All Things Impact.

private capital & the public good

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

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:

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

“There is a kind of quiet and collaborative leader who ultimately often gets results, in part because she (and sometimes he) recognizes that there is no miracle cure — that progress will be a slog and will need to involve and engage many diverse participants. Yes, to be sure, sometimes a high profile for a leader (or leaders) is necessary for success — and, very occasionally, leaders emerge who are both larger than life and elevate and amplify the voices of those around them (like Martin Luther King, Jr.).
But often, paradoxically, high visibility for individual leaders makes meaningful progress tougher. It emphasizes the individual (or individuals) over the collective engagement of the many, including the intended beneficiaries.
So it’s time for us to stop pretending there are easy answers that will be delivered by hero-leaders.  And it’s time for us to roll up our sleeves and do the tough work that effectiveness requires.”

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

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

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

1. All investing is impact investing. All enterprises, regardless of tax status, produce both social and financial results, on a spectrum from positive to negative, including “neutral.” Their financial and social performance is measureable and varies over time. The conscientious investor takes note of both.
5. Heron acts primarily as a capital investor or equity holder in making both grants and investments. In all sectors, we seek to invest in strong enterprises with reliable revenue. Investing with the overall needs of an enterprise in mind, with shared performance goals, promotes the resilience that enterprises and their leaders require to succeed. Most importantly, strong, reliable enterprises are better positioned to deliver results and employ and serve the people on whom we focus.
6. Heron investment decisions are fundamentals-driven. We believe that enterprises that provide superior performance on both mission and financial dimensions are identified through thoughtful analysis of an enterprise’s fundamentals—broad social contribution, market opportunity, management team, and business model, including revenue reliability—as compared against peers and understood within a larger industry, sector and market context.

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

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

“Long viewed as a niche asset class catering to wealthy individuals and institutions that wanted to avoid controversial industries such as tobacco and firearms, sustainable investing seemed to turn a corner last year. Mainstream financial firms such as BlackRock Inc. and Goldman Sachs Group Inc. jumped into the fray, launching investment products that take into account environmental, social and governance (ESG) factors. At the same time, research from Morgan Stanley and others helped dispel concerns that investors have to sacrifice returns to do good.
…The use of screens to avoid compromising sectors, such as tobacco, firearms, alcohol and gambling, became outdated. Now, the amount and availability of ESG data means investors can judge companies individually, rather than having to eliminate whole sectors based on their values.
And thanks to a growing body of data, there is evidence that those who want to invest in companies that pollute less, better manage resources or prioritize workers’ rights can do just as well financially as those who don’t.
…Yet many challenges remain before sustainable investing is truly open to any investor. One of the biggest is that there isn’t yet one agreed-upon definition of what makes an investment “sustainable.”
….There is no audit system to assess what companies report as “sustainable,” and companies aren’t required to disclose their ESG behaviors and associated risks. Collectively these challenges pose an enormous hurdle to investors and asset managers who want financial products that deliver social returns, industry insiders say.”

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

He expands on this further:

“…in a world where the key to building a sustainable business was controlling distribution, the greatest gains naturally accrued to the biggest companies. And, by extension, it was reasonable to ask those companies to not only pay their workers well, but to also provide for needs beyond salary, like health insurance and disability insurance. But do those same assumptions hold in a world where distribution is free, and where preferences and needs can be distilled to an individual or gig basis?
The money problem — the fact it is both a means of exchange and a store of value — is an allegory for the dysfunctional nature of what passes for a social safety net, particularly in the United States: things like health insurance and disability are intermingled with a salary or fee. This is problematic on both sides: new efficiencies that are unlocked through mobile and ubiquitous connectivity are not fully realized thanks to regulations from an era that operated on fundamentally different assumptions. This, ultimately, hurts everyone because it limits the growth of the economic pie,
On the other side are the people actually doing these new jobs, or those who would like to. Given the fact many social safety nets are built by traditional companies, those not in those companies are left completely exposed. This is unacceptable both morally and economically: morally because to deny healthcare or basic insurance is to deny the humanity of those in need; economically both because of higher costs incurred because of treatments not received, but especially because of the cost of opportunities not pursued for fear of having no net.
It would be far better — and a far better match for the reality of today’s labor market — to disentangle once-and-for-all employment from the social safety net. This should be the central political focus of technologists in particular. Outdated regulations forged under fundamentally different assumptions are one of the chief obstacles to the opportunities afforded by mobile and the Internet, particularly when it comes to the aggregation of consumers in markets that weren’t even imaginable 10 years ago.”

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

Until next time, thanks for reading!