All Things Impact.

private capital & the public good

All Things Impact for September 30: business norms, advice to presidential candidates, measuring impact and how finance is ruining America

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: evolving business norms & the conscientious corporate manager
As a former Dean of Stanford Law and former President of the William and Flora Hewlett Foundation, Paul Brest has thought a lot about the law, philanthropy, and investing. He has a new post on the History of Philanthropy website where he attempts to reconcile “Corporate Social Responsibility” with profitability.

“As the late U.S. Supreme Court Justice Potter Stewart once remarked, “Ethics is knowing the difference between what you have a right to do and what is right to do.” But what sources does a corporate manager have for determining what’s right to do?
Business and public social norms can provide valuable guidance for corporate managers considering tradeoffs among a firm’s stakeholders…
Norms of business practice can also evolve over time. Although business norms are often vague and conflicting, sometimes they have developed to a point where they can provide reasonably good guidance. For example, voluntary codes in the apparel industry reflect an evolving consensus about acceptable standards for workplace safety and workers’ wages and hours in factories in developing countries. They provide a useful reference point for the managers of U.S. or multinational companies considering what requirements to impose on manufacturers in their supply chain.
Norms are a starting point, but exclusive reliance on existing attitudes and practices may give too much weight to the status quo and, indeed, inhibit the evolution of norms. There is no reason to assume, a priori, that adherence to norms exhausts the moral responsibilities of corporations and their managers. In any event, the evolution of norms often requires a first mover who takes a step beyond the comfort zone of existing practices.
Therefore, I propose that managers should accord shared norms a defeasible presumption of validity, but also give weight to their own moral values, deliberating and inviting the opinions of people with diverse views on the matter, including “devil’s advocates,” before coming to a decision.
For those concerned that corporate managers will follow their own idiosyncratic views at the expense of shareholder value, it should be noted that most managers tend to hold conventional moral views and have self-interested incentives not to stray too far from shareholders’ economic interests. If managers do stray, unhappy investors can countermand the decision through a shareholder resolution.”

2. Impact Investing: an open letter to the 2016 presidential candidates
Writing in ImpactAlpha, Fran Seegull and Nancy Pfund make the case that Hillary Clinton and Donald Trump should focus on the “Impact Economy": 

“What if we could create good jobs, educate our kids, fix our electrical grids and sewers and roads, address climate change, and in so doing all of that, we could also jet-propel the economy, too? What if we could develop powerful new technologies that fuel prosperity here at home and then go on to share that innovation and prosperity with the rest of the world?
What if private capital could be mobilized to tackle urgent challenges for which public and philanthropic capital isn’t enough? And what if that effort could produce impressive financial returns as well?
Sound good? It’s called The Impact Economy, and it’s already happening. Private capital invested for public good. Billions and potentially trillions of dollars of values-aligned capital driving demonstrable social and environmental progress—and not just to do good, but also because it’s good business.
Impact investing is a growing movement across industries, geographies, communities, races and classes seeking to create an economy that works for all. Bit by bit, the capital markets are beginning to reorient themselves toward a more holistic definition of value—one that rests on the creation of long-term value, rather than short-termism.
Impact investing is already improving the economy, energizing communities, and healing the planet — delivering strong financial returns while creating a world we’re proud to pass onto our children and grandchildren. It is an inclusive financial movement, promoting diversity across gender, race, income and geography.
Impact unicorns are succeeding because of their positive social and environmental impact, not in spite of it.
Who’s doing it? Institutional investors (such as pension and sovereign wealth funds and university and foundation endowments) and individual investors (from billionaires to 401k holders) seeking positive social and environmental impact, as well as compelling financial returns. Firms like Goldman Sachs, JPMorgan Chase, Merrill Lynch and Morgan Stanley are hearing the drumbeat and launching products to meet client demand. And asset managers like Blackrock and Bain Capital are looking for growth prospects by investing in public companies and private businesses in positive-impact areas like agriculture, food, energy, water, healthcare, education and financial inclusion.
Pension funds with 50-year investment horizons must account for long-term risks as part of their investment process.”

3. Effective Philanthropy: why measure impact?
As Marc Gunther points out in Nonprofit Chronicles, the one thing that unifies the sheer diversity of nonprofit organizations is the need to fundraise (“Harvard, Greenpeace, CARE, your local food pantry and a community orchestra have nothing in common —except the need to raise money”). Even so, Marc was disheartened to discover that the first-ever conference hosted by The Chronicle of Philanthropy was mostly about how nonprofits could fundraise more effectively, not necessarily be more effective:

“The tagline was: Measuring Impact, Inspiring Donors. I came hoping to learn about measuring impact, but the nonprofit executives in the room seemed more interested in inspiring donors. Again, that shouldn’t have been surprising; many, perhaps most, were development executives.
Indeed, by the time we had digested lunch, the group had spent an hour or so digging deep into a critique of fundraising appeals; there was talk of audience segmentation, brand congruence, whether direct mail should be kept to a single page, even the need to get familiar with virtual reality as a “leapfrog to empathy connection,” whatever that means.
  A cynic might conclude that the only reason why nonprofits want to “measure impact” is to “inspire donors.”
That’s not so. An increasing number of nonprofits track their impact because they want to improve their performance. Dozens have embarked on systematic efforts to develop feedback loops, listening carefully to the people they serve, and then using what they learn to become more effective…
This isn’t meant as a critique of the people at the Chronicle. They know their audience. It may well be that fundraising is the only topic likely to interest a few hundred assorted nonprofit execs at a conference, or the thousands more who read newspapers, magazines or websites about the social sector. And, of course, without fundraising, there would be neither programs nor impact.
But I worry that events like Philanthropy NEXT reflect the fact that people in charge of nonprofits spend too much time thinking about donors and not enough time thinking about how they are serving their purpose. I certainly hope that I’m wrong about that.”

4. Wildcard topic: “Finance Is Ruining America”
Writing in The Atlantic, Alana Semuels uses economic disparities in Fairfield Connecticut to explore how the finance industry has exasperated economic inequality in the US:

“Few places in the country illustrate the divide between the haves and the have-nots more than the county of Fairfield, Connecticut. Drive around the city of Bridgeport and, amid the tracts of middle-class homes, you’ll see burned-out houses, empty factories, and abandoned buildings that line the main street. Nearby, in the wealthier part of the county, there are towns of mansions with leafy grounds, swimming pools, and big iron gates.
Bridgeport, an old manufacturing town all but abandoned by industry, and Greenwich, a headquarters to hedge funds and billionaires, may be in the same county, and a few exits apart from each other on I-95, but their residents live in different worlds. The average income of the top 1 percent of people in the Bridgeport-Stamford-Norwalk metropolitan area, which consists of all of Fairfield County plus a few towns in neighboring New Haven County, is $6 million dollars—73 times the average of the bottom 99 percent—according to a report released by the Economic Policy Institute (EPI) in June. This makes the area one of the most unequal in the country; nationally, the top 1 percent makes 25 times more than the average of the bottom 99 percent….
But the fact that finance is making a few people very rich is not particularly revealing. More critical is what finance is doing to everyone else—or, more to the point, what it isn’t doing: providing good middle-class jobs. As Time’s assistant managing editor Rana Foroohar describes in her book Makers and Takers: The Rise of Finance and the Fall of American Business, financiers in recent decades have made their money by focusing more on wealth creation through manipulating and timing markets rather than by lending and creating. Investors, asset managers, traders, and others have figured out how to craft financial products that can make money but that do not result in jobs or businesses, she argues.
“The business of America isn’t business anymore, it’s finance,” Foroohar writes.
This means that as the financial professionals of Fairfield County saw their compensation rise, there was little spillover benefit for anyone else…
According to a study from the Roosevelt Institute, every dollar of earnings or borrowing used to be associated with a 40-cent increase in investment. Since the 1980s, though, less than 10 cents of each earned or borrowed dollar is invested. This means fewer jobs created and more money winding up as shareholders’ profits. 
Part of the problem is that trying to achieve incredible returns for those at the top can motivate companies to make changes in the way they run their business, such that they employ fewer people.”

5. Items of Note

6. Job Postings

  • Echoing Green is seeking a Vice President of Finance and Administration (NYC)
  • Medtronic is hiring a Sr Philanthropy Portfolio Lead - Social Business/Impact Investing (Minneapolis)
  • The Hewlett Foundation is seeking an Organizational Learning Officer for their Effective Philanthropy Group (Menlo Park, CA)
  • ClearBridge Investments is hiring an ESG equity research analyst (NYC)
  • Rockefeller Foundation is hiring a Program Associate in their Innovative Finance team (NYC)

7. Upcoming Events
Oct 5-6 Bloomberg Sustainable Business Summit (NYC) Responsible Investing
Oct 10-12 SXSW Eco (Austin, TX) Impact Investing
Oct 9-14  Opportunity Collaboration  (Cancun Yucatan) Impact Investing
Oct 17-18: African Philanthropy Forum (Rabat, Morocco) Philanthropy
Oct 18  High Water Women (NYC) Impact Investing
Oct 18-19 Commit! Forum (NYC) Responsible 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, 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 these bunnies in cups). 

Until next time, thanks for reading!

Brian Walsh
Head of Impact at LiquidnetFull Bio.