All Things Impact 2016.7: foundation transparency, "heropreneurship," long-termism, China's fuerdai

Hi friends,

Here are four links worth your time:

1. Effective Philanthropy: foundations can improve by sharing lessons learned (successes *and* failures)
My friend Lindsay Louie, program officer for Philanthropy Grantmaking at the William and Flora Hewlett Foundation,just wrote about the Center for Effective Philanthropy’s new report, “Sharing What Matters: Perspectives on Foundation Transparency,” which finds that “69 percent of foundation CEOs surveyed believe that transparency is important for increased effectiveness.”

“The report reveals that both foundation leaders and grantees think foundations can do better at sharing how we measure our progress and our lessons learned — including the successes and the failures. The finding that particularly struck me is that “Only four percent of foundations share comprehensive assessments of their performance. Five percent share their experiences of the tools/method they have used to assess performance, and five percent share lessons they have learned from projects that have not succeeded.“

This is a critical area for foundations to improve. I think change will require serious work inside foundations before we see a change outside foundations.

Here are three reasons why: (1.) foundations themselves may be trying to figure these things out and so may not really be ready or able to share yet; (2.) it may be hard for people at foundations to recognize in the first place when they might have failed or played a role in a failure; and (3.) being more open about these things would be a change to the status quo, and people in foundations may resist the uncertainty of that change.

…In the case of increasing foundation openness, foundation staff may fear or resist losing control of information, hurting grantee organizations’ reputations, or losing some aspect of their personal reputation. Maybe some in foundations even fear (unknowingly if not knowingly) that they will lose some of their influence if they are more open.

…My hope is that foundation leaders reading CEP’s report will invest the time to think hard about their own institutions, why they don’t share more today, whether their culture enables and rewards acknowledging failures and lessons learned, and what serious steps they could take internally that might lead to more sharing externally.”

(Disclosure: Liquidnet, like the Hewlett Foundation, is a core funder of the Fund for Shared Insight, which supported CEP’s report.) 

2. Impact Investing: tackling "Heropreneurship"
In talking about this current era of the social sector, Daniela Papi-Thornton coins a new term in the Stanford Social Innovation Review: heropreneurship, "where reverence for the heroic social entrepreneur has led countless people to pursue a career path that promises opportunities to save the world, gain social status, and earn money, all at the same time." 

"In this “everyone an entrepreneur” era, hack-a-thons, accelerators, business incubators, and social entrepreneurship training courses are around every corner. They mostly focus on training people with the skills they need to start a social business, neglecting the many other skills required to fully understand a problem and fuel social change.

To really change a system, I believe people need a more holistic set of skills, including systems thinking, an understanding of collaboration tools to further collective impact, and lateral leadership skills such as the ability to lead without power and to galvanize movement toward a common goal across a diverse and disjointed solutions ecosystem. They also need a grounded understanding of themselves and their skills, such as how they like to work, which roles in a team best fit their skills, and if/how their risk tolerance fits with the range of social impact career options. Finally, if they plan to take a leadership or strategic role in solving a problem, they need a deep understanding of the reality of that problem.

Unfortunately, all too often, the people who get the funding to try their hand at solving global challenges haven’t lived those problems themselves. This comes from a range of biases. Donors, for example, often fund people they can relate to, and as the Dunning-Krugar effect explains, we often think the problems we know less about are easier to solve. The obsession with becoming “a founder” also arises from a lack of diverse educational funding programs. For example, most universities offer competitions or funding to help students start a venture, but don’t have contests and tools to support them in learning about and then “apprenticing with” the problems they care about.

We—the educators, social entrepreneurship training program designers, social impact funders, and university professors who give money and accolades to students to go out and solve problems before we’ve given them the tools to understand those problems—are largely to blame for this phenomenon. We’re wasting limited resources on shallow solutions to complex problems, and telling our students it’s OK to go out and use someone else’s time and backyard as a learning ground, without first requiring that they earn the right to take leadership on solving a problem they don’t yet understand."

3. Responsible Investing: Long-termism - having companies look beyond quarterly results
The world's largest investor is BlackRock, with more than $4.6 trillion (with a "t") in assets under management. Several weeks ago, its CEO Larry Fink sent a letter to 500 company chief executives urgning them for the first time to stop providing quarterly earnings estimate. “Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need,” he wrote. As Andrew Ross Sorkin wrote in the New York Times: 

"The proposal, a provocative recommendation from the influential Wall Street executive, is aimed at trying to curb companies’ short-term focus on quarterly results.

“To be clear, we do believe companies should still report quarterly results — long-termism should not be a substitute for transparency,” he said. “But C.E.O.s should be more focused in these reports on demonstrating progress against their strategic plans than a one-penny deviation from their E.P.S. targets or analyst consensus estimates.” (E.P.S. stands for earnings per share.)

Mr. Fink has made a series of proposals over the last several years to encourage longer-term thinking by companies, including a plan to change the tax code and the treatment of capital gains. But his latest proposition goes further than his previous efforts.

While Mr. Fink wants to eliminate quarterly guidance, he is also making perhaps an even more controversial request, asking chief executives and company boards to provide a “a strategic framework for long-term value creation” that could extend to multiple years. In other words, a company should give shareholders a detailed long-term plan for its business.

“Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future,” Mr. Fink wrote. Without management providing a road map for the next few years, he said, “some short-term investors (and analysts) offer more compelling visions for companies than the companies themselves, allowing these perspectives to fill the void and build support for potentially destabilizing actions.”

Over in Bloomberg View, Matt Levine looks further into this proposal in the context of stock buybacks:

"Some people think that if the manager of a company is skilled enough to make money for that company, she should get to hold onto it and invest it in new projects. After all, she has shown that she is able to make money. Other people think that she should give the money back to the shareholders, so they can invest it in new projects. After all, it is their money, and they have shown that they are able to invest it profitably. Neither of these views is unassailable, and for roughly the same reasons: Past success, in business and in investing, only weakly predicts future success. But there the money is, and someone has to decide what to do with it...

Fink thinks that companies should be managed by their managers. This doesn't sound especially revolutionary, when you say it like that, but of course there is a competing view. Lots of investors think that they have some pretty good ideas for how companies should be managed -- [stock] buybacks are often involved -- and aren't shy about proposing them. Sometimes those proposals are appealing, even to long-termers, and BlackRock sometimes backs them. "Nevertheless," writes Fink, "we believe that companies are usually better served when ideas for value creation are part of an overall framework developed and driven by the company, rather than forced upon them in a proxy fight."

It's useful to keep the capital-allocation-debate model in mind as you read this letter. Fink's message to managers is that they, rather than activist investors, should take the lead in deciding what projects should get funded."

4. Wildcard topic: China's fuerdai
Jiayang Fan writes in the New Yorker about how China's super-rich send their children abroad, telling this story through the lens of the "Ultra Rich Asian Girls of Vancover," a reality show.

"The children of wealthy Chinese are known as fuerdai, which means “rich second generation.” In a culture where poverty and thrift were long the norm, their extravagances have become notorious. Last year, the son of China’s richest man posted pictures online of his dog wearing two gold-plated Apple Watches, one on each front paw..

About a third of China’s wealth belongs to just one per cent of the population. While China’s poor still inhabit a developing-world economy, a recent report found that the country now has more dollar billionaires than the U.S. does. “What is happening in China constitutes one of the most rapid emergences of wealth stratification in human history,” Jeffrey Winters, a politics professor at Northwestern University, told me. Winters, the author of the book “Oligarchy,” pointed out that China is one of a small number of countries—Russia is the other notable example—where extreme wealth stratification was eliminated in a Communist revolution and then later reëmerged. As in Russia, the sudden formation of a new oligarchy in China means that there are many super-rich people who are unfamiliar with the ways in which more entrenched aristocracies quietly protect their wealth. “No matter the culture or age, old money knows from long experience that it is far safer to be secluded and less seen,” Winters said. But new money, as Thorstein Veblen theorized, asserts itself through conspicuous consumption...

This is the first time that China’s rich have sought to emigrate in significant numbers. For thousands of years, the ruling class was proudly isolationist. “People now refer to China as an emerging economy, but it was the world’s dominant economy for two millennia, until 1810,” Shamus Khan, a sociology professor at Columbia who specializes in élites, told me. “Before that, the Chinese élite were very reserved and almost snobbish in their view of foreigners. They thought of the European élite as backward people who wanted to acquire culture from China.” Westerners made hazardous journeys to obtain prized commodities—porcelain, tea, silk—from the Middle Kingdom, which considered itself the center of the world.

Only in the nineteenth century did it become evident that the West had outstripped China, especially in the field of military technology. The Opium Wars, which were fought over China’s trade imbalance with Britain, resulted in a humiliating defeat and, ultimately, the end of the Empire. “China’s first encounter with globalization led to its collapse, one from which the country has never completely recovered,” Khan said. “The emergence of a new Chinese élite is China’s second moment of encounter with these global processes, and it’s interesting how certain dimensions are reversed.”

Job Opportunities:

• Nonprofit Finance Fund is hiring for several positions in multiple cities (Boston, NY, LA, Philly)
• EarthEnable is hiring a Director of Operations (Rwanda)
• SeaChange Capital Partners is hiring a Program Associate (NY)
• Bloomberg LP s hiring a Senior Associate, Sustainable Finance - Product Strategy (NY)
• The Center for Effective Philanthropy (CEP) is hiring Analysts for the Assessment and Advisory Services Team (Boston & SF)
• Big Society Capital is hiring a Head of Strategy and Market Development (London)

That’s it for this week. Help me spread the word about #Allthingsimpact to your friends and colleagues. Please also send me any compelling links you discover in your own journeys across the web (even things like this gif of a young girl giving her large dog a health check-up). Also, I'm happy to pass along *impact-related* job opportunities (please send me the links, not an attachment).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.6: philanthropy vs democracy, what impact investing can learn from microfinance, opting out of ESG, and is humanity getting better?

Hi friends,

Here are four links worth your time:

1. Effective Philanthropy: what is the appropriate role of philanthropy in a democracy?
Gara LaMarche oversaw the deployment of ~$3 billion in philanthropic grants when he ran both the Atlantic Philanthropies and Open Society. Now president of Democracy Alliance, he recently spoke with Denver Frederick for the Business of Giving podcast about the nature of philanthropy in democracy. The whole interview is worth a listen, but here is a partial, unofficial transcript:

“When ‘big philanthropy first came on the scene, about 100 years ago (with the Rockefeller and Carnegie foundations), people on the American left, progressives of the day..viewed the dawn of these big trusts with enormous suspicion, partly because Rockefeller and Carnegie had bad labor practices and operated in extractive industries…it was thought they were trying to ‘cleanse’ or ‘launder’ their money…[Also,] the dominant left critique of philanthropy was to be very suspicious of it and that it was inherently undemocratic…As the years went by that muted considerably. 

Why, now, do progressives have deep concern about the power of money in politics, but not in philanthropy? When you spend hundreds of millions or billions of dollars trying to affect the democratic process and you do so by enjoying a tax exemption (which is a form of subsidy), you can have an enormous influence…a greater degree of self consciousness about it would behoove all of us in philanthropy.”

2. Impact Investing: what can impact investing learn from microfiance?
Many people have pointed out the looming challenge for impact investing as a practice: to gain traction, eventually “impact” can’t be in the eye of the beholder. In SSIR, Laura Foose and Anne Flan offer insights on this challenge from their experience helping to define social performance in the microfinance industry:

“Ten years ago, the microfinance industry was exactly where the impact investment community finds itself now. We prided ourselves on the “double bottom line”—delivering meaningful social performance while operating on a financially self-sustaining, even profitable, basis. Great efforts were underway to measure financial performance. But—and stop us if any of this is sounding familiar—with a few notable early exceptions, no one was measuring social performance. No one was even defining the term. It was simply taken for granted that if a financial institution said it had a social mission, it was serving poor people well. In short, social performance back then, like impact investment today, meant whatever anyone said it meant.

The backlash did not hit until 2007, but when it did, it was fierce. The windfall profits from high-profile IPOs—and the mind-boggling interest rates paid by very poor people that had made those profits possible—soured the public on an industry that had enjoyed respect, not to mention taxpayer funding. Never mind that the IPOs were hardly representative of the whole industry. Without universal standards, the public understandably concluded that “social performance” was nothing more than a marketing slogan.

…The Social Performance Task Force (SPTF) was created in 2005—crucially, so it turned out, before the IPOs—as a platform for the industry to get real about social performance: defining it, measuring it, promoting best practice…

…We’ve seen what happens when a market gets flooded with new money from investors who demand aggressive returns and are content not to ask the tough questions about what makes those returns possible. That story never ends well.

The impact investor community has an opportunity to write a new story, and get it right from the beginning.”

3. Responsible Investing: should ESG investing be the default, and fund managers who want to ignore these factors be required to “opt out”?
The CapRock Group’s Matthew Weatherley-White writes about about a recent encounter at Credit Suisse’s annual gathering of “Conservation Finance” professionals:

“…one of the true luminaries in the world of sustainability-focused fixed income management spoke of his fund’s Environmental, Social and Governance (ESG) research capabilities, and their deep track record in applying it. He was informed. Wicked smart. Thoughtful. Contemplative. Analytical. A bit nerdy, but in just the right way. Precisely the kind of guy you’d want managing your bond portfolio. The focus of his talk was the benefits to be derived from focusing on non-financial metrics when performing due diligence and constructing portfolios. And the results were unambiguously positive.

Anyone who has been around this space for a while would recognize the reasoning: de-risking a portfolio’s carbon exposure and environmental risk; gaining visibility into governance issues that inform credit worthiness; exposure to things like health-care cost liability for pension beneficiaries; etc. And he demonstrated, convincingly, that on a fully risk-adjusted basis, portfolios that emphasized this approach outperformed – if only marginally - his firm’s conventionally managed portfolios. (For context, the firm manages approximately $21billion, of which $1billion is managed specifically against this more stringent set of criteria. So he is not just tossing around a few bucks and calling it a strategy.)

So I raised my hand during the Q&A, and asked him why, if the approach and results were as productive as his slides proclaimed (and I have no reason to doubt him), did his firm not simply apply the same depth of ESG criteria to all of the portfolios they managed? Put more bluntly, I asked him why, with the empirical evidence at his disposal, didn’t his firm require conventional investors to opt-out of the ESG analysis? After all, investment professionals fight hammer and tong every single day for the slightest performance edge. Entire careers are made or broken on a few percentage points. His presentation made it sound like their ESG approach equated, simplistically, to free money.”

The reaction? “It was as if I had suddenly broken out singing “I Like To Be In America”. In Klingon.” Matthew goes on:

[I] came to a startling realization: if we, collectively, were to simply make ESG investing the opt-out proposition, that would change the game instantly and completely.

Imagine asking someone, for example, if they would like to invest along a special set of investment criteria that treated with utter disregard the environmental and social consequences of their capital. We would be required to disclose that by doing so, the investable universe would be limited. And of course, as a result, volatility would increase and the result would likely be a performance sacrifice. On the plus side, this approach would represent an excellent values-alignment exercise (so long as their values included environmental degradation, a willful ignorance to the hardening science around climate change and tacit support for the increasing levels of wealth and income disparity that we see not only in the US, but also throughout the world).”

4. Wildcard Topic: is humanity getting better?
In ‘The Stone’ section of the New York Times, the philosopher Leif Wenar has a beautiful reflection on human progress:

“The 20th century marked an inflection point — the beginning of humanity’s transition from its ancient crises of ignorance to its modern crises of invention. Our science is now so penetrating, our systems are so robust, that we are mostly endangered by our own creations. Our bomb-making is now informed by particle physics; our computers are becoming ever-better informed about our private lives.

In 1665, half a billion humans sweated to sustain the species near subsistence with their crude implements. Now our global economy is so productive that 16 times that number — some 8 billion humans — will soon be alive, and most will never have known such poverty.

…[T]he big picture of postwar history shows significant improvements in nearly all indicators of lived human experience. The average life span of humans is today longer than it has ever been. A smaller proportion of women die in childbirth than ever before. Child malnutrition is at its lowest level ever, while literacy rates worldwide have never been higher. Most impressive has been the recent reduction in severe poverty — the reduction in the percentage of humans living each day on what a tall Starbucks coffee costs in America. During a recent 20-year stretch the mainstream estimate is that the percentage of the developing world living in such extreme poverty shrank by more than half, from 43 to 21 percent.

The real trick to understanding our world is to see it with both eyes at once. The world now is a thoroughly awful place — compared with what it should be. But not compared with what it was. Keeping both eyes open gives depth to our perception of our own time in history, and makes us better able to see where paths to more progress may be open.

…Humanity does learn, painfully and often only after thousands or even millions have died — like a giant starfish hurrying over a jagged reef, with only primitive vision, slicing off spines on its way, yet regenerating as it grows and slowly adapting its motion. The currents are pushing the starfish faster, the reefs ahead are sharper — humanity must become sharper, too. Mainly, humanity learns as identities alter to become less aggressive and more open, so that networks can connect individual capacities more effectively and join our resources together.”

That’s it for this week. Help me spread the word about #Allthingsimpact to your friends and colleagues. People can sign up to receive this newsletter at All Things Impact. Please also send me any compelling links you discover in your own journeys across the web (even things like this gif of a puppy using its mother’s ear as a blanket).

Until next time, thanks for reading!
Brian

2016.5: foundation openness, impact fidelity, the case against SRI funds, and are we hopelessly hooked?

Hi friends,

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

Here are four links worth your time:

1. Effective Philanthropy: what do we mean by foundation openness?
One of my favorite projects in my work at Liquidnet is our participation in the Fund for Shared Insight, a funding collaborative that seeks to make philanthropy more effective by both advancing the research and practice of feedback loops in the nonprofit sector and by advancing foundation openness.

My terrific Shared Insight colleague at the Ford Foundation, Chris Cardona, has a helpful blog post about how we are internally wrestling with what we mean by foundation openness:

“The essential point is, there’s a difference between one-way openness, in which a foundation makes its information available to the outside world, and two-way openness, in which it engages in dialogue with the outside world and is willing to make changes as a result. For some foundations, it’s a huge achievement even to get to one-way openness; as we point out below, nearly a third of foundations with assets over $100 million (that is, pretty big ones) don’t even have a website. For other foundations, sharing by default has become the norm, and they’re pushing themselves to address the power dynamic between funders and nonprofits, or talking candidly about failure. We want to recognize these different forms of openness and encourage conversation and practice that moves foundations toward two-way openness where that makes sense.”

We are trying to refine an RFP that would solicit helpful ideas for how we might meaningfully increase foundation openness. Please do give the whole post a read and either comment on Chris’s blog or send me any thoughts you might have.

2. Impact Investing: impact fidelity & making sense of the many kinds of impact investing

My friend Brian Trelstad of Bridges Ventures wrote a great piece for Harvard Business Review on the confusion around the impact label in investing:

“Currently, impact can mean anything from venture investments in new health technologies to microfinance loans in Peru; from affordable housing in the US to renewable energy in India; from social impact bonds to private equity funds that create jobs.  That’s just the beginning of the confusion—even if you accepted that such diverse investments should all be grouped into one category, how do you even measure and compare impact anyway?

Faced with this uncertainty, most investors have chosen one of three options.  First, they search for examples of impact within their existing portfolios, bringing no incremental capital into the field.  Second, they deploy a small amount out of an experimental or mission-motivated pocket, which still holds back enormous amounts of capital.  Or third, and more common, is that they sit on the impact-investing sidelines. None of these are ideal outcomes.

In order to free up all the dry powder waiting for the right impact opportunity, the investment industry needs to help investors clearly articulate three guiding principles behind their investments: what kind of impact they want to have, how deep or broad their intended impact is, and the level of risk they are willing to accept.”

But after you’ve defined your impact preferences and how they fit into an overall portfolio, who does an investor ensure their impact intent is preserved? Brian proposes that: 

“…without a mechanism to align all players in the impact value chain around an investor’s expectations, the field risks an impact “race to the bottom” where funds or companies do as little as possible to comply with an investor’s [impact] objectives.  A comparable concept to “fiduciary duty” — call it “impact fidelity” — is needed to bind different actors to attempt to achieve the impact preferences that an investor articulates.” 

So…what might this “impact fidelity” look like?

3. Responsible Investing: better to avoid low-performing SRI funds and donate gains to charity instead?
Over at the MutualFunds website, Larry Swedroe offers a skeptical view of SRI (socially responsible investing):

“The implication is that you’re seeking not only profitable investments, but also investments that meet your personal standards. Some investors don’t want their money to support companies that sell tobacco products, alcoholic beverages or weapons, or firms that rely on animal testing as part of their research and development efforts. Other investors may be concerned about social, environmental, governance, labor or religious issues.

It is important to note, however, that SRI encompasses many personal beliefs and doesn’t reflect just one set of values. Therefore, it’s no surprise that each socially responsible fund relies on its own carefully developed “screening” system.”

Swedroe then reports on recent studies on the financial performance of SRI funds, finding:

“Evidence in the literature on mutual funds has shown that investor flows respond positively and significantly to past performance. However, this relationship weakens as the level of CSR increases. Investors in funds with higher ethical standards become less responsive to past performance and derive their utility from non-financial attributes. As the level of ethical compliance increases, it becomes more difficult for investors to find similar investment alternatives and therefore they may be more reluctant to switch to other funds, even when these funds register poor performance.” 

By this, Swedroe argues that SRI investors “pay a price in the form of lower expected returns and less effective diversification” and goes on to argue that SRI investors should instead “avoid socially responsible funds and donate the higher expected returns to the charities that you are most passionate about. In that way you can directly impact the causes you care deeply about and get a tax deduction at the same time.”  

(I obviously disagree, though it’s helpful to read these critiques. Thanks to my friend Aref for sending this link along!)

4. Wildcard Topic: are we hopelessly hooked?
Jacob Weinberg reviews several books in the New York Review of Books dealing with our digital culture and the impact of technology on relationships. (Did you know that evidently on average we check our smart phones 221 times a day—an average of every 4.3 minutes?)

“What does it mean to shift overnight from a society in which people walk down the street looking around to one in which people walk down the street looking at machines? We wouldn’t be always clutching smartphones if we didn’t believe they made us safer, more productive, less bored, and were useful in all of the ways that a computer in your pocket can be useful. At the same time, smartphone owners describe feeling “frustrated” and “distracted.” In a 2015 Pew survey, 70 percent of respondents said their phones made them feel freer, while 30 percent said they felt like a leash. Nearly half of eighteen-to-twenty-nine-year-olds said they used their phones to “avoid others around you.”

One insight he covered that I found interesting: why do teenagers prefer Snapchat over Facebook?

“For young people, she observes, the art of friendship is increasingly the art of dividing your attention successfully. Speaking to someone who isn’t fully present is irritating, but it’s increasingly the norm. Turkle has already noticed considerable evolution in “friendship technologies.” At first, she saw kids investing effort into enhancing their profiles on Facebook. More recently, they’ve come to prefer Snapchat, known for its messages that vanish after being viewed, and Instagram, where users engage with one another around a stream of shared photos, usually taken by phone. Both of these platforms combine asynchronicity with ephemerality, allowing you to compose your self-presentation, while looking more causal and spontaneous than on a Facebook profile. It’s not the indelible record that Snapchat’s teenage users fear. It’s the sin of premeditated curating—looking like you’re trying too hard.”

That’s it for this week. Help me spread the word about #Allthingsimpact to your friends and colleagues. People can sign up to receive this newsletter at All Things Impact. Please also send me any compelling links you discover in your own journeys across the web (even things like this gif of a baboon who has just had it with the internet today). 

Until next time, thanks for reading!
Brian

2016.4: Wounded Warriors & the Overhead Myth, evolution of an impact strategy, institutional investors opine on ESG, and $1.9 trillion in cash

Hi friends,

Welcome to my newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. 

Here are four links worth your time:

1. Effective Philanthropy: Wounded Warrior Project & The Overhead Myth
CBS News and the New York Times had explosive pieces this week criticizing the spending decisions of the popular veterans nonprofit, the Wounded Warrior Project.

According to data from GuideStar (which just revealed an *incredible* redesign of its nonprofit profile pages - congratulations to Jacob Harold & team!), in 2014 Wound Warrior raised over $342mm in donations. Of this, they spent close to $190mm (76%) on “program services”, $15mm (6%) on “administration” and $43mm (18%) on “Fundraising”. Without weighing in this specific controversy, I will instead point you to the “Overhead Myth,” a campaign launched in 2013 by GuideStar, BBB Wise Giving Alliance, and Charity Navigator in the form of an open letter to the “Donors of America”:

“The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—is a poor measure of a charity’s performance.

We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results. For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of a charity’s performance.

That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management. In most cases, however, focusing on overhead without considering other critical dimensions of a charity’s financial and organizational performance does more damage than good.

In fact, many charities should spend more on overhead. Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems — as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition).

When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve.”

2. Impact Investing: right tools, right time
The McKnight Foundation has a $2b endowment, 10% of which is now dedicated to impact investing, particularly to investments “that will accelerate a transition to a low-carbon economy, help ensure a clean and resilient Mississippi River, and contribute to a thriving and sustainable region.” Rick Scott, the foundation's VP of Finance and Compliance, spoke with Goldman Sachs Asset Management about their evolution:

“Our thinking has evolved considerably, as our learning has granted us new perspectives on our approach to the broader portfolio. While McKnight started with 10% of our endowment dedicated to impact investing, we see value in using an ESG mindset in approaching both our dedicated impact investments as well as the entire portfolio. We have found more levers for advancing our grant-making goals as we look at our position as an ESG- and impact-conscious institutional investor with a $2bn endowment.

We see power in our role as: (i) an asset owner who can dictate how our capital is allocated, (ii) a customer of financial services with the capacity to request new approaches or products, (iii) a shareholder who can vote proxies and request better ESG transparency from companies; and (iv) a peer investor who can work with other institutional investors for a better regulatory framework at the SEC, or collaborate with other foundations on deals. So while our endeavor may have started with a keen focus on a subset of our endowment, this approach has seeped into our overall investment thinking. 

How does Rick think think about the divide between investing and philanthropy? 

I do not necessarily see a divide; I see them as complementary and not mutually exclusive or at odds with each other. Investing allows us to engage in philanthropy with the assumptions that we are a foundation in perpetuity and that we want to maintain the purchasing power of our endowment. There can be a natural tension that develops within certain foundation structures, such as when independent investment offices sit in a separate silo from the program functions, however, that is not the case at McKnight. Here, we have long collaborated across all functions within the Foundation, even well before we formally began our impact investing program.

Our Investment Committee members are typically trustees as well as investment professionals, and they are very knowledgeable about our program goals. Our strategic framework states that “Our overarching goal is to optimize the use of all Foundation resources to contribute to building and strengthening socially, economically and environmentally sustainable communities.” This includes mobilizing our investments.”

3. Responsible Investing: 95% of institutional investors are “to some extent” incorporating ESG strategies
According to this Natixis global survey of 660 “senior decision makers working in institutional investment” (press release & full white paper):

95% are to some extent incorporating environmental, social and governance (ESG) factors into their investing strategies
64% say they believe ESG measures are primarily a PR tool
52% say a key challenge with ESG investing is the difficulty in measuring performance
51% say ESG assessments help mitigate headline-making risks
50% see ESG as a potential source of return
44% say ESG will be a standard practice for most managers within five years
38% are concerned by a lack of transparency in ESG reporting
31% do ESG investing primarily because it’s in their fund’s mandate
26% have found that incorporating ESG into investment decision making has had a positive impact on investment performance

4. Wildcard Topic: Why are corporations holding onto $1.9 trillion in cash?
Adam Davidson writes in the New York Times Magazine about the “conundrum” of why American businesses have an unprecedented $1.9 trillion in cash, “just sitting around...[t]ake, for example, Google. Its new parent company, Alphabet…has around $80 billion sitting in Google’s bank accounts or other short-term investments … [With this money], Google could buy Uber and its Indian rival Ola and still have enough left over to buy Palantir, a data-mining start-up. Or it could buy Goldman Sachs outright or American Express or most of MasterCard; it could buy Costco or eBay or a quarter of Amazon.” 

So why hold onto the cash? 

“The answer, perhaps, is that both the executives and the investors in these industries believe that something big is coming, but — this is crucial — they’re not sure what it will be. Through the 20th century, as we shifted from a horse-and-sun-powered agrarian economy to an electricity-and-motor-powered industrial economy to a silicon-based information economy, it was clear that every company had to invest in the new thing that was coming. These were big, expensive investments in buildings and machinery and computer technology. Today, though, value is created far more through new ideas and new ways of interaction. Ideas appear and spread much more quickly, and their worth is much harder to estimate. (Indeed, the impossibility of valuing the Internet is essentially what created the 2000 stock bubble.)

Surely the most important economic question of our time is a fairly simple one: Are the good times over? Will wages continue to fall for many, while rising high for a few? In the cash conundrum, we might find a modest reason for optimism. If corporate leaders and their investors truly believed that the future were bleak, that innovation and economic growth were irreparably slowing, there would be little reason to hold on to all that cash. Their hoarding of it hints that they think the next transformative innovation could be just around the corner. If in fact they do — and if they’re right — it’s good news for all of us.”

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 compelling links you discover in your own journeys across the web (even things like this photo, where one of these animals is not like the otters. Sorry.)

Until next time, thanks for reading!
Brian

2016.3: sunshine laws for foundations, uncorrelated conservation finance, meta-analysis case for ESG, map of the world, and an impact investing job posting

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. 

Here are four links worth your time (plus a job announcement!):

1. Effective Philanthropy: should foundations be subject to sunshine laws?
In Nonprofit Chronicles, Marc Gunther asks "How open are foundations? And, as tax-exempt institutions, operating with little oversight, should they be subject to their own sunshine laws?" Marc notes that transparency can mean different things to different people: "Transparency is an amorphous term. It could refer to strategies, lists of grants, contact information for program officers, blog posts explaining how and why foundations do their work, memos, internal emails, etc."

Marc writes: 

"...it’s easy to envision a legislative demand for transparency coming from a coalition of the left (which has become increasingly suspicious of big foundations and the wealthy, as the reaction to Chan-Zuckerberg made clear) and the right (which worries that foundations foment social change). Tax benefits to foundations, nonprofits and donors cost the U.S. Treasury about $100 billion a year in foregone revenue, congressional researchers have estimated. Citizens arguably have a right to know more about how that money is being spent.

...The absence of transparency is a problem for reasons that should be obvious. It erodes trust. It gets in the way of learning. It makes collaboration harder. It’s an obstacle for the nonprofits that foundations rely upon to carry out their work."

Marc then quotes from a 2015 Grantmakers for Effective Organizations (GEO) report:

"It is clear that grantmakers still view evaluation as something they do internally…A majority of grantmakers are struggling to make evaluation and learning meaningful to anyone outside their organizations.

When we stay in our offices and boardrooms and try to learn in isolation, we miss out on crucial information and perspectives of others, including the expertise of those closest to the issues. And when we hold onto the knowledge we gain through our learning activities instead of sharing it with the outside world, we deprive grantees, fellow grantmakers, community members and other partners of information that could be useful as everyone works to get better results on the issues we all care about."

(Disclosure: Marc writes in this piece about the Fund for Shared Insight, of which Liquidnet is a member.)

2. Impact Investing: Does conservation finance offer investment returns non-correlated to the stock market?
The start to 2016 has seen stock market declines due to everthing from concerns about Chinese economic growth to the declining price of oil. Could impact investing offer an alternative approach? David Bank writes in ImpactAlpha about a new report from Credit Suisse and McKinsey & Co. on the growth in conservation finance, predicting "private investment opportunity for conservation finance products of $200 billion to $400 billion over the next five years. That’s a huge ramp from today’s annual private investment of $10 billion or so." Why the growth? "Because natural resources, such as forests or fresh water, are generally independent from macroeconomic factors, the reports suggests, conservation assets are a way to diversify from stocks and bonds."

“In the current environment, investors are looking for an edge to drive excess returns – and many investors are increasingly seeing conservation impact investing as a way to achieve substantial environmental and social impact alongside market-rate financial returns,” Credit Suisse’s CEO, Tidjane Thiam, writes in the introduction to the report.

Last year’s flat market performance, combined with the new year’s stock swoon has only accelerated the search for low-risk, diversified assets. “For institutional investors, the risk-return profile of a product outweighs any other characteristics,” according to the report. “Low correlation with other asset classes helps ensure a diversification effect. The conservation impact of a product is generally of little importance.”

(Disclosure: Liquidnet is an investor in ImpactAlpha through the Liquidnet Impact Fund, a donor advised fund at ImpactAssets.)

3. Responsible Investing: Do environmental, social and governance (ESG) criteria affect corporate financial performance (CFP)? Yes.
Since the early 1970s, around 2,250 academic studies have been published on the link between ESG and CFP - 70% of which have been published during the last 15 years. This fact alone highlights the growing interest and assets under management (AUM) being deployed through an ESG lens. This December 2015 report from Deutsche Asset & Wealth Management and the University of Hamburg - considered " the most extensive review of academic literature as it relates to ESG and CFP ever undertaken" - reveals that only 10% of the studies display a negative ESG-CFP relationship; 62.6% in meta-studies yield positive findings. That is overwhelming. 

As the analysis makes clear: "the business case for ESG investing is empirically well founded such that investing in ESG pays off financially and appears stable over time."

The report goes on to conclude:

"The materiality of sustainability is undisputed. However, the challenge is to integrate environmental, social and governance criteria into the investment process to harvest the full potential of value-enhancing ESG factors...

ESG opportunities exist in many areas of the market. In particular this holds true for North America and Emerging Markets and also in nonequity classes such as bonds and real estate. The orientation toward long-term responsible investing should therefore be important for all kinds of investors in order to fulfill their fiduciary duties and better align investors’ interests with the broader objectives of society."

4. Wild Card: A Map of the World Based on Market Size
BusinessInsider points to this map (from a larger fascinating report from Bank of America Merrill Lynch) that shows the countries of the world scaled to the size of their stock markets:

"The US, with a market cap of $19.8 trillion, is the biggest and represents 52% of the world's market cap. Japan is in second place at $3 trillion, followed by the UK at $2.7 trillion, and then France at $1.3 trillion.

Notably, Hong Kong's market cap is nearly the same size of China (both of which are significantly smaller than countries like the US and Japan). 

Meanwhile, Russia, which has a bigger surface area than Pluto, is about the same size as Finland in terms of market cap."

5. Job Announcement: I'm hiring an Impact Investing Research Fellow.
This is a paid position and I'm looking for a dynamic grad student who can work with me in NYC 12-20 hours a week this semester (and possibly full time this summer). Here's the posting; please share with anyone great! (Candidates can send a cover email and resume to forgood@liquidnet.com.)

That’s it for this week. Help me spread the word about #Allthingsimpact to your friends and colleagues. People can sign up to receive this newsletter at All Things Impact. Please also send me any compelling links you discover in your own journeys across the web (even things like this dog overtaking a man's sled for his own use). 

Until next time, thanks for reading!
Brian

2016.2: Slow & Steady Philanthropy, Heron’s Investment Policy, Sustainable Investing Goes Mainstream, and a Politics for Technology

Hi friends,

Welcome to All Things Impact, a newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. 

Here are four links worth your time:

1. Effective Philanthropy: Slow, Steady, & Humble Wins the Race
Phil Buchanan of the Center for Effective Philanthropy argues against “miracle cures” and reflects on what philanthropic approach is needed when working on complex issues:

“There is a kind of quiet and collaborative leader who ultimately often gets results, in part because she (and sometimes he) recognizes that there is no miracle cure — that progress will be a slog and will need to involve and engage many diverse participants. Yes, to be sure, sometimes a high profile for a leader (or leaders) is necessary for success — and, very occasionally, leaders emerge who are both larger than life and elevate and amplify the voices of those around them (like Martin Luther King, Jr.).

But often, paradoxically, high visibility for individual leaders makes meaningful progress tougher. It emphasizes the individual (or individuals) over the collective engagement of the many, including the intended beneficiaries.

So it’s time for us to stop pretending there are easy answers that will be delivered by hero-leaders.  And it’s time for us to roll up our sleeves and do the tough work that effectiveness requires.”

(Disclosure: Liquidnet is part of the Fund for Shared Insight, which has offered grant support to the Center for Effective Philanthropy.)

2. Impact Investing: Heron Foundation’s Investment Policy
The Heron Foundation is a philanthropic institution focused on helping people help themselves out of poverty. Over the past several years, they have transformed themselves from the typical foundation model - having an investment team managing endowment assets to maximize financial returns and a separate program team deploying 5% of assets in the form of annual grants to nonprofits - into an integrated team that deploys all assets for impact. Their President Clara Miller was a recent guest on the Business of Giving show. 

Here are some excerpts from the Heron Investment Policy Statement, which they updated last year:

1. All investing is impact investing. All enterprises, regardless of tax status, produce both social and financial results, on a spectrum from positive to negative, including “neutral.” Their financial and social performance is measureable and varies over time. The conscientious investor takes note of both.

5. Heron acts primarily as a capital investor or equity holder in making both grants and investments. In all sectors, we seek to invest in strong enterprises with reliable revenue. Investing with the overall needs of an enterprise in mind, with shared performance goals, promotes the resilience that enterprises and their leaders require to succeed. Most importantly, strong, reliable enterprises are better positioned to deliver results and employ and serve the people on whom we focus.

6. Heron investment decisions are fundamentals-driven. We believe that enterprises that provide superior performance on both mission and financial dimensions are identified through thoughtful analysis of an enterprise’s fundamentals—broad social contribution, market opportunity, management team, and business model, including revenue reliability—as compared against peers and understood within a larger industry, sector and market context.

3. Responsible Investing: WSJ: “Do-good investing took a step forward in 2015, with Wall Street ramping up interest”

Alex Davidson writes in the Wall Street Journal about how “sustainable investing” has gone mainstream:

“Long viewed as a niche asset class catering to wealthy individuals and institutions that wanted to avoid controversial industries such as tobacco and firearms, sustainable investing seemed to turn a corner last year. Mainstream financial firms such as BlackRock Inc. and Goldman Sachs Group Inc. jumped into the fray, launching investment products that take into account environmental, social and governance (ESG) factors. At the same time, research from Morgan Stanley and others helped dispel concerns that investors have to sacrifice returns to do good.

…The use of screens to avoid compromising sectors, such as tobacco, firearms, alcohol and gambling, became outdated. Now, the amount and availability of ESG data means investors can judge companies individually, rather than having to eliminate whole sectors based on their values.

And thanks to a growing body of data, there is evidence that those who want to invest in companies that pollute less, better manage resources or prioritize workers’ rights can do just as well financially as those who don’t.

…Yet many challenges remain before sustainable investing is truly open to any investor. One of the biggest is that there isn’t yet one agreed-upon definition of what makes an investment “sustainable.”

….There is no audit system to assess what companies report as “sustainable,” and companies aren’t required to disclose their ESG behaviors and associated risks. Collectively these challenges pose an enormous hurdle to investors and asset managers who want financial products that deliver social returns, industry insiders say.”

4. Wild Card: A Politics for Technology
Are our politics keeping pace with the rapid innovation in technology? In his always excellent site Stratechery, Ben Thompson tries to get a sense for “what technology owes” society: “increased efficiency, which technology is uniquely suited to deliver, is the only way to grow the pie for everyone’s benefit. But given that much of those efficiency gains also contribute to winner-take-all dynamics, it is reasonable to expect that those winners — and their investors — pay commensurately more.”

He expands on this further:

“…in a world where the key to building a sustainable business was controlling distribution, the greatest gains naturally accrued to the biggest companies. And, by extension, it was reasonable to ask those companies to not only pay their workers well, but to also provide for needs beyond salary, like health insurance and disability insurance. But do those same assumptions hold in a world where distribution is free, and where preferences and needs can be distilled to an individual or gig basis?

The money problem — the fact it is both a means of exchange and a store of value — is an allegory for the dysfunctional nature of what passes for a social safety net, particularly in the United States: things like health insurance and disability are intermingled with a salary or fee. This is problematic on both sides: new efficiencies that are unlocked through mobile and ubiquitous connectivity are not fully realized thanks to regulations from an era that operated on fundamentally different assumptions. This, ultimately, hurts everyone because it limits the growth of the economic pie,

On the other side are the people actually doing these new jobs, or those who would like to. Given the fact many social safety nets are built by traditional companies, those not in those companies are left completely exposed. This is unacceptable both morally and economically: morally because to deny healthcare or basic insurance is to deny the humanity of those in need; economically both because of higher costs incurred because of treatments not received, but especially because of the cost of opportunities not pursued for fear of having no net.

It would be far better — and a far better match for the reality of today’s labor market — to disentangle once-and-for-all employment from the social safety net. This should be the central political focus of technologists in particular. Outdated regulations forged under fundamentally different assumptions are one of the chief obstacles to the opportunities afforded by mobile and the Internet, particularly when it comes to the aggregation of consumers in markets that weren’t even imaginable 10 years ago.”

That’s it for this week. Please send me any compelling links you discover in your own journeys across the web (even things like this gif of puppies which will make your day 10X better).

Until next time, thanks for reading!
Brian

2016.1: New Yorker profiles Ford, Matthew Bishop's Predictions, Mapping Short-Termism, and Graham's Refragmentation

Hi friends,

Happy New Year! Welcome to the first All Things Impact for 2016. This is a newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic.

Here are four links worth your time:

1. Effective Philanthropy: The New Yorker Profiles the Ford Foundation

Larissa Macfarquhar’s must-read profile of the Ford Foundation and its dynamic President Darren Walker in the New Yorker has a dazzling opening sentence:

“The urge to change the world is normally thwarted by a near-insurmountable barricade of obstacles: failure of imagination, failure of courage, bad governments, bad planning, incompetence, corruption, fecklessness, the laws of nations, the laws of physics, the weight of history, inertia of all sorts, psychological unsuitability on the part of the would-be changer, the resistance of people who would lose from the change, the resistance of people who would benefit from it, the seduction of activities other than world-changing, lack of practical knowledge, lack of political skill, and lack of money.”

In shifting the Foundation to focus on inequality, Macfarguhar reports on the internal debate:

“Was it better to work on issues that people were currently agitated about, or to draw attention to ones that nobody was addressing? Was it better to be bold and risk failure, or to give money to a project that had a good chance of success? And how soon would success have to happen in order to count—five years? Ten? Was it better to be patient or impatient? On the one hand, social justice wasn’t the sort of thing that happened overnight; on the other hand, there had to be some point at which a program could be declared a failure and cut off, or there would be no accountability at all.”

The article also provides a distinction between a “development foundation” and a “social-justice foundation”:

“A development foundation, like Gates or Rockefeller, generally had certain concrete things that it wanted to get done, and these things could often be measured. It might want to drill wells, for instance, or disseminate an improved type of seed; it might want to immunize babies in a given region, or administer deworming medicine. But Ford was not a development foundation: it was a social-justice foundation, and a social-justice foundation was concerned more with amorphous entities such as fairness and exclusion than with material well-being.”

She also covers the controversy surrounding the foundation concept from its earliest days:

“Even the conservative legal theorist Judge Richard Posner could not understand why foundation assets should be tax-exempt. “A perpetual charitable foundation . . . is a completely irresponsible institution, answerable to nobody,” he wrote. “Unlike a hereditary monarch whom such a foundation otherwise resembles, it is subject to no political controls either. . . . The puzzle for economics is why these foundations are not total scandals."

In fact, a hundred years ago, at the dawn of the foundation era, they were total scandals. When John D. Rockefeller tried to obtain a federal charter to establish his foundation, in 1910, Congress rejected him. In 1915, a Commission on Industrial Relations recommended that the Rockefeller Foundation be regulated by the government, or be shut down altogether by Congress, and its funds distributed to the unemployed, since presumably the reason it had all that surplus money was that the Rockefellers had been too cheap in paying their workers. “The domination by men in whose hands the final control of a large part of American industry rests is not limited to their employees, but is being rapidly extended to control the education and ‘social service’ of the nation,” the commission warned. The puzzle for history was why the scandal went away."

The whole article is worth reading in full.

2. Impact Investing: The Economist’s Matthew Bishop Predicts Impact Investing Goes Mainstream

 In a LinkedIn post, Bishop predicts: 

“In 2016, three important philanthrocapitalist players will make major strides in growing impact investing. Mark Zuckerberg and Priscilla Chan will start to show why they opted to pledge to give away the bulk of their $44 billion future not via a traditional charitable foundation but through an Omidyar Network-like LLC that can do lots of impact investing. The Ford Foundation will dedicate perhaps as much as 10% of its endowment to impact. And the MacArthur Foundation will roll out a series of initiatives designed to help smaller investors collaborate to scale up impact investing. At the same time, expect mainstream financial organisations from BlackRock to Bain Capital to start implementing their promised commitments to grow impact investing.

There will also be more social impact bonds (some successful enough to make up for the recent Rikers Island disappointment) and more IPOs of B Corps, to follow last year’s by Etsy. One slight worry: Paul Polman, who has become the face of a more sustainable, responsible approach to running a big business, is getting nearer to the end of his time at the helm of Unilever. If he goes this year, it is not clear that there is any existing CEO of substance ready to play that important role of leading the mainstream business world by example.”

3. Responsible Investing: Why Are Companies Short-Term Focused?

In its DealBook section, the New York Times has an extremely helpful systems map of the dynamics at play that lead to short-term thinking in how companies operate, with some possible fixes.It's worth exploring in full.

INVESTORS

Investors provide feedback to boards and executives by buying and selling stocks. As investors have focused more on the short term, they have bought and sold stocks more frequently.

POSSIBLE FIX

Taxes on capital gains could be changed to encourage investors to hold investments longer.

 MUTUAL FUND MANAGERS

Are often paid based on their short-term rather than long-term results, and see investors flee when short-term results lag.

POSSIBLE FIX

The compensation of mutual fund managers could be tied more closely to long-term returns.

 CORPORATE BOARDS

Hire, fire and determine the compensation of top executives. Boards have moved toward more incentive-based compensation, which can encourage executives to hit short-term rather than long-term targets.

POSSIBLE FIX

Boards could structure compensation so that executives only get paid if they hit long-term targets.

 CORPORATE EXECUTIVES

Generally respond to the incentives created by their boards and to the feedback they are getting from investors via the stock market. Both of these may encourage short-term thinking

POSSIBLE FIX

Boards could structure compensation so that executives only get paid if they hit long-term targets. 

4. Wildcard topic:Paul Graham on the "Refragmentation" of American society

Y Combinator co-founder and prolific writer Paul Graham writes on the causes of fragmentation of American Society and possibilities for a "refragmentation":

"CEOs of big companies make more now than they used to, and I think much of the reason is prestige. In 1960, corporate CEOs had immense prestige. They were the winners of the only economic game in town. But if they made as little now as they did then, in real dollar terms, they'd seem like small fry compared to professional athletes and whiz kids making millions from startups and hedge funds. They don't like that idea, so now they try to get as much as they can, which is more than they had been getting.

 Meanwhile a similar fragmentation was happening at the other end of the economic scale. As big companies' oligopolies became less secure, they were less able to pass costs on to customers and thus less willing to overpay for labor. And as the Duplo world of a few big blocks fragmented into many companies of different sizes—some of them overseas—it became harder for unions to enforce their monopolies. As a result workers' wages also tended toward market price. Which (inevitably, if unions had been doing their job) tended to be lower. Perhaps dramatically so, if automation had decreased the need for some kind of work.”

 He goes on to write:

“20th century cohesion was something that happened at least in a sense naturally. The war was due mostly to external forces, and the Duplo economy was an evolutionary phase. If you want cohesion now, you'd have to induce it deliberately. And it's not obvious how. I suspect the best we'll be able to do is address the symptoms of fragmentation. But that may be enough.”

There was some pushback on Graham’s follow-up piece on inequality, and out of fairness I’d like to quote from Holly Wood’s Quartz piece titled Paul Graham has accidentally explained everything wrong with Silicon Valley’s world view:

“About 80% of his essay about economic inequality is a thinly veiled condemnation of poors who Paul Graham thinks are too stupid to understand why the rich are wealthy. They are stupid, he says, because they demand wealth redistribution as a means of addressing poverty rather than attacking poverty itself. Sillies!”

....

We, as a people, determine what is and is not of value mostly through what we believe to be legitimate and worthy of significance. And in late capitalism, we have all basically agreed to allow the market to dictate what is and is not of legitimate value. (This is what social critics recognize as neoliberalism.)

 But what the market deems valuable is not necessarily aligned with what is ultimately good for us as a society, or even what we want. Because under conditions of extreme inequality, the market is biased toward people who have lots of money, at the expense of virtually everyone else.

That’s it for this week. Please send me any compelling links you discover in your own journeys across the web (even things like fluffy doofus of a dog).

 Until next time, thanks for reading!

Brian

A 21st Century Gospel of Wealth, improved regulatory framework for impact investing, Just Capital, and Picketty, Rousseau & the desire for inequality

Hi friends,
 
This is a newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. See more at All Things Impact.

For this holiday season, here are four links worth your time:
 
1. Effective Philanthropy: Why Giving Back Isn’t Enough
In the New York Times, Ford Foundation president Darren Walker calls for an update to Andrew Carnegie’s classic 1889 essay “The Gospel of Wealth” – for the 21st Century:

“…for all the advances made in the last century, society’s challenges may have outpaced philanthropy’s resources. Today, the cumulative wealth of the most generous donors seems a pittance compared with the world’s trillions of dollars’ worth of need. Generosity, blooming as it may be from legacies of both Carnegie’s age and the newly enriched, is no longer enough.
….
Our self-awareness — our humility — shouldn’t be limited to examining the problems. It should include the structures of solutions, like giving itself. As the Rev. Dr. Martin Luther King Jr. said not long before his assassination, “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.” It is, after all, an offspring of the free market; it is enabled by returns on capital.

And yet, too often, we have declined to question our own circumstances: a system that produces vast differences in privilege, and then tasks the most privileged with improving the system.

Whatever our intentions, the truth is that we can inadvertently widen inequality in the course of making money, even though we claim to support equality and justice when giving it away. And while our end-of-year giving might support worthy organizations, we must also ask if these financial donations contribute to larger social change.

In other words, “giving back” is necessary, but not sufficient. We should seek to bring about lasting, systemic change, even if that change might adversely affect us. We must bend each act of generosity toward justice.”

2. Impact Investing: improvements to the regulatory framework
I’ve previously identified four things that need to come together to accelerate the practice of impact investing:

1.      Increased supply of impact focused investment opportunities

2.      Increased demand from capital owners for impact focused investment products

3.      Sufficient market infrastructure (like scalable intermediaries) to bring together the supply of investment opportunities with the demand from capital owners

4.      An effective enabling environment supporting the development of the field.

In the Stanford Social Innovation Review, Michael Etzel reviews two significant regulatory changes from this past year, which in the long-run should help boost the enabling environment for impact investing.

First change from the IRS: 

“On September 18, the IRS issued new guidance for foundations’ mission-related investments. Under the old rules, foundations worried that they would suffer tax penalties for making impact investments, especially those that produced returns below market rates. Henceforth, foundations are free to invest endowment assets in mission-driven organizations that align with the foundation’s charitable purpose. And they need not fear tax penalties if they choose to accept a lesser return from an investment with a strong mission component.”

Second change from the DOL: 

“A month later, on October 22, Department of Labor (DOL) issued a bulletin rescinding a 2008 rule that subjected so-called economically targeted investments—aka impact investments—to extra scrutiny, all but eliminating them from consideration by pension fund managers. The change reverts to a 1994 rule stating that “fiduciaries may consider (social and environmental) goals as tie-breakers when choosing between investment alternatives that are otherwise equal with respect to return and risk over the appropriate time horizon.”

In short, the ruling means that pension funds may invest in organizations with a social mission as long as the investment is financially prudent—the fundamental obligation pension fund fiduciaries. "Investing in the best interests of a retirement plan and in the growth of a community can go hand in hand," said US Secretary of Labor Thomas E. Perez.
 
Even a relatively small percentage increase in pension fund impact investments would add up to billions in new capital. Funds governed by ERISA manage roughly half of the $18 trillion in US pension assets. But ERISA rules also have a powerful spillover effect on the trillions managed by state and local governments, and by religiously affiliated organizations.”

3. Responsible Investing: A Plan to Rank ‘Just’ Companies Aims to Close the Wealth Gap
Paul Tudor Jones II, the hedge-fund billionaire who also helped found the renowned Robin Hood Foundation, has a plan to reduce income inequality. The New York Times covers the ambitions of the nonprofit he recently helped launch, called Just Capital:

“Just Capital will rank corporations on how well, or “justly,” they treat employees, society and the environment. The idea is to laud companies that offer better pay, happier workplaces and greater transparency — and perhaps shame others to follow suit.
 
This kind of moral index, Mr. Jones said, “could not only impact investors, it could impact consumers, it might impact the way companies hire, the way people go and work with companies; it will impact boardrooms, everything.”…
 
Mr. Jones argues that income inequality is being driven by what he calls “shareholder hegemony,” the principle that companies first and foremost should satisfy investors. The solution is for companies to make social responsibility as important as profits and share price.
 
Just Capital’s mission fits into an existing trend. Socially responsible investing, the favoring of companies that demonstrate environmental and social awareness, is a growing movement, driven in large part by the economic ascendance of millennials and women. As of this month, Morningstar said about 2 percent of the mutual funds it tracked were tagged “socially conscious.” Such funds “typically perform on par or a little better than conventional funds,” said Jon Hale, director of manager research at Morningstar.”

4. Wildcard topic: Piketty, Rousseau and the desire for inequality
In Crooked Timber, Chris Bertram explores Piketty through the lens of Rousseau and Rawls, arguing that because some people value inequality for its own sake, it will be harder to tackle than even Piketty imagines:

“Where does this leave democracy? Piketty fears that given rising levels of wealth inequality, democracy is doomed. People will not tolerate high levels of inequality forever, and repressing their resistance to an unequal social order will eventually require dispensing with democratic forms. I’m not so sure.

A highly unequal society in wealth and income is certainly incompatible with a society of equal citizens, standing in relations of equal respect to one another and satisfying their amour propre, their craving for recognition though a sense of shared citizenship. (This benign outcome roughly corresponds to the Rawlsian ideal of a well-ordered society where the social bases of self-respect are in place.)

But the outward form of democracy, its procedures, are surely compatible with great inequality, just so long as the wealthy can construct a large enough electoral coalition to win or can ensure that the median voter is the kind of “aspirational” person who identifies with the one per cent, even though they are not of it. In an unequal society such people are very common. They may be very poor compared to the super-rich, but they have just enough to take pride in their status as members of “hard working families” and to hope for the lucky break that will elevate them. At the same time they can look down with contempt on the welfare claimant and the “illegal” immigrant, nurturing their own amour propre by taking satisfaction in what they are not. Here we have, in another guise, the phenomenon of the “poor white” who looks down on poorer blacks and is thereby impelled to sustain a hierarchical social order.

Procedural democracy limping on against a background of inequality, disdain and humiliaton is not an attractive prospect, but it is already a big part of our present and may be the whole of our future unless egalitarian politics can be revived.”

That’s it for this year! Please send me any compelling links you discover in your own journeys across the web (even things like this seemingly flying bunny).

Until next year – Happy Holidays!
Brian

Beyond overhead, impact tipping point, big solar, and 52 things learned this year

Hi friends,
 
This is a newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. See more at All Things Impact.
 
Here are four links worth your time:
 
1. Effective philanthropy: If not overhead, then what? Maybe this.
Marc Gunther’s excellent Nonprofit Chronicles site continues to deliver. Here is his take on noted Yale economist (and founder of Innovations for Poverty Action) Dean Karlan’s latest project, ImpactMatters, which

"has devised a plan to do “impact audits” of charities that are analogous to financial audits. The audits will focus on four elements: transparency, cost-effectiveness, cooperation with others and “theory of change.” Charities will pass or fail the audits; failed audits will be kept confidential to encourage more charities to participate… the philanthropy market, such as it is, desperately needs disruption. We’d all be better off if high-performing nonprofits captured a bigger share of the $350 billion or so that Americans give to charity each year.” 

 While hopeful, Gunther sees three challenges ahead for the approach ImpactMatters is taking:

1.      Will it scale? (they have currently only posted audits for four charities, out of over 1.5 million in the US alone)

2.      Will donors actually use these audits to inform decision making? (“much giving is done with the heart”)

3.      Will there be limits to what data can measure? (e.g. advocacy efforts)

2. Impact Investing: Omidyar Network says "We're At A Tipping Point For Impact Investing"
Paula Goldman of the Omidyar Network (an LLC predecessor to the Chan Zuckerberg Initiative) makes three observations about impact investing to Devin Thorpe of Forbes: 

1.      We’re at a tipping point for impact investing (“In 2016, we will see interest in impact investing convert into exponentially more action — taking a significant leap forward from an “unorthodox” idea to more mainstream.”)

2.      The next generation is more socially minded and will push for change (“The next generation of investors is more globally aware and connected, viewing investing in a fundamentally different way. 67% of Millennials see investment decisions as a way to express social, political, or environmental values versus only 36% of Baby Boomers”)

3.      Capital and technology will drive innovation in emerging markets (“2016 will be the year where entrepreneurs and investors leverage the ubiquity of smartphone technology and demographic shifts to fuel the next wave of innovation and impact in emerging markets. We’ve identified a $3 trillion opportunity”

 3. Responsible Investing (in the public markets): Big Oil, Make Way for Big Solar.  
Matthew Campbell reports on the winners and losers from the Paris COP Climate Deal:

“The deal will likely accelerate investments in technologies like renewable energy and electric vehicles -- especially if more countries join the European Union and parts of North America in imposing a price or tax on carbon. The United Nations estimates upward of $1 trillion a year in spending is required to de-carbonize the global economy and prevent temperature rises scientists say could flood coastal cities, disrupt agriculture, and destroy ecosystems.

That means companies with business models threatened by a low-carbon world need to re-focus, and fast…

While environmentalists and many politicians argue the overall transformation will be positive for economies and jobs, millions of workers will face severe consequences. In the Canadian province of Alberta, the heart of the country’s oil patch, a newly-elected left-of-center government last month raised carbon taxes sharply. The idea, Environment Minister Shannon Phillips said, is to use the proceeds to help "make those investments in clean tech, in efficiency, in the renewables space," and diversify the economy away from fossil fuels.”

4. Wildcard: 52 things learned in 2015
Tom Whitwell has a fascinating collection of facts he came across in the past year. A sampling:

• More than half of the world’s feed crops will soon be eaten by Chinese pigs
• The web is less than 8,000 days old
• In 1990, more than 12 million children died before the age of 5. In 2015, that number will fall to 5.9 million.
• “In Silicon Valley, people don’t pitch their idea, because ideas are common and rarely original. Instead, they pitch their growth strategy; how they’re going to build not just a customer base, but an organisation employing tens of thousands of people.”
• If you’re selling a product based on emotion, leave out the cents (i.e £16). If you expect purchases to be driven by logic, add some cents (ie £15.97).
• “Some museum or gallery should just do a show called Things You Can Instagram. That’s all anyone wants.”

That’s it for this week! Please send me any compelling links you discover in your own journeys across the web (even things like these two dogs posing for a holiday photo).
 
Until next week!
Brian

All Things Impact #5: More Zuck, BlackRock, Guns, and Africa

Hi friends,

Welcome to another issue of All Things Impact, a weekly newsletter with insights from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic.

Here are four links worth your time:

1. Effective Philanthropy: Mark Zuckerberg wants to change the world, again. You got a problem with that?
A couple announcing the creation of a new legal structure a week after the birth of their first child usually does not draw global headlines. But the launch of the Chan Zuckerberg Initiative, LLC, continues to reverberate. Is it a tax dodge? No, as Josh Barro points out. Is it a tacit acknowledgement that the foundation structure itself might be in some sense outdated, and that impact can come not just from philanthropic grants to nonprofit organizations, but also from investments in for profit companies and engagement in policy debates? Perhaps. Here's Felix Salmon's take in Fusion: 

“[Foundations] generally works a bit like a perpetual-motion machine: you wind it up with some up-front endowment, get it started, and then watch it do whatever it does (teach students, fund charities, whatever) for many decades to come. Zuckerberg’s vision, by contrast, is different. He doesn’t want to create something which just keeps on doing the same thing for hundreds of years. He wants to spend billions of dollars today (or at least within his lifetime) on something transformational, which could help transform the lives of billions of future inhabitants of the planet for the better. Like Rockefeller’s meningitis vaccine, but probably more electronic.”

2. Impact Investing: Is BlackRock Putting the Good in Greed?
Bloomberg Businessweek profiles Deborah Winshel, the former head of the Robin Hood Foundation who in April became the first global head for impact investing at BlackRock. She helps set strategy for $7.5 billion of funds (out of $4.5 trillion in total assets managed by the firm).

"Winshel doesn’t manage money. She’s more of an evangelist trying to win over skeptics who question whether a Wall Street firm can effectively use its resources to benefit society. Some of the biggest threats the world faces—poverty, climate change, and disease—are too big for nonprofits, philanthropists, and governments to solve, Winshel says. “Having companies operate in a responsible way so they’re creating an economic value and social value is a direction I think our world is moving towards,” she says.
...
Some early proponents say they worry that BlackRock is doing little more than repackaging existing products to take advantage of growing demand. “We should all hope they get it right,” says Caprock’s Weatherley-White. “But if BlackRock gets it wrong, that’s going to be the largest pool of capital that’s green washing and not getting impact right.”

The tension is inevitable, says Andrew Kassoy, a co-founder of B Labs, an organization that certifies for-profit companies based on social and environmental performance, accountability, and transparency. “Most of the people who built impact investing came to the capital markets from the perspective of an activist, while the people who are coming to it now are coming from the perspective of a traditional investor,” he says. “They are meeting in the middle, somewhat uncomfortably.”

3. Responsible Investing: Guns in Your 401(k)? The Push to Divest Grows
Let's say you are concerned about gun violence, and support laws advancing gun control. Should you also be an investor in gun manufacturers, which have seen enormous returns after recent terrorist attacks and over the course of this year? You probably already are. Andrew Ross Sorkin writes in the New York Times about the Campaign to Unload and their website Unload Your 401(k).

"There is a growing movement among public pension funds, public advocates and other organizations to help investors divest themselves of financial stakes in the gun and ammunition industry. 
 
…Letitia James, New York City’s public advocate, took an even more unusual step. Hoping to cut off funding for gun makers, she sought to pressure TD Bank, which has provided $280 million in financing to Smith & Wesson, to cut its ties with the gun maker.

“As we stare at the financial smoking gun that enables gun violence, inaction is not an option,” Ms. James wrote in a letter to TD Bank. “If you want to do business with New York City, you can’t be in bed with companies that manufacture the agents that kill our children and families.”
…
 
In attacking the gun industry, Ms. James is taking a page from other successful efforts to pressure “sin” industries like cigarettes and coal. While seeking divestments has long been popular, they have had little direct impact, according to studies, despite the headlines they often generate. [emphasis added]

But efforts to prevent banks and other financing sources from lending money to certain companies has been far more effective. For instance, as chronicled in this column earlier this year, a number of advocacy groups successfully ended the practice of mountaintop removal of coal in Appalachia, an environmentally devastating practice, by pressuring banks like Bank of America, Citigroup, Morgan Stanley, JPMorgan Chase, Wells Fargo and Credit Suisse to choke off funding, which they did over nearly a decade of pressure."

4. Wildcard: For a Growing Africa, Hope Mingles With Fear of the Future
Some of the figures in this Wall Street Journal special report on the demographic changes projected to take place in Africa are jaw-dropping:

• Some 2.5 billion people will be African by 2050, the U.N. projects. That would be double the current number and 25% of the world’s total.
• Humanity is aging. By 2050, nearly a fourth of the people on earth will have passed their 60th birthday, compared with just one-eighth now. A swelling portion of the global economy will be spent hospitalizing or retiring old people.
• By comparison, the average African will be 28. Some 1.3 billion people here will be both young and old enough to start a business, educate themselves, build new homes, embark on a career—and give the world’s farms and factories a reason to grow.
• A century ago, Africa had only one city of one million people: Cairo. Now there are 50 such towns, many housing more residents than most European nations. Lagos, Nigeria, is home to 21 million people. Just 762,000 lived there when Nigeria won its independence in 1960.

That does it for this week! Please send me any compelling links you discover in your own journeys across the web (even things like this cat photobombing a family photo).

Until next week!
Brian
 
Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact #4: Are LLC's the new Foundations?

Hi friends,
 
Welcome to another issue of All Things Impact, a weekly newsletter with insights from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and awildcard topic.
 
Here are this week’s links worth your time:

1. Effective Philanthropy: Are LLC’s the new Foundations? 45 billion reasons why this may be so

(This is a big deal, so more than just one link.) On #GivingTuesday Facebook founder Mark Zuckerberg and his wife Dr. Priscilla Chan announced their creation of a Limited Liability Company (LLC) called the Chan Zuckerberg Initiative with the mission of “advancing human potential and promoting equality for all children in the next generation.” They are intending to place 99% of their Facebook shares into this LLC during their lifetimes. This has produced a lot of stories and opinions in the New York Times, Vox, Bloomberg, The Guardian, The New Yorker, Wall Street Journal, ImpactAlpha, and the Chronicle of Philanthropy, among others. ThisBloomberg article provides 4 potential reasons why the couple decided on the LLC structure instead of a traditional foundation:

1. No limits on lobbying (allowing greater flexibility to engage in policy advocacy work as well as make political donations)
2. Ability to turn a profit (allowing greater range in deploying capital to both for-profit companies and nonprofit organizations)
3. Easier to do joint ventures (so they can collaborate more easily with for-profit companies than foundations typically can; plus, they can more easily take in money from other “donors”)
4. Avoid the 5% payout requirement (allowing them greater optionality in when they chose to deploy their capital).

Does this set a new precedent for other millennial tech billionaires? Taking a twist on the classic line from the Social Network movie: “A Foundation isn’t cool. You know what’s cool? An LLC.”

2. Impact Investing: “The Planet-Saving, Capitalism-Subverting, Surprisingly Lucrative Investment Secrets of Al Gore”

This Atlantic piece by the always-terrific James Fallows on Al Gore’s $12 billion fund Generation Investment Management is worth your time:

“The most sweeping way to describe this undertaking is as a demonstration of a new version of capitalism, one that will shift the incentives of financial and business operations to reduce the environmental, social, political, and long-term economic damage being caused by unsustainable commercial excesses. What this means in practical terms is that Gore and his Generation colleagues have done the theoretically impossible: Over the past decade, they have made more money, in the Darwinian competition of international finance, by applying an environmentally conscious model of “sustainable” investing than have most fund managers who were guided by a straight-ahead pursuit of profit at any environmental or social price.”
 
“The idea is that if some tenets of “long term” and “value based” investing are extended to include the environmental and social ramifications of corporate activity, the result can be better financial performance, rather than returns that are “nearly as good” or “worth it when you think of the social benefits.””

3. Responsible Investing: The Wall Street Journal offers readers a guide to sustainable investing

The fact that the WSJ is producing this report as a guide to readers – both individual and institutional investors – is informative (perhaps even more so than the piece itself). 

“Investments marketed as sustainable—meaning they focus on companies that incorporate environmental and social corporate-governance practices into long-term corporate strategies—are experiencing explosive growth…even people within the sustainable business can’t agree on what is sustainable and what isn’t…The main issue is the lack of uniform information for both individual and institutional investors, meaning interpretation of the word “sustainable” varies depending on who is using it. That can cloud investor decisions when it comes time to dedicate money to a specific fund.”

 4. Wildcard: Left & Right come together to focus on criminal justice reform

President Obama and the Koch brothers don’t agree on much. But in this fascinating conversation (part of the excellent “The Axe Files” podcast), former Obama strategist David Axelrod speaks with Koch Industries general counsel Mark Holden about the Koch brother’s push for criminal justice reform, and the broader challenges of the US political system in general. Worth a listen.

That's it for this week!  Please send me any compelling links you discover in your own journeys across the web (even things like this gif of an adorable corgi surprised when he discovers that a “rock” is actually a turtle).

Until next week!
Brian

All Things Impact #3: Happy Thanksgiving

 Hi friends,

As you shuffle off to spend time with loved ones over Thanksgiving, here are insights from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. 

Here are this week's four links worth your time:

1. Effective Philanthropy: As #GivingTuesday turns four, a look at how it grew

On the Markets for Good site, Lucy Bernholz explores the forces that helped make #GivingTuesday part of the fundraising landscape:

"Part of the success no doubt redounds to the simplicity of the idea – making giving a cool and social thing to do. Early planners understood the power of social media and collaboration, and made it as easy as possible for others to join in. The focus was on the idea and allowing anyone anywhere to brand themselves part of the movement. One of the key resources the coordinating partners have provided is branding collateral – then they have mostly gotten out of the way. As communities created tools or succeeded with certain practices the coordinators made it easy to share those ideas too."

As a bonus - and shamelessly self-promoting link - here is a post I wrote last year for #GivingTuesday defining "Great Giving" as giving: 1) with intention 2) with information and e) with others. 

2. Impact Investing: Geeks, MOPS, and Sociopaths & the "subculture" of impact investing

This link never mentions investing, let alone impact investing. Yet when I came across David Champan's fascinating post exploring the evolution of subcultures, I read it with an eye towards the evolution of impact investing as its own type of subculture, especially over the past decade or so. "Geeks" are comprised of both the creators who invent an exciting New Thing (i.e., "impact investing"), and the early fanatics who contribute energy to support the creators. This then draws some "MOPs" (members of the public) who are fans, but not fanatic fans and ultimately dilute the culture. This then leads the "sociopaths" to arrive and exploit the culture by figuring out how to monetize the MOPs.

I really ought to write a whole post exploring whether this phenomenon is happening in the impact investing space; for now, I'd welcome your reactions as to whether this model applies to impact investing.  
 
3. Responsible Investing: Replacing the acronym ESG (Environmental, Social, Governance) with KWYO & KYC (Know What You Own & Know Your Customers)

In this LinkedIn post, Rob Lake searches for new models for thinking about how asset managers should think about responsible investing, "moving on from the concept of 'integrating ESG into their investments' - in the sense of bringing a new 'thing' in from outside and incorporating it into the way they invest. Instead, their starting point is who they are and how they want and need to invest: what their beneficiaries [editor: beneficiaries are the "asset owners" like pension fund participants and mutual fund investors] are entitled to in the form of their liabilities; what those beneficiaries want and expect in terms of social responsibility; and how the funds view their wider role in financial markets and in society."

4. Wildcard: Choose to be grateful. It will make you happier.

In this NY Times column, AEI president Aurhur C. Brooks reviews social science research that appears to demonstrate that acting grateful (even if you're not) can actually make you feel grateful: 

"It’s science, but also common sense: Choosing to focus on good things makes you feel better than focusing on bad things. As my teenage kids would say, “Thank you, Captain Obvious.” In the slightly more elegant language of the Stoic philosopher Epictetus, “He is a man of sense who does not grieve for what he has not, but rejoices in what he has."

That's it for this week! As we rejoice in what we have, please send me any compelling links you discover in your own journeys across the web (even things like this gif of a fat cat who cannot be bothered by an adorable puppy who wants to play). 

Until next week - Happy Thanksgiving!
Brian

All Things Impact: week #2

Hi friends,

Thanks for the great feedback to the first edition of All Things Impact, a weekly newsletter featuring insights from across the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. Please continue to share your thoughts and your content suggestions.

Here are this week’s four links worth your time:
 
1. Effective Philanthropy: Is David Geffen's $100 million gift to UCLA bad philanthropy?  
Music mogul David Geffen is giving $100 million to UCLA to set up a private middle and high school on its campus. Dylan Matthews of Vox is not impressed: “This gift is actually worse than no charity. No charity at least doesn't actively undermine the LA public school system by encouraging affluent parents to defect from it — in particular affluent parents who are already being specially induced to put their kids in public school. Geffen is actively making education in Los Angeles worse because he wants the medical school named after him to rise in the US News rankings. It's indefensible.”
 
2. Impact Investing: Do “Social Impact Bonds” still have promise?
After recent controversy over two of the earliest pay for success contracts (also known as "Social Impact Bonds" or SIBs) in New York and Utah, Duke University’s Kenneth Dodge argues in NYT’s DealBook that the model is still promising and that “We should celebrate rather than castigate Utah’s pioneers…With any innovation, early steps often seem crude and inexact… The Utah case is a step in the right direction because it shines light on outcomes rather than merely documenting implementation.”
 
3. Responsible Investing: Are divestment campaigns effective? 
Let’s say you’re concerned about climate change. Does divesting from companies that produce fossil fuels help advance your goals? Or should you try to use your influence as a shareholder to engage the management of fossil fuel companies to change their behavior? As one investment manager puts it, “the divestment campaign makes more people aware of the problem but it doesn’t solve the issue. It merely passes it on to the next owner.” An article from the Economist explores the range of approaches by capital owners and managers to wrestle with this issue. “The real aim,” says an official with 350.org, “is to deny energy companies the political, social and cultural backing to influence decisions on climate change.”
 
4. Wildcard: The Bill Simmons interview with President Obama is your long-form must-read of the week
In the GQ article, Obama comes to realize the limitations of presidential power, and that the main requirement of his job is to persuade: “You can’t separate good policy from the need to bring the American people along and make sure that they know why you’re doing what you’re doing…A lot of the work is not just identifying the right policy but now constantly building these ever shifting coalitions to be able to actually implement and execute and get it done.”
 
That's it for this week! Please send me any compelling links you discover in your own journeys across the web (even things like this photo of an elephant sitting on a car.) 

Until next week!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full bio. 

Introducing All Things Impact: a newsletter with four links worth your time

Welcome to the first newsletter of a project I'm working on called All Things Impact. Each week I'll share four interesting links I've come across. Generally, these will touch on the spectrum of impact: effective philanthropy, impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. 

Without further ado, here we go:

1. Effective Philanthropy: Nothing New Under the Sun?

In this interview on the Social Velocity blog, Nell Edgington speaks with the founders and editors of the excellent History of Philanthropy blog, where Stanley Katz reflects that it is “hard to separate rhetoric from reality in the current environment of philanthropic hype. From my perspective, the current boasting that all is new in philanthropy (see the recent New York Times “Giving” section), is pretty uninformed (naïve?).”

2. Impact Investing: IRS Gives Green Light to Foundation Investments for Impact

In this ImpactAlpha article, Dennis Price covers the recent guidance from the IRS which might help unlock some of the $650 billion in assets held in the endowments of U.S.-based private foundations. “Mission-related investments, or MRIs, are different from program-related investments, or PRIs. The latter, which come from foundations’ grant-making budgets, have been allowed since 1969 and have been used to make below-market guarantees, loans, and equity investments targeting social and environmental impact. PRIs, unlike MRIs, count toward foundations’ annual payout of approximately 5 percent of their total assets.”  

Price goes on to quote Paula Goldman of the Omidyar Network: “This is extremely good news for foundations that are eager to more fully leverage their endowments to advance social change. The implications are significant: foundations can carve out a piece – or even all – of their endowments for mission-driven investments.” (Disclosure: my company, Liquidnet, is an investor in ImpactAlpha through the Liquidnet Impact Fund, a donor advised fund at ImpactAssets.)

3. Responsible Investing: Is It Meaningful to Talk About the Ownership of Companies?

So asks John Kay in this recent post. “So who does own a company? The answer is that no one does, any more than anyone owns the river Thames, the National Gallery, the streets of London, or the air we breathe. There are many different kinds of claims, contracts and obligations in modern economies, and only occasionally are these well described by the term ownership.”

4. Wildcard: Artificial intelligence - ‘Homo sapiens will be split into a handful of gods and the rest of us’ 

“I think our best hope going forward is figuring out how to live in an economy of radical abundance, where machines do all the work, and we basically play.” In The Guardian, Charles Arthur looks at the likely effects of a robot revolution. “[T]echnology is leading to a rarification of leading-edge employment, where fewer and fewer people have the necessary skills to work in the frontline of its advances. ‘In the 1980s, 8.2% of the US workforce were employed in new technologies introduced in that decade…By the 1990s, it was 4.2%. For the 2000s, our estimate is that it’s just 0.5%.’”

That's it for this week! Please send me any compelling links you discover in your own journeys across the web (even things like this gif of a chameleon trying to catch bubbles). 

Until next week!

Brian

Welcome to All Things Impact.

All investments have impact. Whenever capital is deployed into an enterprise, that enterprise will put that capital to work in ways that will necessarily have several impacts on society and the environment – some good, some bad, and some neither particularly good nor particularly bad.

This project will explore how we might best deploy capital to enterprises in order to finance the most net positive social and environmental impact. I look forward to being in conversation with you as together we learn what works best. Please do get in touch.