All Things Impact.

private capital & the public good

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 Walsh
Head of Impact at LiquidnetFull Bio.