2. Revisit your strategic plan. 
Strong nonprofit strategic plans rely on measures that show whether your approach to change is making progress. They don’t live on dusty shelves as the nifty product of a smart consultant but on the working agendas of senior staff and board-committee meetings throughout the year. Good strategic planning yields more organizational resilience because it’s inherently flexible and allows senior leaders to pursue large-scale goals and impact while adjusting for challenges and opportunities.

This is a time to review that plan (or if you’re in the midst of a planning cycle, adjust for a changing world order). Are the underlying assumptions still correct? Is the budget reasonable? Are your priorities the right ones? Does your approach to change hold up in a civil society under extreme stress from a radical administration?...

3. Hold leadership discussions. 
Speaking of leadership, these are times to convene often and discuss everything. The best meetings I’ve attended since the election don’t hide behind vagaries and euphemisms; strong leaders (both executives and board members) are explicit about what worries them and where they believe the challenges and opportunities lie. In some ways, the Trump presidency and its potential threats to civil liberty and our system of government can help a canny nonprofit leader draw her leadership closer together…

4. Renew partnerships. 
Real resilience relies increasingly on multiple players, coalitions, and even large-scale networks — and it’s impossible to make a real impact without them. This is a time to strengthen our partnerships with major donors, with other nonprofits, with government, and with corporate supporters. In truth, we should all spend more resources on this anyway because the world we work in is so interconnected that very few nonprofits can achieve much as programmatic islands. But the perceived crisis in civil society demands more attention and more fruitful connections. The human element is in this important as well: Your own personal resilience as a nonprofit leader can only increase by sharing your anxiety and working shoulder to shoulder with caring allies..."

 

4. Wildcard: Giving Pledge 2.0 - "How liberals should spend their Trump-gotten gains"
Since Election Day, the Dow has been up almost 9%. Writing in CNN, John MacIntosh of SeaChange Capital Partners argues that wealthy people who oppose President Elect Donald Trump should “commit to spend the majority of any stock market gains earned from Election Day to the inauguration fighting those policies of the Trump administration that are most antithetical to your values.” He calls it the “Giving Pledge 2.0

“[T]he additional profits are just the extra money that corporations will be allowed to extract from the American people under the Trump administration. An extraction that is particularly objectionable since corporate profits are already at an all-time high (as a percentage of GDP) and the money will be taken from those who can least afford it: subprime borrowers (Goldman and the banks are up), young people (for-profit education organizations are up), future generations (if corporate taxes go down now, taxes will have to go up later), those living in climate-exposed areas (oil stocks are up) and other vulnerable citizens (for-profit prisons are up).

So to me, my post-Election Day profits are just the present value of other people's future misery…

Anyone affluent enough to have meaningful stock market investments won't need extra money under a Trump administration. Our taxes will go down, and we don't need the things -- affordable health insurance, reproductive health services, Medicaid, fair treatment by the police -- that are poised to get very tough over the next four years. So that leaves only one option: Give the money back…

One way is to set up a donor-advised fund at your broker or community foundation (e.g., the "Keep America Decent Fund"). After the inauguration, simply donate 50% (or more) of gains you've made since Election Day to the fund and then spend it down over the next four years by supporting nonprofits most aligned with your values.”

 

5. Items of Note


6. Job Postings


7. Upcoming Events
Feb 7-8 Data on Purpose (Stanford University) Effective Philanthropy
Feb 15 The Economist: Mainstreaming Purpose-Driven Finance (NYC) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) Effective Philanthropy


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog who wants you to leave the internet to play with him).


Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for December 22: the case against social investing; beyond the tradeoff debate; 50 years of philanthropy; and conditional optimism

Brian WalshComment

 

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible investing: the case against public pension funds engaging in social investing
 Public pension funds invest taxpayer money in order to provide money for retired government employees (known as beneficiaries) today and well into the future. Since at least the 1970’s, state legislatures and pension boards have advocated or mandated the types of investments that these public pension funds should – and should not – invest in.
 
The Center for Retirement Research at Boston College recently released a report, “New Developments in Social Investing by Public Pensions,” which concludes that public pension funds should not engage in what they term social investing, claiming that “social investing is often not effective, as other investors step in to buy divested stocks” and that this approach “can also produce lower investment returns, conflict with the views of beneficiaries and taxpayers, and interfere with federal policy.”

“Social investing in public plans highlights a classic principal-agent problem in economics. The principals in this case are tomorrow’s pension beneficiaries and/or taxpayers: the people with skin in the game. The agents are the fund boards or state legislatures that make investment decisions on behalf of the principals. In theory, agents are supposed to act solely in the interests of the principals. In reality, especially in public plans, conflicts of interest may arise if state legislatures make investing decisions for political reasons. If social investing produces losses, tomorrow’s taxpayers will have to ante up or future retirees will receive lower benefits. The welfare of these future actors is not well represented in the decision-making process.
 
Even if decision makers always acted in the best interests of beneficiaries, it is still very difficult to determine how different beneficiaries value ESG factors. For example, one beneficiary may accept lower returns for fossil-free but not firearms-free investments, while a second one may accept lower returns for terror-free but not fossil-free investments, and a third may not accept lower returns at all. Given different preferences, it would be difficult for public pension funds to fully incorporate the value of ESG factors of all beneficiaries. Additionally, these preferences may change over time as social values and political views shift.”


2. Impact Investing: Moving Beyond the Tradeoff Debate
Writing in Medium, the Omidyar Network’s Matt Bannick and Paula Goldman are bullish on impact investing, but “frustrated by some of the rhetoric we hear, especially the ongoing — almost ideological — debate about whether there is a necessary tradeoff between financial returns and social impact….
 

"The skeptics argue there is always a tradeoff; the purists argue there is never a tradeoff. In conferences and newspapers and boardrooms, both sides stake their claim, each readily marshalling compelling examples to reinforce their world view. The argument never seems to end.
 
We believe the answer to this hotly contested question is not yes or no but rather: “It depends.” Our experience at Omidyar Network suggests that there are many opportunities to achieve both great returns and great impact. Indeed, it seems to us that in many cases, the best way to achieve massive social impact is to build a fabulous business that serves a desired market. If a company is highly financially successful, it can use retained earnings and its access to capital markets to serve more people. However, there are also circumstances where commercial returns are simply not possible but businesses can still be highly impactful (and more sustainable than grant reliant nonprofits)…. For us, a concession on return is justified in specific circumstances: when the investment has the potential to transform not just the lives of its direct beneficiaries, but the whole sector within which it operates.”

 They then challenge four “myths” about the relationship between financial returns and social impact:
Myth 1: Solving Social Problems is Inherently Concessionary
Reality: Many Investments Achieve Both Impact and Return

Myth 2: Only Super Profitable Companies Have Real Impact
Reality: There Are Several Paths to Impact
 
Myth 3: Can’t Reach Two Goals
Reality: In Many Cases, You Can
 
Myth 4: “Concessionary Capital” Distorts Markets
Reality: Sometimes There is No Market to Distort

3. Effective Philanthropy: a historical perspective on the past 50 years of philanthropy
In celebration of its 50th Anniversary, the Hewlett Foundation commissioned a study on the past half century of philanthropy in the US. Here are some highlights:

"It estimated there were about 18,000 foundations in 1966, although only 6,803 had assets of more than $200,000 or made annual grants of more than $10,000. Combined, these foundations had approximately $19 billion in total assets and made $1.2 billion of grants out of national charitable giving totals of nearly $14 billion…

In 2014, some 67,700 foundations held $831.6 billion in net assets and gave nearly $55 billion, while total charitable giving rose to its highest level ever, $358 billion…
 
Today’s philanthropy, and especially its mega-philanthropy, echoes and is implicated in today’s skewed economic distribution. Even when it is not directed to ‘‘big bets’’ for social change and instead channeled to traditional institutions------universities, hospitals, museums------such gifts underscore the power of a small elite to impose their preferences and priorities on the public and on private institutions. The gap between the wealthiest nonprofit institutions and the bulk of the sector widens. Some 28 percent of the $40 billion raised by America’s universities, for instance, went to the top 20 institutions with the largest endowments. In fact, as the Congressional Research Service recently reported, 74 percent of the $516 billion in total endowment assets held by colleges and universities in 2014 was concentrated in just 11 percent of those institutions….
 
What is new today is not the predominance of self-made wealth but the speed at which that self-making occurs------and thus, the age at which those who have accumulated great wealth can apply it to philanthropic ends. The vast majority of the major donors of the 20th century only turned to systematic philanthropy (as opposed to haphazard gift-giving to intimates) late in their careers, most often as a post-retirement project…
 
In the last half century, however, the market has risen as a rival paradigm, surpassing scientific or academic norms as the dominant means of understanding philanthropic practice. This market-based orientation has taken on many forms and assumed many names: from venture philanthropy to strategic philanthropy to philanthrocapitalism to social entrepreneurship to hacker philanthropy. There is considerable overlap between these categorizations, but there are also important distinctions between them, reflecting both the particular historical moments in which the labels developed and the dominant modes of industry, commerce, and accumulation that they modeled. There are many other terms whose history we do not consider below – in the time it has taken you to read this paragraph, it is likely a few more have been added to the philanthropic lexicon. This taxonomical profusion is itself a development worthy of consideration… It is difficult to determine whether this has been due to the fact that the actual pace of change within the sector has accelerated, whether the sector is now experiencing heightened self-consciousness, or whether the sector is simply more sophisticated at self-branding….
 
The ascendance of a business management-trained class, and of management-based theory, within the philanthropic sector has perhaps been most significant to the rise of strategic philanthropy, for it encouraged foundations and donors to regard philanthropic interventions in terms of carefully-calibrated investments. In this sense, evaluation was not simply applied retrospectively to understand a program’s impact and to inform future philanthropic practice; nor was it a public relations instrument, to educate the public about the contributions of philanthropy. Strategic philanthropy has helped to incorporate evaluation into the grantmaking process itself, with outcomes defined in terms of closely monitored ‘‘deliverables’’ and frequent benchmarking of performance metrics…"



4. Wildcard: conditional optimism about the future
Cognitive scientist and linguist Steven Pinker gave an interview to Vox on why he’s optimistic about the future:

“I’ve never been “optimistic” in the sense of just seeing the glass as half-full — only in the sense of looking at trend lines rather than headlines. It’s irrational both to ignore good developments and to put a happy face on bad ones.
 
As it happens, most global, long-term trends have been positive. As for the future, I like the distinction drawn by the economist Paul Romer between complacent optimism, the feeling of a child waiting for presents, and conditional optimism, the feeling of a child who wants a treehouse and realizes that if he gets some wood and nails and persuades other kids to help him, he can build one. I am not complacently optimistic about the future; I am conditionally optimistic….
 
Look at history and data, not headlines. The world continues to improve in just about every way. Extreme poverty, child mortality, illiteracy, and global inequality are at historic lows; vaccinations, basic education, including girls, and democracy are at all-time highs.
 
War deaths have risen since 2011 because of the Syrian civil war, but are a fraction of the levels of the 1950s through the early 1990s, when megadeath wars and genocides raged all over the world. Colombia’s peace deal marks the end of the last war in the Western Hemisphere, and the last remnant of the Cold War. Homicide rates in the world are falling, and the rate in United States is lower than at any time between 1966 and 2009. Outside of war zones, terrorist deaths are far lower than they were in the heyday of the Weathermen, IRA, and Red Brigades….
 
Several awful things happened in the world’s democracies in 2016, and the election of a mercurial and ignorant president injects a troubling degree of uncertainty into international relations.
 
But it’s vital to keep cool and identify specific dangers rather than being overcome by a vague apocalyptic gloom…”


5. Items of Note
6. Job Postings
7. Upcoming Events
Feb 7-8 Do Good Data (Stanford University) Effective Philanthropy
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) Effective Philanthropy


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this woman hugging her own real-life teddy bear). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.
 

All Things Impact for December 2: only 1 in 10 funds have female managers; unleashing capital for creativity; selling social change; the case for normalizing Trump

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: only 1 in 10 funds in the US have female managers
 According to a new research examining more than 26,000 asset management funds across 56 countries by data provider Morningstar, the number of women running investment funds globally has not increased since the financial crisis despite a number of high-profile campaigns to correct female under-representation in the asset management market. As the Financial Times reports:

“In June a group of Europe’s largest asset managers…joined forces in an attempt to address accusations that the asset management market is an old boys’ club that promotes and protects the interests of white, middle-aged men.
 
Almost 30 companies and industry organisations signed up to the campaign, called The Diversity Project, to try to ensure diverse recruitment across the industry in terms of gender, ethnicity, socio-economic background, age, sexual orientation and disability…
 
“Beyond entry level, I also see women becoming disillusioned as they still feel the industry is very male-dominated and therefore it can feel less culturally welcoming.”
 
…companies were often unable to retain female employees after hiring them. “Hiring is an important element of diversity and most firms do well at the graduate intake level. The greatest issue is retention,” she said.


2. Impact Investing: unleashing more capital for creativity
The New York Times reports on the new investment product conceived by Upstart Co-Lab & the Calvert Foundationthat allows investors to make a financial return while providing capital for artists and creative place-making efforts. 

“There are artists working on all the important social issues,” said Laura Callanan, the founding partner of Upstart Co-Lab. “Some of those artists are starting social purpose businesses and, like any entrepreneur, they need capital. One of our goals is to unleash more capital for creativity.”
 
…The Calvert Foundation has set returns for its Community Investment Note ranging from 1 to 4 percent, depending on the length of the investment. The note has made $1.5 billion in impact investments in affordable housing, education and small business over the last 20 years, with a 100 percent return of principal and interest.
 
Jennifer Pryce, president and chief executive of the Calvert Foundation, said that when Calvert was approached by Upstart Co-Lab, it analyzed its own $300 million portfolio and found that it already had $20 million in investments going to creative endeavors.
 
“We had never looked at our investment portfolio in terms of groups directing their investment to arts or creative place making,” she said. “It was revealing to me that this has been part of my portfolio implicitly for years. These were groups we had lent to and been repaid.”
 
…[Investor Lorrie] Meyercord said that she wanted to bring other investors along.
 
“My hope is to let people see what’s happening out there in terms of investments and to be inspired,” she said. “Most people invest their money and give it off to someone else, and they hope to get a lot back. They’re not expecting to be totally inspired by what they’re investing in.”

 
3. Effective Philanthropy: Moving from “Build It & They Will Come” to Selling Social Change
Taz Hussein & Matt Plummer write in the Stanford Social Innovation Review about a “a little-discussed issue that affects a wide range of innovative social programs. Just because there’s a clear need doesn’t mean there’s demand. We call this the “need-equals-demand” fallacy. And it’s widely felt.”

“Lack of demand is a particularly vexing issue for those organizations eager to achieve transformative scale—that is, to advance from incremental growth to a scale of intervention that can actually solve a social problem. Rigorously evaluated evidence-based practices and programs alone cannot trump beneficiaries’ lack of awareness or interest. Scale requires more than a program that achieves intended outcomes. Nonprofits and funders that aspire to achieve breakthrough results need to reject the notion that need equals demand. Rather, they must be prepared to actively generate demand for social change. Nonprofits must learn some of the same demand-generation techniques that for-profits have been honing for decades.
 
Learning how to generate demand won’t come easily. Most nonprofits and funders optimistically operate on a widely held assumption about their services: build it and they will come. Often, however, they don’t—at least not in sufficient numbers. Demand often falls short of expectations. So what does it take to close the gap?
 
…Nonprofit organizations need to start by recognizing that innovative social programs don’t simply sell themselves. Getting a new idea adopted, even when it has proved to be effective, is often very difficult, but not impossible. There are three critical steps nonprofits need to take when creating and implementing solutions. In the sections that follow, each of these three steps will be explored in detail.

  • Recognize the limits of designing a service or program primarily for effectiveness and also design for “spreadability.”
  • Go beyond identifying a broad group of potential beneficiaries and focus first on a subgroup most likely to participate.
  • Develop and resource a sales and marketing capability from the outset, right alongside budgeting for program delivery.


4. Wildcard: the Case for Normalizing Trump
Matthew Yglesias writes in Vox that “even when clear evidence of corruption emerges once an authoritarian populist regime is in place, the regime’s key supporters are generally unimpressed.” He thinks it’s too late to focus on Trump’s character – “[as Luigi] Zingales writes, opposition that’s grounded in Trump’s norm-violating personal behavior risks “crown[ing] Mr. Trump as the people’s leader of the fight against the Washington caste.” 

“Normalization, in this context, is typically cast as a form of complicity with Trump in which the highest possible premium is placed on maintaining a rigid state of alert and warning people that he is not just another politician whom you may or may not agree with on the issues.
 
But several students of authoritarian populist movements abroad have a different message. To beat Trump, what his opponents need to do is practice ordinary humdrum politics. Populists in office thrive on a circus-like atmosphere that casts the populist leader as persecuted by media and political elites who are obsessed with his uncouth behavior while he is busy doing the people’s work. To beat Trump, progressives will need to do as much as they can to get American politics out of reality show mode.
 
Trump genuinely does pose threats to the integrity of American institutions and political norms. But he does so largely because his nascent administration is sustained by support from the institutional Republican Party and its standard business and interest group supporters. Alongside the wacky tweets and personal feuds, Trump is pursuing a policy agenda whose implications are overwhelmingly favorable to rich people and business owners. His opponents need to talk about this policy agenda, and they need to develop their own alternative agenda and make the case that it will better serve the needs of average people. And to do that, they need to get out of the habit of being reflexively baited into tweet-based arguments that happen on the terrain of Trump’s choosing and serve to endlessly reinscribe the narrative of a champion of the working class surrounded by media vipers….
 
[T]he most normal, blandly partisan parts of Trump’s agenda are also among the least popular. And yet Trump’s support for them is what immunizes him from Republican criticism and oversight over the abnormal stuff. Defending the basic norms of American constitutional government is important, but doing it as a partisan agenda won’t work — it turns off Trump’s core supporters and signals to wavering ones that his opponents are focused on abstractions rather than daily life. As long as Trump is enjoying the lockstep support of congressional Republicans, his opponents need to find ways to turn attention away from the Trump Show and focus it on his basic policy agenda and the ways in which it touches millions of people.”

 
5. Items of Note


6. Job Postings


7. Upcoming Events
Dec 6 Revaluing Ecosystems: FT - Rockefeller Foundation Series (New York) Responsible Investing
Dec 6-7 RI Americas 2016 hosted by Bloomberg (New York) Responsible Investing
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
Feb 7-8 Do Good Data (Stanford University) Effective Philanthropy
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) Effective Philanthropy

8. Upcoming Webinars
Dec 6 at 1pm ET Markets for Good: The Data Playbook: Data Practices for Purpose-Driven Work
Dec 6, 7, & 14 at 1pm ET Nonprofit Finance Fund: Financial Health & Social Good: Steering through Uncharted Waters
Dec 13 at 2pm ET Mission Investors Exchange: Unlocking Investment in Rural America: A Systemic Approach to Partnerships for Impact

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this puppy who's found a nap buddy). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for November 18: systems-level investing, $8.72 trillion towards impact, civil society under President Trump, and how Obama spoke to his daughters about the election

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: how institutional investors think about “intentional, systems-level” investing
“Systems-level thinking may be the next great evolution of investment theory about how to deal with risk,” according to a new report by The Investment Integration Project and the Investor Responsibility Research Center Institute. “Systems-level thinking is not occurring as a separate activity; it can be well-integrated into traditional investment policies and practices.”

The report set out to identify ways that 50 major institutional investors, with some $17.3 trillion in aggregate assets, are deploying their capital through a systems-level context.

5 Tools of Integration:

  1. Investment belief statements: incorporated their understanding of the value of Environmental, Social and Governance (ESG) issues as fundamental to the investment process
  2. Securities selection: incorporated ESG considerations into their valuations of investment opportunities across asset classes and underweighted or divested from investors that do not meet internationally recognized norms and standards 
  3. Proxy voting and engagement: taken up in-depth engagement with corporations to better understand their portfolio companies as well as to increase the positive impacts of corporations’ operations on the environment and society so as to decrease risk and increase opportunity at an individual company level
  4. Targeted investments: created targeted funds to allocate assets to financially viable projects that directly address pressing contemporary problems such as climate change, water scarcity, healthcare and access to finance and technology 
  5. Manager selection: communicated these concerns  through their selection of external managers, requiring them to consider their own impacts at these systems levels and implement effective policies to manage them.

10 Tools of Intentionality, “pathways through which investors can bridge the gapbetween daily portfolio management decision-making and systems-level investing”:

  1. Additionality: Undertake investments that might not otherwise have been made
  2. Locality: Pursue sound investments that support and strengthen interrelated economic activities within a defined geographic region.
  3. Solutions: Create investment vehicles that target particular social or environmental problems of substantial systemic importance
  4. Standards Setting: Declare off limits certain investments that transgress broadly accepted bounds of normative conduct, or conversely to emphasize certain investments that support broadly agreed upon goals for positive norms.
  5. Polity: Engage in public policy debates they view as relevant to their particular management of risks and rewards at systems levels.
  6. Diversity of Approach: Accommodate the consideration of a diverse set of systems>level issues
  7. Self-Organization: Allocate resources to the strengthening of the resilience of the financial system as a whole.
  8. Interconnectedness: Increase the flow of information about the environmental, societal and financial systems that they operate within, either among themselves or with the general public.
  9. Evaluations: Place a financial value on the difficult>to>quantify wealth or wealth>creating potential of elements of environmental and societal systems, sometimes referred to as non>financial in nature.
  10. Utility: Maximize the alignment of the asset classes in which they invest with the societal purposes those asset classes were designed to address. 


2. Impact Investing: one-fifth of all investment under professional management in the US is sustainable/responsible/impact
According to the Forum for Sustainable and Responsible Investment (US SIF)'s latest report, the market size of sustainable, responsible and impact investing in the United States in 2016 is $8.72 trillion, or one-fifth of all investment under professional management.

From the report:

"The significant growth in these ESG assets reflects several factors. These include growing market penetration of SRI products, the development of new products that incorporate ESG criteria and the incorporation of ESG criteria by numerous large asset managers across wider portions of their holdings. Furthermore, the past two years have seen new disclosure on the part of numerous institutional investors and asset managers on how they are implementing the Principles for Responsible Investment (PRI), a global framework for taking ESG considerations into account in investment analysis, decision making and active ownership strategies.

The broad outlines of the ESG issues incorporated by money managers are as follows:

• Environmental investment factors apply to $7.79 trillion in assets under management. Climate change criteria shape the investment of $1.42 trillion in assets under management, a more than fivefold increase since 2014. Clean technology is a consideration incorporated by money managers with $354 billion in assets under management.

• Social criteria, which include criteria related to issues such as conflict risk, equal employment opportunity and diversity, and labor and human rights, apply to $7.78 trillion in assets under management.

• Governance issues apply to $7.70 trillion in assets under management, a twofold increase since 2014.

• Product-specific criteria, such as restrictions on investment in tobacco and alcohol, apply to $1.97 trillion in assets."


3. Effective Philanthropy: civil society under President Trump
My friend Lucy Bernholz has some reflections on the recent election at her excellent blog Philanthropy 2173:

"That democracy depends on an independent civil society is a bedrock assumption in political theory. In the USA, we've just held an election that will test this theory against reality…
 
We can learn from history, our own in the U.S. and others' around the globe. We can look to previous generations and contemporary societies…. 
 
Civil society in the U.S. will be tested in terms of its ability to hold the newly elected administration accountable, to stand for the rights of those who didn't support the election victors (in this case, the majority of voters), and to remain steadfast protectors of our individual and collective rights to free expression, free press, free assembly, and privacy. Again, there are things we can learn from and build with allies in the U.S. and abroad. What has happened here is not unique, it has unfortunate parallels and amplifiers in many places around the world, here and now….
 
Civil society doesn't have the luxury of time. The structures of civil society have been upended by the digital age - and not in ways that position us well to take on the tasks at hand. We knew what the demands were for digital civil society - and of democracies in the digital age - on Monday. But back then, we mistakenly thought we hadtime to bring our institutions and legal practices closer in line with the nature of digital action. Today these demands are clearer to more people - and more pressing. And we've lost too much time already."


4. Wildcard topic: how Obama spoke with his daughters about the election results:
New Yorker editor David Remnick has a new interview with President Obama following the recent election:

“Even in the midst of what he can only see as a disastrous turn of history, Obama retained the uncanny capacity to view his quandaries as if he were drafting a research paper. “A President who looked like me was inevitable at some point in American history,” he said. “It might have been somebody named Gonzales instead of Obama, but it was coming. And I probably showed up twenty years sooner than the demographics would have anticipated. And, in that sense, it was a little bit more surprising. The country had to do more adjusting and processing of it. It undoubtedly created more anxiety than it will twenty years from now, provoked more reactions in some portion of the population than it will twenty years from now. And that’s understandable.”
 
How did he speak with his two daughters about the election results, about the post-election reports of racial incidents? “What I say to them is that people are complicated,” Obama told me. “Societies and cultures are really complicated. . . . This is not mathematics; this is biology and chemistry. These are living organisms, and it’s messy. And your job as a citizen and as a decent human being is to constantly affirm and lift up and fight for treating people with kindness and respect and understanding. And you should anticipate that at any given moment there’s going to be flare-ups of bigotry that you may have to confront, or may be inside you and you have to vanquish. And it doesn’t stop. . . . You don’t get into a fetal position about it. You don’t start worrying about apocalypse. You say, O.K., where are the places where I can push to keep it moving forward.”



5. Items of Note


6. Job Postings


7. Upcoming Events
Dec 1 Challenging Perspectives on Impact Investing (Stanford)
Dec 6 Revaluing Ecosystems: FT - Rockefeller Foundation Series (New York) Responsible Investing
Dec 6-7 RI Americas 2016 hosted by Bloomberg (New York) Responsible Investing
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
Feb 7-8 Do Good Data (Stanford University) Effective Philanthropy
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) Effective Philanthropy

8. Upcoming Webinars
Dec 6 at 1pm ET Markets for Good: The Data Playbook: Data Practices for Purpose-Driven Work
Dec 13 at 2pm ET Mission Investors Exchange: Unlocking Investment in Rural America: A Systemic Approach to Partnerships for Impact

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog escaping from his owner's beard). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.
brianjwalsh@gmail.com @brianwalsh

All Things Impact for November 11th: four reflections on the election of Donald J. Trump

Brian WalshComment
Hi friends,
 
This week marks the one year anniversary since I started sending out this email newsletter, and this is the 42nd edition. I usually share three links from across the spectrum of ways that people deploy money to make social and environmental impact – responsible investing (in the public markets), impact investing (in the private markets), and effective philanthropy – plus a “wildcard” topic. (For previous issues, to learn more, and to subscribe, visit All Things Impact.)
 
As we come to terms with the implications of the surprising (at least to those who follow polls and media predictions) election of Donald J. Trump as the 45th President of the United States, this week I instead offer four links reflecting on this historic event. As always, I do not necessarily agree nor disagree with these views; I am merely curating content I found interesting. 

I will return to regular postings in the next issue.Please send me any recommendations you have of insightful content worth sharing.

Until then: be kind to one another, and be hopeful. 

We got this.

All the best,
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.
brianjwalsh@gmail.com @brianwalsh

 
1. Leslie Knope’s Letter to America
A member of the writing staff of the TV show Parks and Recreation wrote a “letter to America” in Vox from the perspective of the fictional heroine of that show, Leslie Knope.
“I acknowledge that Donald Trump is the president. I understand, intellectually, that he won the election. But I do not accept that our country has descended into the hatred-swirled slop pile that he lives in. I reject out of hand the notion that we have thrown up our hands and succumbed to racism, xenophobia, misogyny, and crypto-fascism. I do not accept that. I reject that. I fight that. Today, and tomorrow, and every day until the next election, I reject and fight that story.
 
I work hard and I form ideas and I meet and talk to other people who feel like me, and we sit down and drink hot chocolate (I have plenty) and we plan. We plan like mofos. We figure out how to fight back, and do good in this infuriating world that constantly wants to bend toward the bad. And we will be kind to each other, and supportive of each other’s ideas, and we will do literally anything but accept this as our fate.
 
And let me say something to the young girls who are reading this. Hi, girls. On behalf of the grown-ups of America who care about you and your futures, I am awfully sorry about how miserably we screwed this up…
 
Our president-elect is everything you should abhor and fear in a male role model. He has spent his life telling you, and girls and women like you, that your lives are valueless except as sexual objects. He has demeaned you, and belittled you, and put you in a little box to be looked at and not heard. It is your job, and the job of girls and women like you, to bust out.
 
You are going to run this country, and this world, very soon. So you will not listen to this man, or the 75-year-old, doughy-faced, gray-haired nightmare men like him, when they try to tell you where to stand or how to behave or what you can and cannot do with your own bodies, or what you should or should not think with your own minds. You will not be cowed or discouraged by his stream of retrogressive babble. You won’t have time to be cowed, because you will be too busy working and learning and communing with other girls and women like you. And when the time comes, you will effortlessly flick away his miserable, petty, misogynistic worldview like a fly on your picnic potato salad.
 
He is the present, sadly, but he is not the future. You are the future. Your strength is a million times his. Your power is a billion times his. We will acknowledge this result, but we will not accept it. We will overcome it, and we will defeat it.
 
Now find your team, and get to work.”
 
2. The Five Baskets of Trump Voters
William Saletan writes in Slate that the “deplorables make up only one basket. If Democrats dismiss the other four, they’ll keep losing elections.”
“You’re sick to your stomach at the results of this election. Maybe, like me, you’ve had trouble sleeping and eating. You can’t believe your country elected a transparent bigot, misogynist, and conman as president of the United States. You can’t believe voters rejected a supremely qualified woman. The people who did this, the people who voted for Donald Trump, are bad people. They’ve declared war on you. They’ve declared war on all of us…
 
When we talk about Trump’s voters, we’re really talking about five baskets. The first basket is the deplorables: people who love to hate. These are the folks who paint swastikas and write racial slurs on Twitter. The second basket is people who liked Trump’s vilification of immigrants or agreed with him that Clinton didn’t “look like a president.” They’re easily manipulated. The third basket is people who don’t see racism or sexism anywhere. The fourth basket is people who don’t think it’s a big deal. They shrug off Trump’s taped comments about grabbing women as “locker room talk.” And the fifth basket is people who were genuinely troubled by the way Trump treated women, or the way he talked about a Mexican American judge or the mother of a Muslim American soldier, but who voted for him anyway, or stayed home, because they couldn’t stand Clinton.
 
If you talk about all these people as though they’re the same thing—if you call them all racists or sexists or bigots or haters—you’ll lose more elections. And you’ll deserve to lose, because by lumping them all together and dismissing them, you’re doing to them what the worst of them have done to you.
 
Instead, separate the baskets. Ignore the first one. You’re not going to win over these people, and you shouldn’t try to be the kind of party that would. Set the second basket aside and come back to those folks later. They’re educable, but it’ll take a while. Focus on the last three baskets. Try to help these people recognize bias and structural inequality and why those problems matter. If the issue moves them, great. But if it doesn’t, connect with them in other ways. Inspire them with a vision of opportunity. Explain how you can improve their lives. Appeal to values that transcend identity.”
 
3. Autocracy: Six Rules for Survival
Writing in The New York Review of Books, Masha Gessen – a lesbian, Jewish, Russian American dissident who is one of Putin’s chief critics – warns us to take Trump at his word. “I have lived in autocracies most of my life, and have spent much of my career writing about Vladimir Putin’s Russia. I have learned a few rules for surviving in an autocracy and salvaging your sanity and self-respect." 

It might be worth considering them now:
Rule #1: Believe the autocrat. He means what he says. Whenever you find yourself thinking, or hear others claiming, that he is exaggerating, that is our innate tendency to reach for a rationalization. This will happen often: humans seem to have evolved to practice denial when confronted publicly with the unacceptable…
 
Rule #2: Do not be taken in by small signs of normality. Consider the financial markets this week, which, having tanked overnight, rebounded following the Clinton and Obama speeches. Confronted with political volatility, the markets become suckers for calming rhetoric from authority figures. So do people. Panic can be neutralized by falsely reassuring words about how the world as we know it has not ended. It is a fact that the world did not end on November 8 nor at any previous time in history. Yet history has seen many catastrophes, and most of them unfolded over time….
 
Rule #3: Institutions will not save you. It took Putin a year to take over the Russian media and four years to dismantle its electoral system; the judiciary collapsed unnoticed. The capture of institutions in Turkey has been carried out even faster, by a man once celebrated as the democrat to lead Turkey into the EU. Poland has in less than a year undone half of a quarter century’s accomplishments in building a constitutional democracy.
 
Of course, the United States has much stronger institutions than Germany did in the 1930s, or Russia does today. Both Clinton and Obama in their speeches stressed the importance and strength of these institutions. The problem, however, is that many of these institutions are enshrined in political culture rather than in law, and all of them—including the ones enshrined in law—depend on the good faith of all actors to fulfill their purpose and uphold the Constitution.
 
The national press is likely to be among the first institutional victims of Trumpism….
 
Rule #4: Be outraged. If you follow Rule #1 and believe what the autocrat-elect is saying, you will not be surprised. But in the face of the impulse to normalize, it is essential to maintain one’s capacity for shock. This will lead people to call you unreasonable and hysterical, and to accuse you of overreacting. It is no fun to be the only hysterical person in the room. Prepare yourself…
 
Rule #5: Don’t make compromises. Like Ted Cruz, who made the journey from calling Trump “utterly amoral” and a “pathological liar” to endorsing him in late September to praising his win as an “amazing victory for the American worker,” Republican politicians have fallen into line. Conservative pundits who broke ranks during the campaign will return to the fold. Democrats in Congress will begin to make the case for cooperation, for the sake of getting anything done—or at least, they will say, minimizing the damage. Nongovernmental organizations, many of which are reeling at the moment, faced with a transition period in which there is no opening for their input, will grasp at chances to work with the new administration. This will be fruitless—damage cannot be minimized, much less reversed, when mobilization is the goal—but worse, it will be soul-destroying. In an autocracy, politics as the art of the possible is in fact utterly amoral…
 
Rule #6: Remember the future. Nothing lasts forever. Donald Trump certainly will not, and Trumpism, to the extent that it is centered on Trump’s persona, will not either. Failure to imagine the future may have lost the Democrats this election. They offered no vision of the future to counterbalance Trump’s all-too-familiar white-populist vision of an imaginary past…”
 
 4. How to restore your faith in democracy
Joshua Rothman writes in the New Yorker about his recent conversations with the noted Canadian philosopher Charles Taylor:
“I believe it’s a higher mode of being to participate in your own self-government.” In Taylor’s view, cool disengagement is a fiction; an ardent search for goodness is the human reality. “We all seek a sense of what it would be like to be fully connected to something. We all have a sense of what really living, and not just existing, would be. We know that there’s a level of life that’s rare to attain. And whether we attain that or not can be a source of deep satisfaction or shame to us.” It’s possible, Taylor said, to live as a “resident alien” in a democracy, going to work and raising your family without “getting a charge” out of the democratic story. But something might happen to change that. “The feeling that I’m really happy to be living in this society or that I’m really upset; that I’m either living fully or being deprived of that experience—those feelings are signs that the ethic of democracy has seized you….”
 
Taylor believes that, as individuals, we derive our sense of selfhood from shared values that are, in turn, embodied in public institutions. When those institutions change, those changes reverberate within us: they can seem to endanger the very meanings of our lives. It’s partly for this reason that events in the political world can devastate us so intimately, striking us with the force of a breakup or a death. (Similarly, a charismatic candidate can, like a new object of infatuation, help us find new possibilities within ourselves.)
 
Taylor’s calm, scholarly empathy is reassuring; his three-point program for engaging with one’s political opponents—“Try to listen; find out what’s troubling them; stop condemning”—is deeply humane. At times, speaking about Trump’s racist, misogynistic, and xenophobic rhetoric, his voice would rise in anger. Then he would pause, take a breath, and remind me that enthusiasm for Trump could be seen as a genuine and ardent, if misguided, expression of the democratic ethos. “The belief that democracy is supposed to be a system in which non-élites have a say—that principle is built right into the nature of democracy,” he said…
 
Plato proposed a republic run by enlightened philosophers, and Taylor has some ideas about what he might do if he were in charge. In big cities, he told me, it’s easy for people to feel engaged in the project of democracy; they’re surrounded by the drama of inclusion. But in the countryside, where jobs are disappearing, main streets are empty, and church attendance is down, democracy seems like a fantasy, and people end up “sitting at home, watching television. Their only contact with the country’s problems is a sense that everything’s going absolutely crazy. They have no sense of control.” He advocates raising taxes and giving the money to small towns, so that they can rebuild. He is in favor of localism and “subsidiarity”—the principle, cited by Alexis de Tocqueville and originating in Catholicism, that problems should be solved by people who are nearby. Perhaps, instead of questing for political meaning on Facebook and YouTube, we could begin finding it in projects located near to us. By that means, we could get a grip on our political selves, and be less inclined toward nihilism on the national scale. (It would help if there were less gerrymandering and money in politics, too.)
 
One imagines what this sort of rooted, meaningful democracy might look like. A political life centered on local schools, town governments, voluntary associations, and churches; a house in the woods with the television turned off. Inside, family members aren’t glued to their phones. They talk, over dinner, about politics, history, and faith, about national movements and local ones; they feel, all the time, that they’re doing something. It’s a pastoral vision, miles away from the media-driven election we’ve just concluded. But it’s not a fantasy."

All Things Impact for November 4, 2016: ESG & bond portfolios, children of the superrich, feedback loops in philanthropy, and why so many men are incompetent leaders

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: impact of ESG on bond portfolios
You know that responsible and sustainable investing has gained momentum when most of the major Wall Street firms have set up teams to create investable products for clients and research reports on industry trends. Barclays is the latest firm out with a new white paper, “Sustainable Investing and Bond Returns,” by the Barclays Quantitative Portfolio Strategy Research team. They set out to ask the question: “Does the incorporation of environmental, social and governance (ESG) criteria in the investment process improve the financial performance of a bond portfolio or hurt it?” (Spoiler: it improves.)

As the report states, “We are at a turning point where ESG investing is maturing and being formalised through ESG integration into decision-making processes, standardisation of ESG data, new benchmark indices, and broader pro-active engagement with issuers.”

Here are the key findings:

  • Barclays research shows that ESG need not be an “equity-only” phenomenon and can be applied to credit markets without being detrimental to bondholders’ returns.
  • The findings show that a positive ESG tilt resulted in a small but steady performance advantage.
  • No evidence of a negative performance impact was found.
  • ESG attributes did not significantly affect the price of corporate bonds. No evidence was found that the performance advantage was due to a change in relative valuation over the study period.
  • When applying separate tilts to E, S and G scores, the positive effect was strongest for a positive tilt towards the Governance factor, and weakest for Social scores.
  • Issuers with high Governance scores experienced lower incidence of downgrades by credit rating agencies.
  • Broadly similar results were observed using ratings from the two ESG providers considered in this report despite the significant differences between their methodologies.

 
2. Impact Investing: Children of the Superrich Want to Fix the World’s Problems

My friend (and fellow co-host, along with David Bank, of ImpactAlpha’s “Returns on Investment” podcast) Imogen Rose-Smith has a new piece with a provocative title in Institutional Investor about some of the members of The ImPact, “a pledge and a network for high-net-worth individuals and family offices committed to exploring the effects of their investments.” Imogen argues that this individual and family office money is not enough to address the scale of social and environmental problems, without also attracting larger institutional sources of money (which unlike individual asset owners, come with fiduciary obligations).

"The ImPact sees itself as offering a “safe space” for family offices to talk assets and altruism. While the group does publish its white papers and research, and many of its members are public evangelists of impact investing, much else about the group remains private. The ImPact — which wants to be the TED Talks of impact investing — does not disclose its membership’s collective assets, the number of people in its network, or the average deal size in its database.
 
Jessica Matthews, managing director of Cambridge Associates’ mission-related investing group, says the word is getting out to institutional asset owners. She sees rising interest from foundations in particular as well as some endowments, and the quantity of investable products has climbed significantly in recent years. “We have a lot more things to do due diligence on” than when the group started almost a decade ago, Matthews says. Yet the number of institutional-quality impact funds is still small, especially outside of the private markets. “One of the problems is that there needs to be a cross-pollination of strategy,” she notes.
 
Groups like The ImPact can help with that, but their own impact will be limited if they do no more than talk among themselves."


3. Effective Philanthropy: On a Scale of Zero to 10, Would You Recommend This Nonprofit?
In Nonprofit Chronicles, Marc Gunther covers the recent Feedback Summit 2016, a gathering of nonprofits and funders seeking to better listen to people philanthropy seeks to help. (Disclosure: Liquidnet is a donor to the Fund for Shared Insight, which has funded Feedback Labs, the group behind the Summit.)

“[I]magine, if you will, a nonprofit sector with its own Trip Advisor, a guide that would help donors, volunteers and workers better understand which nonprofits do well at serving their customers.
 
The sector is a very long way from creating such a guide, but it is taking small steps in that direction, as more nonprofits experiment with feedback loops — efforts to listen, learn and respond to their constituents, and thereby become more effective. This is welcome news: A movement to build feedback loops into nonprofits is gathering adherents, winning support from foundations and building a community of practice...
 
Feedback loops help address a fundamental disconnect in the nonprofit world: Nonprofits typically are funded by their donors and not by their clients so, unlike businesses, they don’t have financial incentives to be responsive to those they aim to serve. Feedback loops connect them more closely to clients...
  
While these are still early days for feedback loops, they have the potential to improve the performance of nonprofits, give voice to those who are being served and better inform institutional and individual donors.
 
Feedback loops, for example, could be used to evaluate workers in nonprofits or, for that matter, those in government who deliver services. (Imagine a Social Security office or motor vehicles bureau using feedback loops.) They could be used by community foundations to see how the scores of one social service agency compare with others. At the very least, charities could be asked by donors if they listen to the voices of beneficiaries, and what they are learning.
 
Feedback loops raise complicated questions. Should the surveys be anonymous? (Most are.) Should they be used to evaluate nonprofits, their programs, or their workers? (Most are not.) Could feedback loops be used by advocacy groups like 350.org or Amnesty International. (Maybe.) Should any of the data be public? (To the best of my knowledge, none is.) Publicizing the scores of nonprofits will inevitably create temptations to game the feedback system; think of the distortions created by oft-maligned US News college guide."


4. Wildcard topic: Why do so many incompetent men become leaders? 
In the Harvard Business Review a few years back, Tomas Chamorro-Premuzic ponders the reason why more men are in leadership roles than women, positing that this is the case due to “our inability to discern between confidence and competence.”
 
He goes on to write:

 “[B]ecause we (people in general) commonly misinterpret displays of confidence as a sign of competence, we are fooled into believing that men are better leaders than women. In other words, when it comes to leadership, the only advantage that men have over women (e.g., from Argentina to Norway and the USA to Japan) is the fact that manifestations of hubris — often masked as charisma or charm — are commonly mistaken for leadership potential, and that these occur much more frequently in men than in women….
 
The truth of the matter is that pretty much anywhere in the world men tend to think that they that are much smarter than women. Yet arrogance and overconfidence are inversely related to leadership talent — the ability to build and maintain high-performing teams, and to inspire followers to set aside their selfish agendas in order to work for the common interest of the group. Indeed, whether in sports, politics or business, the best leaders are usually humble — and whether through nature or nurture, humility is a much more common feature in women than men….
 
Most of the character traits that are truly advantageous for effective leadership are predominantly found in those who fail to impress others about their talent for management. This is especially true for women. There is now compelling scientific evidence for the notion that women are more likely to adopt more effective leadership strategies than do men. Most notably, in a comprehensive review of studies, Alice Eagly and colleagues showed that female managers are more likely to elicit respect and pride from their followers, communicate their vision effectively, empower and mentor subordinates, and approach problem-solving in a more flexible and creative way (all characteristics of “transformational leadership”), as well as fairly reward direct reports. In contrast, male managers are statistically less likely to bond or connect with their subordinates, and they are relatively more inept at rewarding them for their actual performance. Although these findings may reflect a sampling bias that requires women to be more qualified and competent than men in order to be chosen as leaders, there is no way of really knowing until this bias is eliminated.
 
In sum, there is no denying that women’s path to leadership positions is paved with many barriers including a very thick glass ceiling. But a much bigger problem is the lack of career obstacles for incompetent men, and the fact that we tend to equate leadership with the very psychological features that make the average man a more inept leader than the average woman. The result is a pathological system that rewards men for their incompetence while punishing women for their competence, to everybody’s detriment.”

5. Items of Note


6. Job Postings


7. Upcoming Events
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like this dog excited to see a cat). 

Until next time, thanks for reading!


Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for October 28: passive corporate governance, community development finance & inequality, critiquing philanthropy, and second thoughts on a universal basic income

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: how do passive funds approach corporate governance?
When people have money to invest in the stock market, and they don't want to invest it themselves, they tend to hand it over to asset managers who charge them fees to "actively" manage their money (deciding which stocks and bonds to buy & sell), or to asset managers who charge them lower fees to "passively" manage their money (through things like index funds, which essentially own the whole market). Bloomberg View's Matt Levine writes about "the pleasing theory that index funds, and diversified mutual funds generally, might be illegal under antitrust law because they concentrate too much power over too many companies into too few hands. Vanguard and BlackRock, on this theory, are the new Morgan and Rockefeller, and they have built an anticompetitive trust to enrich themselves at the expense of workers and consumers. The trust is, like, the S&P 500. Like, every big public company is in the trust."

"How do these new monopolists manage their new monopolies? Mostly by not:

'Vanguard has 15 people overseeing work on about 13,000 companies based around the world. BlackRock has about two dozen people who work on governance issues at some 14,000 companies held in its index funds and exchange-traded funds, and it plans to add seven more in the coming months, according to a spokesman.'
Their shareholder engagement style seems pretty chill. "Rakhi Kumar, head of corporate governance at State Street’s asset-management unit, said she tells her team not to agree to every meeting companies ask for because of time constraints." "It’s not shareholders’ role to second guess what management is doing in every single issue," says the woman in charge of BlackRock's voting. There is some active decision-making, on executive pay and mergers and proxy fights. "We moved from a position of reluctance to make our weight felt to absolute interest in making our weight felt," says retired Vanguard founder John Bogle. “We’re riding in a car we can’t get out of,” says a Vanguard governance principal. “Governance is the seat belt and air bag.”
But there doesn't seem to be a ... theme? Like no one quite says "active managers want their companies to be governed like this, and passive managers want their companies to be governed like this." There are some statistical trends -- companies with high passive ownership tend to have more independent board members and fewer takeover protections -- but there is no radical rethinking of what corporate governance means in an age of passive management. It just means regular established good governance practices, with a lot fewer meetings. In particular, no one seems to be giving much conscious thought to how to run a company when you also own all of its competitors. (Or at least they're not talking about it on the record.) If the passive firms are running monopolies, they seem to be doing it by accident.


2. Impact Investing: How can community development finance address inequality?
Writing in Medium, Antony Bugg-Levine of the Nonprofit Finance Fund and Ellis Carr of Capital Impact Partners ask a series of difficult questions for community development finance:

  • What can we do to become more diverse and inclusive? Let’s be blunt: our industry’s leadership is less racially diverse and gender balanced than we need to be. We miss out on talent and products that can better respond to community need. And focusing on not just the effects of the capital we provide but also who is empowered to provide it can unleash additional hope, when individuals in the communities we serve see this work led by their own.
  • How can we measure and manage our social impact more effectively? When our industry started, many considered the lack of capital in low-income communities to be the problem to solve. So it made sense to focus on counting how much capital we were moving into communities previously considered unbankable. Now we must understand better how our financing can unlock sustained social progress and use this understanding to maximize our impact.
  • How can we stay true to our founders’ spirit of social justice? As community development finance has become an industry, with established ways of working and institutional ground to protect, we risk losing touch with the reasons we were created in the first place. The focus on market share and effective risk management can distract us from developing innovative new ways to uplift the communities we serve. As professionalizing opens up more possibilities for institutional partnership and scale, we must cultivate the same urgent impatience for change that our clients feel daily and which motivated our industry’s founders.
  • How can we build conduits that connect marginalized communities to innovations in impact investing and social enterprise? Private investments that specifically aim to drive social progress, benefit corporations with a twin focus on profit and purpose, crowd-funding platforms — none of these existed when our industry emerged. All have huge potential, yet only a tiny share of their capital and creativity is currently being deployed to drive progress in our country’s most marginalized communities. The community development finance industry, with our collective reach, credibility, and track record can change that by building conduits between these movements and those communities. For example, we can help wealth managers and corporate finance departments provide their clients with access to the high-impact product they increasingly seek, but only if we work creatively and patiently to overcome our mutual constraints.



3. Effective Philanthropy: differentiating between philanthropy and speculation
In an opinion piece in The Guardian, Evgeny Morozov offers a scathing critique of the Chan Zuckerberg Initiative, a vehicle for the couple’s good works set up as a limited liability company rather than a traditional foundation: 

 “A world where billionaires were blunt and forthright, where they preferred pillaging the world to saving it, was far less confusing. The robber barons of the industrial era – from Carnegie to Ford to Rockefeller – did eventually commit some of their riches to charity but there was no mistaking one for the other. Oil and steel brought in the cash; education and arts helped to spend it…
 
Today, when five of the world’s most valuable companies are technology firms, it’s very hard to see where their businesses end and their charity efforts begin. As digital platforms, they power diverse industries and sectors from education to health to transport and thus have an option that was not available to the oil and steel magnates of yesteryear: they can simply continue selling their core product – mostly hope, albeit wrapped up in infinite layers of data, screens and sensors – without having to divert their funds into any nonproductive activities. ..
 
To speak of “philanthrocapitalism” here – as many have done, either to praise or bury it – seems misguided, if only because such projects bear so little resemblance to philanthropy proper. One doesn’t have to admire Ford or Rockefeller to notice that their philanthropic endeavours, whatever their real political goals, were not supposed to make extra cash. But is it really so with our new tech barons?
 
...We should be careful not to fall victim to a perverse form of Stockholm syndrome, coming to sympathise with the corporate kidnappers of our democracy. On the one hand, given that the new tech billionaires pay very little tax, it’s not surprising that the public sector would fail to innovate as quickly. On the other, by constantly giving the private sector a head start through technologies that they own and develop, the new tech elites all but ensure that the public would rather choose slick but privatised technological solutions over quaint, but public, political ones.
 
That we can no longer differentiate between philanthropy and speculation is an occasion to worry, not celebrate. 


4. Wildcard topic: second thoughts on the Universal Basic Income
Economist Tyler Cowen now has second thoughts on a "Universal Basic Income," the idea of providing all citizens with a basic level of financial support “to combat income inequality, slow wage growth, advancing automation and fragmented welfare programs.”  He has several concerns, including questioning whether this approach actually “addresses the real problem":  

Consider the millions of prime-age males who have dropped out of the labor force. Many are capable of working, yet these individuals typically are not taking the jobs that immigrants might end up filling. Either they shy away from hard work, don't want to move to where jobs are, or don't like the low social status of those jobs, among other possibilities.
 
I no longer see getting money to those males as the central social problem. Instead, the core issue is how to make the work that's available to them sufficiently rewarding, in cultural as well as economic terms.
 
That's hard to do. For instance, a lot of those men are not employable in the military because the military doesn't want them, and in an age of high-tech warfare can't really use them. Jobs as health-care aides are available, but they're low paid and many men won't take them. Government make-work jobs are a possible option -- think of a modern version of a Civilian Conservation Corps -- yet it's not clear whether those jobs would be taken and whether they'd feel futile rather than like a career ladder to a brighter future.
 
If the kinds of jobs created by the modern service economy can be made more attractive, I think much (not all) of the work problem will take care of itself. Most people do wish to work in jobs they enjoy, as a source of pride, money, and social connection.
 
Unfortunately, I don't have a good answer for how to get there, but I worry that permanent subsidies for those who don't work wouldn't lead toward solutions. That means effective safety-net policies will continue to be messy and complex. Although the universal basic income idea sounds like a good direct fix, it probably leads in the wrong direction.


5. Items of Note


6. Job Postings


7. Upcoming Events
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like this chipmunk who was totally busted stealing from a birdfeeder). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for October 14: tax avoidance, "impact security", keep the strategy - leave the "strategic philanthropy", and a language for demographic anxiety

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: inside the secret world of wealth managers
An often overlooked aspect to responsible investing is compiling with relevant regulations, including paying necessary taxes. Brooke Harrington has a long read in The Guardian about the “secret world of wealth managers", who help the very wealthy to minimize and avoid taxes:

“The work of wealth managers has been described by some leading practitioners as a defence against the depredations of “confiscatory states.” Much of these professionals’ day-to-day practice occurs in an ethical grey area – a realm of activity that is formally legal but socially illegitimate. This includes the use of trusts, offshore corporations and similar tools to help clients avoid paying tax, debts to creditors or alimony to ex-spouses. ..

As world wealth has grown to record levels in recent years – to an estimated $241 trillion – inequality has also grown, with 0.7% of the global population owning 41% of the assets. Wealth managers are estimated to direct the flows of up to $21tn in private wealth, resulting in about $200bn in lost tax revenues globally each year. In effect, these professionals detach assets from the states that wish to tax and regulate them, creating a form of capital that is, like its owners, transnational and hypermobile. Doing so involves creating not just asset-holding and tax-avoidance structures but a new body of transnational institutions, which are expanding outside of any democratic process of checks and balances. In this way, the rise of the super-rich and the wealth management industry is creating an elite who are increasingly ungoverned and ungovernable…

A wealth manager’s daily work is similar to that of an architect, in that both design complex, multifunctional structures. The financial architecture created by wealth managers contains assets rather than people and the structures are composed of linked organisational entities, such as trusts, corporations, and foundations. These structures are often means to reduce tax, avoid regulation and control inheritance planning…

Within the world of wealth management, being obliged to honour debts, pay the costs of government, and otherwise obey the laws of the land are often seen as offences to liberty. One training textbook describes the claims of creditors as “risks”, rather than obligations that borrowers take on voluntarily. Other threats include the legal system itself, regulation and, of course, taxation….

The economist Gabriel Zucman has argued that the offshore financial system has grown to the point that it calls into question the future of national sovereignty. His argument is based primarily on tax avoidance, which he calls “theft pure and simple”. By allowing taxpayers to steal from their governments to the tune of $200bn in worldwide lost tax revenue each year, he argues, wealth managers dramatically undermine the power of the state…

With offshore, the wealthy, and the elite professionals who serve them, have created a kind of parallel world of selective lawlessness: selective in that the super-rich can continue to enjoy the benefits of laws that suit their interests while ignoring laws that inconvenience them. This parallel world operates largely unnoticed, except when it contributes to throwing the world that the rest us inhabit into chaos, as it did in the 2008 financial crisis.


2. Impact Investing: "Impact Security" - putting the “bond” back into “Social Impact Bonds”
Lindsay Beck, Catarina Schwab, & Anna Pinedo write in the Stanford Social Innovation Review about their proposal to tweak the model of a “Social Impact Bond” (SIB) to be not just a “pay-for-success” contract, but an actual fixed income security.

“Despite their potential, SIBs have failed to gain meaningful traction. In the United States, for example, approximately 12 SIB deals have been launched since 2012, raising only about $140 million in initial private investment, which is less than 0.01 percent of the $1.7 trillion in total annual nonprofit revenue and contributions.

 Why is that the case? One major reason is that calling these arrangements “bonds” is misleading. None of the SIBs put in play so far—nor many of their cousins, the development impact bonds, environmental impact bonds, and so on—has actually been a bond. Some people familiar with the field are willing to acknowledge that issue, accept it, and move on. But they are in the minority. Would-be investors who are not intimately acquainted with the nuances of SIBs—and this includes most would-be investors—may not know that the investments are not bonds. And so for most, calling a SIB a “bond” becomes a stumbling block that requires explanation, detracting from the positive and innovative aspects of pay-for-performance instruments…

What if an impact bond was actually a debt security—a financial instrument similar in legal structure to a corporate bond or municipal bond that can be bought or sold between various parties and has basic standardized terms such as obligations to make payments to investors upon the occurrence of certain events? In other words, what if we combined the pay-for-success model with an established, scalable, and tradable capital markets structure, and named it accordingly? And what if we called it an “impact security”?

This new structure would have five main benefits.

1. Credibility: Accurate nomenclature would promote the product’s integrity and build its credibility in investor circles. As mentioned above, attracting investor participation at scale requires accurate terminology.

2. Real scalability: A standard debt security would offer consistent, familiar documentation that allowed for easy replication and faster transaction speeds, resulting in a more scalable product.

3. Expanded investor access: If the debt security were issued by a nonprofit, a foundation, or a government or supranational entity, it would be exempt from SEC registration and available as a public offering open to all investors, accredited and non-accredited. This would expand the pool of eligible investors and could permit crowdfunding.

4. Transparency: A debt security model would facilitate public disclosures and reporting, which would lead to enhanced transparency and pricing that was more responsive to market data.

5. Liquidity: Debt securities could easily be held in brokerage accounts and be readily transferable. That would increase the potential for liquidity, which could broaden the investor market.


3. Effective Philanthropy: Don’t throw the baby strategy out with the “strategic philanthropy” bathwater
Phil Buchanan and Patti Patrizi argue in the Chronicle of Philanthropy that while it is time to “ditch” the term “strategic philanthropy,” it is not time to ditch strategy in philanthropy.  (“After all, what will replace it? Random, uncoordinated acts of philanthropy?” they write.)

“Recently, there has been a kind of backlash against "strategic philanthropy." The term has come to take on some very negative connotations, conjuring up images of arrogant, overpriced consultants and their large foundation clients issuing top-down edicts that are ineffective and divorced from the realities nonprofits face.

Strategic philanthropy, in this conception, is seen as overly formulaic and linear, denying the complexity of the tough, interdependent challenges foundations and nonprofits try to address. Moreover, feedback from grant recipients is usually absent, because the idea is that the donor knows best…

The reality is that good strategy is vital. It is underneath and behind every great philanthropic success — from the response to the tuberculosis epidemic a century ago to recent progress in reforming the criminal-justice system. As longtime proponents of strategy in philanthropy, we would argue that it is, in fact, as important as ever — more so, even, because as philanthropy’s scale increases with every newly minted billionaire, so, too, do the consequences of ineffectiveness.

We see strategy in philanthropy differently than those who come out of business. Indeed, we do not see it as a business concept, because it isn’t one. We see strategy in philanthropy as a set of logical hypotheses about how to achieve a goal — hypotheses that guide decision-making and, importantly, learning. As we have both been saying for decades to anyone who would listen, sound strategy in philanthropy is much harder, and plays out differently, than sound strategy in business, for several reasons:

  • Any sound philanthropic strategy recognizes that many players are needed. 
  • Good philanthropic strategy recognizes the effects of complexity and uncertainty. 
  • Being good at strategy requires being good at learning."


4. Wildcard topic: political correctness and the language of demographic anxiety
Journalist Ezra Klein of Vox sat down with economist Tyler Cowen of George Mason for a fascinating podcast conversation, part of the exceptional “Conversations with Tyler” series. It’s worth a listen, but this section where Ezra discusses our lack of language to talk about demographic anxiety is particularly interesting:

“We do not have a language for demographic anxiety that is not a language that is about racism. And we need one…We have properly been working very, very hard in this society to make racism socially intolerable. We have a society that continues to have a lot of racism, a lot of sexism, a lot of bigotry of different kinds. But I do think that as a by-product of that debate and that effort, there isn’t a good way to have people discuss slightly more inchoate feelings of losing power that aren’t necessarily in their view, about taking it away from other people. It’s more about losing it themselves. I think that’s a big difference in this.

Arlie Hochschild…she’s a sociologist who spent five years with tea party folks in Louisiana—she talks about this deep story of feeling like they’ve been waiting in line, and now other people are getting in front. It’s not so much that they don’t want those other people to get ahead, it’s that they want to get ahead themselves. They are feeling a loss in a zero-sum competition, and they may actually be correct about that.

There are probably types of advancement in society that is zero-sum, particularly when you begin really trying to open up the floodgates. So I think that’s correct, and I think that we don’t have a good language for it. I don’t know what it would mean to get one, but one thing that has annoyed me this year is I really dislike the use of political correctness as a language for it…


5. Items of Note

  • The Manhattan DA has launched an RFP for $7.2 million in grants to up to 4 NYC social enterprises "particularly focused on revenue-generating models that provide quality jobs for participants and facilitate positive economic impact in underserved and under-resourced" NYC communities (the funds come from settlements with international banks charged with violating U.S. sanctions)
  • The Silicon Valley Community Foundation has a new report, Starting with Purpose, which is a guide to social responsibility for startups
  • The Miller Center for Social Entrepreneurship at Santa Clara University has a business accelerator program starting in January 2017 (applications due by Oct 21)
  • Caparia (acclerator for impact fund managers) opens applications for its 3rd cohort (due November 11th)
  • Mission Measurement has launched its Impact Genome Project
  • Etsy has launched a new report on economic security for the "gig economy"
  • 92Y has launched applications for its "Women in Power" fellowship program for rising women leaders in NYC
  • The Packard Foundation has launched an organizational effectiveness knowledge center for nonprofits and foundations


6. Job Postings


7. Upcoming Events
Oct 17-18 African Philanthropy Forum (Rabat, Morocco) Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-19 Commit! Forum (NYC) Responsible Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like this humpback whale breaching). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.
 

All Things Impact for October 7: gender gap, environmental impact bonds, glass pockets, and drifting in the direction of knowledge

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: combatting the gender gap as a strategy to outperform
The “G” in “ESG Investing” stands for “governance” – a look at the people and processes put in place to provide oversight for company management, including the composition of the board of directors. Leslie Picker writes in The New York Times about Dianne McKeever, CEO of Ides Capital, which is believed to be the first “activist” hedge fund led by a woman. “Like any other hedge fund, Ides seeks to generate returns from its investments and sees diversifying small and midsize corporate boardrooms as a way to help improve stock prices. ‘Weak governance practices, including a lack of diversity, coincides frequently with poor valuations,’ Ms. McKeever said in an interview.”
 
The article provides helpful context for the lack of gender diversity in corporate boardrooms:

"About 60 percent of corporate boards have no female directors, according to a recent study by the Peterson Institute for International Economics, a think tank, which surveyed nearly 22,000 companies worldwide.

Some countries, like Norway and Germany, have passed laws that require a minimum percentage of women on each corporate board. In the United States, where there are no such requirements, shareholders have taken it upon themselves to change board composition. More than 250 proposals have been made since 1997, according to data compiled by Carol Marquardt, a professor at Baruch College, and Christine Wiedman, a professor at the University of Waterloo.

But the growing class of shareholder activists, many of whom promote themselves as the stalwarts of corporate governance, have a paltry record when it comes to women.

In addition to nominating fewer women as directors, they appear to disproportionately target female chief executives...

There is also an implicit bias to nominate someone who is demographically similar, said Ms. Shropshire, who has been interviewing female directors at publicly traded firms.

“Their anecdotes about determining the slate of potential board candidates reflect a hesitation among men to change the status quo of boardroom dynamics by bringing in female members, especially more than one,” she said. “Women may be more likely to pose tough questions or engage in more intensive monitoring efforts, though interestingly, I would expect those behaviors could also make them more valued and potential allies for activists themselves.”

2. Impact Investing: launch of first-ever "Environmental Impact Bond" (with payments tied to outcomes) 
"Pay for success" is a concept that has been gaining traction and attention in recent years, with the advance of "Social Impact Bonds" and "Development Impact Bonds." Now we have what is believed to be the first-ever "Environmental Impact Bond" (EIB), whereby a government utility will pay private investors if certain environmental outcomes are reached.The $25 million tax-exempt bond will fund the early stages of a green infrastructure project in Washington, DC., and is a partnership of DC Water, Goldman Sachs, and the Calvert Foundation.

From the press release:

The EIB allows DC Water to attract investment in green infrastructure through an innovative financing technique whereby the costs of installing the green infrastructure are paid for by DC Water, but the performance risk of the green infrastructure in managing stormwater runoff is shared amongst DC Water and the investors. As a result, payments on the EIB may vary based on the proven success of the environmental intervention as measured by a rigorous evaluation. By financing this project through the EIB, DC Water seeks to create a model funding mechanism that other municipalities can leverage to advance the use of green infrastructure to address stormwater management in their communities.
 
Mark Kim, DC Water’s Chief Financial Officer, said “This environmental impact bond represents the first time that DC Water has explicitly tied financial payments to environmental outcomes, in this case reducing stormwater runoff to improve the District’s waterways.”


3. Effective Philanthropy:  Building a Philanthropic World of Data and ‘Glass Pockets’
Foundation Center CEO Brad Smith spoke with Denver Frederick on the Business of Giving podcast about foundations, knowledge, and transparency.  Brad explains that there are approximately 88,000 foundations in the US, which manage assets surpassing $800 billion. Yet only 7% of foundations have websites, and even of the largest ones – the approximately  1,000 foundations with assets over $100 million – at least 30% do not have a website. Here are some excerpts from the interview:

“Foundations have a really important role in American history and American society. Basically, our government has created a kind of social pact in which wealthy individuals are given a tax incentive for creating a charitable foundation. They make a donation of a portion of their assets to the foundation. They no longer control those assets. They can’t take them back for personal use. They get a tax exemption in exchange for creating a stream of charitable giving in the future. ... Today there are well over 80,000 foundations…about 87,000 to 88,000. And the assets they manage–their investments–surpassed $800 Billion. And it’s the earnings on those investments which are tax-free, that are used to actually fund grants and fulfill their charitable purpose…
 
When it comes to knowledge and information, foundations are like black holes, and they need to become supernovas.
 
So what do I mean by that? The average foundation receives hundreds, if not thousands of proposals from nonprofit organizations–different kinds of social sector organizations filled with ideas about how to make the neighborhood, the community, the city, and the world a better place. Some portion of those get approved. As part of the process, the groups that get the grants provide written reports periodically– progress reports–full of information also. Then there’s also the foundation staff themselves. When you’re sitting in a foundation, let’s say you’re working on early childhood issues. On any given day, you probably talk to four or five different people who are the best in their field… who have fantastic ideas about how to solve all the issues around early childhood learning. And you accumulate all that knowledge; that knowledge is in your head; it’s in your notes; it’s on your hard drive. All these documentations areflowing in the foundations. If we weren’t philanthropy– if we were Google or we were Facebook–we would have data scientists crawling all over that stuff!
 
…this is a tremendous source of potential knowledge about how we can make this world a far better place. And I think the next frontier for philanthropy is going tobe managing information, and producing and sharing knowledge…


4. Wildcard topic: investing by drifting in the direction of knowledge
There’s an old quip that Harvard is a $36 billion hedge fund with a university attached. Well last year that hedge fund lost $2 billion, and now a new manager has been brought in to run it (who had previously managed Columbia University’s endowment).
 
Matt Levine uses the opportunity to wax philosophical about the nature of investing in a world with a fundamentally unknowable future:

“It seems to me that there are two basic models of how investing could work over time. One is sort of a random walk: Some stuff makes money sometimes, other stuff makes money other times, it's always hard to know which is which, and the trick is to find a good manager who knows. This is sort of the default model that everyone has in the back of their minds, the model that those Harvard kids are using. Just figure out how to buy the stuff that will go up, and buy it. Or: Figure out who will figure it out, and give them your money.
 
The other model is sort of a random walk with drift: Some stuff makes money, some stuff doesn't, but over time we as a society learn to identify which is which. We learn to index, to look at value and momentum factors, not to invest in tulip bubbles, whatever. The learning is imperfect, and there are setbacks -- sometimes we invest in mortgage bubbles -- but over time the drift is in the direction of knowledge. This would seem to make the investing business harder over time. If asset returns are widely dispersed and hard to know, then there will always be a mystique around someone who knows them, and that person can always charge 2 and 20. If markets become more efficient over time, and asset returns approach their correct risk-adjusted level, and this gets easier for everyone to figure out, then the opportunities to make outsize returns -- and charge for them -- will keep shrinking. And people who thought they were exceptional -- hedge fund managers, Harvard -- will revert to the mean, and feel disappointed and adrift.


5. Items of Note


6. Job Postings

  • Echoing Green is seeking a Vice President of Finance and Administration (NYC)
  • Medtronic is hiring a Sr Philanthropy Portfolio Lead - Social Business/Impact Investing (Minneapolis)
  • The Hewlett Foundation is seeking an Organizational Learning Officer for their Effective Philanthropy Group (Menlo Park, CA)
  • ClearBridge Investments is hiring an ESG equity research analyst (NYC)
  • Rockefeller Foundation is hiring a Program Associate in their Innovative Finance team (NYC)


7. Upcoming Events
Oct 10-12 SXSW Eco (Austin, TX) Impact Investing
Oct 9-14 Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 17-18 African Philanthropy Forum (Rabat, Morocco) Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-19 Commit! Forum (NYC) Responsible Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like this sugar glider jumping in slow motion). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for September 30: business norms, advice to presidential candidates, measuring impact and how finance is ruining America

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: evolving business norms & the conscientious corporate manager
As a former Dean of Stanford Law and former President of the William and Flora Hewlett Foundation, Paul Brest has thought a lot about the law, philanthropy, and investing. He has a new post on the History of Philanthropy website where he attempts to reconcile “Corporate Social Responsibility” with profitability.

“As the late U.S. Supreme Court Justice Potter Stewart once remarked, “Ethics is knowing the difference between what you have a right to do and what is right to do.” But what sources does a corporate manager have for determining what’s right to do?
 
Business and public social norms can provide valuable guidance for corporate managers considering tradeoffs among a firm’s stakeholders…
 
Norms of business practice can also evolve over time. Although business norms are often vague and conflicting, sometimes they have developed to a point where they can provide reasonably good guidance. For example, voluntary codes in the apparel industry reflect an evolving consensus about acceptable standards for workplace safety and workers’ wages and hours in factories in developing countries. They provide a useful reference point for the managers of U.S. or multinational companies considering what requirements to impose on manufacturers in their supply chain.
 
Norms are a starting point, but exclusive reliance on existing attitudes and practices may give too much weight to the status quo and, indeed, inhibit the evolution of norms. There is no reason to assume, a priori, that adherence to norms exhausts the moral responsibilities of corporations and their managers. In any event, the evolution of norms often requires a first mover who takes a step beyond the comfort zone of existing practices.
 
Therefore, I propose that managers should accord shared norms a defeasible presumption of validity, but also give weight to their own moral values, deliberating and inviting the opinions of people with diverse views on the matter, including “devil’s advocates,” before coming to a decision.
 
For those concerned that corporate managers will follow their own idiosyncratic views at the expense of shareholder value, it should be noted that most managers tend to hold conventional moral views and have self-interested incentives not to stray too far from shareholders’ economic interests. If managers do stray, unhappy investors can countermand the decision through a shareholder resolution.”


2. Impact Investing: an open letter to the 2016 presidential candidates
Writing in ImpactAlpha, Fran Seegull and Nancy Pfund make the case that Hillary Clinton and Donald Trump should focus on the “Impact Economy": 

“What if we could create good jobs, educate our kids, fix our electrical grids and sewers and roads, address climate change, and in so doing all of that, we could also jet-propel the economy, too? What if we could develop powerful new technologies that fuel prosperity here at home and then go on to share that innovation and prosperity with the rest of the world?
 
What if private capital could be mobilized to tackle urgent challenges for which public and philanthropic capital isn’t enough? And what if that effort could produce impressive financial returns as well?
 
Sound good? It’s called The Impact Economy, and it’s already happening. Private capital invested for public good. Billions and potentially trillions of dollars of values-aligned capital driving demonstrable social and environmental progress—and not just to do good, but also because it’s good business.
 
Impact investing is a growing movement across industries, geographies, communities, races and classes seeking to create an economy that works for all. Bit by bit, the capital markets are beginning to reorient themselves toward a more holistic definition of value—one that rests on the creation of long-term value, rather than short-termism.
 
Impact investing is already improving the economy, energizing communities, and healing the planet — delivering strong financial returns while creating a world we’re proud to pass onto our children and grandchildren. It is an inclusive financial movement, promoting diversity across gender, race, income and geography.
 
Impact unicorns are succeeding because of their positive social and environmental impact, not in spite of it.
 
Who’s doing it? Institutional investors (such as pension and sovereign wealth funds and university and foundation endowments) and individual investors (from billionaires to 401k holders) seeking positive social and environmental impact, as well as compelling financial returns. Firms like Goldman Sachs, JPMorgan Chase, Merrill Lynch and Morgan Stanley are hearing the drumbeat and launching products to meet client demand. And asset managers like Blackrock and Bain Capital are looking for growth prospects by investing in public companies and private businesses in positive-impact areas like agriculture, food, energy, water, healthcare, education and financial inclusion.
 
Pension funds with 50-year investment horizons must account for long-term risks as part of their investment process.”


3. Effective Philanthropy: why measure impact?
As Marc Gunther points out in Nonprofit Chronicles, the one thing that unifies the sheer diversity of nonprofit organizations is the need to fundraise (“Harvard, Greenpeace, CARE, your local food pantry and a community orchestra have nothing in common —except the need to raise money”). Even so, Marc was disheartened to discover that the first-ever conference hosted by The Chronicle of Philanthropy was mostly about how nonprofits could fundraise more effectively, not necessarily be more effective:

“The tagline was: Measuring Impact, Inspiring Donors. I came hoping to learn about measuring impact, but the nonprofit executives in the room seemed more interested in inspiring donors. Again, that shouldn’t have been surprising; many, perhaps most, were development executives.
 
Indeed, by the time we had digested lunch, the group had spent an hour or so digging deep into a critique of fundraising appeals; there was talk of audience segmentation, brand congruence, whether direct mail should be kept to a single page, even the need to get familiar with virtual reality as a “leapfrog to empathy connection,” whatever that means.
 
  A cynic might conclude that the only reason why nonprofits want to “measure impact” is to “inspire donors.”
 
That’s not so. An increasing number of nonprofits track their impact because they want to improve their performance. Dozens have embarked on systematic efforts to develop feedback loops, listening carefully to the people they serve, and then using what they learn to become more effective…
 
This isn’t meant as a critique of the people at the Chronicle. They know their audience. It may well be that fundraising is the only topic likely to interest a few hundred assorted nonprofit execs at a conference, or the thousands more who read newspapers, magazines or websites about the social sector. And, of course, without fundraising, there would be neither programs nor impact.
 
But I worry that events like Philanthropy NEXT reflect the fact that people in charge of nonprofits spend too much time thinking about donors and not enough time thinking about how they are serving their purpose. I certainly hope that I’m wrong about that.”


4. Wildcard topic: “Finance Is Ruining America”
Writing in The Atlantic, Alana Semuels uses economic disparities in Fairfield Connecticut to explore how the finance industry has exasperated economic inequality in the US:

“Few places in the country illustrate the divide between the haves and the have-nots more than the county of Fairfield, Connecticut. Drive around the city of Bridgeport and, amid the tracts of middle-class homes, you’ll see burned-out houses, empty factories, and abandoned buildings that line the main street. Nearby, in the wealthier part of the county, there are towns of mansions with leafy grounds, swimming pools, and big iron gates.
 
Bridgeport, an old manufacturing town all but abandoned by industry, and Greenwich, a headquarters to hedge funds and billionaires, may be in the same county, and a few exits apart from each other on I-95, but their residents live in different worlds. The average income of the top 1 percent of people in the Bridgeport-Stamford-Norwalk metropolitan area, which consists of all of Fairfield County plus a few towns in neighboring New Haven County, is $6 million dollars—73 times the average of the bottom 99 percent—according to a report released by the Economic Policy Institute (EPI) in June. This makes the area one of the most unequal in the country; nationally, the top 1 percent makes 25 times more than the average of the bottom 99 percent….
 
But the fact that finance is making a few people very rich is not particularly revealing. More critical is what finance is doing to everyone else—or, more to the point, what it isn’t doing: providing good middle-class jobs. As Time’s assistant managing editor Rana Foroohar describes in her book Makers and Takers: The Rise of Finance and the Fall of American Business, financiers in recent decades have made their money by focusing more on wealth creation through manipulating and timing markets rather than by lending and creating. Investors, asset managers, traders, and others have figured out how to craft financial products that can make money but that do not result in jobs or businesses, she argues.
 
“The business of America isn’t business anymore, it’s finance,” Foroohar writes.
 
This means that as the financial professionals of Fairfield County saw their compensation rise, there was little spillover benefit for anyone else…
 
According to a study from the Roosevelt Institute, every dollar of earnings or borrowing used to be associated with a 40-cent increase in investment. Since the 1980s, though, less than 10 cents of each earned or borrowed dollar is invested. This means fewer jobs created and more money winding up as shareholders’ profits. 
 
Part of the problem is that trying to achieve incredible returns for those at the top can motivate companies to make changes in the way they run their business, such that they employ fewer people.”


5. Items of Note


6. Job Postings

  • Echoing Green is seeking a Vice President of Finance and Administration (NYC)
  • Medtronic is hiring a Sr Philanthropy Portfolio Lead - Social Business/Impact Investing (Minneapolis)
  • The Hewlett Foundation is seeking an Organizational Learning Officer for their Effective Philanthropy Group (Menlo Park, CA)
  • ClearBridge Investments is hiring an ESG equity research analyst (NYC)
  • Rockefeller Foundation is hiring a Program Associate in their Innovative Finance team (NYC)


7. Upcoming Events
Oct 5-6 Bloomberg Sustainable Business Summit (NYC) Responsible Investing
Oct 10-12 SXSW Eco (Austin, TX) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 17-18: African Philanthropy Forum (Rabat, Morocco) Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-19 Commit! Forum (NYC) Responsible Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like these bunnies in cups). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

All Things Impact for September 23: $90 trillion needed for green finance, impact unicorns, $3 billion for science, and "I used to be a human being"

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: Republican makes case for “Green Finance” to combat climate change
George W. Bush’s Treasury Secretary Hank Paulson argues in the New York Times that “there is no question that the world needs to ramp up its transition to a low-carbon, environmentally sustainable and resilient economy, and to do so rapidly.” The United Nations estimates that the world will need to mobilize $90 trillion in public and private capital over the next 15 years to combat climate change (to provide context, global gross domestic product in 2015 was $73 trillion).

As Paulson points out: “The question is, how do we pay for it, given the limited availability of government funding, particularly in developing countries? The answer: private financing."

"The good news is that there is a global abundance of private capital. To unlock these riches, governments must create conditions that encourage private investment in clean technologies and sustainable development. With smart, well-designed and coordinated policies, financing models and instruments like bonds and incentive programs, countries have the potential to solve some of the planet’s most pressing environmental challenges while still maintaining economic growth…
 
There have been successful experiments in green finance. The global green bond market is growing rapidly — to $41.8 billion in 2015 from $11 billion in 2013. Moreover, innovative financing solutions are being used around the world — private firms in Mexico and India are financing private wind parks; multinational trust funds are supporting solar plants in India, South Africa and Morocco. A new universe of financial instruments and policies are lowering the cost of capital for green growth.
 
The challenge now is to build on these successes and ensure that green finance mechanisms are widely adopted so that capital markets can allocate financing to low-carbon sectors of the economy that have the potential to generate growth and jobs.
 
For this to happen, countries will need to adopt policies that reduce the price of low-carbon investments to make them more attractive for private investors. These policies include environmental regulations to stimulate clean, sustainable development; incentives and subsidies for clean energy investments; and the pricing of carbon emissions, which can be done in a variety of ways, including emissions trading and taxes. We also need to eliminate subsidies that encourage the use and extraction of carbon-based energy like coal and oil. Such policies will take strong political will, especially as economic growth is slowing…"

 
2. Impact Investing: Beyond Tradeoffs: The Rise of the Impact Unicorns

The always insightful Fran Seegull (who recently announced she is stepping down as the Chief Investment Officer for ImpactAssets to become the inaugural Executive Director of the new U.S. Impact Investing Alliance) writes in ImpactAlpha about the “impact unicorn - a company that is positioned to achieve a market rate of financial return AND high levels of impact.”

"Impact unicorns achieve strong financial returns because of, not in spite of, their impact theses. Population growth, income inequality, climate change and other social and environmental factors are shaping our world. The private sector has a major role to play (and returns to make) in ameliorating these intractable challenges by investing in ventures that are consistent with our values.
 
The impact investing field has often used the Monitor Institute framework of “impact first” and “financial first” to categorize the investment orientation of companies and funds. While a bit reductive, this framework has persisted since its introduction in 2009. According to it, investments that seek to maximize impact with a financial floor are called “impact first.” Those that seek to maximize financial impact with an impact floor are deemed “financial first.” Implied by this framework is a tradeoff between financial and impact returns…
 
Impact investments may fit in a 2×2 matrix. Impact first and financial first are in the upper left and lower right quadrants, implying a tradeoff. In the lower left quadrant, we have deals with suboptimal financial and impact returns—an investor wouldn’t make these types of investments. In the upper right quadrant, we have those investments that achieve risk-adjusted rates of financial returns and strong social and environmental impact. These are the “Impact Unicorns.”…
 
The truth is that many times as investors we can’t have our cake and eat it too. There may be some investments focused on high impact geographies (emerging and frontier markets), certain investment stages (seed- and early-stage entrepreneurs in the “Pioneer Gap”) and specific constituencies (folks at the bottom of the pyramid) that require a tradeoff in financial returns. Maybe these impact enterprises need grant capital at inception or perhaps they require concessionary funding to de-risk them to a point where more commercial rate capital can be attracted.
 
Of course, impact unicorn enterprises aren’t unequivocally better than, say, impact first ventures. But they do indeed fly in the face of the financial tradeoff debate.”


3. Effective Philanthropy: Chan Zuckerberg Initiative's $3 billion bet on science
The U.S. National Institutes of Health (NIH) spends over $30 billion a year, just over half of it going to basic research in the biomedical sciences. The Wellcome Trust in the UK – the world's biggest medical research charity – will spend $6.5 billion over the next five years. But Mark Zuckerberg and Priscilla Chan’s commitment of $3 billion over the next 10 years towards funding basic research, announced this past week, is still big news.
 
As David Baltimore, a Nobel Prize winner and professor at the California Institute of Technology, explains in an editorial in Science about the announcement:

“Philanthropists have long supported academic science, from endowing faculty positions to establishing new research centers. During the 20th century, their financing complemented the steady federal support that U.S. research and development (R&D) enjoyed, particularly in basic science. Regrettably, such government funding turned stagnant in the 21st century. Federal support of R&D at higher education institutions has fallen over 11% since 2011, the longest multiyear decline in federal funding for academic R&D since data collection began in 1972. What does this mean for achieving breakthrough discoveries in science?
 
To solve some of our greatest societal problems, we not only need to focus on basic science research—we also need sufficient resources and new approaches. Basic research allows innovative thinkers in science and engineering to work toward ambitious and important goals, including in biomedicine. This was certainly the case in cancer research, where substantial progress was made once scientists had gained sufficient understanding of gene structure and function to support translational thinking and convert basic findings into cures. However, without adequate resources, great visions cannot be fulfilled. Although private funding cannot match the scale of government funding (the U.S. National Institutes of Health alone is allocated $30 billion per year), it can help fill gaps. Most importantly, it can initiate research thrusts into unproven directions, which generally do not draw government funding.
 
New approaches are also required. Chan and Zuckerberg will direct their first science-focused investment to establish a “Biohub” that marries engineering and life sciences research from multiple institutions. Based in San Francisco’s Mission Bay, this hub will draw on the talented scientists and engineers from the University of California at Berkeley and at San Francisco, and Stanford University. Its proximity to the technologists of Silicon Valley is an asset as well. Future scientific advances likely will be at the interface of different disciplines—a “convergence” that requires breaking down barriers between fields. This is exactly what Biohub is planning. Such cross-disciplinary, open, and collaborative research also has been envisioned by other philanthropists…”
 

4. Wildcard Topic: "I used to be a human being"
Former prolific blogger Andrew Sullivan writes a passionate essay in New York Magazine about his efforts to overcome his "manic information addition":  

“For a decade and a half, I’d been a web obsessive, publishing blog posts multiple times a day, seven days a week, and ultimately corralling a team that curated the web every 20 minutes during peak hours. Each morning began with a full immersion in the stream of internet consciousness and news, jumping from site to site, tweet to tweet, breaking news story to hottest take, scanning countless images and videos, catching up with multiple memes…
 
I was, in other words, a very early adopter of what we might now call living-in-the-web. And as the years went by, I realized I was no longer alone. Facebook soon gave everyone the equivalent of their own blog and their own audience. More and more people got a smartphone — connecting them instantly to a deluge of febrile content, forcing them to cull and absorb and assimilate the online torrent as relentlessly as I had once. Twitter emerged as a form of instant blogging of microthoughts. Users were as addicted to the feedback as I had long been — and even more prolific. Then the apps descended, like the rain, to inundate what was left of our free time. It was ubiquitous now, this virtual living, this never-stopping, this always-updating…
 
Just look around you — at the people crouched over their phones as they walk the streets, or drive their cars, or walk their dogs, or play with their children. Observe yourself in line for coffee, or in a quick work break, or driving, or even just going to the bathroom. Visit an airport and see the sea of craned necks and dead eyes. We have gone from looking up and around to constantly looking down.
 
If an alien had visited America just five years ago, then returned today, wouldn’t this be its immediate observation? That this species has developed an extraordinary new habit — and, everywhere you look, lives constantly in its thrall?
 
…the family that is eating together while simultaneously on their phones is not actually together. They are, in Turkle’s formulation, “alone together.” You are where your attention is… Truly being with another person means being experientially with them, picking up countless tiny signals from the eyes and voice and body language and context, and reacting, often unconsciously, to every nuance. These are our deepest social skills, which have been honed through the aeons. They are what make us distinctively human…
 
There are books to be read; landscapes to be walked; friends to be with; life to be fully lived. And I realize that this is, in some ways, just another tale in the vast book of human frailty. But this new epidemic of distraction is our civilization’s specific weakness. And its threat is not so much to our minds, even as they shape-shift under the pressure. The threat is to our souls. At this rate, if the noise does not relent, we might even forget we have any.”

5. Items of Note


6. Job Postings


7. Upcoming Events
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 17-18: African Philanthropy Forum (Rabat, Morocco) Effective Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Effective Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like like this mother cat who adopted orphaned squirrels). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at LiquidnetFull Bio.

 

All Things Impact for Sept 16: TPG launches $1 billion impact fund; can public equities have impact?; Clinton & Trump foundations

Brian WalshComment

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: responsible investing (in the public markets),  impact investing (in the private markets), effective philanthropy, and a wildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Responsible Investing: can public equity investing have impact?
Mutual Fund manager Garvin Jabusch argues in Seeking Alpha against the notion that impact only happens through private investment. "An associated perception is that investment impact means capitalizing an enterprise beyond what would happen otherwise, meaning private equity alone has the power to provide real impact. But is this true?"

He goes on: 

"Publicly traded corporations are the largest and most visible social and environmental bellwethers of the global economy, and the high allocation to public equities in most investor portfolios means public equity investing is and must remain one of our key opportunities for impact. To cause a positive impact, families, institutions, and individuals can invest in public companies whose primary business activities address pressing social, economic, and environmental challenges at scale. This does not mean companies with a pretty sustainability report or that are incrementally making their operations less carbon-intensive, but firms that have made it their purpose to enable a better world with an indefinitely sustainable economy. Skipping traditional investment practices to focus on buying these companies sends the clear signals that markets do value solutions, and that markets will devalue businesses that are the leading causes of our most pressing risks. In addition, flexible, go-anywhere public equities strategies may invest in micro and small cap firms where there may be limited liquidity, and we can have meaningful impact just by being there.

Clearly, how we invest in public equities matters...

If economic history shows us nothing else, it is that innovation and better products and systems that perform better and cost less always win in the marketplace. And this is what sustainability is - innovation-led gains in efficiency that mean we can have a thriving economy while lessening our footprint on our required yet delicate earth systems. It's imperative to direct capital into the future that you in fact see coming, in part through public equity investing. That investment represents real impact and also positions your stock portfolio to grow as that future emerges and grows, supplanting the old fossil-fuels based economy.

For investors, the best Next Economy solutions simply outperform their old economy counterparts and predecessors, all while circumventing our most daunting long-term risks."

 

2. Impact Investing: large mainstream investor TPG launches $1 billion impact fund
The New York Times reports on what may be the largest impact fund to date: 

"TPG Growth has established itself as a boldface name in investing, with stakes in companies that include Silicon Valley darlings like Uber and Airbnb and the guitar maker Fender.

Now the business, part of the investing titan TPG, is planning to branch out into the world of so ­called social impact investing that is meant to be philanthropically and financially successful — and with operations on a big scale.

TPG Growth plans to raise money for what it will call its Rise Fund, which it hopes will eventually invest more than $1 billion, according to people with direct knowledge of the matter. The fund will involve a partnership with Elevar Equity, an investor that has backed 24 companies in seven countries...

The new fund, which has been in the works for about a year, is the latest entry into social impact investing. Most impact funds have been run by smaller investment firms, though last year Bain Capital announced that it had hired Deval Patrick, the former Massachusetts governor, to oversee what it called its Double Impact fund…

TPG Growth expects returns from the new fund to produce, at minimum, market­-rate returns...One major element of the Rise Fund is that it aspires to have rigorous metrics that quantify the social impact of its investments..."

3. Effective Philanthropy: comparing Trump's & Clinton's foundations
GuideStar CEO Jacob Harold has provided a nonpartisan examination of the available data on both the Trump Foundation (assets of $1 million and no staff) and Clinton Foundation (assets of $354 million and 486 staff).

“The Trump Foundation is legally categorized as a “private non-operating foundation” whereas the Clinton Foundation is a “public charity.” In simple terms that means the Trump Foundation is meant primarily as a vehicle for distributing grants from the Trump family fortune—although it also accepts funding from other donors. The Clinton Foundation is meant primarily as a vehicle for directly operating programs for the social good—while also making some grants to other organizations.
 
Despite these differences, both organizations are, in a (non-legal) sense, “celebrity foundations.” They are seeded by money donated by their founders and also serve as a vehicle for members of the public to demonstrate their support of a prominent person. At their worst, celebrity foundations are vanity projects with negligible impact. At their best, such organizations channel fragmented resources and yield extraordinary impact for society…
 
Transparency is not a guarantee of effectiveness—but, in general, we believe that transparency is correlated with excellence in nonprofits. Transparency indicates an openness to questions and accountability. And, importantly, the act of transparency can force an organization to be clear about its goals and strategy.
 
Most nonprofits—including the Trump and Clinton Foundations—are required by law to file a regulatory document with the IRS, the Form 990. The 990 provides important baseline information but does not give a full view of the nuances of nonprofit work. Accordingly, GuideStar invites nonprofits and foundations to share additional data. Approximately 128,000 have done so. Some 34,997 organizations have provided enough to get one of GuideStar’s four “transparency seals”; of those, 1,061 have earned the highest level, Platinum. The Clinton Foundation is one of them. The Trump Foundation has provided no additional information and so has not earned a transparency seal.
 
As a part of achieving a Platinum seal, the Clinton Foundation has provided a set of quantitative metrics about its programs. For example, one metric, “number of farmers benefitting from access to improved agricultural practices, increased yields, and enhanced market access,” rose from 66,124 in 2014 to 114,825 in 2015. Another, the “number of girls and women provided access to job skills training and livelihood support,” rose from 35,587 in 2014 to 48,696 in 2015. The fact that the Clinton Foundation provides such metrics makes it far easier for donors and citizens to meaningfully analyze the institution’s value to society.
 
The Trump Foundation provides no such metrics..." 

4. Wildcard Topic: have big banks gotten safer?
Writing in Money Stuff in Bloomberg, Matt Levine writes about the progress of banking reform.

Since the 2008 financial crisis, there have been two big impulses in banking reform:

  1. Banks are too risky and we need to make them less risky.
  2. Banks are bad and we need to stop them.

These are overlapping impulses, but they are different, and sometimes in conflict. If you fine banks all the time, they will have less money, and be more likely to fail. More than that, though, if you try to limit the businesses that banks are in and the profits they can make in them, and generally try to make the banks less fat and smug and more haggard and repentant, they will have less cushion to draw on in rough times. And so they'll be more likely to fail. And while their failure will be in some sense a satisfying outcome, for impulse 2, it does seem like, you know, a risk. And impulse 1 was to reduce the risks.

Anyway here is a new paper from Natasha Sarin and Larry Summers with the title "Have big banks gotten safer?" and the Betteridge-approved answer: not really. Sarin and Summers look at various measures of bank equity riskiness -- "price volatility, option-based estimates of future volatility, beta, credit default swaps, earnings-price ratios, and preferred stock yields" -- and find "little support for the view that major institutions are significantly safer than they were before the crisis and some support for the notion that risks have actually increased." They consider three possible explanations for this:

 
  1. "Market error": Banks were really riskier before the crisis, but the market misunderstood the risks and overvalued the banks. ("Implicitly, this is the view taken by the regulatory community.")
  2. "Bank capital mismeasurement": Banks are really risky today, and all of the regulatory measures on which they seem to be safer -- regulatory capital, etc. -- are false.
  3. "Declining franchise value": Higher capital requirements and so forth have helped make the banks safer, but on the other hand, "other developments have eroded their franchise value thus increasing their effective leverage and riskiness."

Explanation 1 is in some ways the most intuitive: When Citigroup's average pre-crisis price-to-book ratio was 2.31, that clearly reflected market expectations of a future that was very different from the one that actually obtained. But Sarin and Summers don't love it as a complete explanation: "It is easy to understand why excessive optimism about financial stability could have led to the overpricing of bank securities before the crisis. It is much less clear why it should have led to their being insufficiently volatile in response to daily news." They instead mostly opt for explanation 3, declining franchise value: Post-crisis fines, regulations, low interest rates and competition from financial technology firms have made it much less valuable to be a bank, making banks more likely to fail. "There is a possibility that by further eroding bank franchise value, further regulatory actions could actually increase systemic risk," they say.

That seems plausible to me, though I cannot let go of the market error hypothesis as easily as they do. (I mean, there was a pretty big crash, implying some pretty big prior errors.) I also sometimes think that something you might call "bailout value" has gone away. Prior to the crisis, there was an expectation that the government would step in to keep banks afloat; now, the government has created a lot of explicit rules and implicit expectations that that support isn't there any more. People often talk about this in terms of bank debt prices, the idea being that bank debt might be impaired in a pure failure but would be made whole in a bailout. But it strikes me as an equity issue too. In the actual 2008 crisis, the Fed and Treasury bailed out Fannie Mae and Freddie Mac's creditors while more or less zeroing the equity, but they also arranged a bailout of Bear Stearns's and AIG's creditors in ways that preserved some equity value. And they arranged programs like TARP that kept other big banks afloat as going concerns, without any need to directly impair the equity. The political will for programs like that seems to be mostly gone, these days, which could make bank equity investors a lot more worried about the downside risks. I guess that's a form of declining franchise value too."

5. Items of Note


6. Job Postings


7. Upcoming Events
Sept 19 Financial Advisor - Inside Alternatives Conference (Denver, CO) Impact, Responsible Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 17-18: African Philanthropy Forum (Rabat, Morocco) Effective Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Effective Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing
April 7, 2017 Wharton Social Impact Conference (Philadelphia) Impact Investing

That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this bulldog puppy struggling to climb up a step). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet