All Things Impact.

private capital & the public good

All Things Impact for September 23: $90 trillion needed for green finance, impact unicorns, $3 billion for science, and "I used to be a human being"

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: Republican makes case for “Green Finance” to combat climate change
George W. Bush’s Treasury Secretary Hank Paulson argues in the New York Times that “there is no question that the world needs to ramp up its transition to a low-carbon, environmentally sustainable and resilient economy, and to do so rapidly.” The United Nations estimates that the world will need to mobilize $90 trillion in public and private capital over the next 15 years to combat climate change (to provide context, global gross domestic product in 2015 was $73 trillion).

As Paulson points out: “The question is, how do we pay for it, given the limited availability of government funding, particularly in developing countries? The answer: private financing."

"The good news is that there is a global abundance of private capital. To unlock these riches, governments must create conditions that encourage private investment in clean technologies and sustainable development. With smart, well-designed and coordinated policies, financing models and instruments like bonds and incentive programs, countries have the potential to solve some of the planet’s most pressing environmental challenges while still maintaining economic growth…
There have been successful experiments in green finance. The global green bond market is growing rapidly — to $41.8 billion in 2015 from $11 billion in 2013. Moreover, innovative financing solutions are being used around the world — private firms in Mexico and India are financing private wind parks; multinational trust funds are supporting solar plants in India, South Africa and Morocco. A new universe of financial instruments and policies are lowering the cost of capital for green growth.
The challenge now is to build on these successes and ensure that green finance mechanisms are widely adopted so that capital markets can allocate financing to low-carbon sectors of the economy that have the potential to generate growth and jobs.
For this to happen, countries will need to adopt policies that reduce the price of low-carbon investments to make them more attractive for private investors. These policies include environmental regulations to stimulate clean, sustainable development; incentives and subsidies for clean energy investments; and the pricing of carbon emissions, which can be done in a variety of ways, including emissions trading and taxes. We also need to eliminate subsidies that encourage the use and extraction of carbon-based energy like coal and oil. Such policies will take strong political will, especially as economic growth is slowing…"

2. Impact Investing: Beyond Tradeoffs: The Rise of the Impact Unicorns

The always insightful Fran Seegull (who recently announced she is stepping down as the Chief Investment Officer for ImpactAssets to become the inaugural Executive Director of the new U.S. Impact Investing Alliance) writes in ImpactAlpha about the “impact unicorn - a company that is positioned to achieve a market rate of financial return AND high levels of impact.”

"Impact unicorns achieve strong financial returns because of, not in spite of, their impact theses. Population growth, income inequality, climate change and other social and environmental factors are shaping our world. The private sector has a major role to play (and returns to make) in ameliorating these intractable challenges by investing in ventures that are consistent with our values.
The impact investing field has often used the Monitor Institute framework of “impact first” and “financial first” to categorize the investment orientation of companies and funds. While a bit reductive, this framework has persisted since its introduction in 2009. According to it, investments that seek to maximize impact with a financial floor are called “impact first.” Those that seek to maximize financial impact with an impact floor are deemed “financial first.” Implied by this framework is a tradeoff between financial and impact returns…
Impact investments may fit in a 2×2 matrix. Impact first and financial first are in the upper left and lower right quadrants, implying a tradeoff. In the lower left quadrant, we have deals with suboptimal financial and impact returns—an investor wouldn’t make these types of investments. In the upper right quadrant, we have those investments that achieve risk-adjusted rates of financial returns and strong social and environmental impact. These are the “Impact Unicorns.”…
The truth is that many times as investors we can’t have our cake and eat it too. There may be some investments focused on high impact geographies (emerging and frontier markets), certain investment stages (seed- and early-stage entrepreneurs in the “Pioneer Gap”) and specific constituencies (folks at the bottom of the pyramid) that require a tradeoff in financial returns. Maybe these impact enterprises need grant capital at inception or perhaps they require concessionary funding to de-risk them to a point where more commercial rate capital can be attracted.
Of course, impact unicorn enterprises aren’t unequivocally better than, say, impact first ventures. But they do indeed fly in the face of the financial tradeoff debate.”

3. Effective Philanthropy: Chan Zuckerberg Initiative's $3 billion bet on science
The U.S. National Institutes of Health (NIH) spends over $30 billion a year, just over half of it going to basic research in the biomedical sciences. The Wellcome Trust in the UK – the world's biggest medical research charity – will spend $6.5 billion over the next five years. But Mark Zuckerberg and Priscilla Chan’s commitment of $3 billion over the next 10 years towards funding basic research, announced this past week, is still big news.
As David Baltimore, a Nobel Prize winner and professor at the California Institute of Technology, explains in an editorial in Science about the announcement:

“Philanthropists have long supported academic science, from endowing faculty positions to establishing new research centers. During the 20th century, their financing complemented the steady federal support that U.S. research and development (R&D) enjoyed, particularly in basic science. Regrettably, such government funding turned stagnant in the 21st century. Federal support of R&D at higher education institutions has fallen over 11% since 2011, the longest multiyear decline in federal funding for academic R&D since data collection began in 1972. What does this mean for achieving breakthrough discoveries in science?
To solve some of our greatest societal problems, we not only need to focus on basic science research—we also need sufficient resources and new approaches. Basic research allows innovative thinkers in science and engineering to work toward ambitious and important goals, including in biomedicine. This was certainly the case in cancer research, where substantial progress was made once scientists had gained sufficient understanding of gene structure and function to support translational thinking and convert basic findings into cures. However, without adequate resources, great visions cannot be fulfilled. Although private funding cannot match the scale of government funding (the U.S. National Institutes of Health alone is allocated $30 billion per year), it can help fill gaps. Most importantly, it can initiate research thrusts into unproven directions, which generally do not draw government funding.
New approaches are also required. Chan and Zuckerberg will direct their first science-focused investment to establish a “Biohub” that marries engineering and life sciences research from multiple institutions. Based in San Francisco’s Mission Bay, this hub will draw on the talented scientists and engineers from the University of California at Berkeley and at San Francisco, and Stanford University. Its proximity to the technologists of Silicon Valley is an asset as well. Future scientific advances likely will be at the interface of different disciplines—a “convergence” that requires breaking down barriers between fields. This is exactly what Biohub is planning. Such cross-disciplinary, open, and collaborative research also has been envisioned by other philanthropists…”

4. Wildcard Topic: "I used to be a human being"
Former prolific blogger Andrew Sullivan writes a passionate essay in New York Magazine about his efforts to overcome his "manic information addition":  

“For a decade and a half, I’d been a web obsessive, publishing blog posts multiple times a day, seven days a week, and ultimately corralling a team that curated the web every 20 minutes during peak hours. Each morning began with a full immersion in the stream of internet consciousness and news, jumping from site to site, tweet to tweet, breaking news story to hottest take, scanning countless images and videos, catching up with multiple memes…
I was, in other words, a very early adopter of what we might now call living-in-the-web. And as the years went by, I realized I was no longer alone. Facebook soon gave everyone the equivalent of their own blog and their own audience. More and more people got a smartphone — connecting them instantly to a deluge of febrile content, forcing them to cull and absorb and assimilate the online torrent as relentlessly as I had once. Twitter emerged as a form of instant blogging of microthoughts. Users were as addicted to the feedback as I had long been — and even more prolific. Then the apps descended, like the rain, to inundate what was left of our free time. It was ubiquitous now, this virtual living, this never-stopping, this always-updating…
Just look around you — at the people crouched over their phones as they walk the streets, or drive their cars, or walk their dogs, or play with their children. Observe yourself in line for coffee, or in a quick work break, or driving, or even just going to the bathroom. Visit an airport and see the sea of craned necks and dead eyes. We have gone from looking up and around to constantly looking down.
If an alien had visited America just five years ago, then returned today, wouldn’t this be its immediate observation? That this species has developed an extraordinary new habit — and, everywhere you look, lives constantly in its thrall?
…the family that is eating together while simultaneously on their phones is not actually together. They are, in Turkle’s formulation, “alone together.” You are where your attention is… Truly being with another person means being experientially with them, picking up countless tiny signals from the eyes and voice and body language and context, and reacting, often unconsciously, to every nuance. These are our deepest social skills, which have been honed through the aeons. They are what make us distinctively human…
There are books to be read; landscapes to be walked; friends to be with; life to be fully lived. And I realize that this is, in some ways, just another tale in the vast book of human frailty. But this new epidemic of distraction is our civilization’s specific weakness. And its threat is not so much to our minds, even as they shape-shift under the pressure. The threat is to our souls. At this rate, if the noise does not relent, we might even forget we have any.”

5. Items of Note

6. Job Postings

7. Upcoming Events
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 17-18: African Philanthropy Forum (Rabat, Morocco) Effective Philanthropy
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 24-26 Impact Convergence (Atlanta, GA) Impact Investing, Effective Philanthropy
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
April 7, 2017 Wharton Social Impact Conference (Philadelphia) 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 like this mother cat who adopted orphaned squirrels). 

Until next time, thanks for reading!

Brian Walsh
Head of Impact at LiquidnetFull Bio.