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private capital & the public good

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

Brian WalshComment

Hi friends,

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

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

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

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

5 Tools of Integration:

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

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

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

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

From the report:

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

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

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

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

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

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

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

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

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

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

5. Items of Note

6. Job Postings

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

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

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

Until next time, thanks for reading!

Brian Walsh
Head of Impact at LiquidnetFull Bio. @brianwalsh