All Things Impact.

private capital & the public good

All Things Impact for August 11: #reasonsforhope, catastrophe insurance, decarbonized portfolios, and "Hillbilly Elegy"

Brian WalshComment

Hi friends,

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

1. Effective Philanthropy: #reasonsforhope & “Foundations as Moral Cheerleaders for America
Writing in Inside Philanthropy, David Callahan raises concern about the full-page ad recently taken out by 39 foundation presidents in the Sunday New York Times and other top newspapers:

“The ad, citing the “recent killings of people and police officers in communities across the country” offers a message of hope based on America’s past track record of steady progress toward “dignity, equality, and justice,” and it calls on readers to chime in with their optimistic thoughts at #reasonsforhope on Twitter.

Sounds nice, right? But I’m imagining that more than a few advocates working in the trenches on race, policing, and guns looked at the list of foundations on the ad, and then at their own list of funders, and noticed something amiss. Or maybe they Googled the cost of a full-page New York Times ad—which starts at around $100,000—and mused about how far that money could go in their shoestring operations…
With more funders pushing into controversial public policy issues, and often in non-transparent ways, the risk grows that these institutions will lose the public’s trust as high-minded institutions with noble intentions. The ever-greater warehousing of tax-subsidized wealth at a time of fiscal austerity is also an invitation to popular ire. Which is one reason why the foundation sector would be well advised to embrace—not reflexively fight—growing calls for reform. The stakes are too high, here, for the sector to not get ahead of this curve.
… foundation leaders need to be mindful of appearing hypocritical in their cheerleading role or hogging the spotlight, as people sitting on piles of money often do. It’s the change makers in the field who should be out front, and the last thing those folks want to hear are foundation CEOs giving lip service to priorities that, in practice, they’ve been underfunding for years.”

2. Impact Investing: catastrophe insurance and the “missing market” in disaster response
In a compelling new paper, Theodore Talbot and Owen Barder from the Center for Global Development make the convincing case for fixing the key “missing market” in disaster response by moving towards an insurance model for tackling humanitarian crises and natural disasters:

As they write in the paper’s abstract:

"Disaster aid is often too little, too late. Pressure on aid budgets is prompting donors to find ways to handle more crises with less funding. But the current model of discretionary, ex-post disaster aid is increasingly insufficient for these growing needs, and does little to create incentives for governments in affected countries and donors to invest in risk reduction and resilience. This framing paper sets out how the global community can do better. It proposes combining novel insurance contracts that provide fast payouts based on ‘parametric’ triggers with clear incentives to manage risks and invest in reducing losses. Pilot programmes show that the model can work. The challenge is to provide coverage for a broader range of risks, explicitly align incentives in managing risks and reducing losses, and determine the appropriate role for governments and donors. Properly implemented, an insurance paradigm for disaster aid will save many more lives for much less money."

From the paper:

“Insurance is fundamentally the trade of resources for risk. A contract is an agreement between an insurance provider and a counterparty to pay an agreed amount in response to an agreed risk or a predetermined loss. By buying insurance, we can pass risk and the cost of loss to the insurer– at a price. Because insurance providers will only operate if they expect to make a profit, the price for insurance, at any point in time, exceeds or is just equal to the expected value of any payout we are likely to get. As a result, we typically only buy contracts for those risks that we cannot afford to bear at once, like being sick or losing our homes to floods or fires. Meanwhile, insurers lower their risk by offering contracts simultaneously to many counterparties, because people are likely to pay their premiums together but are unlikely to be affected by losses at the same time.

In short, we cannot reduce the risk of many hazards, since we cannot control hurricanes or earthquakes. But we can dramatically reduce the losses inflicted by a large number of such hazards. We can reduce losses in two ways: first, by investing in resilience (e.g. investments in flood defences, earthquake-resilient buildings, irrigation to reduce reliance on rainfall); and second, by acting quickly and effectively in the event of a hazard (for example, to prevent a drought from becoming a famine, or a disease outbreak from becoming an epidemic). And insurance contracts can help to ensure that money is provided when and where it is needed, and not caught up in the collective action problems and geopolitics of donors…

3. Responsible Investing: commitment to decarbonize from the largest institutional investor to date
In an attempt to help fight global warming, one of Sweden’s largest pension funds has made the biggest single commitment to low carbon investing by an institutional investor. Chris Flood reports in the Financial Times about the Fourth Swedish National Pension Fund, known as AP4, which has $35 billion in assets under management: 

"[The] pension scheme intends to “decarbonise” its $14.7bn global equity portfolio by 2020. That means it will drastically cut exposure to companies that pollute with fossil fuels and increase allocations to those with low carbon emissions.

The move comes on the back of growing pressure on institutional investors to protect their portfolios from the risks of global warming and climate change…

Mats Andersson, the chief executive of AP4, who has just stepped down from the fund after 10 years, said: “We hope this initiative will help take low carbon investing further into the mainstream.”

…The expectation is that efforts to reduce global temperatures will result in some fossil fuel companies becoming “stranded”, where large writedowns or devaluations make assets worthless.

Pia Axelsson, a spokesperson for AP4, said greenhouse gases that cause global warming would be priced differently in the future. “Companies with lower emissions than their competitors will enjoy a financial advantage and deliver better performance,” she said.”

4. Wildcard Topic: “Hillbilly Elegy” and the condescension of poor white Americans
In the American Conservative, Rod Dreher interviews J.D. Vance, author of the new nonfiction book Hillbilly Elegy: A Memoir of a Family and a Culture in Crisis. Vance, a Yale Law School graduate, “grew up in the poverty and chaos of an Appalachian clan”, and Dreher claims that “Hillbilly Elegy is the most important book of 2016. You cannot understand what’s happening now without first reading J.D. Vance. His book does for poor white people what Ta-Nehisi Coates’s book did for poor black people: give them voice and presence in the public square.”
Here is part of Vance’s reply to Dreher’s question about the “barely-banked visceral contempt that East Coast, professional-class urbanite white people have for poor rural white people in the South” (N.B.: I just rearranged Dreher’s words to concisely fit that sentence):

“…humans appear to have some need to look down on someone; there’s just a basic tribalistic impulse in all of us.  And if you’re an elite white professional, working class whites are an easy target: you don’t have to feel guilty for being a racist or a xenophobe.  By looking down on the hillbilly, you can get that high of self-righteousness and superiority without violating any of the moral norms of your own tribe.  So your own prejudice is never revealed for what it is.
A lot of it is pure disconnect–many elites just don’t know a member of the white working class. A professor once told me that Yale Law shouldn’t accept students who attended state universities for their undergraduate studies.  (A bit of background: Yale Law takes well over half of its student body from very elite private schools.)  “We don’t do remedial education here,” he said.  Keep in mind that this guy was very progressive and cared a lot about income inequality and opportunity.  But he just didn’t realize that for a kid like me, Ohio State was my only chance–the one opportunity I had to do well in a good school.  If you removed that path from my life, there was nothing else to give me a shot at Yale.  When I explained that to him, he was actually really receptive.  He may have even changed his mind.
What does it mean for our politics?  To me, this condescension is a big part of Trump’s appeal.  He’s the one politician who actively fights elite sensibilities, whether they’re good or bad.  I remember when Hillary Clinton casually talked about putting coal miners out of work, or when Obama years ago discussed working class whites clinging to their guns and religion.  Each time someone talks like this, I’m reminded of Mamaw’s feeling that hillbillies are the one group you don’t have to be ashamed to look down upon.  The people back home carry that condescension like a badge of honor, but it also hurts, and they’ve been looking for someone for a while who will declare war on the condescenders.  If nothing else, Trump does that.  

5. Items of Note

6. Job Postings

7. Upcoming Events
Sept 6-8  PRI in Person (Singapore) Responsible Investing
Sept 8 Best for The World Gathering (Berkeley, CA)
Sept 13-16  SOCAP (SF) Impact Investing
Sept 19 Financial Advisor - Inside Alternatives Conference (Denver, CO) Impact, Responsible Investing
Sept 26-28 Exponent Philanthropy Conference (Chicago) Effective Philanthropy
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
Oct 18-20 Conscious Capitalism CEO Summit (Austin, TX) Responsible Investing
Oct 20-22 PopTech: Culture Clash (Camden, Maine)
Oct 27-28 Feedback Labs 2nd Annual Feedback Summit (DC) Effective Philanthropy
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 dog who knows how to execute a perfect dive into a pool on a hot summer day).

Until next time, thanks for reading!

Brian Walsh
Head of Impact at LiquidnetFull Bio.