Article contributed by James Rosebush, CEO of GrowthStrategy; Founder and Managing Partner, Intersection Impact Fund, And Manager of the Reagan White House Office on Impact
Today we have rapidly growing, yet somewhat speculative, estimates of how much money is being allocated to and invested in Program Related Investing (PRI), impact grants, investments in private and public equity vehicles aligned with Environmental, Social, Governance platforms (ESG), Sustainability, and Impact, that reach as high as $2T. Although we do not know the exact number, we do know it is rising quickly and will effectively appear as an avalanche of capital seeking products and strategies in this sector within this decade. Few people expected that by this time most institutional investors would be allocating to and including impact and ESG in their investment policies and models. This fact alone has resulted in a significant challenge for consultants who need to re-tool their research capacity to identify, assess, and access new managers and strategies to satisfy a growing demand from their clients.
Even though investors have shown they are increasingly willing to sacrifice a degree of investment performance for measurable outcomes on the social side, this is a sacrifice that is not necessarily required for investing in public markets. Significant data reveals and supports the fact that many well-managed public firms that embrace robust sustainability practices also perform better financially and make a more attractive public equity opportunity for investors as a result. Private equity investing in start-ups and smaller firms that are singularly focused on social or environmental or social impact results may offer more targeted results along-side greater risk and possible volatility. But even within this reality investors are actively investing in solutions to clean fuels and water, saving the oceans, advancing nutrition and health, and many other worthy causes. Letting market forces drive improvements in health care, personal safety, the reduction in carbon footprints, may be one way that sustainability could have the most lasting and impactful effect and yet some investors are also restless and have spawned the rise of impatient capital being put to use in these directions through political and corporate activism.
I had the unusual good fortune of beginning my career in Impact at age twenty. When I look back, although there have always been a large number of people around the globe engaged in humanitarian and inventive ways to advance human conditions with significant results, the speed with which these improvements have been adopted has been moderate—compared to the speed by which we confront today’s discovery and access to solutions to these problems. Today we are driving at light speed toward human progress, with only our own limited views and fears to overrule. Impact has become the standard bearer and rallying cry of the future and within a decade will be commonplace, rather than the exception.
According to Steven Parker, writing in The Wall Street Journal, since 1988 the number of wars has diminished from 23 to 12 with one third the number of deaths; the number of nuclear weapons has fallen from 60,780 to 10, 235; the number oils spills from 46 to five; and a reduction of people living in poverty from 37% to 9.6% today. More dramatically, at the beginning of the actual Age of Enlightenment (18 th century) a third of all children died before age five and now the very highest of infant mortality is 6% in the poorest countries. But true to the millennial disinterest in history, they don’t focus on what has been accomplished in the past. They focus on what remains to be done. And, to them, it is a long list. The impact epoch, largely created by millennials who have been raised on a steady diet of immediate and constant dramatic news reports and with their wealth, or none, they are prowling for better ways to address human need– fast. And this is all built on top of some of the most statistically impressive social advances mankind has already ever seen.
Here is one example of how one of my friends Donna, a qualified investor, satisfies her instinct for impatient solutions. As my dinner partner Donna and I were listening to speeches at a fundraising gala in Hollywood, she excused herself from the table to investigate just who was trying to reach her and to respond in a quieter place than the noisy ballroom. Her phone had been blowing up with urgent texts. She returned about fifteen minutes later, and, of course I asked if everything was ok.
It seems that Donna had created her own personal response team to address the Opioid crisis and
during the speeches, and among the glamorous gowns and celebrities, she was receiving distress calls. One young woman had started to over-dose and gave birth to a child at the same time on the boardwalk at Venice Beach. Donna had to do something about it– albeit from her phone’s command post right at the ultra-deluxe Beverly Hills Hotel– about ten miles from the scene. But she was prepared. She had first responders on the way within minutes, a team that involved doctors, paramedics, counsellors, and care givers who could respond to a young woman in crisis with no family to assist her.
When I reached Donna the day after our dinner, she reported that the young girl had survived and so had her newborn. Then I asked her about her one-woman lifesaving operation. She told me she had to do it after watching failed local government efforts to save kids who are dying from drug overdoses. She became her own agency. She wanted Impact– -and she got it. Donna wasn’t looking for personal recognition or even to start a formal government program at any level. She just wanted results. She mobilized her team and they responded.
Today there are thousands of Donnas spanning the globe who mobilize to measurably improve– you
name it– education, health care, the environment, sexual mores—and combined with impatient capital and the ubiquity, access, and transparency of social media, they are accelerating the discovery and adoption of creative head-turning solutions. This is like the Age of Enlightenment on Steroids. And there is no stopping it. Impact is penetrating deep and expanding widely through manufacturing, commerce, advertising, sports, and even now through the investment community.
So why this obsession with greater social impact? Individual initiative and philanthropy are nothing new to Americans. Through banding together, investors, inventors, and philanthropists have wiped out rampant and intractable diseases and brought literacy to millions– among other solutions. But with the world “100 times wealthier than two centuries ago” we have the resources and knowledge about these problems to create economic and investment incentives to accelerate solutions. These incentives are of increasing interest to entrepreneurs and inventors, and this is, in part, driving the merger of the financial community with the philanthropic. This is a potent mixture and will ultimately bring down the artificial barrier, established by government tax policy decades ago, between the nonprofit and profit-making sectors.
The creative genius Peter Diamandis, along with author Steven Kotler wrote in their ground-breaking book Abundance “Humanity is now entering a period of radical transformation in which technology has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet. Abundance for all is actually within our grasp.” I always like to think backwards. If abundance is within our grasp, then we can know the obstacles to reaching it and we can begin to create the solutions to surmount them. We must begin to see industry, innovation and the social sciences as partners or we will never reach what Diamandis, the X-Prize Founder, has laid out as our goal. We are not talking income equality. We are talking fetterless opportunity.
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