All Things Impact.

private capital & the public good

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 Walsh
Head of Impact at LiquidnetFull Bio.