All Things Impact.

private capital & the public good

All Things Impact for Feb 10: Proof that Managing for the Long Term Pays Off; Impact in the Era of Trump; Scrutiny of Big Philanthropy; Lessons on Surviving a Populist

Brian WalshComment

Hi friends,

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

1. Responsible investing: Finally, Proof That Managing for the Long Term Pays Off
New research by McKinsey Global Institute and FCLT Global found that companies that operate with a true long-term mindset have consistently outperformed their industry peers since 2001 across almost every financial measure that matters.

As reported in the Harvard Business Review, "Companies deliver superior results when executives manage for long-term value creation and resist pressure from analysts and investors to focus excessively on meeting Wall Street’s quarterly earnings expectations. This has long seemed intuitively true to us...And yet we have not had the comprehensive data needed to quantify the payoff from managing for the long term — until now."

"The differences were dramatic. Among the firms we identified as focused on the long term, average revenue and earnings growth were 47% and 36% higher, respectively, by 2014, and market capitalization grew faster as well. The returns to society and the overall economy were equally impressive. By our measures, companies that were managed for the long term added nearly 12,000 more jobs on average than their peers from 2001 to 2015. We calculate that U.S. GDP over the past decade might well have grown by an additional $1 trillion if the whole economy had performed at the level our long-term stalwarts delivered — and generated more than five million additional jobs over this period...

The key message from this research is not only that the rewards from managing for the long term are enormous; it’s also that, despite strong countervailing pressures, real change is possible. The proof lies in a small but significant subset of our long-term outperformers — 14%, to be precise — that didn’t start out in that category. Initially, these companies scored on the short-term end of our index. But over the course of the 15-year period we measured, leaders at the companies in this cohort managed to shift their corporations’ behavior sufficiently to move into the long-term category."

2. Impact Investing: 10 years after the term "Impact Investing" was coined, does it even matter in the era of Trump? 
Antony Bugg-Levine, CEO of the Nonprofit Finance Fund (and convener of a group of people who coined the term "impact investing" back in 2007), recently asked of his connections on LinkedIn: “Given what is happening around us, I’m wondering myself why making impact investments is the best social contribution we can make with our professional skills and time? How would the impact investors reading this answer that?”

His question received thousands of views and plenty of comments. He then wrote a thoughtful response on ImpactAlpha:  "The takeaway: Yes, more than ever."

He goes on:

"There has always been hate and fear of the other that shows up as racism, sexism, and xenophobia. But the Trump and Brexit forces tapped into a sense of hopelessness and an anger over the selfishness that has fueled growing inequality. In the long-term, we need to provide hope and a new narrative of common purpose.
Impact investing can do both. When we coined the term in 2007, we intentionally embraced its dual meaning. We saw that impact investments could both:
1.     Unlock capital for impact
2.     Impact the investing system
...And when all of us make the case that investors can and should consider the social impact of their investments and not just the financial return, we offer an alternative to the narrative of selfishness that says we should only use investments to secure our own interests.
There is a real danger that impact investing will only makes rich people feel good about their unequal share of wealth. But if we do it well, and remember our purpose, then we will bolster the forces allayed against selfishness who argue that we should consider how our investments, along with all our actions, impact others.
For now, you’ll still find me at the march carrying my poster or on hold with my Senator’s office when necessary. But then I’ll be back at the office, privileged to know that our work matters.
Because in the long term, impact investors can provide hope and counter selfishness and by doing so chip away at the edges of the hopelessness and hate that is taking all of us to the brink."


3. Effective Philanthropy: Big Philanthropists Increasingly Face Scrutiny and Criticism
Writing in the Chronicle of Philanthropy, Drew Lindsay writes about how, in a time of rising income inequality rivaling the Gilded Age, some big philanthropic gifts are being viewed "through a new, more skeptical prism." He asks, "is that charity easing inequality or exacerbating it?"

"By and large, big philanthropists are feted as heroes, even saints. But lately it seems like there’s always someone eager to challenge their motives or question their priorities, often in venomous terms. The debate is about more than whether gifts to wealthy institutions like Stanford fritter away philanthropic dollars and, via the charitable deduction, rob government of dollars that might do good in society broadly. Critics also charge that philanthropists are using their gifts to get their way in public policy and civic affairs...
To some, big philanthropists today represent the same threat to democracy that Mr. Carnegie and Mr. Rockefeller posed. Their gifts give them power to bypass democratic channels and impose their policy ideas, critics worry — and that power, they say, is earned not through the merits of their ideas but through the force of their cash.
Today’s generation of philanthropists is certainly moving fast and using big dollars to encourage change through government. About two-thirds of Giving Pledge signers, who have promised to devote at least half their fortunes to philanthropy, are committed to policy work, according to research by Duke University political scientist Kristin Goss. Mr. Zuckerberg and Ms. Chan recently hired former top campaign aides to Presidents Obama and George W. Bush to guide their policy and advocacy efforts..

[T]he critique extends beyond a few individuals to big philanthropists as a class. "There’s simply too much power in one group of givers," says Mr. Collins, of the Institute for Policy Studies. Its "Gilded Giving" study showed a growing imbalance in philanthropy, with gifts from the rich soaring and donations from middle- and lower-income households dwindling...
Others will argue that aggressive, activist big philanthropy is exactly what’s needed now. Government is weak, if not inept, they contend, and private money can be used to experiment and take risks.
"Thank God for folks like the Gates Foundation," says David Salomon, a New York investment adviser and philanthropist...Big donors like the Gateses, he says, are often successful people who are smart, creative, and innovative. "We’d be blessed to have as many people like that helping with the country’s problems as we can," he says.

4. Wildcard: "In Venezuela, we couldn’t stop Chávez. Don’t make the same mistakes we did."
Writing in The Washington Post, Andrés Miguel Rondón offers advice to Americans on how to deal with Trump, based on his experience living under the populist Venezuelan leader Hugo Chavez:

"The recipe for populism is universal. Find a wound common to many, find someone to blame for it, and make up a good story to tell. Mix it all together. Tell the wounded you know how they feel. That you found the bad guys. Label them: the minorities, the politicians, the businessmen. Caricature them. As vermin, evil masterminds, haters and losers, you name it. Then paint yourself as the savior. Capture the people’s imagination. Forget about policies and plans, just enrapture them with a tale. One that starts with anger and ends in vengeance. A vengeance they can participate in.
That’s how it becomes a movement. There’s something soothing in all that anger. Populism is built on the irresistible allure of simplicity. The narcotic of the simple answer to an intractable question. The problem is now made simple.
The problem is you...
  • Don’t forget who the enemy is.
Populism can survive only amid polarization. It works through the unending vilification of a cartoonish enemy. Never forget that you’re that enemy. Trump needs you to be the enemy, just like all religions need a demon. A scapegoat. “But facts!” you’ll say, missing the point entirely.
What makes you the enemy? It’s very simple to a populist: If you’re not a victim, you’re a culprit.
  • Show no contempt.
Don’t feed polarization, disarm it. This means leaving the theater of injured decency behind...
The worst you can do is bundle moderates and extremists together and think that America is divided between racists and liberals. That’s the textbook definition of polarization. We thought our country was split between treacherous oligarchs and Chávez’s uneducated, gullible base. The only one who benefited was Chávez.
  • Don’t try to force him out.
The people on the other side — and crucially, independents — will rebel against you if you look like you’re losing your mind. You will have proved yourself to be the very thing you’re claiming to be fighting against: an enemy of democracy. And all the while you’re giving the populist and his followers enough rhetorical fuel to rightly call you a saboteur, an unpatriotic schemer, for years to come.
  • Find a counterargument. (No, not the one you think.)
Don’t waste your time trying to prove that this grand idea is better than that one. Ditch all the big words. The problem, remember, is not the message but the messenger. It’s not that Trump supporters are too stupid to see right from wrong, it’s that you’re more valuable to them as an enemy than as a compatriot. Your challenge is to prove that you belong in the same tribe as them — that you are American in exactly the same way they are...

Recognize that you’re the enemy Trump requires. Show concern, not contempt, for the wounds of those who brought him to power. By all means, be patient with democracy and struggle relentlessly to free yourself from the shackles of the caricature the populists have drawn of you.
It’s a tall order. But the alternative is worse. Trust me.

5. Items of Note

7. Job Postings

8. Upcoming Events
Feb 15 The Economist: Mainstreaming Purpose-Driven Finance (NYC) Impact Investing
Feb 24 Yale Philanthropy Conference (New Haven, CT) Effective Philanthropy
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
May 9-10 Shared Value Summit (NYC) CSR
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR

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 these dogs wagging their tails in unison).

Until next time, thanks for reading!