All Things Impact.

private capital & the public good

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

Brian WalshComment

Hi friends,

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

Here are four links worth your time:

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 Is it a tacit acknowledgement that the foundation structure itself might be in some sense outdated, and that impact can come not just from philanthropic grants to nonprofit organizations, but also from investments in for profit companies and engagement in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

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

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

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

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

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

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

“As we stare at the financial smoking gun that enables gun violence, inaction is not an option,” Ms. James wrote in a letter to TD Bank. “If you want to do business with New York City, you can’t be in bed with companies that manufacture the agents that kill our children and families.”

In attacking the gun industry, Ms. James is taking a page from other successful efforts to pressure “sin” industries like cigarettes and coal. While seeking divestments has long been popular, they have had little direct impact, according to studies, despite the headlines they often generate. [emphasis added]

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

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

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

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

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