Beats | April 26, 2017

Action trumps politics on climate, big-ticket social impact bonds, rethinking the meaning of work

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#Featured: ImpactAlpha Roundup

Climate action trumps politics. One of the delicious tidbits to emerge from the infighting in the Trump administration is the codename Steve Bannon’s nationalists use to refer to the leader of the globalist wing, National Economic Council chief Gary Cohn: CTC, for “Carbon Tax Cohn.” The factions are expected to go at it today, in a White House meeting that could determine whether the U.S. remains in the global climate agreement reached in Paris in 2015.

The country may have already moved on. As ImpactAlpha has reported, hundreds of business leaders have asked Trump to accelerate, not impede, the low carbon economy. Even ExxonMobil has called on the president to stand by the Paris agreement. BlackRock, State Street and other major asset managers are taking climate risks seriously, and investors are eyeing the $23 trillion opportunity in financing the solutions. Even some Republican leaders are calling for a carbon tax as the most market-friendly approach to the challenge. Could Trump be getting ready to pull a Nixon-to-China on carbon?

Read ImpactAlpha’s climate action roundup:

Action trumps politics on climate

#Dealflow: Follow the Money

Minnesota foundations invest $17 million in affordable housing and small business bond. The McKnight and Bush foundations and the Otto Bremer Trust, along with other Minnesota foundations, are collaborating to back the Access Capital Community Investment Fund, a fixed-income bond fund managed by RBC Global Asset Management. The fund invests in mortgage-backed and municipal securities and government-backed loans for low- and middle-income housing and small business lending. The standard-issue projects belie the significance of the foundation collaboration: the financing comes from philanthropic endowments, not grant budgets. The Minnesota collaboration follows the Ford Foundation’s billion-dollar pledge to point its own endowment towards its social mission (see, “Ford Foundation to tap endowment for $1 billion to fight injustice and inequality”). “I believe foundations activating 100 percent of assets for mission will become the rule rather than the exception,” says Trista Harris, president of the Minnesota Council on Foundations, which helped coordinate the effort and made its own commitment to the fund. The collaboration could top $20 million as at least eight other foundations complete their reviews.

India’s Diabetes Specialities Centre raises $10 million to expand clinic network. A 26-year old venture fighting diabetes in India raised its first round of institutional capital. Dr. Mohan’s Diabetes Specialities Centre attracted $10.2 million from Lok Capital and the Evolvence India Fund. The Chennai-based company, headed by Dr. V. Mohan, has two hospitals and 23 clinics in seven Indian states and will use the funds to expand to 100 healthcare centers over four years. India has 70 million cases of diabetes, which is expected to grow to 100 million by 2030. Non-communicable diseases account for 60 percent of deaths in India and could cost the country $4.6 trillion in economic growth and productivity by 2030.

Vermont Works raises $50 million for state economic and job growth. Vermont Works is targeting the state’s growth-stage companies. “When companies are out for growth-stage capital, that’s when the availability of capital in Vermont tends to stumble,” Robert Zulkoski, a co-founder of the fund, said in an interview. The new fund has made four investments, in Vermont Farm Table, Stonecutter Spirits, BTV Ignite and ThinkMD, a mobile app that helps nonprofit organizations on overseas medical missions make on-the-spot diagnoses. VSECU, a member-owned cooperative and credit union, is backing the “social impact” fund, as are Zulkoski and co-founder Frank Koster. Most of the capital it expected to come from investors outside Vermont.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

World Bank tiptoes toward impact bonds and a focus on results. The bank’s first CEO, Kristalina Georgieva, is moving the bank to encourage more private investment in emerging markets, in addition to its own traditional lending. As part of its new “relentless focus on results,” the bank is planning to expand pay-for-success initiatives. Until now, the payers for such “development impact bonds,” or DIBs, have been international donors, as in a small DIB in Palestine tackling youth unemployment that is backed by Sir Ronald Cohen’s Portland Trust. The next step is World Bank support for social impact bonds, or SIBs, issued by developing-world governments themselves, which would foster local ownership of the projects. Georgieva, who took over major bank operations in January, is working to improve the organization’s agility and collaboration. “At a time of growing needs and where resources are not quite following, a results focus is even more important,” she told Devex.

Big-ticket social impact bonds could justify transaction costs. Speaking of SIBs, a new report from the Centre for Public Impact, says the complexity of the deals and the high cost of evaluation means social impact bonds will continue to need subsidies unless average deal size increases. The center, a non-profit backed by Boston Consulting Group, found that investors think social impact bonds below $15 million don’t justify their costs. More than 60 SIBs have launched since 2010, mostly in the U.S. and U.K. The average deal size in the U.S. is $9.6 million; in the U.K., it’s a mere $1.5 million. (In the U.K., every £1 invested has been supported by more than that amount in government grants and guarantees). Advocates of SIBs believe the model is best suited for social interventions that cost hundreds of millions of dollars “that effectively take over the role of ‘solving’ particular social problems.”

Cambridge to roll out benchmarks for impact investments in real assets. Cambridge Associates will benchmark impact investments in real estate, infrastructure, timber and other real assets. The move reflects growing interest in such investments as impact investors seek alternatives across asset classes. (Cambridge’s Impact Investing Benchmark for private equity and venture capital funds pegged returns across 51 funds raised between 1998 and 2010 at 6.9 percent, compared to 8.1 percent for comparable funds with no deliberate focus on social impact.) The benchmarks aim to establish a standard for against which investors can measure the performance of their impact portfolio. The advisory firm tracks more than 800 mission-related funds and will break out real assets funds by size, year, and intended impact. “One of the challenges in this space is the lack of knowledge, prompting people to talk about financial performance abstractly,” Cambridge’s Jessica Matthews said in an interview.

#2030: Long-Termism

Can the end of ‘bullshit jobs’ spark a renaissance in meaningful work?First they came for farmers. Then they came for factory workers. But now the professional class is feeling the pain, as automation and outsourcing displaces legions of bankers, accountants, lawyers, tax advisors and managers (and, dare we say, journalists). By 2030 or so, automation could replace between 45 and 55 percent of current U.S. and European jobs.

Seize the moment, argues Rutger Bregman, the Dutch author of “Utopia for Realists,” which was published in English last month. As the need for workers to grow food and make things fell, society created what he terms “bullshit jobs” that even their holders don’t find satisfying. (That’s a technical term, by the way: about half of all professionals describe their work that way, according to a 2013 survey by the Harvard Business Review and The Energy Project.) If robots can take over those roles, he says, we can seize the opportunity to make meaning, not pay, the center of our lives.

“Historically, society has been able to afford more bullshit jobs precisely because our robots kept getting better,” Bregman writes. “Anybody who fears mass unemployment underestimates capitalism’s extraordinary ability to generate new bullshit jobs.”

The opportunity now is to radically rethink our definition of ‘work’ and reap the rewards of technological advances, he argues. Bregman is a proponent of a universal basic income, which is being tested in San Francisco, Finland, Kenya and elsewhere. But rather than simply mitigating automation-driven unemployment, Bregman says universal basic income strategies should prioritize meaningful activity and social connection.

“I believe in a future where the value of your work is not determined by the size of your paycheck, but by the amount of happiness you spread and the amount of meaning you give. I believe in a future where the point of education is not to prepare you for another useless job, but for a life well lived. I believe in a future where “jobs are for robots and life is for people.”

Onward! Please send any news and comments to [email protected].