All Things Impact.

private capital & the public good

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

Brian WalshComment

Hi friends,

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

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

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

He goes on: 

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. Items of Note


6. Job Postings


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

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

Until next time, thanks for reading!
Brian

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

All Things Impact for August 26: confronting privilege in philanthropy; confronting myths in impact investing; BlackRock launches an "impact mutual fund"

Brian WalshComment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.

Here are four links worth your time (plus items of note, job postings, a calendar of upcoming events, and an invitation for discounted tickets to SOCAP 16):

1. Effective Philanthropy: confronting the blind spot of privilege
Kathleen Enright, the CEO of Grantmakers for Effective Organizations, writes in the Huffington Post how for “many in philanthropy, privilege is a blind spot.”

“Privilege” often refers to wealth, but other aspects of privilege might be a bit harder to identify and therefore harder to address—like being socially advantaged merely based on your gender, the country of birth, sexual orientation or the color of your skin.

By their nature, donors are people of economic privilege (though some did not grow up in those conditions). Many of us with careers in philanthropy also come from various forms of privilege or at least experience it now.  Yet for centuries, privileged people have engaged in philanthropy that is, at times, less than effective. It’s clear that — in order to do philanthropy well — we must recognize and confront privilege…
 
It often shows up as attempts to do for instead of with those most affected…It shows up as a lack of understanding — one that often borders on suspicion — as to why it is so hard to break the cycle of poverty. It can show up as exacting standards around evidence and evaluation that often mask a lack of understanding about the type of work required for social change. Unconfronted, privilege can prevent us from feeling true empathy for the people and communities we hope to serve….
 
Privilege means that we’ve benefited from policies that were designed in a way that, whether intentionally or unintentionally, disadvantage others....

So how best to overcome this privilege?

"When I think about philanthropy leaders who model the best ways to be in this work, they operate from a place of humility, gratitude and service, not privilege…What would change if philanthropy broadly prioritized hiring people whose life experiences provide them with fewer blind spots and with the hard won, gut level empathy that comes from a lack of privilege?"


2. Impact Investing: confronting the 4 myths of impact investing
Writing in Medium earlier this summer, Jean Case, CEO of the Case Foundation, addressed four “myths and skeptical perceptions that we’re hearing, which may be posing barriers to taking impact investing to the next level.”
 
Here is a condensed version of her piece:

Myth #1: You need to sacrifice profit for purpose
Much like other types of investments, what we’re seeing with impact investing are returns that fall along a spectrum, with investments targeting a variety of financial and social outcomes, and an increasing evidence base showing you do not have to sacrifice profit for purpose.
 
Myth #2: Impact Investing is cannibalizing philanthropy
We agree that foundations should be thoughtful and strategic as they incorporate this new tool into their community development, conservation, education or other charitable funding strategies to avoid the potential pitfalls of the “square peg round hole” problem or cannibalizing effects…Our hope for the sector is that through effective integration, impact investments will work as a strong complement to, rather than a replacement for, other philanthropic tools through either mission related or program related investments (MRIs or PRIs).
 
Myth #3:The market is limited to “do gooders” — the serious, savvy players haven’t jumped in
Perhaps the greatest single change that has driven the momentum of impact investing is the “broadening of the tent” in recent years, as world-class investors, respected financial institutions, private equity and venture funds have all jumped into the space. And most recently, significant policy changes pave the way for foundations and pension funds to play an increasing role. Indeed, we are truly seeing deal flow across a broad spectrum of asset classes and an equally broadening array of investor classes emerge.
 
Add to this some world-class investors and respected institutions that have stepped into the game, including Bill Gates, Reid Hoffman, Vinod Khosla, Marc Andreessen, BlackRock, Bain Capital, Goldman Sachs and more.
 
Myth #4: Impact investing will never really go mainstream — it’s only available to the rich
It’s true that impact investing has gained traction for a set of accredited and high net worth investors and institutions, but we see the potential for a wider set of individuals to align their investments with their values. This is a dynamic that is rapidly advancing as a greater number of organizations are creating onramps for investors from a wider range of income levels to get into the impact investing game. 
 

3. Responsible Investing: BlackRock Launches Impact Mutual Fund
I don't usually source from press releases, but its pretty significant when one of the world's largest asset managers (BlackRock manage nearly $5 trillion - that's trillion with a t - on behalf of investors), steps into the impact game. The "BlackRock Impact Bond Fund" (BIIIX) is the first broadly available U.S. fixed income fund launched by the company since the formation in February 2015 of BlackRock Impact, the firm’s $200 billion sustainable investing effort.

So what will the Fund invest in? Corporate bonds, through a "unique research and investment approach" that will identify companies with "positive aggregate societal impact outcomes such as corporate citizenship, high impact disease research, greenhouse gas emissions, ethics controversies, and litigation...The portfolio focuses on measurable impact and consistent alpha."

“Impact investing seeks to enable investors to achieve competitive returns while targeting transparent, measurable social and environmental goals,” said Deborah Winshel, Managing Director and Global Head of Impact Investing at BlackRock. “BlackRock continues to leverage the breadth of its investing and risk management skill to create innovative portfolios that seek to combine social purpose and investment performance.”
...
 
“We believe this new investment strategy will address a growing demand for fixed income impact solutions in the public markets,” said Scott Radell, Managing Director and portfolio manager of the Fund. “The BlackRock Impact Bond Fund seeks to leverage the firm’s renowned analytics capabilities and with its deep knowledge of the bond markets to create something truly differentiated for sustainable investors.”

 

4. Wildcard Topic: the end of Gawker.com
Alex Balk is a writer and editor I’ve read for many years now. He used to work at Gawker and then co-founded The Awl, where he recently reflected on the demise of Gawker.com:

"Each morning you wake to a new set of lies. They vary in subject and value and size. Some are omissions and some are direct, but the accretion of deceit contributes to a culture of cynicism and despair. Even knowing that you are being lied to is no help when everything around you is lies. You know that the positive reviews you read are written by writers who will not offer honest criticism for fear that it might hurt their future prospects. You know that no one is making the world a better place with an app that allows you to be chauffeured from a bar on one side of town to a bar on the other. You know that the people who are paid to tell you about your government regurgitate conventional wisdom to make themselves sound more authoritative. You know that you are being fed fear or hope or an idealized sense of yourself so that you will accede to their demands. Knowing you are being lied to is no help when everything around you is lies. All it does is habituate you to living with lies, so why would you bother to take anything too seriously? When words lose their meaning our very idea of what we owe each other is debased and devalued to such an extent that we become closed off and contemptuous and unable to rise above our own self-interest. We are afraid to diagnose deceit because we might be mocked for our innocence by those who tell us everyone already knows that these things are false, and so we stay silent. This situation has become so unremarkable that to make mention of it seems tiresome.

What Gawker did at its best was stand up and say, “No, you’re right, these are lies, you are correct to think that you are being lied to” and for however long that assertion hung there in the air you were able remind yourself that you weren’t wrong to feel discomfort with what whatever narrative they were pushing at you. You weren’t alone. It did not make the world better but at least it pressed pause on the world’s becoming worse.

Gawker was not always, or even often, at its best…Gawker was stupid, loud, bullying and ill-informed, and most days it was the only honest thing you could read.
 
Now those days are over."
 

5. Items of Note

  • Special announcement for All Things Impact readers: Liquidnet has a limited number of discounted passes ($795) to SOCAP16 available. If you reply to this email with a good case for going, and if I have any left, I'll be happy to provide you with one.  

  • The Beeck Center at Georgetown University released a new report on the state of impact investing education and training (including a listing of nearly 200 educational opportunities)

  • Fund for Shared Insight announces $2.6m in new grants for foundation openness

  • Markets for Good launches an RFP for Good Data Grants


6. Job Postings


7. Upcoming Events
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 8 Best for The World Gathering (Berkeley, CA)
Sept 13-16  SOCAP (SF) Impact Investing
Sept 19 Financial Advisor - Inside Alternatives Conference (Denver, CO) Impact, Responsible Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Effective Philanthropy
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for August 11: #reasonsforhope, catastrophe insurance, decarbonized portfolios, and "Hillbilly Elegy"

Brian WalshComment

Hi friends,

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

1. Effective Philanthropy: #reasonsforhope & “Foundations as Moral Cheerleaders for America”
Writing in Inside Philanthropy, David Callahan raises concern about the full-page ad recently taken out by 39 foundation presidents in the Sunday New York Times and other top newspapers:

“The ad, citing the “recent killings of people and police officers in communities across the country” offers a message of hope based on America’s past track record of steady progress toward “dignity, equality, and justice,” and it calls on readers to chime in with their optimistic thoughts at #reasonsforhope on Twitter.

Sounds nice, right? But I’m imagining that more than a few advocates working in the trenches on race, policing, and guns looked at the list of foundations on the ad, and then at their own list of funders, and noticed something amiss. Or maybe they Googled the cost of a full-page New York Times ad—which starts at around $100,000—and mused about how far that money could go in their shoestring operations…
 
With more funders pushing into controversial public policy issues, and often in non-transparent ways, the risk grows that these institutions will lose the public’s trust as high-minded institutions with noble intentions. The ever-greater warehousing of tax-subsidized wealth at a time of fiscal austerity is also an invitation to popular ire. Which is one reason why the foundation sector would be well advised to embrace—not reflexively fight—growing calls for reform. The stakes are too high, here, for the sector to not get ahead of this curve.
 
… foundation leaders need to be mindful of appearing hypocritical in their cheerleading role or hogging the spotlight, as people sitting on piles of money often do. It’s the change makers in the field who should be out front, and the last thing those folks want to hear are foundation CEOs giving lip service to priorities that, in practice, they’ve been underfunding for years.”


2. Impact Investing: catastrophe insurance and the “missing market” in disaster response
In a compelling new paper, Theodore Talbot and Owen Barder from the Center for Global Development make the convincing case for fixing the key “missing market” in disaster response by moving towards an insurance model for tackling humanitarian crises and natural disasters:

As they write in the paper’s abstract:

"Disaster aid is often too little, too late. Pressure on aid budgets is prompting donors to find ways to handle more crises with less funding. But the current model of discretionary, ex-post disaster aid is increasingly insufficient for these growing needs, and does little to create incentives for governments in affected countries and donors to invest in risk reduction and resilience. This framing paper sets out how the global community can do better. It proposes combining novel insurance contracts that provide fast payouts based on ‘parametric’ triggers with clear incentives to manage risks and invest in reducing losses. Pilot programmes show that the model can work. The challenge is to provide coverage for a broader range of risks, explicitly align incentives in managing risks and reducing losses, and determine the appropriate role for governments and donors. Properly implemented, an insurance paradigm for disaster aid will save many more lives for much less money."

From the paper:

“Insurance is fundamentally the trade of resources for risk. A contract is an agreement between an insurance provider and a counterparty to pay an agreed amount in response to an agreed risk or a predetermined loss. By buying insurance, we can pass risk and the cost of loss to the insurer– at a price. Because insurance providers will only operate if they expect to make a profit, the price for insurance, at any point in time, exceeds or is just equal to the expected value of any payout we are likely to get. As a result, we typically only buy contracts for those risks that we cannot afford to bear at once, like being sick or losing our homes to floods or fires. Meanwhile, insurers lower their risk by offering contracts simultaneously to many counterparties, because people are likely to pay their premiums together but are unlikely to be affected by losses at the same time.

In short, we cannot reduce the risk of many hazards, since we cannot control hurricanes or earthquakes. But we can dramatically reduce the losses inflicted by a large number of such hazards. We can reduce losses in two ways: first, by investing in resilience (e.g. investments in flood defences, earthquake-resilient buildings, irrigation to reduce reliance on rainfall); and second, by acting quickly and effectively in the event of a hazard (for example, to prevent a drought from becoming a famine, or a disease outbreak from becoming an epidemic). And insurance contracts can help to ensure that money is provided when and where it is needed, and not caught up in the collective action problems and geopolitics of donors…


3. Responsible Investing: commitment to decarbonize from the largest institutional investor to date
In an attempt to help fight global warming, one of Sweden’s largest pension funds has made the biggest single commitment to low carbon investing by an institutional investor. Chris Flood reports in the Financial Times about the Fourth Swedish National Pension Fund, known as AP4, which has $35 billion in assets under management: 

"[The] pension scheme intends to “decarbonise” its $14.7bn global equity portfolio by 2020. That means it will drastically cut exposure to companies that pollute with fossil fuels and increase allocations to those with low carbon emissions.

The move comes on the back of growing pressure on institutional investors to protect their portfolios from the risks of global warming and climate change…

Mats Andersson, the chief executive of AP4, who has just stepped down from the fund after 10 years, said: “We hope this initiative will help take low carbon investing further into the mainstream.”

…The expectation is that efforts to reduce global temperatures will result in some fossil fuel companies becoming “stranded”, where large writedowns or devaluations make assets worthless.

Pia Axelsson, a spokesperson for AP4, said greenhouse gases that cause global warming would be priced differently in the future. “Companies with lower emissions than their competitors will enjoy a financial advantage and deliver better performance,” she said.”


4. Wildcard Topic: “Hillbilly Elegy” and the condescension of poor white Americans
In the American Conservative, Rod Dreher interviews J.D. Vance, author of the new nonfiction book Hillbilly Elegy: A Memoir of a Family and a Culture in Crisis. Vance, a Yale Law School graduate, “grew up in the poverty and chaos of an Appalachian clan”, and Dreher claims that “Hillbilly Elegy is the most important book of 2016. You cannot understand what’s happening now without first reading J.D. Vance. His book does for poor white people what Ta-Nehisi Coates’s book did for poor black people: give them voice and presence in the public square.”
 
Here is part of Vance’s reply to Dreher’s question about the “barely-banked visceral contempt that East Coast, professional-class urbanite white people have for poor rural white people in the South” (N.B.: I just rearranged Dreher’s words to concisely fit that sentence):

“…humans appear to have some need to look down on someone; there’s just a basic tribalistic impulse in all of us.  And if you’re an elite white professional, working class whites are an easy target: you don’t have to feel guilty for being a racist or a xenophobe.  By looking down on the hillbilly, you can get that high of self-righteousness and superiority without violating any of the moral norms of your own tribe.  So your own prejudice is never revealed for what it is.
 
A lot of it is pure disconnect–many elites just don’t know a member of the white working class. A professor once told me that Yale Law shouldn’t accept students who attended state universities for their undergraduate studies.  (A bit of background: Yale Law takes well over half of its student body from very elite private schools.)  “We don’t do remedial education here,” he said.  Keep in mind that this guy was very progressive and cared a lot about income inequality and opportunity.  But he just didn’t realize that for a kid like me, Ohio State was my only chance–the one opportunity I had to do well in a good school.  If you removed that path from my life, there was nothing else to give me a shot at Yale.  When I explained that to him, he was actually really receptive.  He may have even changed his mind.
 
What does it mean for our politics?  To me, this condescension is a big part of Trump’s appeal.  He’s the one politician who actively fights elite sensibilities, whether they’re good or bad.  I remember when Hillary Clinton casually talked about putting coal miners out of work, or when Obama years ago discussed working class whites clinging to their guns and religion.  Each time someone talks like this, I’m reminded of Mamaw’s feeling that hillbillies are the one group you don’t have to be ashamed to look down upon.  The people back home carry that condescension like a badge of honor, but it also hurts, and they’ve been looking for someone for a while who will declare war on the condescenders.  If nothing else, Trump does that.  


5. Items of Note


6. Job Postings


7. Upcoming Events
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 8 Best for The World Gathering (Berkeley, CA)
Sept 13-16  SOCAP (SF) Impact Investing
Sept 19 Financial Advisor - Inside Alternatives Conference (Denver, CO) Impact, Responsible Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for August 5: Diversity, Equity, and Inclusion in Philanthropy

Brian WalshComment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
After taking the month of July off due to work and personal travel, here are four links worth your time (plus items of note, job postings, and a calendar of upcoming events):

1. Effective Philanthropy: Diversity, Equity, and Inclusion in Philanthropy
Writing in the Stanford Social Innovation Review, my friend Chris Cardona of the Ford Foundation thoughtfully wrestles with the challenge of how inequity shapes funders’ choice of partners: “do you go with established organizations that may at first glance have a higher likelihood of success but that aren’t representative of the communities you’re working with, or do you go with organizations led by people most affected by inequality that have been starved of resources and therefore may have a harder time executing—or that may execute in ways you aren’t used to?”

“When you boil it down, the source of the dilemma is equity. Organizations that are more representative of underserved communities tend to get fewer resources. Their more well-resourced brethren may be in a better position to execute in terms that are familiar and palatable to funders, perhaps because they come from similar educational backgrounds and have similar cultural frames of reference. Those ways of operating get coded as “capacity,” as in, for example, “I’m not sure about the capacity of these people of color-led organizations.” As Vu Le, executive director of Rainier Valley Corps, points out in a blog post that addresses—from the nonprofit perspective—who gets paid to work on equity, engaging authentically with grassroots communities of color may require a different approach to something as basic as meeting facilitation. “Convenience is often the greatest enabler of inequity,” he writes, referring to what’s convenient for funders and mainstream organizations in terms of where and how they choose to engage with grassroots communities of color….

And so we’re back to the dilemma funders face: Do we work with groups, whether consultants, intermediaries, or grantees, that work on inclusion generally and can deliver results “efficiently,” but that are not necessarily representative of the communities with which they work, or do we invest the time to work with organizations that are grounded in the communities they serve, but who may need more from us, whether time, money, understanding, or simply an open mind?”


2. Impact Investing: towards defining "impact classes"
Cathy Clark of Duke University and the consulting firm Tideline have been working since the Fall 2015 on the Navigating Impact Investing project, and they released a working paper in July. “Even as the field of impact investing has made progress on multiple fronts, market observers and participants still face challenges in comprehending and navigating the market, in part due to the lack of shared knowledge and frameworks.” Their initial findings point to the need for defining “impact classes” with the following design characteristics:

  • Simple

– Straightforward and compelling: Impact classes that can be easily understood will likely have wider adoption and be more useful as a result.
– Limited in number: The fewer the number of impact classes, the more likely they are to yield efficiency benefits.

  • Objective

– Meaningful, but objective: Impact classes need to offer product providers the opportunity to distinguish their work, but retain the possibility of third-party verification.
– Neutral on the degree or quality of impact: Impact classes need to be descriptive without making value judgments.

  • Universal

– Inclusive, cutting across asset classes, sectors, and public and private markets: One of the most promising opportunities for impact classes is to be able to compare the impact dimension of investments across asset classes, across sectors, and consequently, across a portfolio.
– Categorical and exhaustive: Impact classes should capture and distinguish the depth and breadth of activity in impact investing, but also not stifle further innovation.


3. Responsible Investing: "commonsense" principles of corporate governance
Over the past year, Jamie Dimon of JPMorgan Chase and Warren Buffett of Berkshire Hathaway convened a group of 13 of America’s most prominent chief executives to talk about the importance of corporate governance. The result? A list of 77 “suggestions” for corporate boards. As the Economist reports, these recommendations “represent a sober take on some big issues—how big companies should be led, how they should communicate with their shareholders, and how large investment firms should fulfil their own responsibilities.”

"The most controversial recommendation seemed innocuous: for corporate accounts to follow generally accepted accounting principles (GAAP). Startups often recoil at this, because they believe that GAAP reporting, which counts their high, initial fixed costs, penalises them. So too, with far less merit, do clever chief financial officers who have learned to make adjustments and tweaks that often highlight successes and disguise failures. For similar reasons, the report discouraged companies from providing earnings “guidance”, since making predictions about future numbers created pressure to fiddle the actual results.

Much of the report is devoted to the role of directors, in theory the apex of a company but in reality often an assembly of dim bulbs with bright names that serve as an appendage of the CEO. The report counsels that directors should be “shareholder oriented”, with diverse backgrounds and skills, undistracted by excessive other commitments. Opportunities should exist for critical issues to be discussed without the chief executive. The board should be able to speak with senior employees and outside consultants. Pay for board members and senior executives must be linked to the company’s success through share grants or the equivalent.

Corporate shareholders were also taken to task. They should, the report said, take direct responsibility for voting on proxy motions, rather than delegating their ballots away to advisory firms; weigh in on issues tied to long-term value creation; and have access to company management and its board. They should, in sum, be active in their ownership even if, as in the case of index funds, they take a passive approach to what they own."


4. Wildcard Topic: Why Diversity Programs Fail
Writing in the Harvard Business Review, Frank Dobbin and Alexandra Kalev argue that diversity programs launched since the 1990s in corporate America aren’t increasing diversity. “Among all U.S. companies with 100 or more employees, the proportion of black men in management increased just slightly—from 3% to 3.3%—from 1985 to 2014.” They don't find this surprising:

"Despite a few new bells and whistles, courtesy of big data, companies are basically doubling down on the same approaches they’ve used since the 1960s—which often make things worse, not better. Firms have long relied on diversity training to reduce bias on the job, hiring tests and performance ratings to limit it in recruitment and promotions, and grievance systems to give employees a way to challenge managers. Those tools are designed to preempt lawsuits by policing managers’ thoughts and actions. Yet laboratory studies show that this kind of force-feeding can activate bias rather than stamp it out. As social scientists have found, people often rebel against rules to assert their autonomy. Try to coerce me to do X, Y, or Z, and I’ll do the opposite just to prove that I’m my own person."

So what works?

"A number of companies have gotten consistently positive results with tactics that don’t focus on control. They apply three basic principles: engage managers in solving the problem, expose them to people from different groups, and encourage social accountability for change.”

(h/t to Fay Twersky for this article recommendation!)

5. Items of Note

6. Job Postings

7. Upcoming Events
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 8 Best for The World Gathering (Berkeley, CA)
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for July 1: how insights from behavioral science can inform charitable giving

Brian WalshComment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
Programming note: I will be out of the office for the entire month of July (vacation, work travel, training program), so look for the next All Things Impact in August.

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

1. Effective Philanthropy: how insights from behavioral science can inform charitable giving
I’ve spent years trying to understand how we might influence donors to give to the truly high-performing nonprofits, helping to channel a genuine impulse to give – individual US donors gave $258 billion in 2014 – towards the most effective organizations. Why aren’t donors more rational? ideas42, a behavior science research organization, with support from the Bill & Melinda Gates Foundation, tried to uncover a mystery in charitable giving in the US: “individuals may be giving in ways that don’t align with their true preferences or intentions.” Why might this be so? In their must-read report, ideas42 suggests that “[i]nsights from behavioral science can help explain how people currently make charitable decisions and inform new ways to reduce biases or remove barriers to action. Charitable dollars could then be better allocated, with critical resources directed toward the most urgent issues and effective solutions. Further, aligning individual preferences and donations could increase the total level of giving.”
 
Here are some more highlights from this fascinating report:

Social Norms
Humans rely on a wide range of external cues when deciding how to act in any given situation. Because we are social creatures, one of the most powerful cues is the perceived social norm: people tend to observe what others are doing and do the same – especially if they identify with the larger group. Letting prospective donors know that people like them are contributing to charitable causes can boost participation, and providing a benchmark for how much others have given can influence donation amounts.
  • Communicating norms increases participation.
  • Visible indicators of participation influence giving decisions.
  • Mentioning another donor’s contribution level can increase donation amounts. I
  • Revealing similarities between current and prospective donors increases average donations
Signaling and Matching
In charitable giving, the behavior of lead actors can communicate information about organizational quality. Signals about who else has already given, and how much, can influence decisions to give. These cues are especially powerful when people aren’t sure about whether an organization merits their support, since potential donors who don’t have enough information are much more likely to do nothing than to conduct their own research and due diligence.
  • Sharing information about major supporters validates your organization.
  • Seed money increases donations.
  • Lead gifts encourage participation and higher donation amounts.
Image and Identity
Each of us has a multi-faceted identity: we are parents, friends, consumers, investors, advocates, artists, and much more. Most of the time, we seek to act in accordance with the way we see ourselves or hope to be seen by others. Encouraging people to identify as charitable donors, or reminding them that their actions influence the way they are perceived by others, can increase contributions.
  • Reaffirming donors’ identities as charitable, giving people increases donations.
  • Reminding people of their past behavior as “donors” increases contributions.
  • Offering public recognition increases donations.
  • Selective recognition increases donations.
Emotions
People often make decisions based on their positive or negative feelings toward a subject, rather than on objective analysis. Different kinds of information evoke varying degrees of emotion, and strong positive emotions seem to encourage prosocial behavior.
  • People tend to like – and support – people who are similar to themselves
  • Photographs that elicit emotion increase donations.
  • Sharing information about an “identifiable victim” heightens emotions.
  • Considering a volunteer experience activates an emotional mindset and increases generosity.
  • Deliberative thought suppresses emotion-based giving.
Avoidance
It’s often hard for people to say no, including when they’re asked to give to charitable organizations. Direct, personal solicitations can therefore increase donations, but resulting gifts may not reflect true support for particular causes. Further, some people may preemptively avoid requests to donate.
  • Avoiding emotional stories and requests to donate helps people justify decisions not to give.
  • Avoiding direct, verbal requests to donate defends against impulse-giving.
  • People may give to avoid saying no.
Time-Inconsistency
Preferences change over time, especially when it comes to money. People tend to be present-biased, valuing today’s money more than they value tomorrow’s. This means that losses in the present are more painful than losses at some future point. Asking donors to commit today to donating funds later can boost total contributions.
  • Asking donors to “Give More Tomorrow” encourages generosity.
Hassle Factors and Procrastination
“Hassle factors” are small roadblocks that must be dealt with in order to complete an action. Despite being small in scope, hassle factors can lead to out-sized consequences if not resolved (e.g., needing to find a stamp could result in a late or missed rent payment). These seemingly minor inconveniences are at play in charitable giving as well, and can lead people to procrastinate, then forget about following through, or decide not to give after all.
  • Making it easier to donate encourages participation.
  • Reminders encourage participation.
  • Even minor inconveniences can depress giving.
Small Incentives
When thoughtfully designed, incentives can attract attention and inspire action. For example, providing small, nonmonetary gifts when making requests can sometimes trigger desires to reciprocate. However, the danger of incentivizing prosocial behaviors is that the external reward will “crowd out” the intrinsic desire to contribute by turning a donation into a transaction.
  • Lottery prizes increase the likelihood of giving.
  • Nonmonetary gifts encourage donations.

 
2. Impact Investing: the Vatican puts on an impact investing conference
Stop me if you’ve heard this one: a priest, a congressman, and a banker all walk into an impact investing conference. There is no punchline…this really happened this week at the Second Vatican Conference on Impact Investing, “Making the Year of Mercy a Year of Impact for the Poor.” Here is a roundup of the best tweets and photos from the gathering, and Naki Mendoza of Devex Impact covered the gathering:
 

"When a nearly 2,000-year old institution with more than a billion followers says that it wants to apply market-based solutions to solve the world’s most intractable problems, influential leaders are bound to take notice…
 
“The church’s growing role as an impact investor and investee are both significant. Like other large institutional investors, an organization as old and well endowed as the church has the financial capacity to create large scale social change. The church’s involvement in impact investing can also influence other religious organizations to pursue similar strategies," [Aspen Network of Development Entrepreneurs executive director Randall] Kempner said.
 
For the church itself, the more profound change would likely be the way that it conducts its affairs by re-orienting some of its work from charity-based to capital enterprise models. Today, most church enterprises are not financially sustainable and rely on donations to fund their operations.
 
“To transition from a charity-based model to one which is financially sustainable through scale and the proper use of capital and cost structures is not easy,” said Carolyn Woo, chief executive of Catholic Relief Services and the former dean of the University of Notre Dame’s Mendoza College of Business. “Once the church invites financiers, it involves a transition of mindset, a transition in competencies to develop as social entrepreneurs and a transition of governance.”
 
…Impact investors place a particular premium on innovative and efficient distribution models. Social enterprise funders often say that even the most groundbreaking technologies are only as good as the models that distribute them to disparate communities in rural areas.
 
The global structure of church organizations also provides a form of risk mitigation for potential investors. Church enterprises are often backed by the funds and resources of peer organizations, both domestically and abroad, giving would-be investors a bit of a financial cushion.
 
The goal is to now reorient church organizations toward more commercial models."


3. Responsible Investing: Under Armour’s investment in Baltimore
One of the impacts that companies have is on the places where they operate. Kevin Plank, the CEO of the athletic apparel company Under Armour, is building a 4 million square-foot headquarters for the company in Baltimore, as part of a larger urban revitalization through his real estate investment arm, Sagamore Development. In a profile in BloombergBuisnessweek, Rachel Monroe explores the impact of his ambitious plans, whereby he’s essentially building a neighborhood from scratch over 50 city blocks, called Port Covington:

“In cities struggling with postindustrial disinvestment and high rates of unemployment and poverty, such investors are often treated as saviors. “I would like to also extend a sense of deep appreciation and true excitement on the part of the city for what we see presented here,” Baltimore’s city planning director, Tom Stosur, said after Sagamore revealed the Port Covington master plan.
 
Plank’s ideas for Port Covington have also faced criticism that cuts against the savior narrative, particularly after Sagamore announced this spring that the arrangement would seek $1.1 billion in support from local, state, and federal governments, including $535 million in tax increment financing, or TIF, from the city of Baltimore. The TIF money would go toward infrastructure improvements and come from municipal bonds issued by the city, to be repaid by new property taxes eventually generated by the project. MuniCap, a Maryland consulting firm that analyzed the project, estimates it won’t create enough tax revenue to repay the TIF until 2038. More worrying, perhaps, is that the TIF request is so substantial, it would limit the city’s ability to issue other bonds without hurting its credit rating. “Baltimore is a deeply segregated city and has been for the past century,” says Lawrence Brown, a professor of community health and policy at Morgan State University. “A project like Port Covington, where there’s no fair-housing mandate and no promise for living wages, is really a missed opportunity. It’s reifying and intensifying the ‘two Baltimores’ problem we have now.” In its sweeping vision and unprecedented costs, Port Covington is an example of the increasing influence corporations are having on city planning.
 
Others are concerned about earmarking so much money for a new development company with no experience working at this scale. During a recent meeting, members of the city’s Urban Design and Architectural Review Board pointed out that preliminary designs for Port Covington looked something like a millennial daydream, one that included a whiskey distillery and makerspace, but no post office or fire station or library or school. (A subsequent plan corrected those omissions.) Asked if he is worried about criticism that he’s essentially building a synthetic, Disneyland version of Baltimore—all crab boils and racehorses—Plank says, “Why is that a bad thing? I love Disneyland. The purpose of Disneyland is to make people smile.”

 
4. Wildcard Topic: How "Culturally Constructed Ignorance" Wins the Day
Reflecting on the Brexit vote, Barry Ritholtz writes in Bloomberg View about agnotology, a word coined by Stanford University professor Robert N. Proctor, who described it as “culturally constructed ignorance, created by special interest groups to create confusion and suppress the truth in a societally important issue.”

"It’s a term worth knowing, since it is going global...
  
We see the results in a variety of public-policy issues where one side has manufactured enough doubt through false statements, inflammatory rhetoric and data from dubious sources that they can mislead public opinion in a significant way, at least for a time.
 
The backers of each of these public issues have used the technique of culturally constructed ignorance to affect public opinion, direct government policy and alter regulatory oversight. Here a just a few examples:
  • Iraq has weapons of mass destruction
  • Genetically modified crops are dangerous
  • Global warming is a scientific hoax
  • Vaccines cause autism
  • Tax cuts pay for themselves
  • Poor people caused the financial crisis
Each of these is, of course, wrong and lacking in any factual basis. Nevertheless, they have a following...
Democracy is based on the concept of a marketplace of ideas. Supreme Court Justice Oliver Wendell Holmes described the “free trade in ideas” within “the competition of the market.” By the time voters head to the polls, the participants will have chewed over the finer points, the details will be well known to all and, for the most part, everyone more or less understands what’s at stake.
 
Or not.
 
The assumption underlying policy debates -- their true purpose in a democracy -- is to engage in a principled argument in order to reach a discernible truth. It isn’t, as we have seen more and more often, to win a short-term victory at any and all costs .
 
Jonathan Swift once wrote, “Falsehood flies, and the Truth comes limping after it.” That was never truer than today, when falsehoods and Facebook hoaxes can travel around the world at the click of a mouse.
 
Hyperbole and exaggeration is one thing, creating an alternative universe is something else entirely.


5. Job Postings


6. Upcoming Events
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until August, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for June 24: "the most significant event in British history since the second world war"

Brian Walsh1 Comment

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 job postings and a calendar of upcoming events): 

1. Effective Philanthropy: What’s in a measure? Don’t be seduced by quantification
In the Stanford Social Innovation Review, my friend Fay Twersky, the director of the Effective Philanthropy Group at the William and Flora Hewlett Foundation, reviews Sally Engle Merry’s book, The Seductions of Quantification: Measuring Human Rights, Gender Violence, and Sex Trafficking. In her review, Fay discusses the social sector's use of indicators for measuring progress:

"Merry, a professor of anthropology at New York University, offers a thorough critique of what she describes as the “indicator culture” that shapes policy around the globe. Indicators are all systematic ways of organizing, comparing, and presenting information about various social phenomena, but they come in many forms. Adding to well-known economic indicators like gross domestic product, the international aid community is increasingly focused on designing new indicators to inform humanitarian and development work. It is with these that Merry takes issue.
 
As its title suggests, Merry’s book encourages us not to take these indicators as unvarnished facts: Don’t be seduced by quantification. Instead, Merry wants us to remember that indicators draw on subjective information about social phenomena, quantify it, package it, and then represent it as objective and reliable. “Quantification has a great deal to contribute to global knowledge,” she writes, “but it is important to resist its seductive claim to truth.”
 
…[Merry] argues that the largely Western experts who develop such indicators simplify complex on-the-ground situations in ways that often fail to account for crucial cultural context. The quest for technical expertise shuts out participation from the Global South, and the people whose circumstances the indicators measure typically lack a voice in their construction. Merry argues this is risky because what gets measured shapes our sense of what needs to change. For a more nuanced understanding, she suggests we supplement quantitative measurements with qualitative, ethnographic methods…
 
If you can get through the book, you will undoubtedly emerge a more skeptical consumer of the various indicators that get tossed around as truth.”

  
2. Impact Investing: The ImPact & the $30 trillion in private wealth held by the world’s wealthiest families
ImpactAlpha’s David Bank interviews Abigail Noble for the “Returns on Investment” podcast. Abigail was formerly of the World Economic Forum and now is the first CEO of The ImPact, an organization working to help wealthy families devote more of their investments towards impact. (Disclosure: I am a host on the ROI podcast, and Liquidnet is an investor in ImpactAlpha through the Liquidnet Impact Fund, a donor advised fund managed by ImpactAssets). 

“I want to get the top 100 to 200 wealthiest families in the world to make impact investments,” [Abigail] says. “If they’re making none, make one. If they are making a few, start to think about it as a strategy for a diversified portfolio.”
 
Noble says wealthy and influential stakeholders are key to making the inclusion of social and environmental value the norm, not the exception, in investing and business decision-making. The 200,000 families around the world with more than $30 million in assets hold nearly $30 trillion in assets, roughly double the annual output of the United States.
 
“We’re interested in the [aggregate] change from where they are now to where can be next year, to where they can be in the future,” Noble told ImpactAlpha in a podcast interview.
 
Indeed, in some wealthy circles, impact investing is beginning to take its place next to philanthropy. The ImPact network of wealthy families is inspired by the Giving Pledge, Bill Gates’ and Warren Buffett’s network of billionaires who have pledged to give away the majority of their wealth. The ImPact asks members to “Make The Pact,” and to go beyond philanthropic giving to use the power of their private investments and the broader capital markets to solve global challenges….
 
High-net worth individuals committed to social and environmental impact have long been seen as the early adopters of impact investing practices, but the expected flood of capital has yet to arrive. Obstacles include the paucity of performance data, a lack of education around investment strategies, and peer support to overcome resistance from other family members and, sometimes, financial advisors. “We’re seeing both a mindset gap and an action gap,” says Noble.

 
3. Responsible Investing: Facebook, the Chan Zuckerberg Initiative, and corporate governance
Responsible investing often involves an analysis of a company’s non-financial, ESG – Environmental, Social, and Governance – factors. Corporate governance – who has decision-making authority at a company – is a critical dimension to this analysis. Matt Levine of Bloomberg looks at Facebook’s new share structure allowing Founder and CEO Mark Zuckerberg to “do more or less whatever he wants, even though he doesn’t own a majority of the company" as he sells some of his Facebook shares to support his family's philanthropic efforts:  

“There is a social contract at most companies, partly explicit and partly implicit, that defines the roles and rights and duties of shareholders and directors and managers. And then Facebook has a different contract. For instance, at most companies, there's an annual meeting, and shareholders show up and vote on stuff, and if the shareholders are unhappy they can vote for changes, and while those changes aren't necessarily immediately self-executing, everyone has to at least pretend to take them very seriously. But at Facebook, Mark Zuckerberg has enough votes to approve whatever he wants, so the annual meeting is just for ineffectual shouting.
 
I feel like part of the contract at Facebook is, or really ought to be, that if you buy shares, you should not also complain about the voting structure that you bought into. But people do:

One shareholder spoke out to protest the new share structure, saying it wasn’t responsible to have one person having the most say in the company’s direction.
 
“It will continue to become impossible for outside shareholders to have any input on company decisions,” said Christine Jantz of Northstar Asset Management, which owns $5.4 million in Facebook common stock. “We are very concerned about governance risks.”

Now, to be fair, Jantz is complaining about the new share structure involving non-voting Class C shares, which is even more shareholder-unfriendly than the old one. She's not complaining about the voting structure she bought into; she's complaining about the even worse voting structure that will succeed that one. But the voting structure she bought into lets Mark Zuckerberg do more or less whatever he wants, without any shareholder input, including voting for a new and even worse voting structure. So the new, shareholder-unfriendly Facebook governance structure was in a sense contained within the old, shareholder-unfriendly Facebook governance structure. "It will continue to become impossible," Jantz complains, correctly.
 
I guess the point is, if you care about corporate governance, maybe just don't buy shares in huge companies that are controlled by individual founder-shareholder-CEOs? Certainly don't go to the annual meeting to complain; what does that get you?”

 
4. Wildcard Topic: "the most significant event in British history since the second world war"
Martin Wolf writes in the Financial Times about the shocking results of the UK voting to leave the EU:

"The hinge between the EU and the English-speaking powers has been snapped. This is quite probably the most significant event in British history since the second world war. It could mark an important moment in the west’s retreat from globalisation. It is, above all, a victory of the disappointed and fearful over those confident in the UK’s ability to adapt to change and lead in Europe.
 
The geography of the outcome reveals that this has also been a revolt of the provinces against a prosperous and globalised London. It is also a revolt against the establishment — political, economic and commercial. Meanwhile, those who consider themselves losers and those who resent the changes in their country, notably the mass immigration, have won. They have torn down the structures built up by the establishment over half a century. The Labour party, to mention one notable casualty, must have lost a huge part of its support.
 
Yet the UK might not be the last country to suffer such an earthquake. Similar movements of the enraged exist elsewhere, notably in the US, with the rise of Donald Trump, France, with the rise of Marine Le Pen, and even Germany, with the rise of Alternative for Germany. Others might follow. But, in an act of terrible self-mutilation, the UK has led...
 
Businesses who depend on their ability to employ European nationals must also reshape their operations. Many, surely, will want to move within the EU single market. Such decisions will not have to be made at once. But they will adversely affect investment right now.

In economic life, the future is always, to an extent, today."
 

5. Job Postings


6. Upcoming Events
June 23-July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
June 29-30 Future Finance & Social Innovation (Toronto) Impact & Responsible Investing
June 30 Innovative Strategies for Impact Investing Luncheon (Denver) Impact Investing
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this gif of corgis struggling with a 3 inch barrier).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for June 17: the "Innovative Finance Revolution"

Brian WalshComment

Hi friends,

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

1. Effective Philanthropy: Why don’t foundations share what they learn?
Marc Gunther writes in Nonprofit Chronicles about the re-launch of the Foundation Center’s IssueLab website, and the reluctance of foundations to share what they learn in the course of their work:

Pardon me for generalizing, but this reluctance to talk about failure is too frequently part of the culture of foundations and nonprofits. Partly that’s because foundations and nonprofits don’t do enough evaluations; they are hard to do, and they cost money, and donors are reluctant to divert money away from programs into research. I get that. But foundations have nothing to lose by sharing their insights…
 
Foundations and nonprofits spend tax-advantaged money to study the world’s most important problems. We can presume that they want to be better understand how to solve them. Why, then, wouldn’t they want to share what they are learning, in any way they can? As a newcomer to the social sector, I remain puzzled… About the only explanation that I can come up with for the reluctance to talk more widely about their results is that personal embarrassment that talking about failure might bring. I assume that people don’t get fired from foundations for making grants that don’t accomplish their aims, but perhaps I’m wrong about that?
 
Since its inception, Issue Lab has collected nearly 20,000 “resources” from about 5,500 publishing organizations. That sounds impressive, but Fitz told me that it is “barely scratching the surface.” To test out that proposition, I searched IssueLab for research on several topics that are interests of mine — clean cookstoves, cash transfers and animal welfare — and found a couple of reports of value, but not much.
 
But do we need Issue Lab when we have search engines such as Google, I wondered? Fitz explained that Google’s algorithms tend to drive users to the websites of well-established think tanks like the Urban Institute and Brookings. They produce valuable work but too often the lessor known but incredibly valuable evidence about programs operated by nonprofits winds up buried deep in search results." 


2. Impact Investing: the "Innovative Finance Revolution"
Georgia Levenson Keohane and Saadia Madsbjerg write in Foreign Affairs about the “innovative finance revolution", where private capital is being deployed towards the public good:

“In recent years, however, a new model has emerged, as collaborations among the private sector, nonprofit organizations, and governments have resulted in innovative new approaches to a variety of global chal­lenges, including public health, disaster response, and poverty reduction. Instead of merely reacting to crises and relying solely on traditional funding, financiers—working closely with governments and nongovern­mental organizations—are merging private capital markets with public systems in ways that promote the common good and make money for investors as well. By relying on financial tools such as pooled insurance and securitized debt, these efforts—which have come to be known as “innovative finance”—can unlock new resources and lead to cost-effective interventions. At the same time, such solutions generate profits and give investors an opportunity to diversify their holdings with financial products whose performance isn’t tied to that of the overall economy or financial markets.
 
Technological advances and creative thinking have led to a boom in innovative finance. To realize its full potential, however, solving public problems by leveraging private capital requires more attention from policymakers, who should consider a series of steps to encourage even more progress in this area.
 
A wide range of players have begun to embrace innovative finance, including treasury departments, multilateral development agencies, nonprofit financial firms, and traditional investment banks. In most cases, philanthropic foundations have stepped up with seed money. Government aid agencies have then put new concepts into practice by providing funds to create new financial vehicles.
 
The term “innovative finance” suggests complexity, but it’s less com­plicated than it sounds...
 
Innovative finance can help improve the international community’s response to some of the most costly aspects of such crises. Imagine, for example, how pay-for-success contracts or approaches similar to IFFIm’s could allow governments to raise funds quickly for the health-care, housing, and educational needs of refugees by securitizing future spending. Such proposals might once have seemed far-fetched; not any longer. With continued philanthropic support and sustained commitment from governments, innovative finance can put the power of private capital markets to work for the public good.


3. Responsible Investing: From “The Lean Startup” to the Long-Term Stock Exchange
The UK's Social Stock Exchange calls itself “the world’s first regulated exchange dedicated to businesses and investors seeking to achieve a positive social and environmental impact through their activities.” Bloomberg’s Matt Levinewrites somewhat skeptically about a separate new idea, the “Long Term Stock Exchange” being floated by “The Lean Startup” author Eric Ries:

“It's a little weird that corporate governance standards should be set by stock exchanges. A stock exchange is a place -- or a computer -- for people to get together and trade stocks. A good stock exchange has fast computers and good rules for trading stocks. Separately, a good stock exchange might trade only good stocks, but in modern markets there is no real conceptual connection between those things. I could just write down a List of Good Stocks, and decide only to buy those stocks, and not care which exchange I buy them on.
 
But in practice a lot of governance standards -- about independent directors and shareholder vote requirements and so forth -- are set by exchanges as a condition for listing. And here is the story of a new proposed exchange that will have different governance standards:

If all goes according to plan, the LTSE could be the stock exchange that fixes what Ries sees as the plague of today's public markets: short-term thinking that squashes rational economic decisions. It's the same stigma that's driving more of Silicon Valley's multi-billion-dollar unicorn startups to say they're not even thinking of an IPO. "Everyone's being told, 'Don't go public,'" Ries said. "The most common conventional wisdom now is that going public will mean the end of your ability to innovate."

…The things that will make his exchange long-term-oriented and innovative are, like, different executive compensation, and more voting rights for investors who've held shares for a longer time. This contrasts with the efforts by, for instance, Facebook to combat short-termism by giving public shareholders (essentially) no voting rights. "The LTSE also wants to nudge companies and investors to share more information, such as detail on R&D spending," which contrasts with some of the calls to fight short-termism by reducing public disclosure.
 
It is a little weird that short-termism is a problem with so many opposite solutions, but then, I am a bit skeptical that it is actually a problem. In any case, I am a big fan of companies experimenting with the formulas of governance and share ownership, so I am happy that Ries is doing his thing. I don't really know why it needs to be an exchange -- companies could, for the most part, just do these things on their own -- but I guess every governance innovation needs some sort of marketing angle. “


4. Wildcard Topic: Radical Changes Are on the Way for Investment Banks
John Carney reports in the Wall Street Journal about the future of investment banking - which will be more reliant on technology and less reliant on workers:

Trading will migrate to hedge funds. Jobs in the back office and stock-research departments will be done by machines. The heavy lifting of funding and capital allocation will shift from banks to giant asset managers, pension funds and sovereign-wealth funds.

Pressure on margins will persist, forcing investment banks to unbundle offerings and start charging for services like research and pricing data that they used to give away to win business.

In short, investment banks will be smaller, more specialized and home to technologists instead of traders. Instead of mastering the universe, they will seek to dominate smaller domains...

The center of power in finance has shifted to the “buy side”—those that purchase services—and investment banks will have to rethink their relationships with the asset managers, private-equity funds, pension funds, sovereign-wealth funds and hedge funds that make up that world.

As assets under management rise toward $100 trillion by 2020, according to the Boston Consulting Group’s forecast, the buy side will replace banks as the source of funding for deals and underwriting.
 

5. Job Postings


6. Items of Note

  • After 12 years, Rockefeller Foundation president Judith Rodin announces she's stepping down.
  • The MacArthur Foundation has launched an ambitious open grant competition 100&Change, a $100 million prized for a nonprofit - or even for profit - to submit a compelling idea to solve a major issue. 
  • Echoing Green has developed the Seed Impact Investment Template Note, or “SeedIIT,” to help emerging social entrepreneurs running for-profit businesses. 


7. Upcoming Events

June 22-23 Social Impact Exchange - Conference on Scaling Impact (NYC) Effective Philanthropy
June 23-July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
June 29-30 Future Finance & Social Innovation (Toronto) Impact & Responsible Investing
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this gif of Queen Elizabeth instructing her grandson to standup at a public event and this collection of golden retriever gifs - it's been a tough week and we can use all the "awww's" we can get).  

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio

All Things Impact for June 10: 42% of affluent investors “associate responsible investments as charity"

Brian WalshComment

Hi friends,

Welcome to All Things Impact. Here are four links worth your time (plus job postings, items of note, and a calendar of upcoming events): 

1. Effective Philanthropy: Building a Foundation for the 21st Century
Foundations deploy about $45 billion annually in the form of grants. But they have roughly $800 billion in endowment assets. Should a foundation's impact only come from it's grantmaking budget? Clara Miller writes in the Nonprofit Quarterly about her work transforming the way the Heron Foundation thinks about its full portfolio of impact, both its "endowment" and grantmaking, putting all of this in the context of the estimated $200+ trillion (that's trillion with a "t") global financial markets:

"The portfolio itself—Heron’s permanent capital, sometimes called an “endowment”—was in the vicinity of $300 million. This, by itself, was hardly enough to move the economy. Moreover, even if we recruited all our peers to do exactly as we had done, we, together, would comprise a total of one percent of assets under management globally. Even one percent would be a start, but we needed to look further. Our work, and our investing, must be influential not only beyond our walls, but beyond philanthropy.

So we decided to look beyond our portfolio of investments, to examine the way we operated and how we interacted with the economy as a whole. Our goal was to do more, and the route we saw was to move beyond marginal and toward fundamental philanthropy, where philanthropy is seen as essential to the functioning of the economy, not as separate and in ways protected from it. We realized that our dominant model was designed to address problems at the margins, in isolation from the commercial mainstream. But this meant that the model itself left on the shelf one of its key distinguishing strengths as an enterprise: the ability to approach all forms of commerce with social benefit in mind.

Possibly the current operating model of the private foundation was logical in an era where economies were subject to the “pull of place,” when business owners lived near their workers and were visible in the community; where shared “enlightened self-interest” was manifest and actionable; and where problems seemed bounded by geography (such as transshipment points), political sub-divisions and mid-20th century technology. But from Heron’s point of view, current conditions demanded something that went beyond a hermetic, self-protective model...

To fully engage all of our assets for mission, we would not only need to unify the financial and mission goals of the foundation in practice, we would need to push ourselves to break down our protective terrarium and rebuild an operating model that would require that we engage more actively with others—nonprofits and for-profits alike. Reinventing the private foundation would require that we build a model that requires the combined strengths of dispassionate, efficiency-oriented bankers and passionate, mission-focused program officers to make the most of philanthropic as well as broader societal assets, both inside and, more importantly, outside the terrarium."

2. Impact Investing: What RFK’s “Ripples of Hope” can teach about impact investing
50 years ago this week (June 6, 1966), while addressing a group of students in Cape Town, Robert Kennedy said: “Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring those ripples build a current which can sweep down the mightiest walls of oppression and resistance.”

South African native Antony Bugg-Levine, of the Nonprofit Finance Fund, reflects in Medium about how four themes identified in the speech might have something to tell us about today, about impact investing:

Futility: When we stop believing that we can change the existing order, we are prone to give up. How many of us working in mainstream finance or private foundations have not faced moments when it just seemed that the forces of inertia were too dominant to be dislodged?

Expediency: When we realize how hard it is to do this work with integrity, we are tempted to pass off relatively mainstream investments as impactful, or to praise what we know to be spurious claims by others.

Timidity: Kennedy notes that few people are willing to “brave the disapproval of their peers”. How many of us are willing to change how we invest and manage assets while these new approaches still face skepticism? From our bosses? Our Boards? Our partners? Or to call out the expedient when we see it?

Comfort: Those of us who care about investments, and who have the power to influence them — whether our institutions’ or our own — are immensely privileged. And with that privilege, we have the option to pursue a relatively easy path to material and professional comfort. How many of us have the strength to resist the urge to walk down that easy path, to give in to the security of the current order of things?


3. Responsible Investing: 42% of affluent investors “associate responsible investments as charity"
Do we need better language and clarity around responsible investing (RI)? Justin Morton of Bloomberg Brief reports on a survey by TIAA Global Asset Management of the attitudes towards responsible investing from both affluent investors and their investment advisors. One cautionary finding: 42% of affluent investors “associate responsible investments as charity." 

Here are some other key findings:

  • Only 41% of affluent investors are familiar with responsible investing, compared to 68% of advisors.
  • Millennial investors are the most passionate supporters of RI, with 90% saying their investments should try to make a positive impact on society (compared to 74% of other generations)
  • Out of 2,206 investors who responded to the survey, 48% said they were interested in participating in responsible investing over the next 12 months, while 62% of those respondents said they are likely to ask their adviser about responsible investing in the next 12 months.
  • 36% of Advisors don’t know how to accurately evaluate responsible investments.
  • Advisors hesitate to recommend RI due to concerns about performance and the quality of choices available

The report concludes:

"Responsible Investment is now mainstream, a reflection of a society-wide shift towards recognizing the social and environmental impacts of individual choices. Interest is strong—especially among Millennials—but investors aren’t always aware of their options. In addition, a few old myths persist, especially about performance, fees and the availability of best-in-class products. Practice management and educational resources are urgently needed to close the final gap and satisfy the growing demand for responsible investments."


4. Wildcard Topic: 'Star Wars' Is Really About Feminism. And Jefferson. And Jesus.
Cass Sunstein excerpts his new book, The World According to Star Wars, in BloombergView, by showing that, "like a great novel or poem, Star Wars doesn’t tell you what to think. You can understand it in different, even contradictory ways." He then lays out possible six interpretations: Christian, Oedipal, Jeffersonian politics, Devil Party, Technology, or even Feminism: 

From the feminist point of view, is Star Wars awful and kind of embarrassing, or actually terrific and inspiring? No one can doubt that "The Force Awakens" strikes a strong blow for sex equality: Rey is the unambiguous hero (the new Luke!), and she gets to kick some Dark Side butt. Just look at the expression on her face when she has a go at Kylo Ren.
 
By contrast, the original trilogy and the prequels are easily taken as male fantasies about both men and women. The tough guys? The guys. When you feel the Force, you get stronger, and you get to choke people, and you can shoot or kill them, preferably with a lightsaber (which looks, well, more than a little phallic -- the longer, the better).
 
But there’s another view. Leia is the leader of the rebellion. She’s a terrific fighter, and she knows what she’s doing. She’s brave, and she’s tough, and she’s good with a gun. By contrast, the men are a bit clueless. She does wear a skimpy costume, and she gets enslaved, kind of, by Jabba the Hutt. But isn’t everything redeemed, because she gets to strangle her captor with the very chain with which he bound her? Isn’t that the real redemption scene in the series?

5. Job Postings


6. Items of Note

  • Echoing Green has developed the Seed Impact Investment Template Note, or “SeedIIT,” to help emerging social entrepreneurs running for-profit businesses. They are hosting a webinar explaining SeedIIT on June 15 at 11am EST. 
  • The MacArthur Foundation has launched an ambitious open grant competition 100&Change, a $100 million prized for a nonprofit - or even for profit - to submit a compelling idea to solve a major issue. 


7. Upcoming Events

June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy
June 22-23 Social Impact Exchange - Conference on Scaling Impact (NYC) Effective Philanthropy
June 23-July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
June 29-30 Future Finance & Social Innovation (Toronto) Impact & Responsible Investing
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

 

All Things Impact for June 3: major asset owners are ignoring climate risks

Brian Walsh1 Comment

Hi friends,

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

1. Effective Philanthropy: Pay for What it Takes & the "shadow economy" of nonprofit financing
We've talked before about the campaign to dispel the "overhead myth" - the nonsensical idea that nonprofit effectiveness can be demonstrated by how much nonprofits spend on "programs & services" vs. "overhead & administration." In the Stanford Social Innovation Review (SSIR), Jeri Eckhart-Queenan, Michael Etzel, & Sridhar Prasad argue that a "new grantmaking approach is needed - one that provides enough money for nonprofits to pay for all their operations, not just programs and services. The first step toward achieving that is for grantmakers to realize that different types of nonprofits have different cost structures."

"The advantage of a pay-what-it-takes policy is that it eliminates the need for the shadow economy in which funders and grantees purposely obscure financial data and quietly craft end runs around the arbitrary indirect cost spending caps imposed by most foundations. Foundation program officers, for example, often team up with grantees to recategorize underfunded indirect costs as direct costs that the funder covers. Other times, funders approve capacity-building or general operating grants to close the indirect cost gap. As a result, we do not know as a sector what it really costs to achieve impact.
“We know that for a grantee, 15 percent is not enough, so we give general operating support and capacity-building grants to compensate the grantee,” explains one program director. “One of our grantees is a very important partner,” says a foundation deputy director, “but we had to do a number of work-arounds, including creating a separate institute that the foundation could fund directly.”
A Bridgespan analysis of 10 grantees of one major foundation found that seven received additional financial support via work-arounds—the shadow economy in action. Work-arounds, particularly if under the table, create their own problems. They are inconsistently applied, and the time-consuming negotiations they entail increase complexity and raise transaction costs while distracting nonprofits and foundations from programmatic work. The pain inflicted by all these financing schemes, in both hard feelings and valuable time lost, is a major source of irritation for grantees and funders alike....
IRS Form 990, filed annually by most US nonprofits, is the best current source of information about a US nonprofit’s expenditures. Unfortunately, 990s don’t shed much light on actual indirect costs. The form has categories for “program” expenses and “management and general” expenses, but it gives nonprofits little guidance on defining the terms. That vagueness leads to widespread reporting inconsistencies as organizations apply their own definitions...As one nonprofit executive says: “If you think you can analyze a nonprofit through IRS filings, you are in outer space.”


2. Impact Investing: the GIIN's 6th annual survey of impact investors
Sophie Baker of Pensions & Investments reports on the Global Impact Investing Network (GIIN)'s 6th annual Survey of 158 self-identified impact investors. Survey respondents are mostly fund managers (60%), but also foundations (13%), banks (6%), and some development finance institutions, family offices, and 3 (not percent, just 3) institutional investors such as pension funds or insurance companies.

Here are some highlights:

  • Raising more money: money managers plan to raise $12.4 billion in 2016 vs. $6.7 billion raised last year
  • Deploying more money: investors plan to increase the capital committed to impact investments to $17.7 billion, a 16% increase from commitments in 2015 (by way of comparison, the U.S. venture capital industry invested$58.8 billion last year)
  • Closing more deals: investors committed capital across 7,551 deals in 2015, and plan to increase the number of deals to 11,722 this year
  • Range of return expectations: 60% principally target risk-adjusted, market rate returns, while 25% target ‘below market rate returns: closer to market rate’ and 16% target ‘below market rate returns: closer to capital preservation'
  • Investment targets: renewable energy, energy efficiency and clean technology were the most targeted environmental focuses; while finance, employment generation and health improvement were the top social impact themes
  • Performance: Almost 90% of all the respondents said the investment performance of the impact investments was either in line with, or above, expectations. Outperformance of these assets was reported by 19% of respondents.
  • Challenges to industry growth: "appropriate types of capital across the risk-return spectrum—especially early-stage (including seed and venture) capital that does not necessarily require high returns—and high-quality investment opportunities with track record"


3. Responsible Investing: major asset owners are ignoring climate risks
Nearly half of the world’s 500 largest investors are ignoring climate risks. Attracta Mooney of the Financial Times covers a recent report by the nonprofit Asset Owners Disclosure Project, which ranked large investors (including sovereign wealth funds, insurers and pension funds) according to their efforts to mitigate climate change risk:

"The world’s largest government-backed investment funds have been accused of ignoring the risks climate change poses to their portfolios despite warnings it could hurt returns and make high-carbon investments worthless...

Julian Poulter, chief executive of AODP, which collects information about investors’ exposure to environmental risks, called the findings “shocking”.

Climate change risk has risen up the global agenda over the past year, with nearly 200 countries agreeing to limit global warning at the UN’s climate change summit in Paris last December.

The move has prompted warnings that investors could suffer large losses as a result.

“[Investors] that ignore climate change are gambling with the savings and financial security of hundred of millions of people around the world and risking another financial crisis,” said Mr Poulter...

Ben Caldecott, director of the sustainable finance programme at the University of Oxford, said few asset owners consider the long-term risks of climate change, despite having liabilities many decades into the future.

The Financial Stability Board, an international body monitoring the global financial system, and Mark Carney, the governor of the Bank of England, have warned that climate action could turn fossil fuel and other high-carbon investments into worthless stranded assets, where the assets suffer large writedowns or devaluations.

Some pension fund members have demanded information from their plans on how their money is being protected against climate risks, under a campaign launched by ClientEarth, a non-profit, and ShareAction, a charity that campaigns for responsible investing.

Jamie Audsley, head of education at ShareAction, said: “Funds have a fiduciary duty to consider the impact that climate change might have on their portfolios.

“The global transition to a low-carbon economy presents both risks and opportunities for investments.”..

According to research published last month and led by the London School of Economics, climate change could cut the value of the world’s financial assets by $2.5tn...

Three of the largest coal companies in the US have filed for bankruptcy in the past year, as tightening environmental regulations and competition from cheaper fuels hurt their business model.

“The risk of stranded assets is real, it is here and we have already seen good examples of how it will materialise,” said Mr Pedersen.


4. Wildcard Topic: "A Universal Basic Income Is a Poor Tool to Fight Poverty"
Eduardo Porter argues in the New York Times throws cold water on the growing interest in the US and around the world for a Universal Basic Income:

"The popularity of the universal basic income stems from a fanciful diagnosis born in Silicon Valley of the challenges faced by the working class across industrialized nations: one that sees declining employment rates and stagnant wages and concludes that robots are about to take over all the jobs in the world.

That might lie in our future...But it’s certainly not our present...today more than eight out of every 10 Americans in their prime are working...

It is undoubtedly true that the American safety net needs fixing. Fifty million Americans live in poverty. Sixteen million live on the equivalent of $8.60 a day. Providing more income security for the struggling working class would not only produce a more equitable society, it would also increase spending and improve economic growth.
In this world, though, where work remains an important social, psychological and economic anchor, there are better tools to help than giving every American a monthly check.
How about subsidized employment? The government could subsidize jobs as varied as school repairs and fixing potholes. “This would provide employment while doing things that improve productivity and improve people’s lives,” Mr. Greenstein said.
Perhaps we could expand the earned-income tax credit, the country’s most successful antipoverty tool, which increases the earnings of low-income workers. Or take the idea pushed for years by Edmund Phelps from Columbia University: Instead of providing a subsidy to workers that phases out as their income rises, why not subsidize workers’ wages instead?
As Mr. Summers told a gathering last week at the Brookings Institution, “a universal basic income is one of those ideas that the longer you look at it, the less enthusiastic you become.”

5. Job Postings


6. Items of Note

  • The MacArthur Foundation has launched an ambitious open grant competition 100&Change, a $100 million prized for a nonprofit - or even for profit - to submit a compelling idea to solve a major issue. 

Two upcoming webinars should be on interest to readers:


7. Upcoming Events
June 7-8  Social Innovation Summit (DC) Various
June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy
June 22-23 Social Impact Exchange - Conference on Scaling Impact (NYC) Effective Philanthropy
June 23-July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact for May 27: self driving trucks & the destruction of small town economies

Brian Walsh1 Comment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
Here are four links worth your time (plus job postings, items of note, and a calendar of upcoming events): 

1. Effective Philanthropy: Investing in Infrastructure
The Federal Transit Administration found that public transit systems have a backlog of $86 billion in critical maintenance nationwide. Both Clinton and Trump have promised increased investments in infrastructure. And now a coalition of more than 20 philanthropic “Infrastructure organizations,” led by GuideStar and the Center for Effective Philanthropy, are calling on foundations to dedicate at least 1% of their grantmaking budgets to strengthen the infrastructure of the philanthropic sector:

"An economy needs roads, bridges, and train stations to thrive. A community needs schools, parks, and houses of worship to ensure the flowering of human potential.
 
And civil society needs infrastructure to ensure that nonprofits and foundations can act with integrity and impact. Nonprofit infrastructure organizations run the training programs that support the growth of our staff and volunteers. They do the research to help us understand what works, and what doesn’t. They build the technology platforms that make communication and learning possible. They hold the conferences that gather nonprofit leaders together and provide them the resources and connections to improve their work. They advocate for new levels of excellence to push us all to do better — and for policies that create the legal environment in which we work…
 
Nonprofits, foundations, and social enterprises — private organizations devoted to the public good — form a central part of our society: more than one million organizations are responsible for more than one trillion dollars in economic activity in the United States alone. But, more, they are responsible for countless transformed lives, communities, and ecosystems.
 
The infrastructure that supports this nonprofit sector can collectively magnify or diminish this shared work for social good. And anyone who watches philanthropy closely knows it — we — have room to improve. Collectively, we waste hundreds of millions of dollars in a fundraising process that is full of duplication and confusion. Nonprofits struggle to find the right staff with the right skills. The power imbalance between foundations and nonprofits dampens the honest conversations that are so critical to any partnership. Too often nonprofit leaders do not reflect the diversity of the communities they serve. Too few organizations admit failure; and, thus, few learn from it.

These are solvable problems. With the right investments in civil society’s supporting institutions — across the local, state, national, and global levels — we can reach new levels of efficiency, ethics, and excellence."


2. Impact Investing: Millennials and Impact Investing
David Bank of ImpactAlpha covers a new report from Toniic, a global network of impact investors, profiling how wealthy millennials are engaging in impact investing:

The ongoing “generational transfer of wealth” – the estimated $30 trillion expected to pass from Baby Boomers to their heirs in the next three to four decades – has wealth advisers salivating and impact entrepreneurs and fund managers strategizing.
 
The potential has spurred the creation of a new crop of networks…from Nexus Global Summit (“a global movement to bridge communities of wealth and social entrepreneurship”), Resource Generation (“organizes young people with wealth and class privilege in the U.S. to become transformative leaders working towards the equitable distribution of wealth, land and power,” pictured above) and the new ImPact (“provides families with knowledge and networks to make more impact investments more effectively”). In 2014, for example, Nexus brought together more than 600 largely millennial participants representing nearly $750 billion in assets.
 
…And the requisite batch of white papers, including Morgan Stanley’s “Sustainable Signals,”Deloitte’s “Winning Over the Next Generation of Leaders,” and ImpactAssets’ “The Millennial Perspective,” to name just a few.
 
Toniic’s report, backed by Bank of the West’s Family Wealth Advisor unit, rounds up the usual obstacles (lack of investment knowledge and investor education, resistance from family members and financial advisors) and suggestions (education, peer networks, communities of practice and most importantly, access to attractive deals).
 
What’s distinctive about the report are the detailed accounts from 10 next-gen investors who provide personal perspectives on moving from Millennial talk to action. “A couple of compelling messages came through loud and clear from the interviews,” said Lisa Kleissner, a co-founder of Toniic and its board chair. “Many millennials want to invest with their families and they also want to work with their advisors.  However, they also want to partner with them, be heard and co-learn about impact.”


3. Responsible Investing: conservative business group seeks new regulation restricting "Gadfly Shareholders"
“Climate change is a serious issue. But the shareholder process in the banking industry is not the appropriate vehicle for addressing it,” argues John Engler, president of the conservative CEO group Business Roundtable in a Wall Street Journal opinion piece. He objects to regulations which allow "small-stakes" shareholders to make proposals to company management:

“…the rules governing shareholder proposals are broken. Small-stakes investors take advantage to flood companies with frivolous ballot measures. The cumulative effect is to drag down the economy by consuming time and money that could be put to better use…
 
Investors who have real skin in the game don’t want to undermine a company’s operations. But existing regulations allow a small minority to hijack a company’s agenda.
 
The primary problem is that the ownership threshold for submitting a shareholder proposal is absurdly low: Owning $2,000 in a company’s stock or 1% of its total stock supply, whichever is lower.
 
Last year, according to Institutional Shareholder Services, activists submitted nearly 500 shareholder proposals for U.S. companies dealing solely with social and environmental concerns. Bank of America, J.P. Morgan Chase and several other big banks have had to grapple with proposals requiring them to quantify their role in greenhouse-gas emissions, specifically by detailing the loans they’ve provided to carbon-emitting companies.”


4. Wildcard Topic: Self-Driving Trucks and the Coming Destruction of Small Town Economies
Self-Driving trucks will probably regularly appear on US highways well before self-driving cars, according to the New York Times.  “According to the American Trucker Association, there are 3.5 million professional truck drivers in the US, and an additional 5.2 million people employed within the truck-driving industry who don’t drive the trucks. That’s 8.7 million trucking-related jobs.” What happens when driverless trucks replace those jobs? Scott Santens explored the implications in a Medium post:

“We can’t stop there though, because the incomes received by these 8.2 million people create the jobs of others. Those 3.5 million truck drivers driving all over the country stop regularly to eat, drink, rest, and sleep. Entire businesses have been built around serving their wants and needs. Think restaurants and motels as just two examples. So now we’re talking about millions more whose employment depends on the employment of truck drivers. But we still can’t even stop there.
 
Those working in these restaurants and motels along truck-driving routes are also consumers within their own local economies. Think about what a server spends her paycheck and tips on in her own community, and what a motel maid spends from her earnings into the same community. That spending creates other paychecks in turn. So now we’re not only talking about millions more who depend on those who depend on truck drivers, but we’re also talking about entire small town communities full of people who depend on all of the above in more rural areas. With any amount of reduced consumer spending, these local economies will shrink.
 
One further important detail to consider is that truck drivers are well-paid. They provide a middle class income of about $40,000 per year. That’s a higher income than just about half (46%) of all tax filers, including those of married households. They are also greatly comprised by those without college educations. Truck driving is just about the last job in the country to provide a solid middle class salary without requiring a post-secondary degree. Truckers are essentially the last remnant of an increasingly impoverished population once gainfully employed in manufacturing before those middle income jobs were mostly all shipped overseas.


5. Job Postings


6. Items of Note

  • Guggenheim Partners has launched its PROPEL10 application, through which the firm will invest up to $100,000 each in up to 10 high-performing, early stage non-profit organizations using innovative solutions to address enduring social problems. The application deadline is May 31, 2016 at 5:00PM EST. 


7. Upcoming Events
June 1-2  Impact Capitalism Train Stop Tour (Philadelpha & DC) Impact Investing
June 7-8  Social Innovation Summit (DC) Various
June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy
June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact: Living in the Age of the ‘Impact Enlightenment’

Brian WalshComment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
Here are four links worth your time (plus job postings, items of note, and a calendar of upcoming events): 

1. Effective Philanthropy: Living in the Age of the ‘Impact Enlightenment’ 
I wrote a blog post for Alliance Magazine to highlight the Fund for Shared Insight's RFP on foundation openness (proposals due today!). Here's an excerpt:

During the 18th century Enlightenment in Europe, scientific rigor – with evidenced-based explorations for how the world worked – challenged superstitious beliefs. Reason, not tradition, came to dominate as the primary source of authority and legitimacy. This caused an explosion in the production of knowledge, with incredible insights discovered across a wide range of fields.
 
Today, in these early decades of the 21st century, I believe we are in the midst of a new epoch generating new knowledge and insights, especially among those seeking to advance the common good.  From governments tying payment for services to evidenced-based policies and successful outcomes, to institutional investors incorporating environmental and social considerations into their analyses of the enterprises and projects in which they invest, to nonprofits conducting rigorous evaluations of their interventions, we are in era that I call the ‘Impact Enlightenment.’
 
The opportunity to generate, share, and use data to make informed decisions has never been greater. We are benefiting from an explosion of digital technologies, distributed networks, big data (along with small and medium data), and global communication tools which enable real-time collaboration. Combined with advances in behavioral economics – the understanding that we humans are not merely utility-maximizing rational actors, but rather multidimensional decision-makers who operate inside of complex systems – and it is no wonder we are seeing so much innovation in the social sector. We are in an era of pay for success contracts, inclusive capitalism, impact investing, social enterprise, effective philanthropy, and data-driven decision-making.

The Fund for Shared Insight is an example of this transformation. We created the Fund for Shared Insight—a funder collaborative with diverse support from 30 different funders—to increase foundation openness. The more than 80,000 foundations in the US have nearly $800 billion in endowment assets and deploy approximately $45 billion annually in the form of grants to nonprofit organizations. More than this financial capital, foundations have significant knowledge capital: information about the communities and issues they fund. We hope to tap into this knowledge capital in the hope of adding to our collective knowledge of how we might advance the common good.


2. Impact Investing: Making Markets Work for the Poor
In a special supplement to the Stanford Social Innovation Review (sponsored by the Bill & Melinda Gates Foundation), former Hewlett Foundation President Paul Brest – along with David Bank and Dennis Price of ImpactAlpha – examine how the Gates Foundation uses program-related investments (or PRIs: loans, equity stakes, and guarantees made to advance the foundation's charitable purpose as opposed to generate income) to complement its traditional grant making. This whole report is well worth your read. 

Today, the Gates Foundation has allocated $1.5 billion to fund PRIs, of which it has committed $1 billion across 47 investments. Its PRIs have allowed the foundation to reach beyond the nonprofit sector to draw on the talent, expertise, and innovations offered by the private sector to advance its mission to “help all people lead healthy, productive lives.”

With its PRIs, the Gates Foundation has invested to scale up enterprises that serve the poor. It has guaranteed public agencies’ purchase of vaccines and contraceptive implants in order to convince large pharmaceutical manufacturers to boost their production and reduce prices for the benefit of those most in need. And it has made equity investments in biotech startups to induce them to focus on neglected diseases such as malaria and tuberculosis...

PRIs are not typical investments. The Gates Foundation’s PRIs, designed to accomplish the foundation’s charitable mission, are driven by program teams that include some of the world’s top experts in global health, global development, and education. Its depth of in-house knowledge gives the foundation a unique perspective on how market-based solutions can serve its beneficiaries’ needs. The program teams work in tandem with a team of investment experts and lawyers to negotiate term sheets and agreements, address the legal complexities involved in PRIs, and support the investments post-close.
 
The Gates Foundation’s influence—a combination of its mission, money, reputation, and willingness to take considered risks— allows it to negotiate especially favorable terms for the benefit of the poor. Its Global Access agreements with pharmaceutical companies and other investee partners, for example, provide preferential pricing for the foundation’s target beneficiaries. The foundation also reserves the right to withdraw its investment if the agreed-upon charitable purposes are not being fulfilled.

The Gates Foundation is treating its PRI process as a real-time experiment. Its hypothesis is that leveraging resources through collaboration with private investors and for-profit entrepreneurs can drive high impact. “We’ve been doing this for a few years and are starting to draw a few conclusions,” Sunderland says. “But we still have a lot to learn.”

(Disclosure: Liquidnet is an investor into ImpactAlpha through the Liquidnet Impact Fund, a donor advised fund managed by ImpactAssets)


3. Responsible Investing: does ESG remain mostly "a matter of compliance & labels"? 
Are "mainstream" investors  merely ticking boxes when it comes to responsible investing, or are they actually changing their behavior? Pierre Lenders of Responsible Investor reports on closing of Prius Partners, a company specializing in ESG (environmental, social, and governance) analysis. Here is part of the email blast the firm principals sent out announcing their closing: 

Despite many declarations of intent, integrating ESG concerns within mainstream portfolio management is happening rather slowly. Because of its origins, ESG remains mostly a matter of compliance and labels. It is an explicit, integrated part of investment policy only within SRI allocations, and further progress from here depends on ESG proponents’ ability to demonstrate that it is not just there to satisfy some ethical agenda but that it also works financially. Therefore a prerequisite for a larger scale impact is a valid framework to conduct such assessment, encompassing products which are not explicitly SRI labelled. And asset owners need user friendly and reliable tools to help them ascertain how effectively asset managers proceed to integrate ESG across any of their products. Such tools, we believe, should not be “coffee for everybody” but allow starting from the asset owners’ concerns and preferences. They should answer two separate sets of questions about the investment style of managers or passive solutions under consideration, in just a few comprehensive dashboards and indicators:

• Is enough attention paid to the ESG factors that are deemed to matter? Is there a preference for companies that already behave well on specific factors, or for companies improving their behaviour on others, or is there no evidence of any of such two biases? (independently from financial performance)

• Is there an acceptable rate of avoiding financial losses related to bad or deteriorating E, S and/or G behaviours, and/or enough evidence of being able to benefit financially from positive or improving ESG behaviours, at least along material factors?

As evidenced by the choice of topic for the “great debate” at the upcoming June RI Europe conference, this issue is now coming to the forefront. Ranking and rating of all mainstream funds based on ESG metrics might indeed help, or make the problem worse if left to dogmatism, unduly homogeneous and backward looking calculations. We believe it will all depend on how credible and sound the framework will be in the eyes of the mainstream community, and what will be said about how ESG factors interact with security prices will need to make perfect financial sense to them as investment professionals, and not just from a marketing angle. 
 

4. Wildcard Topic: there's no such thing as free will
Stephen Cave writes in The Atlantic about the nature of free will: many scientists believe it's a myth, but perhaps we are better off as a society if everyone believed in it anyway. 

The 20th-century nature-nurture debate prepared us to think of ourselves as shaped by influences beyond our control. But it left some room, at least in the popular imagination, for the possibility that we could overcome our circumstances or our genes to become the author of our own destiny. The challenge posed by neuroscience is more radical: It describes the brain as a physical system like any other, and suggests that we no more will it to operate in a particular way than we will our heart to beat. The contemporary scientific image of human behavior is one of neurons firing, causing other neurons to fire, causing our thoughts and deeds, in an unbroken chain that stretches back to our birth and beyond. In principle, we are therefore completely predictable. If we could understand any individual’s brain architecture and chemistry well enough, we could, in theory, predict that individual’s response to any given stimulus with 100 percent accuracy.
 
This research and its implications are not new. What is new, though, is the spread of free-will skepticism beyond the laboratories and into the mainstream. The number of court cases, for example, that use evidence from neuroscience has more than doubled in the past decade—mostly in the context of defendants arguing that their brain made them do it. And many people are absorbing this message in other contexts, too, at least judging by the number of books and articles purporting to explain “your brain on” everything from music to magic. Determinism, to one degree or another, is gaining popular currency. The skeptics are in ascendance.
 
This development raises uncomfortable—and increasingly nontheoretical—questions: If moral responsibility depends on faith in our own agency, then as belief in determinism spreads, will we become morally irresponsible? And if we increasingly see belief in free will as a delusion, what will happen to all those institutions that are based on it?
 
…[University of Haifa Philosophy professor Saul] Smilansky advocates a view he calls illusionism—the belief that free will is indeed an illusion, but one that society must defend. The idea of determinism, and the facts supporting it, must be kept confined within the ivory tower. Only the initiated, behind those walls, should dare to, as he put it to me, “look the dark truth in the face.” Smilansky says he realizes that there is something drastic, even terrible, about this idea—but if the choice is between the true and the good, then for the sake of society, the true must go.


5. Job Postings


6. Items of Note

  • Fund for Shared Insight RFP on increasing foundation openness proposals are due by Friday, May 20, 2016, at 11:59pm pacific time. 
  • Guggenheim Partners has launched its PROPEL10 application, through which the firm will invest up to $100,000 each in up to 10 high-performing, early stage non-profit organizations using innovative solutions to address enduring social problems. The application deadline is May 31, 2016 at 5:00PM EST. 


7. Upcoming Events
May 25 A discussion of PRIs with philanthropy leaders (Stanford) Impact Investing, Philanthropy
May 25 Venture Jobs Prosperity Conference (Rochester, NY) Impact Investing
June 1-2  Impact Capitalism Train Stop Tour (Philadelpha & DC) Impact Investing
June 7-8  Social Innovation Summit (DC) Various
June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy
June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

 

All Things Impact: no silver bullet for impact measurement

Brian WalshComment

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 job postings, items of note, and a calendar of upcoming events): 

1. Effective Philanthropy: GuideStar Platinum allows nonprofits to share information about their effectiveness
What’s better than Gold? Michael Wyland of Nonprofit Quarterly reports on GuideStar Platinum, the latest effort to help nonprofits generate & share information to inform decision making:

“GuideStar, the nonprofit repository of information on 2.4 million U.S. nonprofits visited by 7 million people annually, is adding a new way for organizations to report quantifiable data in support of their program achievements. GuideStar Platinum was developed as a way for nonprofits to provide non-financial data to demonstrate effectiveness, thereby addressing the pitfalls of the “overhead myth,” which gauges an organization’s worthiness of support by measuring its effectiveness in terms of its expenditures on program services versus management and fundraising.
 
GuideStar Platinum features can be used without charge by any nonprofit organization, and may be accessed by any visitor to the GuideStar website. In addition, the program-based data submitted by nonprofits will be shared with GuideStar’s 180 “data partners,” including Amazon Smile and JustGive.org. However, only nonprofits that have also completed the disclosure requirements for GuideStar’s bronze (basic information), silver (finances), and gold (qualitative impact) recognition will be able to display a “GuideStar Platinum Participant” badge on their organization’s GuideStar page.
 
The most ambitious aspect of the program is its effort to promote dialogue about what is being measured by nonprofits. GuideStar provides a “Common Results Catalog” of 800 sample metrics with definitions. In prerelease testing, 900 nonprofits used 1,300 metrics to describe their program accomplishments. GuideStar officials hope that long-term community dialogue about metrics will help develop common definitions for metrics as well as refine which metrics are most meaningful in common usage.”


2. Impact Investing: no silver bullet when it comes to measuring impact
The Annie E. Casey Foundation just released a new report – “Aligning Capital with Mission” – evaluating its $125 million “Social Investment Program”, which was an allocation from their endowment to invest in impact funds, Community Development Financial Institutions (CDFIs), and nonprofit organizations.
 
A recurring theme of the report relates to the challenges of measuring impact. After all, impact can’t just be in the eye of the beholder. As the report concludes: “Investing in measurement enables mission investors to better monitor and understand the social performance of their investments, leading them to make better-informed decisions that ultimately maximize the impact of their portfolios in alignment with their mission.”

“Impact measurement is an emerging practice and, as such, there are a variety of methods for tracking and reporting on social impact. As investors and investees move to adopt new measurement systems and processes, they find that there is not one agreed upon approach or a “silver bullet” solution for impact measurement and reporting. This fragmentation in the market creates difficulties for investors as well as investees as there remains confusion on how to conduct impact measurement.”
“Impact investors continually struggle with the tension between the desire for standardization and the occasional need for customized metrics”

Here are some of their “lessons learned”:

"By integrating measurement practices into investment sourcing and due diligence processes, investors can better identify mission-aligned investment opportunities and also assess an investee’s likelihood of delivering social impact, leading to better and more impactful investment."
 
Best practice for investors seeking to embed impact measurement within due diligence:
  • Assess potential investees’ impact measurement practices during due diligence
  • Discuss impact targets prior to making an investment
  • Understand methods and assumptions behind social impact targets
  • Consider social impact benchmarks for investee performance comparison

 

3. Responsible Investing: Gates Foundation divests entire holdings in BP
“Climate change poses the greatest threat to health in the 21st century, according to doctors, and to avoid catastrophic impacts, most known fossil fuel reserves must be kept in the ground. If the world’s governments succeed as promised and halt global warming, those reserves could become worthless, and divestment campaigners argue there are both financial and moral reasons for divestment.” So reports Damian Carrington in The Guardian:

"The Bill and Melinda Gates Foundation has sold off its entire holding in oil giant BP, in a move welcomed by fossil fuel divestment campaigners.

Bill Gates has called the selling off of coal, oil and gas stocks a “false solution” to climate change, but the known investments of his foundation in major fossil fuel companies has fallen by 85% since 2014.

The foundation, which has spent many billions of dollars improving global health, sold its $187m stake in BP between September and December 2015, according to recent regulatory filings to the US Securities and Exchange Commission (SEC).

It had previously dumped its entire $824m holding in ExxonMobil. BP posted a record $6.5bn annual loss in February while ExxonMobil is under investigation about whether it lied in the past to investors about the threat of climate change.

The Guardian’s Keep it in the Ground campaign has called on the Gates foundation to divest its $40bn endowment from fossil fuels...

An analysis in November found that the Gates foundation would have been $1.9bn better off if it had divested from fossil fuels in 2012."

 

4. Wildcard: social innovation, "Social Innovation," scale, and the maintenance of civil society
Steve Goldberg (in the US) wrote on Twitter “Social innovation has not scaled. Full stop.” This prompted Dan Gregory (in the UK) to write an essay debating the nature of social innovation (or "Social Innovation"), which Steve then responded to with his own essay.

From Dan Gregory's essay:

"...the excitement and hype associated with this recent, self-styled, hip, urban, technological version of social innovation serves to distract policymakers and resource allocators from the critical maintenance work of civil society, charities and communities which hold our very economy together. Charities, voluntary and community groups, social enterprises and informal social action are worth billions of pounds a year to the UK economy and make up the critical foundations of our society. But the fetishisation of innovation and the attraction of shiny social innovation baubles divert the gaze of politicians, public officials and funders from the boring and essential maintenance work undertaken every day by food banks, homeless shelters, furniture recycling projects, credit unions and citizens’ advice bureaux across the country.

As resources are directed towards this self-conscious social innovation, critical maintenance work is starved. Funders would rather fund new projects but not the core costs, overheads or ongoing costs associated with established models of care. This puts our underlying social infrastructure at risk, undermining the stability of civil society...

A significant proportion of charities admit to pretending to be innovative in order to attract funding when they know what they are doing is really nothing new..

...a handful of academics have questioned whether there is indeed some hidden ideology behind the curtain, suggesting that social innovation functions as a sort of cover for reform of the welfare state and the privatisation or rationalisation of public services. Phill et al, for example, express a concern that social innovation “might simply become a convenient buzzword to forward neoliberal ideology in a time of austerity… social innovation might soon turn out to be simply another way to juxtapose the qualifier “social” to the private sector jargon in order to avoid heated discussions on structural inequalities."

From Steve Goldberg's response:

"I certainly agree that “the attraction of shiny social innovation baubles divert[s] the gaze of politicians, public officials and funders.” But funders don’t starve social services because they’re distracted by social innovation; they do so because, as Sir Ronald Cohen put it so well, “government is out of money and out of breath.” Appropriators and philanthropies have short attention spans and spend irrationally for many reasons, but it has always been and will always be thus, even without the occasional frisson of publicity that comes from backing the Next Big Thing. We’re not “sacrificing maintenance at the altar of innovation”; social innovation (of whatever kind) is a response to the nonprofit starvation cycle, not its cause...

"... scale doesn’t mean “lots” or “many,” it means “all” or “most.” In terms of quantity, it refers to how much of the total need you’ve addressed, not how much bigger you are than before. It means how far you have to go, not how far you’ve come. A journey of a thousand miles might begin with a single step, but a thousand steps later the destination is still, on average, 999.5 miles away. Second, when it comes to social innovation, scale doesn’t matter unless it makes a large difference in something truly important. Having “enough” homeless shelters—which we clearly don’t have—wouldn’t solve homelessness, nor would “enough” food banks solve food insecurity. I’m happy if Dan’s right that there’s an ample supply of fun runs and babysitting circles, but that’s not at all what I’m protesting. Taking a thousand steps might be an accomplishment, unless it’s vital to travel a thousand miles, in which case it’s not."


5. Job Postings

 

6. Items of Note

  • My friend Laura Callanan recently launched Upstart Co-Lab, which "will work to connect artists with impact investing and social entrepreneurship opportunities and social innovators with the storytelling, improvisation, and creative intelligence of artists. Among other things, the organization aims to increase opportunities for artists as innovators, starting with a greater recognition of artists' accomplishments in the private, social, and public sectors; catalyze more capital for creativity by making creativity investable through public equity, debt, and venture capital investment products; and contribute to the sustainability of creative lives by equipping artists with the skills needed to execute their ideas and linking eligible artists to existing social services and subsidies." Much more to explore here.
  • Fund for Shared Insight RFP on increasing foundation openness proposals are due  by Friday, May 20, 2016, at 11:59pm pacific time. 
  • Guggenheim Partners has launched its PROPEL10 application, through which the firm will invest up to $100,000 each in up to 10 high-performing, early stage non-profit organizations using innovative solutions to address enduring social problems. The application deadline is May 31, 2016 at 5:00PM EST. 


7. Upcoming Events
May 25 Venture Jobs Prosperity Conference (Rochester, NY) Impact Investing
June 1-2  Impact Capitalism Train Stop Tour (Philadelpha & DC) Impact Investing
June 7-8  Social Innovation Summit (DC) Various
June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy
June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 13-16  SOCAP (SF) Impact Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
Sept 26-28 ANDE Conference (Lessburg, Virginia) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 18  High Water Women (NYC) Impact Investing
Nov 3-5  Net Impact (Philadelphia) Various
Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing
Nov 16-18 Independent Sector (DC) Philanthropy
Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio

All Things Impact 2016.15: time to consider a universal basic income?

Brian WalshComment

Hi friends,

Here are four links worth your time (plus job postings, items of note, and a calendar of upcoming events): 
 
1. Effective Philanthropy: how foundations can stay relevant
Phil Buchanan has a very thoughtful column in the Chronicle of Philanthropy on “5 Issues Foundations Must Confront to Stay Relevant”, which is itself adapted from his new essay "Big Issues, Many Questions.” The column (and essay) are worth reading in full, but here are some of highlights:

[Former Ford Foundation executive Michael Edwards] argued recently that "philanthropy is supposed to be private funding for the public good, but increasingly it’s become a playground for private interests."
 
…Concerns about foundations’ role in policy debates are not new, but they appear to be on the upswing and coming from both ends of the political spectrum. The critiques of philanthropy are happening in an environment in which anything deemed "establishment" is under fire — the very word has become a political liability. The simmering disaffection that manifested itself in the Occupy and Tea Party movements has now gone mainstream.”

One foundation colleague put it this way to me recently, "We fund a lot of movements, but we can be mistaken for the oligarchs."...

Endowments are no longer just about investing but about social change...

Foundations that want to help bring a new, promising approach "to scale" or wide adoption need to ensure that the approach, in fact, works…If something is a new, innovative approach that seems promising, by all means fund it — but fund it in a way that provides support for the data collection and analysis to see if it works and under what conditions...
 
Working together in a way that really creates impact requires us to get over ourselves. We can’t all look good all the time. We can’t all lead all the time. We can’t all "punch above our weight." We can’t always be the ones "creating leverage" or attracting disproportionate dollars to our ideas. Sometimes the best way to have an impact is to follow someone else who’s succeeding...
 
“Supporting organizations means supporting their administrative expenses — and not dismissing anything related to investment in strengthening an organization as "waste" or "overhead." Although nonprofit and foundation leaders have been railing for decades against the overreliance on administrative spending ratios as a terrible proxy measure for effectiveness (I’ve been one of them), there is increasing momentum on the topic, too...

2. Impact Investing:  IRS Widens the Scope of Program-Related Impact Investing by Foundations
Since 1969, Program-Related Investments (PRIs) have been a way for foundations to deploy their capital not just as grants but as loans, loan guarantees, and even equity investments. Currently, less than 1 percent of foundations actually make PRIs. Even among practitioners, only 0.5 percent of program budgets is committed to such investments. This may be changing. 

As Dennis Price wrote recently in ImpactAlpha, the IRS and Treasury department clarified their guidance on these: 

“The White House announcement should reduce legal uncertainties around foundations’ ability to use equity, loans and guarantees from their program budgets to advance their missions. The regulations provide nine new examples of the kind of investments that qualify as PRIs, including disease research, the environment, smallholder agriculture and other areas.

“Today’s guidance reassures foundations that a wide range of investments can qualify as PRIs and reduces the perceived need for legal counsel or IRS rulings in many cases,” Wilkinson added.

PRIs investments, like grants, can count against foundations’ minimum annual payout requirements, so their expanded use could conceivably reduce the amount of funding available to nonprofit organizations, which traditionally have been the main recipients of foundation funding. But because PRI capital, unlike a grant, is expected to be returned, such funding can be recycled many times over. That could expand total funding and preserve traditional grants for areas, such as policy and advocacy, in which repayment is not feasible...

The new PRI regulations follow favorable guidance last fall from the IRS on mission-related investments, or MRIs, a separate category of impact investments foundations can make from their endowment assets. Together, the actions represent a recent push by the Obama Administration to catalyze the use of impact investing at private foundations to address complex problems facing regions, communities and schools.

3. Responsible Investing: the business case for ESG Investing
The Intentional Endowments Network has a new report on ESG Investing: 

"ESG investing is the systematic consideration of environmental, social, and governance criteria in investment decision-making and portfolio construction to identify risks and opportunities. Investors use ESG strategies as an enhancement to traditional analysis that can underappreciate the business relevance of ESG factors. At times when these factors are not easily quantifiable in conventional analyses, they may still translate into real financial risks or rewards.

Megatrends in global, inter-related social and ecological factors can impact financial markets and companies’ financial performance. Drivers of these impacts include environmental liabilities, resource scarcity, climate change, modern slave labor, and gender equality. These issues pose real risks to businesses, investors, and society as a whole, both in the immediate and longer term.

ESG investing does not dictate the exclusion of any one investment or economic benefit; consideration of ESG factors does not imply avoiding ‘sin stocks’ or implementing negative screens for ethical, moral, or political reasons. It is not a values based investment strategy. It does call for the inclusion of data and relevant considerations traditionally excluded by strategies focused solely on quarterly returns which may in turn lead some investors to include or exclude specific investments... 

Elements of fundamental equity valuation that can be impacted by ESG factors to a material degree:

  • Supply chain risks
  • Reputational and brand impact 
  • Operational or product delays and lost productivity 
  • Potential for impaired assets 
  • Human capital: recruiting necessary talent 
  • Winning bids/license to operate 
  • Regulatory and legislative risks 
  • Operating costs

4. Wildcard: Could an income for all provide the ultimate safety net?
A lot of people are discussing 'universal basic income' (UBI) as a potential policy tool to deal with rising inequality and the increasing likelihood that robots will take all of our jobs. Tim Hartford takes up the debate in the Financial Times (linking to his personal blog):

"...we should simply give people money — a basic income for everyone, regardless of what they do or what they need. It’s the ultimate social safety net.

For an idea that is so far from mainstream political practice, the payment of a basic income has had astonishingly broad support, from Martin Luther King Jr to Milton Friedman. It’s on the lips of the policy wonk community too: the Freakonomics podcast recently devoted an episode to the case for a universal basic income. The Royal Society for Arts, a venerable British think-tank, has published a report enthusiastically supporting the idea. Dutch journalist Rutger Bregman is just as keen, as outlined in his recent, eloquent book Utopia for Realists.

Policy experiments are also on the way. The charity GiveDirectly has just announced plans to run a randomised trial in which 6,000 Kenyans will receive a basic income for more than a decade. Various Silicon Valley types — with one eye on the looming Robot Job Apocalypse — are making serious-sounding noises about running experiments too. Pilots are planned in Canada and Finland, and the Swiss have a referendum on the topic in June.

Could a basic income really work? The answer is yes. But the plan may be more painful than some of its advocates are willing to admit...

In the end, the idea appeals to three types of people: those who are comfortable with a dramatic increase in the size of the state, those who are willing to see needy people lose large sums relative to the status quo, and those who can’t add up.

A basic income makes perfect sense once we arrive at an economy where millions work for low wages while automation produces a bountiful economy all around them. The debate turns on whether that world has already arrived."


5. Job Postings


6. Items of Note

  • Fund for Shared Insight RFP on increasing foundation openness proposals are due  by Friday, May 20, 2016, at 11:59pm pacific time. (A final "Open Conference Call" about this RFP will be on Monday May 9th at 2pm EST)
  • Guggenheim Partners has launched its PROPEL10 application, through which the firm will invest up to $100,000 each in up to 10 high-performing, early stage non-profit organizations using innovative solutions to address enduring social problems. The application deadline is May 31, 2016 at 5:00PM EST. 


7. Upcoming Events

May 10-12  Mission Investors Exchange (Baltimore) Impact Investing

May 25 Venture Jobs Prosperity Conference (Rochester, NY) Impact Investing

June 1-2  Impact Capitalism Train Stop Tour (Philadelpha & DC) Impact Investing

June 7-8  Social Innovation Summit (DC) Various

June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy

June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy

Sept 6-8  PRI in Person (Singapore) Responsible Investing

Sept 13 – 16  SOCAP (SF) Impact Investing

Sept 26 - 28 ANDE Conference (Lessburg, Virginia) Impact Investing

Oct 9 – 14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing

Oct 18  High Water Women (NYC) Impact Investing

Nov 3-5  Net Impact (Philadelphia) Various

Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing

Nov 16-18 Independent Sector (DC) Philanthropy

Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing


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

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.14: “the best solutions don't always come from white guys in Silicon Valley”

Brian WalshComment

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 awildcard topic. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
Here are four links worth your time (plus the All Things Impact Calendar):
 
1. Effective Philanthropy: inside the room where it happens
The way that most philanthropic funding decisions get made can seem like a black box to those outside the process. Just because this is normal doesn’t mean it has to be the norm. My colleague on the Fund for Shared Insight, Chris Cardona of the Ford Foundation, offers the “deleted scenes” of how our recent draft RFP - opened to public comment - became a final version. He blogged about this at TransparencyTalk (the Foundation Center’s blog for its GlassPockets initiative).

“Shared Insight is a funder collaborative working to improve philanthropy by increasing foundation openness – i.e. sharing our goals, strategies and failures; listening and engaging in dialogue with others; acting on what we hear; and, sharing what we have learned…we developed a draft request for proposals (RFP), and decided that we should model the behavior we hope other funders will adopt by publishing the draft online, and inviting anyone to comment…we were honored to receive 18 pages worth (!) of feedback…

The upshot of this feedback is we’ve produced an RFP that we hope is more streamlined, more straightforward, and more direct. We added several more examples of the types of projects we’re interested in funding, and we made our definition of openness much simpler, without a framework. The process of gathering the feedback was tremendously informative, and we deeply appreciate all those who contributed their time and wisdom to this effort. We hope the result was worth it – and that in the end, we’re able to fund even better projects that advance foundation openness.”


2. Impact Investing: “the best solutions don't always come from white guys in Silicon Valley”
In Inc. Magazine, (h/t Jamie A.) Kelly Hoey writes about Village Capital, the “venture development organization that finds, trains and funds entrepreneurs working to solve global challenges.” According to Executive Director Ross Baird, “the way we currently support entrepreneurs as a society unfortunately funnels a ton of dollars into the hands of a very small amount of people, who work in a few U.S. states, and went to a handful of schools, and they're investing in people who look like them. As a result, the innovations we're seeing aren't relevant to the majority of people.”

“Village Capital recognizes that one startup or a single innovative technology is not going to solve the problems of the world's unbanked…the point…is not to find a single silver bullet to the challenges of financial inclusion--rather, it is on finding and honing a large number of really good lead bullets to solve specific, targeted sub-issues within the greater problem of financial inclusion.

What can problem-solvers, game-changers and visionary investors learn from Village Capital's social impact entrepreneurs? Dustin Shay offers the following 3 suggestions:

Social Good and Profit Are Not Mutually Exclusive. Some of the best solutions to critical problems are actually for-profit. There's a limit to the amount of philanthropic money in the world, and it won't be enough to solve every major problem. We need to leverage the power of entrepreneurship if we're going to create self-sustaining solutions that can grow and scale to move the needle in a meaningful way.

The Best Solutions Don't Always Come From White Guys in Silicon Valley. The prevailing thought process is that Silicon Valley is the only place innovation happens (75% of venture capital is deployed in Boston, New York, and San Francisco). Further, venture capital has an inherent bias in favor of people who look like them. Entrepreneurial innovation is present everywhere (95% of the entrepreneurs Village Capital supports DON'T come from Boston, New York, or San Francisco) and to solve challenges for specific communities we need to find the entrepreneurs within those communities.

Everyone Can Start Something That Can Make a Difference. "If not now, then when? If not us, then who?" If you approach problems from an entrepreneurial perspective and realize that these issues aren't going to solve themselves, you can make an incredible difference. Everyone's viewpoint is necessary when it comes to starting an organization - money is certainly not the only thing entrepreneurs need. If you're not starting something yourself, getting involved and offering honest, direct, actionable feedback is a great way to support many entrepreneurs solving critical issues.”

3. Responsible Investing: Yale’s $25.6 billion endowment confronts climate change
My working model for how responsible investing will become even more mainstream is if enough asset owners (or asset stewards) put pressure on enough asset managers, then those managers will invest in companies (and other assets) while acknowledging externalities, minimizing harm, maximizing impact, and generating as much risk-adjusted financial return as possible.  

A few years ago students concerned about climate change at Yale organized and convinced the University - an enormous asset steward with an endowment of $25.6 billion - to require the outside asset managers who invest their money on their behalf to reduce the climate change risk in their portfolio. Now, 18 months later, the CIO David Swenson is declaring success in an open letter to Yale Community.

Dialogue with external asset managers has resulted in “more thoughtful consideration of investment opportunities, higher quality, and lower risk portfolios for Yale, and better environmental outcomes.”

"[Yale] has incorporated into its investment process pointed engagement with Yale’s external managers on the topic of climate change. Although public scrutiny has focused on investments in fossil fuel producers, the Investments Office approaches the climate change issue more broadly by considering any exposure with risk related to climate change and potential regulations aimed at reducing emissions. That consideration includes, for example, asking managers about the implications of climate change when evaluating farmland acquisitions in southern locations or pushing our partners to consider the risks of owning lowlying coastal real estate…

The Investments Office believes the risks of climate change, like any risks, should be incorporated in the evaluation of investment opportunities. This is not an easy, straightforward task. However, initiating and continuing a dialogue with our managers about those risks result in more thoughtful consideration of investment opportunities, higher quality and lower risk portfolios for Yale, and better environmental outcomes.


4. Wildcard: “Evolutionary Cognition” & How Animals Think
Alison Gopnik writes in The Atlantic about a new way for humans to learn from nonhuman minds.

“The study of animal minds was long divided between what are sometimes called “scoffers” and “boosters.” Scoffers refused to acknowledge that animals could think at all: Behaviorism—the idea that scientists shouldn’t talk about minds, only about stimuli and responses—stuck around in animal research long after it had been discredited in the rest of psychology. Boosters often relied on anecdotes and anthropomorphism instead of experiments…

Psychologists often assume that there is a special cognitive ability—a psychological secret sauce—that makes humans different from other animals. The list of candidates is long: tool use, cultural transmission, the ability to imagine the future or to understand other minds, and so on. But every one of these abilities shows up in at least some other species in at least some form…

A better way to think about other creatures would be to ask ourselves how different species have developed different kinds of minds to solve different adaptive problems. Surely the important question is not whether an octopus or a crow can do the same things a human can, but how those animals solve the cognitive problems they face, like how to imitate the sea floor or make a tool with their beak. Children and chimps and crows and octopuses are ultimately so interesting not because they are mini-mes, but because they are aliens—not because they are smart like us, but because they are smart in ways we haven’t even considered. All children, for example, pretend with a zeal that seems positively crazy; if we saw a grown-up act like every 3-year-old does, we would get him to check his meds.

Sometimes studying those alien ways of knowing can illuminate adult-human cognition. Children’s pretend play may help us understand our adult taste for fiction…We human beings tend to think that our social relationships are rooted in our perceptions, beliefs, and desires, and our understanding of the perceptions, beliefs, and desires of others—what psychologists call our “theory of mind.” In the ’80s and ’90s, developmental psychologists, including me, showed that preschoolers and even infants understand minds apart from their own. But it was hard to show that other animals did the same. “Theory of mind” became a candidate for the special, uniquely human trick."

5. All Things Impact Calendar
Here are some events I'm keeping an eye on. Please send me any I should add to this calendar.

April 26-27  Impact Capitalism (Chicago) Impact Investing

May 1-4  Milken Global Conference (LA) Various

May 2-4  Grantmakers for Effective Organizations (Minneapolis) Effective Philanthropy

May 4-5  Ceres (Boston) Responsible Investing

May 10-12  Mission Investors Exchange (Baltimore) Impact Investing

May 25 Venture Jobs Prosperity Conference (Rochester, NY) Impact Investing

June 7-8  Social Innovation Summit (DC) Various

June 13 GrantStation Forum on Philanthropy (NYC) Effective Philanthropy

June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy

Sept 6-8  PRI in Person (Singapore) Responsible Investing

Sept 13 – 16  SOCAP (SF) Impact Investing

Sept 26 - 28 ANDE Conference (Lessburg, Virginia) Impact Investing

Oct 9 – 14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing

Oct 18  High Water Women (NYC) Impact Investing

Nov 3-5  Net Impact (Philadelphia) Various

Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing

Nov 16-18 Independent Sector (DC) Philanthropy

Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

 

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 dog's owner projecting a theory of mind onto his pet). 

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.13: the enduring power of “Shareholder Value”

Brian Walsh1 Comment

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. For previous posts, to subscribe, and for more information, please visit All Things Impact.
 
Here are four links worth your time (plus the All Things Impact Calendar):

1. Effective Philanthropy: what $250mm and Lady Gaga have to do with cancer research
It's always helpful to put philanthropic funding in perspective. “The Federal government will spend $5.2 billion this year on cancer research. Big Pharma will invest even more. By comparison, Sean Parker’s grant of $250 million to advance cancer immunotherapy, announced yesterday, is not a lot of money.”

So begins the coverage by the always insightful David Callahan of Inside Philanthropy of the latest mega-philanthropy announcement. 

"How much progress can a philanthropist wielding a slingshot hope to have against a disease that kills 8 million people a year worldwide?

That question was on my mind last night when I showed up at a phantasmagoric rollout event for Parker’s new anti-cancer effort at his estate in Los Angeles..

I didn’t even want to think about how many malaria nets one could buy for the cost of putting on this shindig, which featured Tom Hanks as MC and cameos by the likes of Bradley Cooper and Sean Penn. Oh, and Lady Gaga didn’t go on until after the Red Hot Chili Peppers and John Legend had finished performing...

In Parker’s analysis, one shared by many, the long and well-financed push against cancer has yielded disappointing results for a combination of reasons. Government tends to be too risk-averse, with the National Cancer Institute gravitating toward sure-thing research that delivers incremental gains, not breakthrough cures...

Meanwhile, cancer researchers tend to be silo-ized, spread out across institutions that don’t talk to each other, guarding findings that ideally should be shared and built upon. These same researchers also spend too much time writing grants and too little time running studies, with the freedom to easily pivot as new information comes in. “These web-like layers of bureaucracy don’t just make it hard for scientists to do their best science, they make it hard for scientists to do science at all,” Parker said.  

Which is where the Parker Institute for Cancer Immunotherapy comes in.

Over recent years, Parker—who co-founded Napster and became a billionaire from a stint as Facebook’s first president—crafted a vision of a new effort that would knit together America’s most brilliant cancer researchers, free them from bureaucratic constraints, and foster the in-depth collaboration and free flow of information needed to make breakthrough progress in conquering cancer. To help advance this vision, Parker enlisted leaders from six of the nation’s top cancer research centers, including Memorial Sloan Kettering, Stanford Medicine, UCLA, and MD Anderson Center. He also recruited a renowned immunologist, Jeffrey Bluestone of UC San Francisco to run the effort. In turn, prior to its launch, the Parker Institute formed partnerships with over two dozen other leading players in medical research…

That initial investment is designed to create a research effort that becomes self-financing over time. The idea is that revenue from commercializing the new intellectual property created by the institute will be reinvested back into more research. “This is an evergreen model,” Parker said.

How else is it different?

“It’s highly focused. While it’s true that $250 million is not much money compared to billions spent on cancer research annually, all the new money is being targeted in one area, financing a level of high-powered collaboration never seen before around cancer immunotherapy.”

2. Impact Investing: Enable Impact launches impact investing deal platform
I’ve written before that in order to accelerate the practice of impact investing, four forces need to come together: 
1. Supply of investable opportunities (“deal pipeline” of impact-focused companies, projects, and funds)
2. Demand from asset owners to put pressure on asset managers to seek impact deal opportunities
3. Market infrastructure & intermediaries to connect the supply of investment opportunities with the demand from impact-intentioned capital
4. An effective enabling environment to support these forces (a smart regulatory framework, metrics & reporting systems, data platforms, talent development, communities of practice, etc.)

It’s not easy work. “The short history of impact investing is already littered with matchmaking platforms that have largely failed to take off,” my friend Jerome Tagger writes in ImpactAlpha. 

Philip Berber is trying to buck that trend with Enable Impact, an regulated online trading platform that focuses on helping growth-stage impact companies raise $1-2 million in Series A funding. 

“Berber expects the platform to grow to $50 million worth of deals over the next three years. The platform is free for investors: income will come from success fees paid by the companies. Investors will be able to find and fund impact companies in about five clicks, from validating accredited investor status to sending money and completing deals..

The rationale is that investors want to see deals coming from a trusted source. Bringing transactions that already have the imprint of a lead investor helps pass the “credibility hump.” The companies are vetted by the distinct investment committees of North Capital, the broker-dealer, and Enable Impact. Berber says less than 1 percent of the deals reviewed go on the platform.

Impact objectives, as established and reported by the companies, are one of six high level criteria which the committee factors into its decisions. Enable Impact also plans to monitor and track invested companies’ impact performance over the long term for its own impact reporting…

Berber says dealflow will increase as new investors enter the market. He estimates there are only about 30 impact investors currently active. The next group is about three hundred, and the larger potential universe three thousand – all of whom he says are following his platform already.

“Personal relationships are still very important in the process,” he says.”

(Disclosure: I head up impact at Liquidnet, which is an investor into ImpactAlpha through the Liquidnet Impact Fund, a donor advised fund managed by ImpactAssets. Unnecessary disclosure: Yes, the word impact appears a lot in that previous sentence.)

3. Responsible Investing: the enduring power of “Shareholder Value”
The Economist recently explored the framework of shareholder value, suggesting that for all its shortcomings there isn't a better model for how companies should be run.

“Technically, shareholders do not own a company: the firm is a legal person and a share represents a bundle of entitlements to dividends and voting powers. But a doctrine of “shareholder primacy” had been outlined in 1919, when a Michigan court observed that “a business corporation is organised and carried on primarily for the profit of stockholders”. The new science of corporate finance revolutionised the pursuit of that goal. Managers realised that by working out where firms employed capital and using it more efficiently they could increase their value. Outsiders had a methodology with which to second-guess incompetent managers…
 
Yet at this moment of ascendancy in the business world, shareholder value is under fierce attack beyond it, fuelled by a sense that Western economies are not delivering rising prosperity to most people. The criticism falls into two categories. The first is that shareholder value is a licence for bad conduct, including skimping on investment, exorbitant pay, high leverage, silly takeovers, accounting shenanigans and a craze for share buy-backs, which are running at $600 billion a year in America…
 
The second criticism is weightier: that firms should be run for all stakeholders, not just shareholders. In a trite sense the goals of equity-holders and others are aligned. A firm that sufficiently annoys customers, counterparties and staff cannot stay in business. Some bosses, such as Paul Polman of Unilever, and Joe Kaeser at Siemens, say that pursuing social and financial objectives is consistent. But it is disingenuous to pretend conflicts do not arise. A firm with a loss-making factory cannot shut it without destroying jobs.
 
The trouble is identifying a goal that could replace the pursuit of shareholder value. If firms had to promote employment they would be less productive and riskier borrowers, as China is discovering. The objective of maximising wealth is deeply embedded in the global savings system, with asset managers obliged to protect clients’ money. Asking firms to adopt objectives to solve inequality loads a giant problem on their shoulders.”

4. Wildcard Topic: "If you eat food, you are being lied to everyday"
In a classic sketch from the satirical indie show Portlandia, two diners at a ‘farm to table’ restaurant inquire not only about the provenance but also the personality of the chicken they are about to eat: "He looks like a happy little guy running around...did he have a lot of other chickens as friends?"

Laura Reiley, the food critic for the Tampa Bay Times, breaks the story about how many of the area restaurants which advertise as being “farm to table” are far from that.

“This is a story we are all being fed. A story about overalls, rich soil and John Deere tractors scattering broods of busy chickens. A story about healthy animals living happy lives, heirloom tomatoes hanging heavy and earnest artisans rolling wheels of cheese into aging caves nearby.

More often than not, those things are fairy tales…

People want “local.” and they’re willing to pay. Local promises food that is fresher and tastes better; it means better food safety; it yields a smaller carbon footprint while preserving genetic diversity; it builds community…

Servers are likely to start proceedings with a mini-disquisition on how all the food comes from within a couple hundred miles of the restaurant (mileage may vary).

If you eat food, you are being lied to every day...

Everywhere you look, you see the claims: “sustainable,” “naturally raised,” “organic,” “non-GMO,” “fair trade,” “responsibly grown.” Restaurants have reached new levels of hyperbole.

What makes buying food different from other forms of commerce is this: It’s a trust-based system. How do you know the Dover sole on your plate is Dover sole? Only that the restaurateur said so.

And how can you be sure the strawberries your toddler is gobbling are free of pesticides? Only because the vendor at the farmers market said so.

Your purchases are unverifiable unless you drive to that farm or track back through a restaurant’s distributors and ask for invoices.

I did.”

Through extensive research - including performing DNA analysis on fish served to her - she concludes that “Just about everyone tells tales. Sometimes they are whoppers, sometimes they are fibs borne of negligence or ignorance, and sometimes they are nearly harmless omissions or “greenwashing.” 

One of the facts that stood out to me: on an average week, 530,000 head of cattle are processed in the United States. Fewer than 12,000 of them are naturally raised and antibiotic free.

5. All Things Impact Calendar
Here are some events I'm keeping an eye on. Please send me any I should add to this calendar.

April 26-27  Impact Capitalism (Chicago) Impact Investing

May 1-4  Milken Global Conference (LA) Various

May 2-4  Grantmakers for Effective Organizations (Minneapolis) Effective Philanthropy

May 4-5  Ceres (Boston) Responsible Investing

May 10-12  Mission Investors Exchange (Baltimore) Impact Investing

June 7-8  Social Innovation Summit (DC) Various

June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy

Sept 6-8  PRI in Person (Singapore) Responsible Investing

Sept 13 – 16  SOCAP (SF) Impact Investing

Sept 26 - 28 ANDE Conference (Lessburg, Virginia) Impact Investing

Oct 9 – 14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing

Oct 18  High Water Women (NYC) Impact Investing

Nov 3-5  Net Impact (Philadelphia) Various

Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing

Nov 16-18 Independent Sector (DC) Philanthropy

Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

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 these series of drawings about a single father doing his best to raise a daughter).

Until next time, thanks for reading!
Brian
 
Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.12: philanthropy is open for improvement

Brian WalshComment

Hi friends,

Here are four links worth your time:

1. Effective Philanthropy: announcing up to $2 million to increase foundation openness
My company, Liquidnet, is proud to be one of the core funders of the Fund for Shared Insight, a multi-year collaborative working to improve philanthropy by increasing foundation openness. We are betting that if foundations are more open, they will be more effective. We recently launched an open request for proposals for nonprofit partners who are interested in increasing foundation openness in service of effectiveness. We expect to provide up to $2 million in grants in 2016-17.

From the RFP:

"The more than 80,000 foundations in the US have nearly $800 billion in endowment assets and deploy approximately $45 billion annually in the form of grants to nonprofit organizations. More than this financial capital, foundations have significant knowledge capital: information about the communities and issues they fund. We believe that if foundations are more open – which we define as how they share about their goals and strategies; make decisions and measure progress; listen and engage in dialogue with others, act on what they hear, and share what they themselves have learned – they will be more effective."

My colleague Melinda Tuan - our indispensable project manager for Shared Insight - expands on this in a post on theCenter for Effectively Philanthropy blog:

"In order for philanthropy to improve, foundations need to not only share what they know but also listen to what others — including grantees and the people they seek to help — have to say, and, as appropriate, act on what they learn. Foundations sharing more about what they know is necessary, but on its own is not enough.

Imagine, for example, if more foundations shared information about how they assess their own work and posted their evaluations of what worked and didn’t work on their websites. Would the existence of more documents dramatically improve philanthropic and nonprofit effectiveness? We hypothesize that while there would be some benefits to foundations and grantees from having access to these learnings, the act of sharing alone would likely not lead to better outcomes. Rather, meaningful discussion and dialogue about these learnings, incorporating the voices of beneficiaries, and implementing changes in foundation and nonprofit practice informed by these learnings is ultimately what will improve results..."

Proposals are due May 20, 2016.

2. Impact Investing: Etsy wants to crochet its cake, and eat it too
Amy Larocca offers a well-observed and thoughtful profile of the online marketplace Etsy in New York magazine:

“Etsy has always wanted to do a whole lot more than sell pot holders: It wants to rewrite the idea of what it is to be corporate, all the while erasing the line between making money and doing good — going so far as to suggest that these two things are essentially the same.

One might have predicted the financial crisis would produce cynicism about the behavior of corporations and the power of the wealthy, and in some ways it did — there was Occupy, and the tea party, and Wall Street regulation, for starters. (And, yes, a socialist is actually running for president.)

But much more interesting was the way the opposite happened, too—the rise of a new faith in the transformative power of capitalism, especially among start-ups and in Greater Silicon Valley, where, in the aftermath of an economic disaster, venture capitalists and entrepreneurs often seemed the most optimistic people in the country…

[Etsy] might embody this new faith most of all — the hope that, in a country long soured on both big business and big government, a new kind of company could be not only a force for good in the world but possibly the greatest hope for good, and all of it would happen in these open-plan offices, micro-Scandinavias where crafty and buoyant flannel enthusiasts gleefully compost their lunch…

The company is certified as a B Corp, which means that while it is a publicly traded company, it isn’t, like others, beholden entirely to its shareholders. The B Corp has a do-gooder cousin in the Benefit Corporation — which is a legal status, while the B Corp is merely an accreditation (handed out by a nonprofit called the B Lab). But the model is the same: A B Corp declares itself equally responsible to its community and to the environment as to its shareholders, which means, functionally, that the company’s founders (and its executives) get to establish priorities that the profit motive doesn’t automatically trump. In exchange, the company gets a seal of approval not unlike that little organic or fair trade stamp you find in the aisles at Whole Foods. And gets to send a clear signal about its priorities to investors, who can then be considered duly warned that the company may not try very hard to make them any money."

(Disclosure: I have friends who work at Etsy and have participated in workshops and discussions at their charming Dumbo headquarters over the years about how business can be leveraged as a force for good. While there, I dutifully composted my food waste and smiled at the hand-knit sweaters covering the exposed ducts.)

3. Responsible Investing: Investing With a Conscience, but Done by a Robot
David Gelles reports in the New York Times about new approaches to responsible investing, relying on computer algorithms as opposed to human analysts. These algorithms mine data from sources such as Bloomberg, Sustainalytics, MSCI, RepRisk, Carbon Disclosure Project, and Institutional Shareholder Services, a corporate governance specialist.

“Arabesque is one of a growing number of investors that are leaning on mountains of new data about companies’ environmental, social and governance performances in hopes of making more profitable trades…

The motivation is not entirely about ethics. Underpinning the strategy is a belief that companies that take better care of the environment and their communities will perform better in the long run.

“No one wants to be patronized with a moral argument,” said Andreas Feiner, head of ESG research at Arabesque. “You tell investors that these companies are going to perform better.”

And yet even among the most strident capitalists, there is a growing sense that doing well by doing good is in vogue.

“We have the opportunity to marry making money with a purpose,” Mr. Feiner said. “That is a very rare thing in finance.”

…Now there is little doubt that ESG issues can have meaningful effects on stocks. Shares in coal companies have plunged in recent years, pushed down by growing environmental concerns and increased regulation. Since the Deepwater Horizon disaster, more investors are scrutinizing the health and safety data of oil and gas companies. After world leaders agreed in Paris in December to try to cap greenhouse gas emissions, stocks in many fossil fuel companies fell.

“More and more people are realizing that this is a smart thing to do when you’re making investments,” Ms. Carlisle said. “Better to know than not to know.”

4. Wildcard Topic: Idiots, Maniacs, and Delusions of Objectivity
Tim Harford – the “undercover economist” columnist at the Financial Times – writes on “naïve realism,’ the seductive sense that we’re seeing the world as it truly is, without bias or error….This is such a powerful illusion that whenever we meet someone whose views conflict with our own, we instinctively believe we’ve met someone who is deluded, rather than realising that perhaps we’re the ones who could learn something.”
 
Harford quotes the comedian George Carlin’s immortal observation: “Have you ever noticed when you’re driving, that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?”

“True enough. But when you think for a moment about Carlin’s quip, how could it be otherwise? You’ve made a decision about the appropriate speed for the driving conditions, so by definition everybody else is driving at a speed that you regard as inappropriate…
 
The truth is that we all have biases that shape what we see…We see what we want to see. We also tend to think the worst of the “idiots” and “maniacs” who think or act differently…
 
Even when we take a tolerant view of those who disagree with us, our empathy only goes so far. For example, we might allow that someone takes a different view because of their cultural upbringing — but we would tend to feel that they might learn the error of their ways, rather than that we will learn the error of ours…
 
It is hard to combat naive realism because the illusion that we see the world objectively is such a powerful one. At least I’ve not had to worry about it too much myself. Fortunately, my own perspective is based on a careful analysis of the facts, and my political views reflect a cool assessment of reality rather than self-interest, groupthink or cultural bias. Of course, there are people to the left of my position. They’re idiots. And the people on my right? Maniacs.”

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 cute kitty now all grown up).
 
Until next time, thanks for reading!
Brian
 
Brian Walsh
Head of Impact at Liquidnet. Full Bio.

 

All Things Impact 2016.11: Perpetuity is a really long time

Brian WalshComment

Hi friends,

Here are four links worth your time (plus job postings and an All Things Impact Calendar of upcoming events):

1. Effective Philanthropy: rethinking foundation life spans
Perpetuity is a really long time. In the Chronicle of Philanthropy, Ray Madoff and Rob Reich explore whether foundation "endowments designed to operate forever provide the best approach for donors and society at large" referencing John Stuart Mill who wrote that it was folly to make "a dead man’s intentions for a single day a rule for subsequent centuries."

"[T]he world faces catastrophic risks, such as climate change, bioterrorism, and nuclear warfare. If humanity faces the possibility of extinction, what reason could be produced to warehouse philanthropic assets for a long-term future that might not exist? What’s more, faster giving in the near term might actually succeed in warding off these existential threats...

How should current philanthropists, as well as policy makers, weigh the interests of future generations? Are future generations best served by current saving or current spending? If foundations are to survive past the lives of their founders, what deference should the living owe to the preferences of the dead?"


2. Impact Investing: seeking liquidity in impact investing
As some keen readers noted, I didn't publish a newsletter last week. I was in The Hague for the Impact Summit Europe, where I was happy to speak about liquidity in impact investing alongside Laurie Spengler, CEO of Enclude (formerly known as ShoreBank International and Triodos Facet). Liquidity is important because in order to attract new investors to impact opportunities, they will need better assurance that they will someday see their capital again (ideally with a healthy return). Enclude was engaged by the Global Alliance for Banking on Values to create an open-ended fund structure which would allow for the liquidity needs of impact investors. The new vehicle, launched last year, is calledSFRE (pronounced "sapphire"), standing for  "Sustainability | Finance | Real Economies".  SFRE has so far raised $40 million but aims to raise as much as $1 billion over the next 10 years, to be invested in the "globally growing segment of banks focused on serving individuals and enterprises in the real economy."


3. Responsible Investing: investments in sustainability issues are shareholder-value enhancing
Materiality is a fundamental principle of financial reporting; it’s an acknowledgement that some information is important to investors in making investment decisions. According to SASB (the Sustainability Accounting Standards Board), “U.S. Federal law requires publicly listed companies to disclose material information, defined by the U.S. Supreme Court as information presenting “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”
 
Academics Mozaffar Khan, George Serafeim & Aaron Yoon have a new working paper on the economic performance of companies which perform well on material sustainability issues:

An increasing number of companies make sustainability investments, and an increasing number of investors integrate sustainability performance data in their capital allocation decisions.

To date, however, the prior academic literature has not distinguished between investments in material versus immaterial sustainability issues. We develop a novel dataset by hand-mapping data on sustainability investments classified as material for each industry into firm-specific performance data on a variety of sustainability investments. This allows us to present new evidence on the value implications of sustainability investments.

Using calendar-time portfolio stock return regressions we find that firms with good performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that investments in sustainability issues are shareholder-value enhancing. Further, firms with good performance on sustainability issues not classified as material do not underperform firms with poor performance on these same issues, suggesting investments in sustainability issues are at a minimum not value-destroying. Finally, firms with good performance on material issues and concurrently poor performance on immaterial issues perform the best. These results speak to the efficiency of firms' sustainability investments, and also have implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decisions.


4. Wildcard Topic: Does Cryonics Make Sense?
Tim Urban at the always-intriguing Wait But Why has a long post on the science and philosophy of cryonics. 

He begins his exploration skeptically, with the understanding that “Cryonics is the morbid process of freezing rich, dead people who can’t accept the concept of death, in the hopes that people from the future will be able to bring them back to life, and the community of hard-core cryonics people might also be a Scientology-like cult.”

After exhaustively researching and analyzing each piece of his initial framework, he concludes with the understanding that “Cryonics is the process of pausing people in critical condition, in the hopes that people from the future will be able to save them.” No matter your personal views on cryonics (or foundations existing in perpetuity, for that matter), his journey is thought-provoking throughout: 

“[T]his post has forced me to take a big step back—back to where I can see death not as a moment but as a process, back to where I can see the human lifespan as a product of our times, not our biology, and back to where I see the concept of human health spread out along the spans of time and where I can imagine how future humans will see our current times of helplessness in the face of biological deterioration.
 
From way out here, it hits you that we’re living in a phase—a sad little window that an intelligent species inevitably passes through, when they’re advanced enough to understand their own mortality, but still too primitive to save themselves from it. We grapple with this by treating death like a tyrannical overlord we wouldn’t dare try to challenge, not even in our own private thoughts. We’ve been universally defeated and dominated by this overlord for as long as we’ve existed, and all we know how to do is bow down to it in full resignation of its power over us…
 
Cryonicists view death as a process and consider many people who are declared dead today to still be alive—and they view cryonics as an attempted transfer of a living patient to a future hospital that can save his life. In other words, they view cryonics merely as an attempt to resist the overlord, no different than the way we view someone being transferred to a hospital in a different location which has better treatment options for their condition. Most of us, by contrast, view death as a singular moment, so we see cryonics as an attempt to bring a dead person back to life—i.e. we see cryonics as an attempt to defeat the overlord. When cryonicists see us cheer on a billionaire who fights cancer and shake our heads at one who signs up for cryonics, when they see us praying for someone in a coma and rolling our eyes at someone being vitrified—they see us being highly irrational.

Cryonicists view death not as an all-powerful overlord but as a puzzle to be solved. They see humans as an arrangement of atoms and see no reason that arrangement should have to inevitably deteriorate if our scientists can just get better at working with atoms. So for them, trying to defeat death altogether is an obvious, rational mission to undertake. But most of us view death as a fundamental fact of the universe—a mysterious and terrifying shadow that hovers over all living things and that only a naive fool would try to escape from—so instead of cheering on the people trying to solve the puzzle of death, we scoff at them and laugh at them, as if they’re too immature to come to peace with the inevitable."


5. Job Opportunities
Here are some impact related job opportunities that have come across my desk. Please feel free to send relevant openings, which I am happy to pass along.


6. All Things Impact Calendar
A new section to this newsletter, here are some events I'm keeping an eye on. Please send me any I should add to this calendar.

April 4-6  Global Philanthropy Forum (SF) Effective Philanthropy

April 6-7  Impact2 Conference (Paris) Impact Investing

April 8 – 12  Council on Foundations (DC) Effective Philanthropy

April 13-15  Skoll World Forum (Oxford, UK) Effective Philanthropy

April 26-27  Impact Capitalism (Chicago) Impact Investing

May 1-4  Milken Global Conference (LA) Various

May 2-4  Grantmakers for Effective Organizations (Minneapolis) Effective Philanthropy

May 4-5  Ceres (Boston) Responsible Investing

May 10-12  Mission Investors Exchange (Baltimore) Impact Investing

June 7-8  Social Innovation Summit (DC) Various

June 23 – July 2  Aspen Ideas Festival (Aspen, CO) Effective Philanthropy

Sept 6-8  PRI in Person (Singapore) Responsible Investing

Sept 13 – 16  SOCAP (SF) Impact Investing

Sept 26 - 28 ANDE Conference (Lessburg, Virginia) Impact Investing

Oct 9 – 14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing

Oct 18  High Water Women (NYC) Impact Investing

Nov 3-5  Net Impact (Philadelphia) Various

Nov 9-11  Sustainable, Responsible, Impact Investing (Denver) Responsible Investing

Nov 16-18 Independent Sector (DC) Philanthropy

Dec 7-8  Global Impact Investing Network (Amsterdam) Impact Investing

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 baby goat playing with a horse).
 
Until next time, thanks for reading!
Brian
 
Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.10: nonprofit solvency, whether $40 trillion will go to impact, climate change deniers, and Obama on tribalism

Brian WalshComment

Hi friends,

Here are four links worth your time (plus job opportunities):
 
1. Effective Philanthropy: 10% of NYC nonprofits are technically insolvent
SeaChange Capital Partners, a merchant bank that focuses on the nonprofit sector, and Oliver Wyman, a global management consulting firm, recently analyzed the financial capacity of nonprofit organizations in New York City. The results should give all nonprofits and their board members pause:

  • More than 10% of the nonprofits are technically insolvent (i.e., their liabilities exceed their assets)
  • Roughly, 40% of the organizations have virtually no margin for error, with cash and operating reserves of less than two months
  • At best, 20-40% of organizations appear to be financially strong, defined as having more than six months of unrestricted net assets.

As the authors explain: 

“Distressed nonprofits have very limited ways to recover, so trustees must do all they can to reduce the risk that their organization becomes distressed in the first place. And they must take prompt, decisive action if it does.  Practices such as scenario planning, benchmarking and self-rating, and setting explicit financial stability targets, can improve risk management…

Trustees must strive to maximize the good that their organization does while managing its risks. Balancing these can be challenging because of the passion they feel for the organization and its mission. Nonprofits lack the indicators of organizational health that reach the directors of for-profit businesses, such as stock prices or credit spreads. They also lack outside parties like activist investors, rating agencies, stock market analysts, and short-sellers to encourage them to step back and take an objective view of the situation. In this context, nonprofit trustees in leadership positions must ensure that well thought through risk management processes are in place. In a challenging operating environment, the status quo is no longer acceptable.”

2. Impact Investing: will the $40 trillion transfer of wealth go towards impact?
The always insightful Fran Seagull is chief investment officer at non-profit financial services company ImpactAssets (which, in full disclosure, manages Liquidnet’s donor advised fund).
 
She recently spoke to Bloomberg Sustainable Finance:

“We define impact investing as investing for social or environmental impact as well as for social returns. The impact must be intentional, measured, and reported…

I think about the growth [in impact investing] being at the intersection of supply of capital and demand for capital. On the demand for capital side, we have huge population growth. There will be 9 billion plus people on this planet by 2050 and it always floors me to think about 80 percent of people who live on less than $10 a day. We have to increase food supply by 70 percent in order to feed this growing population, and there’s also a lack of access to food, jobs, and education in both developed and developing markets. There are also worries about how climate change and droughts will change this.

On the supply of capital side, there’s a $40 trillion wealth transfer to women and millennials that is just starting. This wealth transfer could be an extraordinary shift in how folks invest. In these two cohorts of women and millennials, there’s absolutely a debate about passive versus active investing. You are starting to see index funds focused on environmental issues. We see the advent of robo-advisers that enable people to dice and slice based on their values. We’re seeing innovation in this space to try and meet the demand of constituencies that have these values. Millennials really care about the values of where they work and as this money transfers, intermediaries, investment banks, and asset managers will take the lead from the bottom up. It’s a sea change. Wealth management has previously been a very top-down affair. I think something very interesting is going to happen around this bottom-up input from investors.”

3. Responsible Investing: is your mutual fund a climate change denier?
The way tens of millions of people invest in the capital markets is through mutual funds, either directly or indirectly through their retirement funds or pension plans. These mutual funds generally then invest in hundreds or thousands of publicly-listed companies. As shareholders in these public companies, mutual fund managers have the opportunity to vote in shareholder resolutions – annual “proxy voting” – about issues of corporate governance and management. The nonprofit organization Ceres works with investors focused on sustainability, and tracks relevant shareholder resolutions filed by their investor network, “focusing on climate change, energy, water scarcity, and sustainability reporting."

As they reported on the site EcoWatch, Rob Berridge and Jackie Cook analyzed the proxy voting records of 42 large mutual funds. They found that 9 of them “failed to support a single climate-related shareholder resolution in 2015…

“The resolutions filed by investors request that companies take such actions as: set greenhouse gas (GHG) reduction goals; disclose the risk of assets such as fossil fuel reserves and coal plants being unusable—“stranded” in Wall Street parlance—due to weakening global demand for fossil fuel products; disclose political lobbying expenditures related to climate change; and issue sustainability reports describing material business risks from climate change.” Some of those who failed to support these resolutions are members of the UN’s Principles for Responsible Investment (PRI), “meaning that they have publicly committed to six principles, including: Principle 2 “active ownership,” which entails actions such as supporting resolutions on environmental, social and governance (ESG) issues; and Principle 3 to “seek appropriate disclosure on issues by the entities in which we invest.”

4. Wildcard: Obama on Tribalism
In The Atlantic, Jeffrey Goldberg has a tour de force profile of President Obama and his "Obama Doctrine" foreign policy. Set aside at least an hour if you plan on reading the whole thing, as I did last weekend. Here’s a passage I found particularly interesting:

“One of the most destructive forces in the Middle East, Obama believes, is tribalism—a force no president can neutralize. Tribalism, made manifest in the reversion to sect, creed, clan, and village by the desperate citizens of failing states, is the source of much of the Muslim Middle East’s problems, and it is another source of his fatalism. Obama has deep respect for the destructive resilience of tribalism—part of his memoir, Dreams From My Father, concerns the way in which tribalism in post-colonial Kenya helped ruin his father’s life—which goes some distance in explaining why he is so fastidious about avoiding entanglements in tribal conflicts.

“It is literally in my DNA to be suspicious of tribalism,” he told me. “I understand the tribal impulse, and acknowledge the power of tribal division. I’ve been navigating tribal divisions my whole life. In the end, it’s the source of a lot of destructive acts…

“Look, I am not of the view that human beings are inherently evil,” he said. “I believe that there’s more good than bad in humanity. And if you look at the trajectory of history, I am optimistic.

“I believe that overall, humanity has become less violent, more tolerant, healthier, better fed, more empathetic, more able to manage difference. But it’s hugely uneven. And what has been clear throughout the 20th and 21st centuries is that the progress we make in social order and taming our baser impulses and steadying our fears can be reversed very quickly. Social order starts breaking down if people are under profound stress. Then the default position is tribe—us/them, a hostility toward the unfamiliar or the unknown.”

5. Job Opportunities
Here are some impact related job opportunities that have come across my desk. Please feel free to send relevant openings, which I am happy to pass along.

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 baboon’s adorable reaction to a magic trick).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

All Things Impact 2016.9: patriotic philanthropy, peer to peer lending, ERISA, and abundance

Brian WalshComment

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. For previous posts and more, please visit All Things Impact.

Here are four links worth your time (plus job opportunities):

1. Effective Philanthropy: David Rubenstein, "patriotic philanthropy" and tax rates on carried interest
When I make money, there are at least 4 things that can happen: 
1) that money can be taxed to pay for government services
2) I can spend it on products and services
3) I can save/invest it for future use
4) I can donate it  

Many people prefer to have maximum control over the money they make, so prefer as low a tax rate as possible. If I made $100 and my tax rate were 35%, then I have $65 to use as I would like: consume, invest, or give. If, however, my tax rate were only 15%, I would have $85 to do as I like. I could even give away $10, be honored as a philanthropist, and still come out ahead of the guy paying $35 in taxes.

David Rubenstein's father sorted mail for the postal service in Baltimore. After several years in government, including working for Democratic President Carter, in 1987 Rubenstein formed the Carlyle Group, a private-equity firm. He is now worth an estimated $2.6 billion. He donates a considerable amount of money to charity and has been known for his "patriotic philanthropy", whereby he donates to things like repairing the Washington Monument after earthquake damage or supporting Jefferson's Monticello.  

Because of the "carried interest" exception in the US tax code, most of the money he earns from his private equity firm is taxed at the 15% rate, as opposed to the 35% tax rate most people pay on their labor. As Alec Macgillis explores in the New Yorker, Rubenstein has been an active lobbyist to maintain this favorable tax rate, while also being hailed as a prominent philanthropist (here is the Tina Fey-narrated video from October when Rubenstein was honored with the Carnegie Medal of Philanthropy):

"Private-equity partners argue that their tax treatment is justified under the tradition of encouraging risky business partnerships and is necessary for their industry to flourish. So far, the partners have won out: despite the rise of anti-Wall Street sentiment after the 2008 financial collapse, the loophole has withstood every effort at reform...

In 1889, Andrew Carnegie published “The Gospel of Wealth,” his Gilded Age manifesto. He believed that concentrated wealth was essential to capitalism, but that much of that wealth must be given away, in order to maintain a “reign of harmony” with the poor. The “duty of the man of Wealth,” he wrote, is to “set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds.” Those should be put toward whatever, “in his judgment, is best calculated to produce the most beneficial results for the community.”...

Major philanthropists today do not quote indiscriminately from Andrew Carnegie’s “Gospel.” In one passage, Carnegie writes that making a large charitable gift is “a much more potent force for the elevation of our race’’ than dividing the money into “trifling amounts” for distribution as donations or higher wages, which would likely be “wasted in the indulgence of appetite.” He says that “even the poorest can be made to see this.”

David Rubenstein’s patriotic philanthropy can be seen as a way of establishing the level of control over his wealth that Carnegie enjoyed. In Carnegie’s time, there was no federal income tax; charity was the primary means the rich had of giving back to society, and they could, of course, determine the size of their contributions. The super-wealthy now view taxes more or less the way Carnegie viewed higher wages, or alms spread among the needy: as more likely to be frittered away than if they bestowed the money themselves...

"Many of today’s Wall Street philanthropists win the public’s esteem by giving away money that, without the loophole they’ve fought to protect, would not all have been theirs to donate. “I don’t want to bash the philanthropy, because it does good,” Victor Fleischer told me. “But we’re creating what’s essentially a parallel system, where a small number of individuals control quasi-public spending, and that will reflect their values and not democratic values.” Of Rubenstein, he said, “It’s great that he’s helping out with the Washington Monument. But, if we had a government that was better funded, it could probably fix its own monuments.” 

2. Impact Investing: Peer to Peer lending platform SoFi is starting its own hedge fund
The always insightful Matt Levine at Bloomberg View reports on the "unusual" move by "peer to peer" lender SoFi to start its own hedge fund: 

"[It] turned out that a lot of the investors were not regular people -- not "peers" of the borrowers -- but hedge funds and banks. This makes sense. People have jobs! Why would they spend a lot of time evaluating which small-business or consumer loans are good risks? Instead they give their money to professional managers (as hedge-fund investments, or as bank deposits), and the professionals make those decisions. It also turned out that even the professionals don't necessarily want to spend their time choosing which loans to buy, so companies like SoFi package their loans into securitizations and sell different risk tranches to different investors. The encrusted layers of intermediation build back up. "SoFi is a modern finance company that's fueling the shift to a bankless world," says SoFi, but that world is looking increasingly like the bank world.

The latest news is that SoFi is starting its own hedge fund:

"The unusual move by SoFi, as the company is commonly known, is an attempt to get around waning investor interest that is threatening online lenders’ growth. The sector lacks the deposits needed to fund its loans like traditional banks, so it relies on being able to sell the loans to investors to free up capital to make new ones.

The new hedge fund, called SoFi Credit Opportunities Fund, has “a real chance to solve the balance-sheet problems facing the industry," said SoFi Chief Executive Mike Cagney in an interview."

The model to keep in mind is the basic one from the beginning: There are people with money looking to invest, and people without money looking to borrow. If online lending platforms face "waning investor interest," that means people with money are looking to invest less of it (with SoFi). SoFi's solution to that problem -- "the balance-sheet problem" -- is to repackage the way those people invest: If you can't sell your loans to hedge funds, build your own hedge fund, and then sell shares in that hedge fund to investors. You still rely on investor interest -- all financing relies on investor interest -- but you are at least presenting a different package to different pools of investor money...

SoFi's name is "Social Finance," not, like, "Captive Hedge Fund Securitization Finance." Lending Club is a "club." You can witness ontogeny recapitulating phylogeny. A social club for regular people to lend money to other regular people becomes a securitization platform with its own in-house hedge fund while you watch. The whole history of modern finance recurs, sped up, right before your eyes. It is kind of beautiful.

3. Responsible Investing: with ERISA clarification, fund managers promote sustainable investing to retirement plan administrators
Back in October 2015 the US Labor Department clarified the fiduciary duties of retirement plan administrators under the Employee Retirement Income Security Act (ERISA), saying they “do not need to treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social or other such factors.” As Alex Davidson reports in the Wall Street Journal, this has led sustainable investment fund managers to actively reach out to retirement plan administrators:

"Efforts to get sustainable investments into corporate retirement plans have accelerated in recent months, as funds try to capitalize on investor demand for products that have both a financial and social impact...

Fund providers have taken the initiative, rather than waiting for retirement-plan managers to seek out their offerings. “I don’t think the strategy of waiting for the market to come to you is the right one,” says Scott Kilgallen, managing director at investment manager Neuberger Berman, a firm that includes what it calls a socially responsive investment fund among its many fund offerings.

Mr. Kilgallen says many companies are still surprised to hear his argument that sustainable investments don’t necessarily sacrifice performance to achieve their social goals. The advisers who help plan sponsors formulate their retirement plans are a focus of fund providers’ marketing efforts...

Joe Sinha, director of sales and marketing at Parnassus Investments, which runs the largest socially responsible mutual fund, Parnassus Core Equity (PRBLX), says he and his team lobby for his firm’s offerings by meeting plan sponsors and sketching out scenarios that illustrate why sustainable investing is important. In one example he talks about two different companies with the same price/earnings ratio but different safety records. He then explains how a good safety record could affect future performance, including fewer lawsuits and more-successful recruiting efforts. Eventually, he says, plan sponsors come to understand the significance of social factors.

“I believe that there’s been a shift in thinking” among plan sponsors, he says. But many, he says, still haven’t shaken the notion that a pure sustainable-investment play could compromise returns."

4. Wild Card: Abundance
Joshua Brown writes at The Reformed Broker about abundance:

"There’s too much of everything and it’s not good for anyone. It’s hurting everyone. Paradoxically, abundance is now the enemy. This sets us apart from virtually every other society throughout history.

You can blame the Federal Reserve’s loose money policies if you’d like. There is over-investment in every industry. It’s killing confidence. Nothing is worth what it used to be. We haven’t adjusted to this reality yet.

Unlimited music, nine dollars a month.
Unlimited movies and TV shows, thirteen dollars a month.
Unlimited news and journalism, zero dollars a month.

Facebook is free. Twitter is free. Snapchat is free. Instagram is free. Youtube is free. Video game apps are free. Texting is free. Sexting is free. Skyping is free. Chatting is free. Why would you spend money on anything? Where do you think people spend their time now? Endless entertainment and content, for almost nothing.

What’s the business model? “We go public or get bought out by someone with the opposite problem – too much profit, not enough user growth.” The business model is an exit for the investors. “BlackRock will eat it. They’ll eat anything.” No one cares how many actual business models get wrecked in the process. How many useful jobs are lost in the process. The new fixed income or currency trader on Wall Street will never need health care, or take a vacation or grab a female co-worker’s ass. It’s a chip on a server. Much cheaper to employ, much easier to manage.
Automate everything, outsource the rest – it’s cheaper for the customers. “But now there are no customers left, no one has the money to be a customer anymore.”
...
Here’s the perfect business idea for this environment: Open a Hundred Dollar Bill Store™. You sell hundred dollar bills for ninety dollars each. You’ll lose ten dollars per transaction but you’ll do a trillion in revenues in year one. Maybe you show an ad to everyone who walks into the store and you break even. User growth with be on the order of 1000% per month. A billion users. You’ll be the biggest IPO of all time when Goldman’s underwriters get wind of that growth rate. Go public and let someone else worry about a competitor selling hundred dollar bills for eighty-five."

5. Job Opportunities
Here are some impact related job opportunities that have come across my desk. Please feel free to send relevant openings, which I am happy to pass along.

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 gif of a prairie dog sneaking a kiss).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.

 

All Things Impact 2016.8: Jamie Dimon says that "markets are amoral" and a job opportunity with Markets for Good

Brian WalshComment

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: just how should Zuckerberg and Chan deploy $45 billion?
Michael Hobbes spent the past few months talking to more than 40 researchers, development practitioners, foundation employees, and Silicon Valley philanthropists to better understand the promise and the potential pitfalls awaiting Mark Zuckerberg and his wife Priscilla Chan, as they embark on their commitment to deploy 99% of their wealth for the public good. The result is an incredible piece in the Highline, a microsite of the Huffington Post. I highly recommend you read the whole piece - it's well worth it. Here are some select passages:

"Zuckerberg has interest and expertise in technology, and there's nothing inherently wrong with making bets on gadgets or innovations that have the potential to help the poor. But as he does so, he should acknowledge that the silver-bullet promise of technology only works at changing the world when it's combined with political will and popular demand. Until he finds a way to engineer those (please don't), he should focus on the small ways, at the margins, where technology can improve people's lives, 8 percent at a time.

…how Zuckerberg gives away his money will be just as important as what he gives it to. Because one way to look at his $45 billion is that it's a lot of money. Another way to look at it is that it's about what the United States spends on prisons every six months. Or education every four weeks. Or health care every five days. Even at a scale that large, efficiency matters.

…I heard similar arguments from almost all the tech people I talked to: Zuckerberg shouldn't be afraid to fail; he should approach philanthropy like a venture capitalist, testing out ideas to scale up later on. Bypassing legacy institutions is what Silicon Valley CEOs are good at, right? All those consultants must strike them as the charity equivalent of taxi medallions.

Still, running a charity does require fully understanding problems before you try to solve them. "Move fast and break things" is a fine mentality for Facebook, where the consequences of a few bad lines of code are mostly limited to a drop in revenue or an exodus of users to Snapchat. Applying the same philosophy to health or education or criminal justice has consequences that can't be shrugged away. 

…when Zuckerberg hears pitches from companies seeking to solve the world's problems, he shouldn't ask them if they have a plan to grow, or an ambition to exist in perpetuity. He should ask himself whether he really wants them to replace the systems that already exist, or simply make them better. Because successful companies don't just disrupt other companies—they disrupt economies, governments and the people who depend on them. That's not something that Zuckerberg ever had to worry about, but he has to start.”

2. Impact Investing: reflections from Ackman, Cohen, Branson, and Hoffman
The always-wonderful Paula Goldman, of the Omidyar Network, spoke with several prominent business leaders - Bill Ackman, Sir Ronald Cohen, Sir Richard Branson, and Reid Hoffman - and came away with a few themes, which she wrote about in the Harvard Business Review: “invest for impact in both non- and for-profits, measure results (but not at the expense of taking risk), and shape your existing business around social good.”

“Impact investing has an array of champions — from Pope Francis to the White House — and is gaining traction in sectors as diverse as education, financial inclusion, and alternative energy. Some observers worry that it diverts money away from worthy nonprofits. But Omidyar argues that it’s more about finding the right solution for each problem: “It’s important to invest in the best change-makers you can find regardless of what legal form their organization takes. It’s about using everything in your toolkit.”

…The drive for more and better data and analysis on the efficacy of programs is now widely accepted as best practice. As Jean Case (who started the Case Foundation with AOL co-founder Steve Case) says, “Moving more toward a dashboard approach is important where there is available data. Where there isn’t, you need to invest in getting the data or ‘being the data’ by innovating and breaking new ground to help those that come after you be farther up the learning curve. Don’t let [the lack of existing data] be an excuse to not take risks.”

…The opportunities to harness the power of markets for social good are enormous — especially for the next generation of change-makers who can build on these ideas. Richard Branson sums it up well: “If you put charity on one side and for-profit business on the other, we see the beautiful hybrid models in the middle as the greatest opportunity of our lifetime.”

Hoffman agrees: “Organizations with very few resources can now achieve a reach and scale that once would have required hundreds of employees and millions of dollars. It’s never been easier for good ideas to achieve massive impact.”

3. Responsible Investing: a Q&A with Jamie Dimon, CEO of JP Morgan Chase
Jamie Dimon has been CEO of JP Morgan Chase for 10 years, and recently sat down with John Micklethwait, editor-in-chief of Bloomberg, for a Q&A session:

John Micklethwait (JM) “[When you were growing up], being a stockbroker wasn’t a mundane career, but it wasn’t an amazingly glamorous one either. That all changed on your watch. Financiers rose to become “masters of the universe.” Now they are often vilified, albeit very well compensated [Jamie Dimon was paid $27 million last year]. Can you explain that story? What changed?

Jamie Dimon (JD): Finance went from being a small business, effectively, to being a big business. In part, that’s the growth of the world’s wealth. That’s called savings. As countries get wealthier—all of them, together—you’re going to have financial assets. That is a good thing. You could argue the assets were traded too much, or that they’re too highly valued, or too leveraged. But in general, as countries get wealthier, there’s going to be more savings, which means you’re going to have intermediation. So part of it is just the huge growth in wealth, and part of it was globalization—these companies, these clients getting much bigger and much more global.

…Remember that banks aren’t markets. The market is amoral. The market doesn’t care who you are. You’re a trade to the market. The market will sell you if they think you’re riskier. Banks didn’t do that.

JM: You’re saying banks are more moral than markets?

JD: Yes, because a bank is a relationship. I can’t desert you and expect to have a strong relationship afterward. If I told someone, “I know you’ve been buying milk from me and you need milk to survive. But the price is no longer $2 a gallon. It’s going to be $40 a gallon. I’m going to bankrupt you.” What do you guys think of me? You would hate us. I mean, obviously some of these banks did bad stuff. Yet even in the depths of the crisis, banks didn’t materially change the prices for clients...

JM: I suppose there’s an image of finance, and then there’s an image of capitalism—the general idea that capitalism is there to help, that it’s an integral part of society.

JD: I think the free-enterprise system has been great for society. That doesn’t mean it’s completely perfect. And also, when people say capitalism, I’m not really sure what they mean. I’ve been regulated my whole life. We have progressive taxes. It’s not a free-market free-for-all. I completely understand that society has a perfectly legitimate right to put in structures and regulations and rules that make it fairer, better, cleaner.

4. Wildcard Topic: core differences between Republicans & Democrats
Over at Marginal Revolution, economist Tyler Cowan picks up Paul Krugman’s inquiry into the differences between R’s & D’s:

"The Republican Party is held together by the core premise that the status of some traditionally important groups be supported and indeed extended.  That would include “white male producers,” but not only.  You could add soldiers, Christians (many but not all kinds), married mothers, gun owners, and other groups to that list.

(The success of Trump by the way is that he appeals to that revaluation of values directly, and bypasses or revises or ignores a lot of the associated policy positions.  That is why the Republican Party finds it so hard to counter him and also fears it will lose its privileged position, were Trump to win.  The older Republican policy positions haven’t delivered much to people for quite some time.)

Democrats are a looser coalition of interest groups.  They agree less on exactly which groups should rise in status, or why, but they share a skepticism about the Republican program for status allocation, leading many Democrats to dislike the Republicans themselves and to feel superior to them.  In any case, that underlying diversity does mean fewer litmus tests and potentially a much broader political base, as we observe in higher turnout Presidential elections, which Democrats are more likely to win these days.  That also means more room for intellectual flexibility, although in some historical eras this operates as a negative.

…Republicans, who are focused on the status of some core groups at the exclusion of others, are more likely to lack empathy.  Democrats, who oppose some of the previously existing status relations, and who deeply oppose the Republican ideology, are more likely to exhibit neuroticism.

It is easy for Republicans to see the higher neuroticism of Democrats, and easier for Democrats to see the lesser empathy of Republicans.  It is harder for each side to see its own flaws, or to see how the other side recognizes its flaws so accurately.

… both the Democrats and the Republicans have their ready made, mostly true, and repeatedly self-confirming stories about the defects of the other.  They need only read the news to feel better about themselves, and the academic contingent of the Democrats is better at this than are most ordinary citizens.  There is thus a rather large cottage industry of intellectuals interpreting and channeling these stories to Democratic voters and sympathizers.  On the right, you will find an equally large cottage industry, sometimes reeking of intolerance or at least imperfect tolerance, peddling mostly true stories about the failures of Democratic governance, absurd political correctness, tribal loyalties, and so on.  That industry has a smaller role for the intellectuals and a larger role for preachers and talk radio.”

Important Job Announcement: Markets for Good is hiring!
Markets for Good is an initiative that I helped to start, with the goal of improving the social sector's capacity to generate, share, and use information to make better decisions. It is now being managed by the incredible team at theStanford University Philanthropy and Civil Society Center, with support from Liquidnet and the Bill & Melinda Gates. We are seeking a dynamic Program Manager to help manage this program on a day-to-day basis. Please share this job posting with talented people in your network! (Or maybe that talented person is you?)

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 cat confused by walking on ice).

Until next time, thanks for reading!
Brian

Brian Walsh
Head of Impact at Liquidnet. Full Bio.