Magical Thinking at Intersection of Commerce and Positive Social Change

Laura Callanan, currently of the Institute of Business and Social Impact at Berkeley, and one of the most thoughtful and experienced folks working in the impact investing field, has crafted a great piece warning of the magical thinking that so many people use when working at the intersection of commerce and positive social change.

https://businesssocialimpact.wordpress.com/2013/11/25/social-innovation-with-our-eyes-wide-open/

We all know the shortcomings of public and corporate silos and intuitively understand that weaving together the best elements of each in the form of "innovative hybrids" like social impact bonds and impact investing is necessary to address some of the complex problems facing the world.

But I agree with Laura that we need to create structures that really work rather than just assuming that somehow magic will happen when we pull together commerce and social change.

The Ministry of Nudges - Behavioral Economics and Public Policy

http://www.nytimes.com/2013/12/08/business/international/britains-ministry-of-nudges.html?smid=pl-share

I Don't Do Maths - Ha-Joon Chang

http://www.ft.com/intl/cms/s/2/27a2027e-5698-11e3-8cca-00144feabdc0.html#axzz2mvbLQVfZ

Gucci to the rescue: Has philanthropy become just another luxury product?

I typically read the FT's "How To Spend It" weekend supplement as a naughty voyeuristic pleasure - a chance to look at the lives of the watch-wearing, jewelry-toting caste through the ironic yet somehow respectful tone that the FT brings to such topics.  

I was then very surprised to read an intriguing article this weekend by the FT's Fashion writer, Vanessa Friedman, outlining Gucci's launch of Chime for Change, a "global campaign to raise funds and awareness for girls' and women's empowerment." 

http://howtospendit.ft.com/philanthropy/42573-cause-for-thought

Gucci created Chime for Change to bring its consumers to a crowdsourcing platform called Catapult where they can select pre-vetted NGOs - all of this occurs in a highly branded setting.   Chime for Change is a trademark of Gucci.  This is not your aunt's CSR initiative.  

Friedman succinctly summed up the challenges facing Chime for Change and Gucci as "the contemporary conundrum of how to navigate between an industry based on indulgence, the imperative to demonstrate commitment beyond the creative, and the concerns about profiteering do-goodism that may follow."

Chime for Change has raised $4 million from a high-profile concert (Madonna, Gloria Steinem, etc.) in the UK this summer.  The concert was underwritten by Gucci and attendees could donate the cost of their ticket to an NGO of their choice on Catapult.  Chime is also raising money for specific projects on its site.  

My fellow impact investment colleague Margot Brandenburg, a fellow at the Nathan Cummings Foundation, was quoted on the challenges of branded movements: “The truth is, for the price of one luxury handbag, you can easily give food and water to a family in a challenged area for a year.  A ‘branded’ movement makes facing that reality unavoidable – which can create a lot of discomfort for a consumer. On the other hand, it also lays bare the contradictions we all live with every day.” 

I'm not sure what I should think about this:  

Is philanthropy becoming just another luxury product manufactured for those who already have to feel better about getting more?  

OR

Can corporate brands serve as powerful vehicles for positive change in the world when other institutions are not?

I guess time will tell. 

Morgan Stanley announces major impact investing initiative

Morgan Stanley has launched a new sustainable investing initiative.  As several of the major financial institutions (re)enter the impact investing arena, I hope they can bring new capital to address important issues even though their existing client platforms have not been able to move the products through their traditional channels.  

http://www.bloomberg.com/news/2013-11-21/big-investors-and-the-young-nudge-morgan-stanley-toward-sustainable-investing.html#disqus_thread

Toniic's New Early Stage Impact Investing eGuide is a real roadmap

I read Toniic's new eGuide to Early Stage Impact Investing yesterday and was happy to see that it is full of helpful and specific information about how to do this very important work.  In contrast to some impact investing guides which operate at an more poetic level, this guide is really wired to answer very concrete questions and describes a clear process from theory of change to evaluation.

It focuses on early stage investing, but the framework is applicable to all impact investing.

http://www.toniic.com/toniic-institute/early-stage-e-guide/

White House Update on Pay for Success

Jonathan Greenblatt's recent post from the White House's Center for Social Innovation and Civic Participation is a good summary of the federal government's current approach to pay for success (PFS) aka social impact bonds.  The relatively slow rollout of PFS also highlights the challenges of leading from the top for an instrument which is typically built on local service provision.

Building a Smarter, More Efficient Government through “Pay for Success” | The White House

Is Coal the New Tobacco for Shareholder Engagement?

The divestment movement among shareholders is now targeting fossil fuels as a new category of (environmental) sin stocks.  Although climate change legislation seems dead in the water, a new movement is calling for institutional investors to divest from fossil fuels.  As the proverbial long-term investors, pension funds and endowments are increasingly moving away from dirty fuels - not an easy thing to do within traditional asset allocation models.

http://www.bloomberg.com/news/2013-11-20/coal-seen-as-new-tobacco-sparking-investor-backlash-commodities.html

New Entrants Coming to the Social Impact Bond Market

Jessica Toonkel from Reuters outlines the latest news from the SIB market as new players and transactions begin to compete with Goldman Sachs in this new sector.  

http://www.chicagotribune.com/business/sns-rt-us-goldman-social-impact-bond-analysis-20131112,0,5959128.story?page=1

Corporate Lemonade Stands and Corporate Structure

http://dealbook.nytimes.com/2013/11/12/in-a-lemonade-stand-a-transformation-of-the-corporation/?smid=pl-share

NASDAQ for Nonprofits

How can nonprofits most efficiently raise capital?  This ongoing debate continues as the NYT mixes aggregating capital for non-profits with pay for success financings.  

http://dealbook.nytimes.com/2013/11/11/plan-to-finance-philanthropy-shows-the-power-of-a-simple-question/?smid=pl-share

What happens to certification programs when large corporations and suppliers are on different sides of the issue.

http://www.nytimes.com/2013/10/22/business/salmon-fishermen-battle-walmart-on-certification.html?smid=pl-share

The Economics of Rubbish

http://www.economist.com/news/international/21588889-one-mans-waste-anothers-livelihood-mucking

The Dance of NGOs and Corporations

http://www.economist.com/news/business/21588853-charities-are-irritating-often-help-companies-do-right-thing-butterfly-effect

Bill Gates and the Importance of Boring Details

http://www.ft.com/intl/cms/s/2/dacd1f84-41bf-11e3-b064-00144feabdc0.html

Forbes Interview with World Economic Forum Impact Investing Report Authors

http://www.forbes.com/sites/devinthorpe/2013/09/24/report-authors-share-impact-investing-highlights-live/

Ben Thornley on Mainstreaming Impact Investing

http://www.huffingtonpost.com/ben-thornley/the-question-of-mainstrea_b_3949731.html

As part of SOCAP, the Federal Reserve of San Francisco hosted a series of sessions on building health-related impact investing products and partnerships. A great resource for those interested in this massive sector.

http://www.frbsf.org/community-development/events/2013/september/socap-social-capital-markets-health/videos/

Interesting New Impact Investing Report from the World Economic Forum.

http://reports.weforum.org/impact-investment/

Impact Investing 2.0 -- What $3 Billion Tells Us About the Next $300 Billion

http://www.huffingtonpost.com/cathy-clark/impact-investing_b_3850296.html

A Nice Summary of Events at SOCAP

Recognition of the Viability of Social Impact Investment and Business Models Shows Signs of Global Critical Mass as Social Enterprise Community Heads to SOCAP13 – Press Releases on CSRwire.com

Interesting Impact Investing Platform for Solar

http://www.nytimes.com/2013/09/03/business/energy-environment/a-firm-that-aims-to-match-environmental-values-with-financial-value.html?smid=pl-share

Is the Tragedy of the Commons Really a Tragedy?

The FT's Tim Harford highlights two sides of a very important academic debate on how we can address environmental issues.  He compares Garrett Hardin's 1958 "Tragedy of the Commons" approach to Lin Ostrom's focus on how communities solve the challenges of sharing resources by creating systems and rules.

http://www.ft.com/intl/cms/s/2/afc5377e-1026-11e3-a258-00144feabdc0.html#axzz2dk2XoC4A

Internalizing Externalities to Address Climate Change

http://www.nytimes.com/2013/09/01/business/a-carbon-tax-that-america-could-live-with.html?smid=pl-share

Is there a hierarchy of goodness in public policy?

Melissa Berman of Rockefeller Philanthropy Advisors makes clear the challenges of using philanthropy for large social change.

But specifically because philanthropy is personal and voluntary, it may supplement - but cannot replace - the rigorous, messy public debate we need in a democracy to decide how we as citizens want to choose between museums and fighting blindness.

Too often, private philanthropy is used to drive the allocation of public resources.

http://www.nytimes.com/2013/08/20/opinion/in-charitable-giving-no-hierarchy-of-goodness.html?smid=pl-share

Peter Singer's Critique of Philanthropy

Peter Singer, who has shed light on a wide range of ethical issues, has now turned his sights on philanthropy.

Calling for a shift in resources from cultural funding to humanitarian projects, he applies cost-benefit analysis to explain why we should fund disease prevention instead of museum capital campaigns.

Philanthropy is voluntary and as such donor intent will continue to drive funding decisions rather than quantifiable cost-benefit analysis.  Whether I want to support my church, local museum or disease prevention for the world's poorest is a personal decision.

Perhaps he should also focus on public sector aid funding and how it can be made more effective or ask the question why we allow charitable contributions to be tax-deductible in the first place rather than trying to reform philanthropy.

http://www.nytimes.com/2013/08/11/opinion/sunday/good-charity-bad-charity.html?smid=pl-share

Peter Buffett and the Charitable Industrial Complex

While Mr. Buffett makes points which have been made elsewhere about the unintended consequences of philanthropy, charity as penance for the affluent, and the need for systems change rather than one-off projects, it is refreshing to see someone in his position step outside of the philanthropic echo chamber and ask some larger questions.   

As he states, philanthropic leaders, heads of state and corporate leaders are "all searching for answers with their right hand to problems that others in the room have created with their left."   We are all dealing with the contradictions and dissonance created by a networked global market that our existing systems such as government, corporations and philanthropy do not begin to solve. 

What he does not state is how we can begin to address these contradictions beyond a vague call for multi-stakeholder partners and listening. 

I applaud his piece but want to dig deeper.

http://www.nytimes.com/2013/07/27/opinion/the-charitable-industrial-complex.html?smid=pl-share

When is Peer-to-Peer Lending Not Peer-to-Peer?

http://dealbook.nytimes.com/2013/08/07/not-banks-but-still-lending-and-drawing-investors/?smid=pl-share

Teaching Old Dogs New Retrofitting Tricks:

http://www.nytimes.com/2013/06/19/realestate/commercial/making-energy-efficiency-attractive-for-owners-of-older-seattle-buildings.html?smid=pl-share

Announcement of G8 Social Impact Taskforce

http://www.huffingtonpost.co.uk/sir-ronald-cohen/g8-launch-social-impact-taskforce_b_3452877.html

Goldman closes 2nd Social Impact Bond with Much Lower Credit Enhancement

As details of the transaction emerge, it appears that J.B Pritzker has taken a first-loss subordinated position of 34% which is much lower than the 75% credit enhancement which Bloomberg Philanthropies provided in the NYC Rikers Island transaction.

http://dealbook.nytimes.com/2013/06/12/goldman-to-invest-in-utah-preschool-program/?smid=pl-share

How Can We Align Who We Are with What We Do?

David Brooks describes a phenomenon I see in my students and colleagues as we all try to reconcile the sometimes conflicting desire to make a living and make the world a better place.  Can we consume our way to a sustainable and just world?  Can we do well and good? This complexity only seems to increase as the world gets smaller.  

http://www.nytimes.com/2013/06/04/opinion/brooks-the-way-to-produce-a-person.html?smid=pl-share

Social Investment Comes to the G8 this Week

http://blogs.cabinetoffice.gov.uk/socialimpactbonds/2013/06/social-investment-comes-to-the-g8/

New SIB Tools Launched by UK Government

https://www.gov.uk/government/news/centre-for-social-impact-bonds-new-tools-launched

Leveraging the Power of Foundations-An Analysis of Program-Related Investing

This new report by the IU Lilly Family School of Philanthropy provides a fresh look at program-related investments and how they are being used by foundations but continue to remain a very small part of the philanthropic toolkit.

http://www.philanthropy.iupui.edu/research-by-category/PRIreport

Learning from Odysseus: Can stuffing our ears help us make better decisions?

"When Odysseus wanted to sail around the island of the Sirens, he stuffed his fellow sailors’ ears with wax and tied himself to the mast.  In doing so, he influenced his future decision by wise precaution – and became the first to listen to the enchanting song of the Sirens without steering his ship into the cliffs." The University of Heidelberg's Centre for Social Investment has a new report on how choice architectures may improve decision-making. 

https://www.csi.uni-heidelberg.de/report/pdf/CSI_report_14__2013-05_english.pdf

Unburnable Carbon

If governments are serious about climate change, a portion of oil and gas reserves of major energy companies would not be usable.  Carbon Tracker has done an interesting analysis of this issue.
http://www.economist.com/news/business/21577097-either-governments-are-not-serious-about-climate-change-or-fossil-fuel-firms-are

Google Investing in Peer-to-Peer Lender

http://dealbook.nytimes.com/2013/05/02/google-to-invest-in-lending-club/?smid=pl-share

In Brown-Vitter Bill, a Banking Overhaul With Possible Teeth???

This legislative attempt to simply increase the capital requirements for the large U.S. banks will probably go no where. Socializing risk and privatizing profits.  Will the story ever change?

http://dealbook.nytimes.com/2013/05/01/in-brown-vitter-bill-a-banking-overhaul-with-possible-teeth/?smid=pl-share

Jeremy Leggett from Carbon Tracker

http://www.alliancemagazine.org/node/4257

Impact Investing Panels from the Milken Institute Global Conference

http://www.forbes.com/sites/devinthorpe/2013/05/01/impact-investing-discussions-at-milken-institute-global-conference-suggest-economic-returns-and-social-impact-can-be-achieved-together/

Interview with GIIN's Amit Bouri on Forbes.com

http://www.forbes.com/sites/meehyoekoo/2013/04/29/connecting-the-global-community-of-leading-impact-investors-global-impact-investing-network/

SIB Guide for Providers from Children's Aid Society

This SIB guide for service providers by Megan Golden is a great addition to the SIB field.

http://www.childrensaidsociety.org/files/upload-docs/CAS_FINAL_Report.pdf

Rockefeller Foundation's Judith Rodin Profiled in FT on Impact Investing

Rockefeller continues its support of impact investing as the G8 plans to include impact investing its June meetings.

http://www.ft.com/intl/cms/s/0/cf342d78-ab53-11e2-8c63-00144feabdc0.html#axzz2Rr9egaMR

Social Impact Bonds: Pay-for-Success Programs Could Help OMB with Grant Guidance

http://www.americanprogress.org/issues/economy/news/2013/04/26/61415/pay-for-success-programs-could-help-omb-with-grant-guidance/

First the Giving Pledge and now the Investing Pledge

Which Leading Investors are Seeking Profit and 100% Impact by 2020?:

If Bill Gates and Warren Buffett are willing to eventually give away all of the wealth through philanthropy, just image the positive impact they could create if they agreed to make all of their investments reflect their values and philanthropic goals.

Future of Impact Investing from Sir Ronald Cohen

Is impact investing the Next Big Thing?  I hope so as we work through how to move capital into this strategy/asset class/sector.  Sir Cohen sees the foundation community's endowments as critical to the shift.

Future of Impact Investing

Gabrielle Giffords' Powerful Message to our Shameful U.S. Senate

I think Gabrielle Giffords' op-ed piece on the shameful behavior of our U.S. Senate is the most powerful message I have heard about the need to control gun violence in our country. I hope you read it.

http://www.nytimes.com/2013/04/18/opinion/a-senate-in-the-gun-lobbys-grip.html?smid=pl-share

San Francisco Fed's Community Development Investment Review Issue on Pay for Success Financings

I am pleased to be part of this issue with an article on the role that CRA banks can play as pioneer investors in pay for success financings.

http://www.frbsf.org/publications/community/review/vol9_issue1/index.html

NYC's Social Impact Bond on the PBS Newshour

Making Sense is the goal of this segment - I think it is a good overview

http://www.pbs.org/newshour/bb/business/jan-june13/bonds_04-09.html#

Third Sector Case Study: Preparing for a Pay for Success Opportunity

http://www.thirdsectorcap.org/wp-content/uploads/2013/04/Third-Sector_Roca_Preparing-for-Pay-for-Success-in-MA.pdf?utm_source=Work+Etc.+Import+April+10%2C+2013&utm_campaign=f3ecd9fe91-3_1_13_Hiring&utm_medium=email

Illinois to Launch 2nd SIB in US

http://www.wrex.com/story/21923194/2013/04/09/illinois-to-be-2nd-state-to-start-social-impact-bond-program

If all politics are local, how can we ever hope to solve global challenges like climate change?

In this article on the History of Earth Day, it becomes clear that the strategy of environmental organizations to engage with corporations to support climate change legislation in the U.S. did not work in the absence of a grassroots movement.  It's not about messaging.  It is about exercising political power through democratic structures - sounds naive but there doesn't appear to be a better substitute.
 
http://www.newyorker.com/arts/critics/atlarge/2013/04/15/130415crat_atlarge_lemann

Mixing Economics and Philosophy Over Lunch

Harvard Philosopher Michael Sandel's critical take on Imperial Economists like Larry Summers and how we can begin to challenge our prevailing "culture of the transaction" makes for an interesting FT Lunch article.

http://www.ft.com/intl/cms/s/2/bd509112-9c55-11e2-9a4b-00144feabdc0.html#axzz2Ph2kofNJ

Physics Envy on Wall Street?

A fascinating story about the fallacy behind the rigor of Wall Street Quants and regulators' feeble attempts to manage them.  John Breit, the former head of Risk Management at Merrill Lynch, explains why successful risk management requires human spies gathering intelligence more that quantitative models which try to ape the hard sciences like physics.  It also includes a damning portrayal of how disconnected and isolated the senior management of financial institutions are from the real risk taking activities of the firms they lead.

http://dealbook.nytimes.com/2013/04/03/uncovering-the-human-factor-in-risk-management-models/?smid=pl-share

BRIGHTON: Social Impact Bonds have promise if scrutinized | The Chronicle Herald

http://thechronicleherald.ca/business/1120334-brighton-social-impact-bonds-have-promise-if-scrutinized#

Nova Scotia moving forward with first Canadian SIB

Health Impact Bond Proceeding in California


http://www.socialfinanceus.org/sites/socialfinanceus.org/files/imce/user/u104/Fresno%20Asthma%20Demonstration%20Project%20Press%20Release.pdf

Can Impact Angels Bridge the Gap in Social Funding?

This FT article with a profile of Suzanne Biegel updates the state of social enterprise financing and the important role impact angel investors can play.  http://www.ft.com/intl/cms/s/0/47af39ba-90b9-11e2-862b-00144feabdc0.html#axzz2ONuHiaMD

As a member of Freelancers Union since 2003, I am pleased to see its success and growth.  This quote seems to sum it up: “It reminds me of the old guilds” — the precursors of modern-day labor unions — “that focused on workers’ individual autonomy, trying to build their own careers, with the backing of a collective organization to assist them,” says Janice R. Fine, a professor of employment relations at Rutgers University.
http://www.nytimes.com/2013/03/24/business/freelancers-union-tackles-concerns-of-independent-workers.html?smid=pl-share

Not London, Not New York: Emerging Centers of Gravity for Impact Investing Are in the Global South

http://www.huffingtonpost.com/margot-brandenburg/impact-investing_b_2931818.html

Belly Tranches and The Big Whale

The fact that the US government wants us to subsidize the big banks while applying the "too big to jail" principle, makes this story about the hubris and incompetence of JP Morgan's risk management essential reading.
http://www.nytimes.com/2013/03/22/business/behind-the-derivatives-gibberish-risks-run-amok.html?smid=pl-share

Are We Living in a Material World?

David Brooks as well as The Economist are talking about the importance of natural resources and agriculture for the US economy.   The US reduction in carbon emissions has been driven by the Great Recession as well as a dramatic shift into natural gas from coal and oil.  How can we start to reconcile these forces with the call to divest from fossil fuels?
Article | The Real Winners Of The Global Economy: The Material Boys

CT News Junkie | OP-ED | The Delivery of Social Services Can Save Money

Brian O'Shaughnessy of Community Impact Strategies makes an important call to action for social impact bonds in Connecticut.  I was at the meeting in Hartford and I hope that the energy in the room in December can actually create some real change. 
CT News Junkie | OP-ED | The Delivery of Social Services Can Save Money

Why Wasn't This Front-Page News?

http://www.nytimes.com/2013/03/08/science/earth/global-temperatures-highest-in-4000-years-study-says.html?smid=pl-share

A Lesson in How to Present Statistics in a Compelling Way

http://news.yahoo.com/wait--wealth-inequality-the-new-harlem-shake---214735978.html

Are We More Than Digital Breadcrumbs?

Data-Driven Societies:
A snippet in the NYT about an M.I.T. Media Lab Conference on the Data-Driven Society introduced me to Alex Pentland and his thoughts on how we can now capture the difference between our beliefs and our actual behavior. These "micro-patterns" have profound implications when we try to apply them. A great thought piece for those thinking about systems change through structures such as social impact bonds and fields like microfinance.  http://www.edge.org/conversation/reinventing-society-in-the-wake-of-big-data

High Tech Payday Lenders are Still Payday Lenders

Bleeding the Borrower Dry