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For philanthropy and social investment worldwide focus on . . .

Resilience investing Guest editors: Alejandro Litovsky and Dana Lanza Includes interviews with Major General Muniruzzaman, Arnold Schwarzenegger and Kristian Parker PLUS

Do foundations take enough risks, asks Lisa Jordan How will venture philanthropy fare in Asia?


Contents Focus on . . .

Cover photo The contraction of the Aral Sea is widely regarded as one of the world’s worst manmade environmental disasters. The ‘ships’ graveyard’ is just outside the town of Moynaq in western Uzbekistan, once the main shipbuilding and fishing port of the region. Photo by Arian Zwegers

Resilience investing

26 A decade for the Earth’s security Alejandro Litovsky and Dana Lanza discuss how the ecological and resource limits we face may challenge philanthropists and social investors to rethink their portfolios

43 Less than 100 per cent is not enough In order to achieve change on a large scale, foundations need to focus more on making their endowment investments fully mission‑driven, says Sonja Swift, one of the next generation of philanthropists

32 Interview Major General Muniruzzaman in Bangladesh talks about why the military are turning their attention to resource scarcity and climate change, and suggests that funders should follow suit in looking at security

46 Innovations in climate change finance give hope for our future Ben Caldecott writes about two new innovations presented to the recent Durban climate change meeting by Climate Change Capital


48 Interview Africa needs to look to traditional farming practices if it is to meet the food demands of a growing population, says Gathuru Mburu of the African Biodiversity Network p50

35 Interview Arnold Schwarzenegger talks about the R20 Regions of Climate Action group and his hopes that its policy of immediate action will cover a quarter of the world’s economy in just five years 37 Interview Kristian Parker, chair of the Oak Foundation, explains why he prioritizes funding for oceans and climate change, and why he thinks foundations should take more risks with their funding in this sector 40 Common interest: the key to investing in life‑supporting assets Sergio Oceransky on a new model for impact investing where communities are the owners of the capital


Guest editors Alejandro Litovsky and Dana Lanza

45 Investing in insurance: reducing vulnerability and risk Mihir Bhatt on the role of insurance in increasing the resilience of vulnerable communities

50 Creating the first generation of great marine parks We should follow the success of land‑based national parks with marine reserves if we are to protect the vital resources of the world’s oceans, writes Joshua Reichert 52 Cultivating a solution to climate change Although it has been difficult to achieve a solution to agricultural greenhouse gas emissions so far, there are funding opportunities that could create real change, say Ricardo Bayon and Walt Reid 54 New coalitions to focus on market resilience Solutions to intertwined social and ecological problems can be accelerated where private, public and philanthropic actors work together to influence markets, writes Carl Mossfeldt

Alliance  Volume 17 Number 1 March 2012


Letters 4  Some themes from Jacob Harold’s December article on foundation accountability resonate with what’s happening in India, writes Cristiana Peruzzo, while Gerry Salole takes issue with the Gates Foundation being portrayed as a gorilla

Global updates 6  From Philanthropy Bridge Foundation to philanthropy bridge network How the work of developing philanthropy in emerging markets will be taken forward p6

8  Stories from around the world, including: ` New funding for London‑based Social Stock exchange ` Building community foundations from proceeds of privatization ` Why european environmental grants should be moving eastwards ` Arab philanthropy sector urged to aim for greater transparency ` Yav Hanadiv sheds cloak of anonymity ` What’s new at . . . CIVICUS, eFC, NeF, GIFe, WINGS, COF, Indian Philanthropy Forum and Foundation Center p9

Opinion 18 ‘What is your failure rate?’ taking risks should be a vital part of organized philanthropy, says Lisa Jordan, and we must not be afraid of admitting to our failures

Conference reports 55 Highlights from the Bellagio Summit and the eVPA conference plus a report on the launch of the Social Impact Analysts Association

19 Advisers’ perspectives Felicitas von Peter and Patrick Frick explain why they think strategic partnerships like that between Beyond Philanthropy and Social Investors Partners will be the way forward for the sector

Book reviews 57 Richard Branson’s Screw Business As Usual reviewed by Matthew Bishop and Michael Green

21 Investors’ perspectives Doug Miller and Simon Chadwick talk about the challenges ahead for the newly formed Asian Venture Philanthropy Network and progress so far

Articles 23 Bread, freedom and social justice Philanthropy has a vital role to play in the Arab world but it has to be completely different from in the past. Barry Knight reflects on discussions at an Alliance Breakfast Club in London in January 24 Bringing community philanthropy to the next stage Community philanthropy could play a unique role in sustaining civil society and improving the effectiveness of development aid. How this potential can be realized was the focus of a recent consultation, writes Barry Knight


58 Jed emerson and Antony Bugg‑Levine’s Impact Investing: Transforming how we make money while making a difference reviewed by Uli Grabenwarter 59 Fred Reichheld and Rob Markey’s The Ultimate Question 2.0 reviewed by David Bonbright 60 Lucy Bernholz’s Blueprint 2012 reviewed by Charles erkelens


While we looked the other way The worst consequence of perhaps the worst recession the world has ever known may be that we were all looking the other way as the world slipped into irreversible global warming and the vital natural resources on which we depend became depleted beyond repair.

Editorial board Bisi Adeleye‑Fayemi African Women’s Development Fund, Ghana

Janet Mawiyoo Kenya Community Development Foundation, Kenya

Akwasi Aidoo TrustAfrica, Senegal

timothy Ogden Philanthropy Action, USA

Lucy Bernholz Arabella Philanthropic Investment Advisors, USA David Bonbright Keystone, UK Maria Chertok CAF Russia eleanor Fink World Bank Group, USA

For governments desperate to cut deficits, cutting green investment programmes and green subsidies may seem like an easy win. The public, increasingly squeezed economically, is putting minimal pressure on their leaders to consider the long-term effects. The recent agreement to negotiate a follow-up treaty to Kyoto has been hailed as a great advance, but binding commitments still lag and the timetable doesn’t envisage an agreement in place until 2020, eight precious years from now. More urgent matters like water scarcity, biodiversity loss and food security still sit outside the concerted agenda on climate change.

Sheela Patel Society for the Promotion of Area Resource Centres, India Felicitas von Peter and Michael Alberg‑Seberich Active Philanthropy, Germany

Fernando Rossetti GIFE, Brazil Alan Fowler Centre for Civil Society, Sevdalina Rukanova University of Natal, European Foundation South Africa Centre Barry Gaberman Karla Simon USA International Center for Civil Society Law, Christopher Harris USA USA

That is why we have decided to focus this Alliance special feature on resilience investing. Major General Muniruzzaman, formerly with the Bangladesh army, paints a compelling picture of the consequences of climate change in south Asia.

Ingrid Srinath John Harvey Council on Foundations, CIVICUS, South Africa USA Boris Strecˇansky´ Centre for Andrew Kingman Philanthropy, Micaia, Mozambique Slovakia Marcos Kisil Chet tchozewski Institute for Global Greengrants Development and Fund, USA Social Investment, Brazil Volker then Centre for Social Barry Knight Investment, CENTRIS, UK Heidelberg Atallah Kuttab University, SAANED for Germany Philanthropy Advisory Services Arabia, Jordan Andrés thompson Uruguay Massimo Lanza Fondazione di Venezia, Jorge Villalobos Mexican Center for Italy Philanthropy Peter Laugharn Priya Viswanath Firelight Foundation, Dana Asia, India USA Editor Caroline Hartnell Assistant editor Alex Davidson Associate editor Andrew Milner Contributing editor timothy Ogden

Founding editor Carole Shelbourn George

I would normally be the first to say that issues as huge as climate change can be tackled only by governments and international institutions. But with governments focused elsewhere, it’s heartening to see other players taking action to fill the vacuum. Arnold Schwarzenegger’s R20 sees action by regional governments as the way forward. Kristian Parker’s Oak Foundation tells us that given current ecological and resource trends, the window of time we have to act is rather short.

All correspondence should be addressed to caroline@alliance

Both Climate Change Capital and the Yansa Group attempt to structure financial arrangements that put communities that own natural resources in the driver’s seat. The Earth Security Initiative attempts to bring ecological risk to the forefront of countries’ political and investment decisions. Many of these initiatives are new and untested; they involve coalitions to change the basic building blocks of capitalism. All are ambitious and offer philanthropists and social investors an opportunity to get involved now, and start tackling this gravest of threats to the human race. Caroline Hartnell Editor, Alliance

General manager David Drewery Marketing officer Rachel Izakowicz

Alliance  Volume 17 Number 1 March 2012



‘Gorillas in the midst’: Some responses

‘While stricter accountability in philanthropic donations remains a challenge in India . . . there have been many green shoots in recent times that allow for an optimistic outlook.’

and concentrated on PR-friendly and popular projects such as textbooks, medicine and food distribution. In addition, many philanthropists remain oblivious to the greater impact that could be achieved with a more strategic approach.

Guerrillas or gorillas?

As a board member of Alliance Publishing Trust, I feel it is my responsibility to provide Caroline Hartnell with regular feedback on the content of Alliance magazine, and to play the role of friendly critic. And while Caroline and I However, the past five years have enjoy disagreeing from time to seen the emergence of a new time, it was only when the gorilla I would like to congratulate generation of Indian business (a tongue-in-cheek reference to the Jacob Harold for his interesting people who are bringing new Bill and Melinda Gates Foundation) suggestions in his article energy and increased involvement appeared on the cover of the ‘Gorillas in the midst: foundation to their philanthropic efforts. September 2011 edition that I took accountability in a networked age’ Many corporate foundations are specific issue with the aesthetics of in the December issue of Alliance moving beyond charity and the the magazine. and for highlighting how ‘a new mere distribution of handouts to governance bargain’, created for Jacob Harold, Philanthropy the underprivileged. a business, governmental and Program Officer at the Hewlett Instead, they are investing their non-for-profit environment, can Foundation, also referred to time and larger sums of money be adapted to foundations. such ‘Gorillas in the midst’ in his in social causes that they are contribution to the December 2011 I was pleased to see that his passionate about in order to edition. But before commencing four accountability behaviours bring about systemic change my simian tirade, I would like to are becoming more and more in society. Indian foundations make clear that I largely agreed applicable to the Indian context in are thus beginning to be staffed with the points outlined by Mr which I have been working for the with the best people, with the Harold. Increased regulation of past three years. While stricter intention of creating strategic our sector is surely inevitable, and accountability in philanthropic partnerships with reputable the four behaviours he outlines donations remains a challenge NGOs, adopting much-needed (transparency, measurement of in India due to an environment accountability measures and, multiple bottom lines, proactive of inadequate legislation, more importantly, implementing engagement with stakeholders, lack of transparency, and the an active engagement with and collaboration) are all endemic plague of corruption their stakeholders which was indeed viable paths to greater that permeates all sectors, there unthinkable only a few years accountability. More significantly, have been many green shoots in ago, under the then-prevalent none of these behaviours are recent times that allow for an paternalist approach. precluded from being self-enacted optimistic outlook. and achieved without unwanted Much remains to be done, but The most common model of external, top-down interventions. the younger philanthropists philanthropy in India is the We can and must take are setting a new, vibrant and formation of a foundation or auto-regulation more seriously in promising tone and their energy public charitable trust, created this business. I feel that this is said and dedication can really make and funded by a family-run time and again, but I’m optimistic a meaningful contribution to business. It is true that in the that there is more traction in this majority of cases, these corporate tackling the many social issues direction in the current climate. still rampant in the country in a foundations are still viewed more efficient and accountable Now back to that gorilla. Despite as a separate CSR entity and manner. my general agreement with Mr commonly lack the processes and Harold’s piece, I find the winking Cristiana Peruzzo measurement of outcomes found allusion to the Gates Foundation Head of CSR, Innovaid Advisory in the parent enterprise. Most unhelpful and detracting. The Services, Mumbai of their funding is still in the reduction of the foundation to its form of short-term contributions size, alas all too predictably and

Foundation accountability in India

Alliance  Volume 17 Number 1 March 2012


let ters

boringly done whenever the Gates good behaviour must sit equally Foundation is mentioned, is an on foundations of all sizes. The error, particularly considering behaviour of a small foundation what the organization has in Spain or Liechtenstein could achieved for the sector as a whole have as damning an impact on in firmly placing the foundation the reputation of the brand as any. brand on the radar, engaging We know this and so we must be with new stakeholders in novel careful in two ways: first, not to and exciting ways, and being make transparency a complicated an exceptional advocate of the and difficult issue and, second, not principle that those that can to assume that accountability can give, should. Rather than being be meaningful only if it’s imposed a haughty beast, my personal from outside. experience with the Gates I applaud Mr Harold’s appropriate Foundation is one of a learning call for greater accountability; organization. Just yesterday but perhaps it’s better to talk I was asked to anonymously about guerrillas rather than complete a Gates-led, self-reflexive gorillas. Before our sector survey on external perceptions becomes unnecessarily tangled in of the foundation. How many unsolicited red tape, I think the organizations regularly take the time has come for an urgent and risk of asking their partners to greater emphasis to be placed on provide them with frank feedback holding ourselves, and each other, like this? Surely that could be to higher standards. We must all replicated by others. become adept in demystifying The ‘gorilla’ error is compounded, foundations and fierce advocates of the tenets proposed by Mr moreover, because it seems to suggest that issues of transparency Harold: guerrilla fighters against the individual trappings of conceit and accountability need only and egoism that risk marring the concern foundations with reputation of the wider sector. significant assets, and it lets smaller (and dare I say sometimes And I’m not monkeying around. more inclined to ‘fly under the Gerry Salole radar’) foundations off the hook. Chief Executive, I feel very strongly that the European Foundation Centre responsibility for transparency and

‘Perhaps it’s better to talk about guerrillas rather than gorillas . . . guerrilla fighters against the individual trappings of conceit and egoism that risk marring the reputation of the wider sector.’

spring issue of EffEct looks At finAnCiAl Crisis And soCiAl justiCe

WHAt’s next in AlliAnce ?

the spring 2012 edition of the eFC’s Effect magazine focuses on how european foundations are navigating today’s troubled financial and political waters, and how these new and challenging realities are affecting their work, particularly when it comes to peace and social justice issues. Articles explore foundations investing in times of crisis; the role of foundations in the Occupy movement; an innovative foundation partnership to uncover the causes of the London riots of 2011; how funding women’s issues can lead to peace; and views from foundation leaders in the Arab region on how they see philanthropy’s role in the region’s future, among many other pieces in this issue.

The June 2012 issue will have a special feature entitled . . . High risk/high gain: foundations, risk-taking, and global development in the 21st century

‘Peace through social justice – A role for foundations?’ is the theme of the eFC’s 2012 annual conference, to be held 6–8 June 2012 in Belfast (see p15). For more information

It is often said that foundations have the capacity to take risks, or that they are ‘society’s risk capital’. But how often do we actually see this in practice? How should foundations look at, and manage, risk? How can a more risk‑tolerant approach to grantmaking enhance foundations’ contributions to global development efforts in the coming decades? these are some of the questions this special feature will address. Guest editor is Peter Laugharn of the Firelight Foundation. Alliance  Volume 17 Number 1 March 2012


G L o b a L u p d at e s

From Philanthropy Bridge Foundation to philanthropy bridge network

development of philanthropy in emerging markets that Olga had begun. As PBF chair Caroline Hartnell pointed out at the beginning of the meeting, one of Olga’s most striking achievements was to effectively make the development of philanthropy in emerging markets into a field. But ‘So far, we had all been relying on Olga to drive could this emerging field continue development of philanthropy in emerging economies. to develop without her formidable She knew, she was there, she had the contacts, she was energy and passion? the driver. We all trusted her to set the agenda for what was most needed in whatever country/context PBF was With PBF closing, there would be no organization in place to working in. now, it’s all different.’ follow up after the meeting and Felicitas von Peter ensure things happened. It was ‘Now that we don’t have Olga or PBF, what are we going up to those present to take on the to do?’ At the end of January, six months after the work, if they chose to, and to see it death of Olga Alexeeva, and with Philanthropy Bridge through. In that sense the meeting Foundation (PBF), the organization she had founded a was extremely unusual. And the year earlier, about to close, this was the question facing results were extraordinary. a group of 40 or so people from around the world with By the end of an intensive two days, whom Olga/PBF had worked or planned to work. participants had identified ten separate projects to take forward. he meeting, titled ‘Building Some of them were already Bridges: Developing under way or in various stages of philanthropy in emerging markets’, took place in London on development, by PBF and others; others were thrown up by the 23 and 24 January. The aim was discussion of needs in emerging to explore ways to take forward market countries. All were picked the work of encouraging the


projeCts to be tAken forWArd

‘translation workshops’ to increase understanding and trust between donors and NGOs.  China‑Africa project: to help Chinese and ultimately other external investors develop appropriate CSR policies in Africa. the Foundation School, already under way as a partnership between Charities Aid Foundation and IDIS in Brazil. A global donor education project, to be based on three hubs in emerging market countries, starting with a survey of what is already happening in terms of donor education. An annual forum on philanthropy in emerging markets for practitioners from those countries.

 Collection and dissemination of inspiring stories of giving. A periodic survey of new trends in philanthropy. A biography of Olga. A social networking site, which will link meeting participants and serve as a repository for resources, both those produced for the meeting and those subsequently generated by different projects (interactive, wiki‑like features will enable users to add to the resources). An annual prize for an individual showing leadership in developing philanthropy in an emerging market country, with a special emphasis on unpopular causes. this will be the focus of the Olga Alexeeva Memorial Fund.

Alliance  Volume 17 Number 1 March 2012

over, constructively criticized, elaborated and scrutinized by a panel of four distinguished ex-funders. As one participant pointed out, they were fleshed out to quite a high degree of specificity. And in every case, several people, either individually or through the institution they represented, committed themselves to working on the project. In addition, a working group was established to form a new philanthropy bridge network to connect those at the meeting and enable them to share experiences and ideas and continue to build this new field. These results were far from inevitable. The meeting was designed using ‘open space’, which gives participants the freedom to determine the outcomes they want. Participants could easily have gone home leaving nothing behind but general expressions of goodwill. Instead, they rose to the challenge. Plans were put in place and commitments made to carry them out. During the two days, a number of people remarked that they felt as if Olga were present. The energy, decision and creativity with which those attending worked suggested that, in some way, she was. For more information to download the reports prepared for the meeting and for updates on projects and on the Olga Alexeeva Memorial Fund, visit (the PBF website will be maintained for up to a year). Reports will also be available from Photo on p2: consensus voting at the ‘Building Bridges’ meeting.


global updates

Social Stock Exchange to get under way in UK

this the SSE was formed, led by Pradeep Jethi, a former new product development manager at the London Stock Exchange, and Mark Campanale, a former fund manager.

known as the Big Society Bank). Other beneficiaries of the BSIF investments are FranchisingWorks, which will receive £1 million to help long-term unemployed people As part of a £3.1 million package of investments to set up their own franchise announced by the Big Society Investment Fund (BSIF) business; Triodos Bank, which will at the end of December 2011, the Social Stock Exchange Although the Cabinet Office claims use its £500,000 investment to fund in its press release that it is the (SSE), based in London, will receive £850,000 world’s first social stock exchange, a payment-by-results initiative to develop a securities exchange, a social stock to improve educational, training it is predated by the Bolsa de exchange and a secondary business, the Early Stage and work outcomes for vulnerable Valores Sociais (BVS) in Brazil Investment Exchange (ESIE), to build a pool of equity young people in Merseyside; (although this is strictly speaking investment‑ready social enterprises for initial public and Community Generation more of a philanthropic giving offering (IPO). Fund, which will receive platform), Impact Investment £750,000 to set up an initiative Exchange Asia (IIX) in Singapore he SSE, seen by many as to create community-owned and, most recently, iX in Mauritius. fundamental to creating social enterprises in deprived a thriving social investment BSIF was set up by the Big communities which offer marketplace which will provide Lottery Fund, using money affordable, green energy. investment to social enterprises from dormant bank accounts, wishing to scale up, began in Source to make investments prior 2008 with a £252,000 Rockefeller Cabinet Office News Release, to the establishment of Big 28 December 2011 Foundation grant to fund a Society Capital (previously Visit feasibility study. Following


Philanthropication through privatization

This is not a mere pipedream. Readers familiar with the Italian foundations of banking origin will know that privatization processes have already been tapped Efforts now under way to build community foundations to create substantial charitable and other philanthropic institutions in regions lacking endowments. What no one has them hold enormous promise, but generating the realized is how widespread this capital resources that can sustain them over the long practice has been. Demonstrating run presents a huge challenge. this, assembling the lessons of past experience, and bringing ortunately, a possible solution the resulting insights to those is in sight. In many regions eager to build sustainable where foundation-building efforts philanthropic assets in areas are starved of capital, enormous privatization sales are also taking that lack them are the objectives of the Philanthropication thru place, transferring hundreds of Privatization (PtP) project being billions of dollars of government carried out by Lester Salamon in or quasi-public assets into private, cooperation with the East-West often foreign, hands. Capturing even a fraction of the proceeds for Management Institute and an international team of colleagues. nascent community foundations would set them on a very different To date, the project has identified developmental path and potentially five different ways in which this PtP phenomenon can unfold, transform the philanthropic depending on the nature of the landscape of their countries.


Alliance  Volume 17 Number 1 March 2012

public or quasi-public asset involved. No fewer than 415 PtP transactions have so far been identified around the world, including such well-known institutions as the Volkswagen Foundation, Austria’s ERSTE Stiftung and the New Zealand community trusts. Case studies are being completed on 22 of these to tease out lessons and a search has begun for possible sites for pilot implementation efforts. With resistance to privatization growing everywhere, governments and purchasers of privatized assets may well see the advantages of accompanying future sales with the creation of sizable charitable endowments aimed at the needs of local citizens. Here is an idea whose time may have come. For more information Contact Lester Salamon at lsalamon@ or William Burckart at william.

European environmental grants should go east In September 2011 the European Foundation Centre published a new report looking at the state of environmental philanthropy across EU member states. environmental Funding by european Foundations: A snapshot forms part of a growing set of research on environmental philanthropy around the world. Both it and its UK counterpart, Where The Green Grants Went 5, provide overviews of the environmental performance of a range of countries, and in doing so raise questions about where philanthropic funds can most effectively be spent. What emerges most clearly is that grants should be moving eastwards.

Jon Cracknell is director of the JMG Foundation. email jon@jmgfoundation. org Marilena Vrana is interest groups coordinator at the eFC. email mvrana@

at the EU, it is L ooking clear that there is a gulf in environmental awareness between northern Europe and many central and eastern European member states. In the five member states with the highest awareness of climate change, almost 76 per cent of the public feel they are well-informed, while in the five with the lowest awareness the corresponding figure is just 32.7 per cent. There are similar disparities in citizens’ involvement in environmental organizations, and in the extent to which the public hold ‘post ‘post-materialist’ values, where material possessions are seen as less important in life. The research shows that environmental grants from European foundations are currently concentrated in countries like the Netherlands and the UK, which already perform relatively well on metrics of environmental policy and have no shortage of environmental groups. Given that EU environmental policy


Jon Cracknell and Marilena Vrana

is the result of negotiations between all 27 member states, shouldn’t European environmental foundations be actively investing in countries with lower environmental awareness and fewer environmental organizations? The research also shows that only a small share of grants are directed towards environmental initiatives in emerging economies such as China, which received just 12 of the 791 grants that were coded. Shouldn’t foundations be moving resources systematically eastwards to countries that are deciding whether to follow or leapfrog the West’s ‘dirty’ development path? These countries currently lack depth in their domestic philanthropic infrastructure, for understandable reasons, yet the decisions they are taking will affect everyone in the world.

Sunset in Shanghai through the smog; taken from the top of the Jin Mao tower.

in the world in environmental performance. More research is undoubtedly needed into the links between NGO resourcing and good policy outcomes. However, the data now being gathered suggests the need for a geographical re-orientation of grantmaking, informed by analysis of the changing geopolitics of the environment. Further reading Marilena Vrana and Jon Cracknell (2011) Environmental Funding by European Foundations: A snapshot, Brussels: eFC. InterestGroupsAndFora/environment/ Documents/efc_environmental_final. pdf Jon Cracknell et al (January 2012) Where the Green Grants Went 5, environmental Funders Network

Money isn’t everything when it comes to environmental policy success. For example, US environment groups had combined revenues in 2008 of $11.3 billion, yet the US ranks 61st Alliance  Volume 17 Number 1 March 2012


global updates

Arab funders debate greater accountability to increase impact

power with government in efforts to create more conducive regulatory and fiscal structures.

The main areas for discussion were the framework for analysing organizations and what makes a good organization; Recent moves to build the infrastructure of philanthropy the legal environment for the in the Arab region have envisaged gradual progress, philanthropy sector and how but this year’s events have shown that this is not to assess the donor-grantee enough. The region’s people are demanding justice relationship. Participants and ‘ownership of the agenda’. This will require a new level of transparency in donor‑grantee relations, while recognized a number of needs communities are demanding programmes that fit local with implications both for the internal working of organizations needs rather than the donor’s agenda. and for the relations of the n December 2011, SAANED sector with the other elements of society. In terms of governance, for Philanthropy Advisory not all board members are convened a meeting in Amman attended by more than 20 leaders equally engaged. There is often no regular review of board from the philanthropy sector in Egypt, Lebanon, Jordan, Palestine, performance, if there is one at all, and there is too much board Saudi Arabia and United Arab involvement in management Emirates to discuss how to issues. There is sometimes a drive more accountability and problem with ownership of transparency within our sector. organizations: founders or Such a move will enhance the funders have to acknowledge sector’s credibility, which will when it is time to let go. in turn increase its negotiating


Statute at last hurdle Last month, the European Commission adopted a proposed Regulation on a European Foundation Statute, bringing legislation on the matter a step closer. The Statute, a long‑cherished project of the European Foundation Centre (EFC) and its allies, has already won the backing of the sector – through members of the EFC and DAFNE (Donors and Foundations Networks in Europe) – and secured the support of the European Economic and Social Committee in 2010 and of the European Parliament in a recent written declaration. he last step is for the t legislative proposal to receive the consent of the European Parliament and the approval of the Council of Ministers. Proponents

Alliance  Volume 17 Number 1 March 2012

are demanding national governments and the EU adopt the Statute before 2014. The Statute would be both additional to existing national legislation and optional – that is, used by those who want to expand or start cross-border activities and collaborative ventures. It will allow anyone to set up a European foundation with the same conditions throughout the EU, thereby removing costly and cumbersome legal and administrative barriers that have until now delayed or hampered foundation-led European initiatives.

In terms of the external dimension of funders’ work, a clearer focus is needed. Funders need to cultivate better links with the private sector to create greater impact. They also need better communications with the community and with the constituency served. One problem in this respect is measuring impact. This problem and other measures related to performance should be tackled not only at the level of individual organizations but comparatively, in relation to peers, in order to build a local database for a cohort of organizations in the Arab region as a step to establishing recognized national and regional benchmarks and standards for performance, including impact. Participants also recognized that the sector can increase its impact by taking a greater advocacy role. For more information Contact Atallah Kuttab at akuttab@ for a detailed report of the meeting.

The Statute’s supporters hailed the EC’s adoption of the Regulation as a ‘milestone’. However, as DAFNE Chair Rosa Gallego points out, ‘the job is not yet done. . . . It is vital that ministers realise the value that a European Foundation Statute will bring to the individual member states they represent. It is not about initiating long and complex reform; it’s about creating a simple but robust and trusted new tool to allow public-benefit foundations to maximise their potential.’ For more information Sectoronestepclosertoeuropean FoundationStatute.aspx


Alliance  Volume 17 Number 1 March 2012



global updates

Yad Hanadiv opening the cloak of anonymity

narrower than the reality. It was, for example, Yad Hanadiv that established Educational Television in Israel in the mid-1960s and the Jerusalem Music Centre (1973), as well as supporting a multitude of organizations working to improve the environment and to advance civil society and the Arab community. Yad Hanadiv is currently cooperating with the National Library in building a state-of-the-art, 21st-century National Library for Israel.

website to describe its activities and interests, and as a platform, not yet fully utilized, to share knowledge.

It is also worth mentioning that Yad Hanadiv, in a partnership with Yad Hanadiv acts in Israel on behalf of Rothschild Israel’s Ministry of Justice, took family trusts that carry forward a 130‑year tradition of the initiative to launch the Israeli philanthropy in Palestine and then Israel. ‘Hanadiv’ is GuideStar database, affording the Hebrew word for ‘benefactor’, the name that was digital access to the annual official bestowed upon Baron Edmond de Rothschild, who was filings of Israeli non-profits and a instrumental in supporting activities that paved the platform for non-profits to make way for the establishment of the state of Israel. Baron available supplemental information. Edmond carried out his philanthropy without seeking This move reflected appreciation for personal publicity, and this example is still followed. the value of data and information to owever, given the scope of Yad In its work Yad Hanadiv has always inform decision-making at all levels. Hanadiv’s activity, including strived to ensure excellence. The While Yad Hanadiv can be resulting knowledge and the construction of Israel’s Supreme expected to remain reticent about lessons of experience – positive Court building, establishment of self-promotion, in the coming and negative – have value as the Open University, with more years its public online presence than 40,000 students, and annual ‘public goods’ that Yad Hanadiv’s – especially as a framework for opaqueness made it difficult to postdoctoral fellowships abroad, sharing knowledge, information and complete anonymity is impossible. share. Accordingly, in 2010 Yad experience – will undoubtedly grow. Hanadiv took what was for it the The public impression of Yad For more information dramatic step of putting up a Hanadiv’s interests is therefore


New findings from the Johns Hopkins Center for Civil Society Studies

Did you know . . . The non‑profit sector was one of the few engines of job growth in the US economy during the first decade of the 21st century. employment in non‑profits rose by an average of 2.1 per cent per year while employment in businesses fell by an average of 0.6 per cent. this pattern continued during the recent 2007–09 recession, during which non‑profit employment increased by 1.9 per cent per year while for‑profit jobs declined by 3.7 per cent per year. However, in some key non‑profit fields, for‑profit job growth actually outpaced that of non‑profits, leading to a loss of non‑profit market share. For example, the non‑profit share of employment in the social assistance field dropped from 62 per cent in 2000 to 54 per cent in 2010. this is part of a larger trend affecting non‑profits in other fields as well. this points up one of the unexpected consequences of the shift to contracting on the part of governments: for‑profits can enter formerly non‑profit‑dominated fields, cut corners on care and employee compensation to undercut non‑profits, and win government contracts. Alliance  Volume 17 Number 1 March 2012

Average annual employment change, non‑profit vs for‑profit 2000–10 Overall Profit



–0.6% 2.6%

Health Social assistance Education 2007–09  Overall

4.4% 2.2% 5.4% 2.0% 2.8% 1.9%


Source Authors’ estimates based on data drawn from the US Bureau of Labor Statistics Quarterly Census of Employment and Wages For more information Lester M Salamon, S Wojciech Sokolowski and Stephanie L Geller (2012) Holding the Fort: Nonprofit employment during a decade of turmoil Johns Hopkins Center for Civil Society Studies. Available at

W H at ’ s n e W at . . . CIVICUS

New report shows civil society through the eyes of civil society actors The CIVICUS State of civil Society 2011 report captures the current status of civil society actors, issues and engagements through the words and eyes of civil society itself. With Time magazine declaring ‘The Protestor’ person of the year for 2011, there is renewed interest in trying to understand the multiple forms of activism, participation, protest and engagement that characterize civil society.


Awards for ‘Living Well with Dementia in the Community in europe’ Ten projects led by community‑based organizations from eight European countries were presented with awards in Brussels on 16 January at a ceremony in the presence of HRH Princess Mathilde of Belgium. The awards, each worth up to 10,000, are part of a wider project called the European Foundations Initiative on Dementia (EFID), and are designed to recognize and encourage the dissemination of good practices that help people with dementia and their families to live well and participate actively in their local community.

first report about civil t hesociety by civil society during

in new ways and engaging in novel forms of activism, the report – the first of what will a time of great transformation be an annual series – serves as and challenge, the report draws on the views of CIVICUS members, a comprehensive resource for policymakers, activists and CSOs partners and networks to offer on global civil society trends, an up-to-the-minute snapshot of the state of civil society today. Key issues and engagements, and themes include civil society space, seeks to increase awareness on civil society’s vital and changing citizen activism, civil society roles globally. resourcing, civil society’s role in global governance, and civil For more information society and disaster response. Using information collected at a time when CSOs and communities are mobilizing

award winners were t heselected from 81 eligible projects. The jury awarded inspirational projects, evaluating candidates in terms of social innovation, effectiveness of the project, impact and sustainability of results. Dementia is one of the biggest problems facing European society today. The spontaneous reaction of people when confronted with Alzheimer’s disease and related conditions is generally fear or even rejection. Actors in the field stress the importance of changing existing one-sided perceptions of dementia. Respect for the patient’s autonomy, local initiatives and more compassionate care could bring significant improvements to the quality of life of those with dementia and their carers. Civil society at local level (such as local authorities, NGOs, the police, volunteer organizations and neighbourhood committees) can contribute to this through

education and information, communicating a different, more balanced view of dementia, and encouraging people locally to take responsibility for how those with dementia are integrated in and supported by society. Improving perceptions of dementia and stimulating solidarity at local level were the motivation for a group of foundations, comprising the Atlantic Philanthropies, the Fondation Médéric Alzheimer, the King Baudouin Foundation and the Robert Bosch Stiftung, to fund the EFID programme under the NEF umbrella. For more information Visit the NeF website at http://tinyurl. com/eFIDawards

EFID award winners with HRH Princess Mathilde. Alliance  Volume 17 Number 1 March 2012


what ’s new at . . .


Improving the practice of global philanthropy In December 2011, the Council hosted the Global Grantmaking Institute to educate foundation staff and trustees about a range of topics on global philanthropy. These topics included deliberate leadership, understanding the legal and regulatory issues, the importance of relationships, collaboration, due diligence, investing in systemic change, disaster relief and response, measuring impact and learning from evaluation. sold-out institute t heincluded 50 participants and 10 faculty members from foundations including the Atlantic Philanthropies, the Levi Strauss Foundation and the

Women’s Funding Network. The participants enjoyed hearing the perspectives of colleagues in global grantmaking, gaining an understanding of the actual mechanics of working internationally, and building a community of learners. The Council will host additional institutes in 2012, in March and September. Another excellent resource for anyone interested in global giving is Beyond Our Borders: A guide to making grants outside the United States, 4th edition, released in December 2011. Filled with sample documents and indispensable advice for all US-based philanthropic organizations that make grants that affect people and conditions outside the US,

Are you looking for a publisher? Alliance Publishing Trust offers a complete, customized publishing service, at very reasonable prices. “I have worked for several years with staff at Alliance and would strongly recommend their publishing services. I particularly value their high standards, efficient and friendly services, understanding of the third sector and sensible pricing.” Cathy Pharoah, Centre for Charitable Giving

this clear and accessible guide dissects and explains the various legal and technical requirements necessary to comply with US law and regulations concerning grants to non-US organizations. The fourth edition of the publication contains updated information on anti-terrorism measures and requirements of grants by public charities. For more information About the Global Grantmaking Institute: to purchase Beyond Our Borders: https://personify‑ ebuspPROD/OnlineStore/tabid/54/ Default.aspx

In addition to publishing Alliance magazine, APT also publishes books and reports. We can offer any of these services at affordable prices: Editing and proofreading Done by people familiar with foundations and the NGO sector, who can accurately edit the work of non‑native English writers Design Including cover, layout, online materials Printing Books and reports, printed to the highest quality Distribution Worldwide postage & packaging for your title

and Philanthropy, Cass Business School

Project management Complete attention from beginning to end

“Alliance Publishing Trust provides very efficient and

For more information, please contact Caroline Hartnell at

cost-effective services. We have used them for several publications and they have made them very attractive, which has contributed to their branding as cutting edge, informative materials.” Peggy Saïller, Executive Director, Network of European Foundations Alliance  Volume 17 Number 1 March 2012


Belfast conference to discuss foundations’ role in ‘peace through social justice’ More than 500 delegates will convene in Belfast from 6 to 8 June for the 23rd EFC Annual General Assembly and Conference to debate foundations’ role in achieving peace through social justice. Northern Ireland’s capital, which has emerged from 30 years of conflict to establish itself as a prominent destination, provides an apt location for debates and discussions on an issue that still resonates to the core of the city. conference will use t heBelfast’s historic backdrop to explore peace and social justice issues from a variety of regions around the globe. From conference sessions to site visits, delegates will have the opportunity to witness how a former conflict zone can transform a violent past into


GIFe seeks new concept of social investor Since its foundation in 1995, GIFE has sought to contribute to the promotion of sustainable development in Brazil through strengthening the political and institutional underpinning of the social investment sector. This has largely meant ensuring that planned private voluntary donations are kept monitored to assure they serve the common good.


owever, because of the significant growth and strengthening of the sector, and lack of clarity in Brazilian legislation, uncertainty has

Mural on Whiterock Road in west Belfast.

a vibrant present. Specifically, they will be able to see how foundations can play a key role in supporting this process. Foundation professionals from Europe and around the world will learn about, share and debate issues surrounding peace and social justice and other pressing philanthropic topics,

from education to the financial crisis. Justice Albie Sachs, the highly regarded anti-apartheid campaigner and changemaker, will deliver the keynote speech at the conference’s closing plenary.

grown up around the definition and limits of what investing is. This uncertainty has led to a paradox where a foundation can be at the same time the recipient and the donor of resources for the same cause.

says GIFE’s general secretary, Fernando Rossetti.

With the object of clarifying the position of such groups and clearly differentiating the investor from the recipient, GIFE has launched a series of actions to better define the terms of Brazilian philanthropy. Moreover, the problem is not confined to Brazil. ‘These actions could be important for all of Latin America, since we are dealing with a regional problem,’

For more information

Besides undertaking research, GIFE has also programmed debates to be held during the seventh GIFE Annual Congress in São Paulo, from 26 to 30 March this year, which will seek to define a sector of relevant and legitimate social investment, formed by a group of sustainable investors. For more information

Alliance  Volume 17 Number 1 March 2012


what ’s new at . . .


Next generation giving focus of third annual event The Indian Philanthropy Forum, entering its third year, is going from strength to strength as Indian high net worth individuals increasingly look to us for guidance and advice on giving opportunities as strategic philanthropy gains momentum in India. n 20–21 March, over 250 o philanthropists, sector experts, non-profit leaders and representatives from international foundations are expected to come together for the third Indian Philanthropy Forum annual event at the Taj Mahal Palace Hotel in Mumbai. Under the banner of ‘Next Generation Giving’, the conference will explore the giving approach of


Global Philanthropy Panel with WINGS board members Last November WINGS held a discussion forum on Philanthropy Perspectives from Africa, Latin America and the Arab Region. he global nature of t philanthropy is hardly disputed – grantmaking organizations from North America and Europe have funded projects outside their home countries for years. Nevertheless, as the global economy and political attention shift towards the global South, this dynamic is changing. There

Alliance  Volume 17 Number 1 March 2012

India’s large family foundations and the growing role played by younger generations in their philanthropic efforts. The conference will also address issues ranging from adolescent girl empowerment to children’s education and sanitation. These discussions will also act as platforms to launch Dasra’s latest research reports on adolescent girls’ empowerment and youth employability. Owning Her Future: Empowering adolescent girls focuses on the plight of adolescent girls in the rural states of north India, and the challenges and high-impact interventions undertaken by non-profits working in the field. On a different track, Leveraging the Dividend: Enhancing youth employability investigates the huge skills gap being created as India moves from a

is a growing interest in new forms of philanthropy and in the possibility of traditionally grant-recipient countries becoming grantmakers themselves. To address these issues and the challenges, as well as opportunities, they present to the philanthropic community, WINGS held an event in London in November attended by over 60 participants. The current developments in Africa, Latin America and the Arab region, and the role of philanthropy in this new scenario, were discussed by three WINGS’ board members with extensive knowledge of the issues and the regions: Atallah Kuttab, Barry Smith and Fernando Rossetti. Topics discussed included the deeply entrenched

traditional agricultural society to a production powerhouse. The report also recommends a partnership approach between government, corporates, non-profits and civil society to create a more employable workforce in India to drive national growth. Each report will highlight the work of non-profits working in these sectors and will see the launch of two Dasra Giving Circles to commit over £600,000 over three years to one of the organizations highlighted in each report. The Indian Philanthropy Forum is also planning to host a second event in New York later this year for American philanthropists. For more information

traditions of giving and community help in Africa and the current significant growth in formal sector philanthropy; the shared ambitions brought about by the protests in the Arab region; and the rapid growth of the philanthropy sector in Latin America, especially in corporate philanthropy. Following WINGS traditions of networking and building partnerships, the Global Philanthropy Panel was organized by the European Association for Philanthropy and Giving (EAPG) and hosted by investment firm BlackRock. For more information

what ’s new at . . .


Americas. The report reveals that US foundation giving explicitly designated to benefit Hispanics and Latinos domestically has remained virtually unchanged over the past decade, averaging 1 The Foundation Center continues to break new ground in per cent of total foundation philanthropic research in partnership with grantmaker giving, even though the Hispanic networks, providing essential knowledge for strategic population in the US has grown significantly over the same decision‑making and improving the practice of period. The report also looks at philanthropy. US foundation giving for Latin America and finds that Mexico Hispanics/Latinos and Brazil received the largest The first study of its kind, proportion of those grant dollars. Foundation Funding for Hispanics/ Latinos in the United States and People with disabilities for Latin America was published Later this year, the Foundation recently by the Foundation Center will publish a first-ever Center in collaboration with report on US foundation Hispanics in Philanthropy, a grantmaking that benefits people transnational network of with disabilities. The study will be more than 600 grantmakers conducted in cooperation with the committed to strengthening Disabilities Funders Network and Latino communities across the will examine changes in overall

Breaking new ground in philanthropic research

levels of funding over a decade as well as analysing giving patterns. Human Rights Also in 2012, the Foundation Center will analyse grantmaking for human rights issues for the first time. A report of the findings will be published in cooperation with the International Human Rights Funders Group and will be accompanied by an interactive grants database modelled on the Philanthropy In/Sight® mapping tool. The Foundation Center hopes that studies such as these will encourage foundations to improve the quality of their own data when it comes to the subject focus of their grants, beneficiary populations and geographic area served. Download the free report


Explore social justice models Debate key issues for the sector Connect with your peers Get inspired by visonary thinkers Discover a city in transformation

Don't miss! • 'Meet the social activists' evening • Next Generation programme • Titanic Belfast

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Alliance  Volume 17 Number 1 March 2012


opInIon Opinion

Lisa Jordan

due to internal conflicts within the migrant populations. We have never put this story into the public domain, though many other foundations and the Israeli government continue to I believe taking risks is an try to serve the same population. inherent responsibility of Recently, I was talking to a venture There are countless reasons why organized philanthropy. A big capitalist who is setting up a new foundation. ‘In the foundations do not share failures, part of our value added to society first half of the life of a venture capitalist,’ he said, including, as in this case, the need is to use private money to try to ‘I expect 70 per cent of my investments to fail. In the to avoid further marginalizing solve intractable problems; to second half I expect 70 per cent to succeed. What is vulnerable populations. But are dare to finance dialogue on things your failure rate?’ How often do we ask ourselves that are most often left unspoken; we fulfilling our responsibility to ‘what is our failure rate?’ Unfortunately, I had and society when we do not share our to experiment with better health still have no answer. Risk is perhaps the most poorly failures? or education delivery systems; to defined concept within the world of philanthropy. encourage pioneering and often In the interest of creating spaces In turbulent times such as these, the important lonely voices in the arts. If we to discuss failure and risk, the role of risk in philanthropic practice needs greater fail, we have not wasted public EFC’s annual conference in Belfast exploration. money or sacrificed another in June will include a session n research and development important line of social spending. called ‘Risky Business’. Here a for new products and Barry Gaberman, a long-time group of foundations will explore Lisa Jordan is in the hard sciences, risk is a vice president of the Ford risk as it pertains to foundation executive director well-respected companion in of the Bernard van Foundation, noted in Alliance that programmes, and the relationship Leer Foundation. every part of the process. Failure one of the attributes of organized between risk, mission and email Lisa.Jordan@ is the number one learning tool. philanthropy is ‘the ability to take innovation, and map foundations Among foundations, only on the risks, to grapple with sensitive across Europe on a risk investment side is risk analysed. issues the public sector will continuum. We hope to be able And failure is to be avoided as shy away from’. The question is, to illuminate how foundations it means less money for the do we? talk about risk, what constitutes foundation. risky behaviour, and which risks The answer to this question is are worth the consequences While we are not great at defining unclear and rarely explored. The of failure. Risk is perceived risk, we like to talk of innovation. sector has a good understanding differently depending upon what But innovation requires risk and of financial risk and a number role one has in a foundation. As experimentation. So how do we of forums in which investment an executive director I will focus define risk? In the UK, foundations officers can discuss and calculate on reputational risk, while a of a certain size are required to risk. On the programme side, programme officer might focus on report on five categories of risk however, we have no forums risks associated with a strategic relating to governance, operations, where risk can be discussed nor approach to a goal. finance, environmental and tools to help us make calculated external factors, and legal risks, and we rarely use the tools Instead of focusing on mitigating compliance. The UK Charity we have such as evaluation to risk, I hope foundation Commission defines risk as ‘the help us understand the degree to executives, trustees and officers uncertainty surrounding events which we have succeeded or failed. will understand that risky and their outcomes that may behaviour is part and parcel of Sadly, we are not in the habit have a significant impact, either a foundation’s DNA. We should of publishing our failures. The enhancing or inhibiting any have a greater appetite for risk, Bernard van Leer Foundation area of a foundation/charity’s just like that venture capitalist, operation’. In the view of Stephen (BvLF) ceased financing a and learn to embrace failure. particular migrant community Pittam, secretary of the Joseph One day we should know how to in Israel because our programmes Rowntree Charitable Trust, answer the question ‘what is your were not serving children as the interesting thing about failure rate?’ well as we had hoped, in part

‘What is your failure rate?’


Alliance  Volume 17 Number 1 March 2012

this definition is the fact that uncertainty could enhance a foundation’s operation. When we do focus on risk, we usually focus on mitigating it.


Advisers’ perspectives

Strategic partnerships to serve the sophisticated philanthropist Last July, Beyond Philanthropy, the for‑profit affiliate of Berlin‑based Active Philanthropy, and the Swiss philanthropy consultancy Social Investors Partners signed a cooperation agreement. Patrick Frick of Social Investors Partners talked at the time of ‘a new model for the charitable sector’ which would increase its effectiveness. Six months on, Caroline Hartnell talked to Patrick Frick and Felicitas von Peter of Active Philanthropy about what the partnership brings them and why they think strategic partnerships are the way ahead.

language skills, expertise in facilitation, long experience working for UN organizations, a strong background in family philanthropy, experience working in a strategic advisory capacity on the board of a large foundation, and von Peter’s own seven or eight years’ history of building a peer-to-peer networking and exchange and experiential learning. ‘It just seems a good combination,’ she says.

The most important thing, however, is that they have the same target audience and the same values. Von Peter talks about how involved working with individual donors and the intricacies of their family relationships can be and how he cooperation extends the important it is to ‘understand reach and capacity of both. The bulk of Beyond Philanthropy’s the family as a complex system work, explains von Peter, has been with very particular needs. This in Germany, but they have worked has a lot to do with passing on a legacy to the next generation across Europe and elsewhere. about family values, tradition, ‘What we haven’t had, and Social what the family stands for. It Investors has, is staff on the was a very easy discussion with ground. It has two partners who Social Investors right from the travel to Africa, Latin America start because we had the same and Asia, which helps both with philosophy.’ due diligence and with project management. For Frick, the main Frick agrees that their role as advantage is that there was no advisers is not to tell clients what advisory firm capable of offering to do but to enable: ‘Some of our advice on a wide range of thematic clients were literally sitting on and geographic areas. In the the fence for years, stuck between independent advisory market in so many options from around continental Europe, ‘you have the world for them to fund; we mainly individuals or very small were able to help them focus teams’. Both he and von Peter see a and identify the opportunities need to provide for philanthropist where they could make the clients with large-scale contracts most impact given their values or mandates that so far no one and resources and the needs of in Europe has been equipped to society.’ Crucial to this role, says deal with. von Peter, is independence: ‘We


Felicitas von Peter is managing director of Beyond Philanthropy and managing partner of Active Philanthropy. email vonpeter@ beyondphilanthropy. eu

Patrick Frick is a co‑founding partner of Social Investors Partners. email patrick.frick@

‘It just seems a good combination’ Moreover, the partnership brings together a team who between them have strong networks and a wide range of skills, including

don’t have any product to sell, and that independence gives us the freedom to take time to help people figure out what they want to do.’ Ultimately, their

philosophy is to deliver the best results for the client, and it’s to the client that they are accountable. Disagreements over the best course What happens when the client wants to pursue a course which the adviser doesn’t think is the best use of funds? ‘It’s one of the hardest questions because as an adviser you are aware of the wide range of options for having an impact,’ says von Peter. She herself is a big fan of funding advocacy work but she concedes it’s a difficult sell because ‘you can’t see the school that you’ve built, or the 15 children that have their school certificates’. She sees that as one of the virtues of working with a client over a long period: as their engagement and experience grow, they are more likely to be open to funding things like advocacy. Although they don’t work with people unless they want to make a positive impact on society, adds Frick, ‘it would be preposterous to pretend that an adviser always knows the best way forward. The issues we’re dealing with are way too complex for anyone to predict what will happen if you make a particular intervention. It’s much more about creating a safe space in which you can have open conversations with the client and grapple with difficult questions as best you can.’ Cooperation and capacity Frick believes that if the philanthropy advisory market is to serve the full spectrum of philanthropists, ‘from the novice to the most sophisticated’, collaborations such as that between Social Investors and Beyond Philanthropy are critical. ‘Otherwise,’ he argues, ‘we would not, as individual players, have the complete range of services and

Alliance  Volume 17 Number 1 March 2012



opinion Advisers’ perspectives

Clients don’t want to run around to 15 organizations; they want trusted advice, and referrals from people they trust.

expertise necessary to meet the diversity of needs.’

a joint approach, but you each bring complimentary assets.’

Moreover, believes von Peter, the sector is going to change over the next to five to ten years ‘towards a more integrated approach between donations and social investment’. It will become ‘a lot more interdisciplinary. The clients will want a mixed portfolio, especially the ones who are entrepreneurial, which is the majority.’ This will throw up a whole new range of legal and fiscal questions ‘and the client wants one stop, not necessarily somebody who can answer all the questions, but someone who knows how they can be answered. Clients don’t want to run around to 15 organizations; they want trusted advice, and referrals from people they trust.’

Another thing, she adds, ‘we are the tip of the iceberg. There are millions of people out there who are giving without any advice because we have not been good enough at making the point that money going into the sector can be made more efficient.’ Too many? Too bossy? A US non-profit magazine called Blue Avocado recently suggested1 that:

doesn’t always come naturally to philanthropists. The adviser, he believes, can help to ‘establish a constructive relationship with the recipient and through that partnership help them to improve, insist on results and ultimately ask some tough questions. In some cases, recipients have asked us for advice based on what we have seen in other parts of the world or in other sectors. We are happy to provide any guidance that can help them maximize their impact, as it not only benefits them but also the beneficiaries they are trying to help. In the end, I think everyone benefits.’

‘in the blink of 15 years, we’ve gone from a time when there was hardly any nonprofit infrastructure Both rebut the idea that the support to one where it feels as if philanthropy advice market is the infrastructure – we coined the swamped. On the contrary, they term Philanthropic‑Consultant both feel that, in continental Industrial Complex – outweighs Europe at least, the infrastructure the nonprofits doing the actual is still far from where it needs work. Even more than the money, At Beyond Philanthropy, she to be in order to meet the needs the philanthropic‑consultant says, they had decided against of philanthropists. There are infrastructure is changing who’s specializing in impact investment the very big consultants in the running the show: rather than because ‘if you want to build US, like Arabella and Rockefeller supporting nonprofits, foundations up a real capacity inside an Philanthropy Advisers and FSG, organization you need at least one and consultants are increasingly and advisory services run out telling nonprofits what nonprofits or two specialist teams and that of banks and wealth advisers. should be doing.’ would be crazy for either Social Then there are the individual Is this a picture that von Peter and Investors or us because we are practitioners, what Frick calls the Frick recognize? more on the navigation side’. You ‘Mom and Pop shops’ (‘or rather need access to the right resources It’s more a case of mediating and Mom or Pop shops,’ corrects von but they don’t need to be in house. getting both around the table Peter). However, there are almost ‘We want to work with others who than telling non-profits what no medium-size philanthropy are specialist in impact investing they should be doing, thinks von consulting practices in Europe of, so we can offer the client better Peter. Previously, the NGO-donor say, half a dozen people. ‘I think experience.’ Social Investors relationship was more focused on there’s a tremendous challenge Partners, says Frick, is ‘co-located the exchange of money. There was out there,’ says Frick. ‘We want with two other companies that no real willingness to enter into to make this work but it’s a truly have large venture funds in a true partnership. ‘Advisers have entrepreneurial challenge . . . impacting investing . . . we’re been helping donors and NGOs and I think the jury is still out if building around us an ecosystem engage a lot more and I think we can actually create players in and a group of individuals that that is for the benefit of the sector this space that truly matter on a truly know how to go about this.’ overall if done in the right way.’ larger scale.’ Von Peter concludes: ‘I think we’ll Frick agrees. What he calls ‘active 1 Blue Avocado Editor’s Notes, 11 November see a lot more of these strategic donorship’ plays a crucial role in 2011: partnerships where you work nthropic-consultant-industrial-compleximproving and maximizing the together based on joint values and impact of non-profits, but this role editor-notes-issue-74

Alliance  Volume 17 Number 1 March 2012


Investors’ perspectives

From acorns to oaks Building on the success of its sister organization, the European Venture Philanthropy Association (EVPA), in Europe, the Asian Venture Philanthropy Network (AVPN) is developing the venture philanthropy movement across the Asia Pacific region. Currently recruiting founder members ahead of an official launch later this year, it ran a series of roadshow events last year in Mumbai, Singapore, Hong Kong and Tokyo. Alliance asked AVPN chair Doug Miller and CEO Simon Chadwick what they see as the critical challenges for the adoption of the venture philanthropy approach in Asia and how much progress they have made so far. Venture philanthropy started in the US, and the EVPA has been hugely successful in Europe. Why Asia next? DM When we started EVPA, the idea was to do a roll-out on a global basis, so once EVPA was up and running we would go to the next market, which, logically, was Asia. It’s a very dynamic market where people are early adopters of new ideas and they have both philanthropic capital and social issues to address. Doug Miller is chair of AVPN and Simon Chadwick is CeO. emails and

What countries are you going to be starting in? SC We have been researching the market for the last two years and expect venture philanthropy to grow more quickly where it is already being practised. That means India, Hong Kong and Singapore, with the next largest countries being China and Japan. From the research we’ve done, there are around 200 organizations that are active supporters of venture philanthropy in Asia and about 40 or 50 practitioners.

One of the topics of the AVPN roadshow was applying venture philanthropy to grantmaking and impact investing strategies. How does it apply in each case? Do you see the most interest coming from grantmakers or impact investors? SC Venture philanthropy is a method for selecting investments and actively engaging with them for several years. You can apply that method to grant funding for non-profits or debt and equity for social enterprises or social businesses. What’s interesting in Asia is that there’s a very dynamic trend towards social enterprise, which is often being encouraged by governments. We have a lot of interest from people who are not looking at established not-for-profits but at organizations that have a social mission and are able to take investment. The rise of impact investing is creating a lot of interest in the venture philanthropy approach. Is lack of deal flow going to be a problem? SC Because social investing and venture philanthropy are relatively new in Asia, there is limited deal flow at the moment. Currently, practitioners may typically be doing two or three transactions a year, but are having to develop a very wide deal pipeline to support that. We expect this to improve as venture philanthropy and its practitioners become more visible. One challenge is to help social enterprises and charities become more familiar with what a venture philanthropist is looking for and the support VP can provide.

You work across both grantmaking and investments. Do you think deal flow will be more of a problem on the investment end of the spectrum than at the grantmaking end? DM The NGO sector has been around for many, many years and social enterprise for maybe ten years or so, so it’s only natural that you’d have a lot more deal flow on the non-profit side. But social investment is starting to take off. We saw more or less the same thing in Europe. Deal flow in both non-profit and social enterprise is challenging because you’ve got to find the right management teams and the right products and services. The promotion of venture philanthropy will help the impact investing deal flow in these countries because a lot of social enterprises need grant funding and capacity support for the first three to five years of their development. What are the other challenges to developing venture philanthropy in Asia? SC First, I think the key challenge is educating a far broader group than is currently involved in venture philanthropy. We’ll be offering examples of the way VP organizations work in Europe and in Asia. Once potential VP funders see others active in their country or the region, they will begin to think about how they themselves could become active. Second, one of the critical challenges is engaging enough people to bring their experience and talent to the process of selecting promising, fast-growing social enterprises and charities, and then working with them on a pro bono basis. For Asia, that’s

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opinion Investors’ perspectives

We’ll have to focus all of our energy and resources on Asia for at least two years. But in 2014 or so, my best guess would be the Middle East and Africa next.

a very new way of providing philanthropic human capital. Is there a shortage of people willing to invest? SC I think there is a lot of available capital in Asia. What’s missing are the teams and people with sufficient grasp or experience of venture philanthropy to start deploying it. So you will see relatively small investment amounts and small funds at the moment. Our job is to promote the sector and to help by training in best practices. How important is it to develop commonly accepted ways of measuring social impact? DM I think it’s absolutely crucial because what we’re trying to do is to improve the efficiency and effectiveness of the sector. But you need to keep measurement simple and relevant to the work that the individual management teams are doing. With EVPA, we found that a lot of the academic work around performance measurement is not feasible with small teams. The other thing is that if a philanthropist has limited capital, you need to come up with some form of measurement that lets you know where to allocate it. Each investment is different. You agree with the management team what the parameters should be, how they should be measured, when they should be measured and the effort that that’s going to take. The objective is to improve the team’s performance. Does AVPN have any members yet? SC We do. We soft-launched at the beginning of December. One member applied on the day we sent out the invitation and we have been having a steady flow

Alliance  Volume 17 Number 1 March 2012

since then, but it’s too early to talk about numbers. We want to have a strong and representative group of founder members across the countries where we see a lot of activity already. We hope to have around 60 members by the end of March. The EVPA began with 14 members in 2005 and now has over 140. What are the next steps for AVPN? SC We plan to engage our members through a series of events in key Asian cities. We will be holding roundtables for members and their guests for sharing information and experience and also seminars to promote VP more generally. Our big event will be a regional conference in early 2013. We will be publishing some research reports and how-to guides, bringing in case studies from Asia as well as relevant content from the EVPA Knowledge Centre. After Asia, where next? DM We worked on EVPA for almost six years before we launched AVPN. We’ve been doing research on the Asian markets for almost two years, so it’s my belief that we’ll have to focus all of our energy and resources on Asia for at least two years. But in 2014 or so, my best guess would be the Middle East and Africa. It seems like Africa is presently where there’s the most interest. Ever since venture philanthropy has been going there have been comparisons with venture capital. Usually they have fallen down, often because there is no real exit in venture philanthropy. If you extend venture philanthropy to impact investing, does the comparison become more valid? DM Both VC and VP start with extensive due diligence and

longer-term investment and then go on to capacity building and the human capital inputs. But they diverge in two areas. One is that as a venture philanthropist you don’t own these non-profits so your degree of influence is based on personal rapport and alignment of interest. With venture capital you have a significant ownership share and can change management if it’s required. The other major difference is that with venture philanthropy you usually don’t gain financially from your exit. You are actually passing that organization on to another funder. The organization is in a much stronger position than they were when you started, and that’s how you define success. As far as impact investing goes, the market is not yet developed enough to see whether you can produce the financial return and the social return that everyone is shooting for. Even in the UK, where the market is more advanced than elsewhere, it’s still early days. In the venture capital sector you lose 50 per cent of the investments that you make and the other investments produce the return. The upside on a successful venture capital investment might be a multiple of five to ten times your capital or more, and that’s very unlikely to happen with a social enterprise. The very positive thing about social enterprise is that it’s much easier to scale an organization if it’s cashflow-positive and it’s not always out fundraising. You can recycle capital back into the business. AVPN encourages supporting both non-profits and social enterprises. For more information


Bread, freedom and social justice

solutions, local people can develop their own solutions based on their perceptions of need.

Zina Jardaneh pointed out that this approach implies a human rights dimension that cannot be ignored. In barry Knight Tahrir Square, people chanted ‘Bread, freedom, social justice’. Since this is what people want, this is what foundations should support. This implies an agenda Philanthropy in the Arab world can never be the same again. based on inclusion and equity, both of which are No longer will it be possible to smooch up to authoritarian lacking in the Arab region. Despite the considerable governments by performing charitable acts. Foundations will have wealth in the region, it is not shared fairly, with large to play their full part in the transitions to peace and democracy disparities both between countries and within the by supporting civil society and governance reform. That was the same country. Young people have few employment central message of the Alliance Breakfast Club, held to follow up prospects and there is discrimination against women the December issue of Alliance on ‘Responding to the hopes of the everywhere. The transition has to address these issues Arab Spring’. and develop open and tolerant societies where people, regardless of race, ethnicity, religion or other characA three-person panel composed of Atallah Kuttab, teristics, can play a full part in economic, social and guest editor of the December special issue and founder chairman of SAANED, Zina Jardaneh, a board mem- political life. ber of the Welfare Association, and Salah Khalil, an This implies a secular approach to philanthropy. Egyptian businessman and founder of the Alexandria Atallah Kuttab said the label ‘Islamic philanthropy’ Trust, were united in their optimism that the tran- confused him. ‘Religion is about me and my god, but sitions will take root. Although they acknowledged the country should be for everyone,’ he said. It follows Barry Knight is risks, such as the potential for prolonged civil conflict that the values that underpin the development of the Secretary to Centris. and the rise of radical Islam under leaders unwilling country should be based on respect for all. Women email barryknight@ to share power with secular political parties, the have played leading roles in the transition, and should panel felt that democracy and peace will eventually play leading roles in societies after the transition. It prevail, and Arab states will join a community of is also important to encourage young people’s leadenlightened peers. ership for it is the coming generation that will drive Speakers were in no doubt that philanthropy has a vi- reforms through. tal role to play. At the same time, it will have to raise its game to realize its full potential. People from the audience cited difficulties in the way that philanthropy had performed in earlier transitions in Central and Eastern Europe. Following the collapse of the Berlin Wall, foundations had typically rushed in, funded initiatives without understanding local culture, and rushed out again leaving their grantees high and dry. There is now much experience of grantmaking that suggests that success is delivered by building local capacity. In the Arab region, however, there is little respect for foreign funders, because they have typically pursued their own political agendas, got too close to repressive regimes, and ignored the wishes of local people.

The diaspora is an important dimension. In many European cities, Arab populations make up a significant minority, and London has long been a capital of Arab culture. The meeting saw great value in harnessing the power of the diaspora. Although there are elements of fear and apathy about getting involved, there are also signs of much more engagement and money is beginning to flow. European foundations can form partnerships with diaspora communities, and strengthening their hand in working for the benefit of the region could be a particularly strategic approach, both in terms of transitions in the region and in terms of encouraging harmony in Europe.

The issues discussed at the breakfast meeting are being taken forward by the Global Philanthropy People at the meeting felt that foundations should Leadership Initiative (GPLI), which has developed a strengthen the hand of local people. Salah Khalil ‘Road Map for Peaceful Transitions in North Africa and explained how the Alexandria Trust is developing a the Middle East’. new generation of citizens who can act as informed For more information citizens. This is a good model for foundations to sup- For more on GPLI, contact Sevdalina Rukanova at the eFC at port because, rather than developing off-the-shelf

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Bringing community philanthropy to the next stage barry Knight

Over the past year, the Aga Khan Foundation (USA) and the C S Mott Foundation have consulted the field about how to develop community philanthropy. A new report, The Value of Community Philanthropy, suggests ways of transforming the relationship between donors and beneficiaries to improve the effectiveness of development aid. Barry Knight facilitated the consultations on community philanthropy. email barryknight@

The report is based on a series of consultations in Washington DC, Johannesburg and Dhaka designed to examine the value of community philanthropy as a means of contributing to the sustainability of civil society and supporting the effectiveness of development aid. At the start of the consultation, the general trend did not appear to bode well for such a development. Most foundations now favour a top-down approach, deploying large amounts of money in big grants to solve big problems with specific hard outcomes as the desired results. The rise of ‘philanthrocapitalism’, which takes concepts and techniques from venture capital finance and high technology business management and applies them to achieving philanthropic goals, has reinforced this approach’.1 The consequence is that a focus on ‘soft outcomes’ in ‘community’ has largely disappeared from the mainstream agenda of large foundations. A new generation of activist foundations During the consultation, however, it became evident that, as local neighbourhoods across the world face up to the challenges of climate change, economic recession, retreat of the state and mounting inequality, there is an upsurge of citizen engagement. This has spawned social enterprises, social movements, protest groups, women’s funds and hybrids that defy easy classification. A new generation of community foundations is part of this trend. Shaped by their particular context and driven by their desire to have their own independent assets, examples include the Community Foundation of South Sinai, Amazon Partnerships Foundation in Ecuador, and Ilha Community Foundation in Mozambique.

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Some have been on the frontlines of democracy building, as in the case of Waqfeyat al Maadi Community Foundation in Egypt, and in changing mindsets, as with the Dalia Association in Palestine. The trend is not restricted to the developing world: a new generation of community foundations in the US is also pioneering a participatory approach. Examples include the Black Belt Community Foundation in Alabama and the Foundation for Appalachian Ohio. Although many of these developments are new and small, and take different organizational forms, what makes them important is that local people are both taking the lead and contributing their own money in favour of an inclusive and equitable society. This new generation of community foundations plays important interstitial roles, building trust between people and institutions, harnessing the power of small grants, building constituencies among people who are oppressed and marginalized, and negotiating the territory between such marginalized groups and governments. They are ‘activist foundations’. A new relationship between donor and beneficiary From the perspective of development agencies, the fact that local people contribute their own money is a game changer. It breaks down the hierarchy between donor and beneficiary normally found in development aid relationships. Tewa, for example, which was formed specifically to break down that hierarchy in Nepal, now has 3,000 local donors, which guarantees local ownership of the institution. That local people invest in their own development undoubtedly increases the chances of long-term sustainability. In contrast to many NGOs where donors effectively own them, this confers legitimacy in a way that no amount of external funding ever could. For the development agency, community philanthropy is an attractive option because it builds on what is already there. There is evidence that an ‘asset approach’ (using what we have to build what we need) is more effective than a ‘needs approach’ (focusing on problems that need to be fixed). Borrowing a metaphor that the Sabanci Foundation uses to define its work, developers should be ‘farmers’ (nurturing the ground and reaping the harvest in the fullness of time) rather than ‘hunters’ (finding the prey and bringing it back home immediately). In sum, community philanthropy enables a new relationship between ‘top-down externally based resources’ and ‘bottom-up internally generated resources’.


Moving to the next stage Having agreed the uniquely important role that community philanthropy plays in sustaining civil society, and could play in improving the effectiveness of development aid, the consultation moved on to what needs to happen to realize this potential. The main requirement is to join up parts of the field that are presently disconnected, specifically to combine the best features of community philanthropy and international aid to make development more effective. People worked on practical ways in which community philanthropy could gain recognition as a valuable, necessary and legitimate feature of development practice. They concluded that there are five prerequisites relating to evidence, legitimacy, partnerships, roles and communications.

communities and with public authorities and building bridges between them. Roles To find complementary roles for different actors to ensure the sustainability of civil society and the effectiveness of development aid. Community philanthropy offers a means of addressing dependency in communities, which tends to occur when the main actors are development agencies and professional NGOs. NGOs need to rediscover the principle of voluntarism, and funders need to support the development of community philanthropy. Communication To develop constructive engagement using plain language. The consultations suggested that communication should form a key part of an engagement strategy with a wide range of development actors. Much of the field building of community philanthropy has involved the field talking to itself rather than making the right connections with agencies able to bring the field to scale.

Evidence To apply clear definitions and use more rigorous metrics and data analysis to demonstrate what works. Such an approach has not been a high priority and this needs to change. One of the reasons that the field of community philanthropy has not established itself properly has been its inability to sell itself in terms understood by economists. Community philanthropy needs to establish itself as an essential requirement of good development, not a desirable extra. Legitimacy To mobilize a critical mass of people as part of a process of participatory democracy in favour of the common good. The field has tended to see its own activity as sufficient justification without demonstrating the legitimacy of that activity. It is important to showcase good examples such as the Kenya Community Development Foundation, which has been a shining beacon of propriety in the 14 years of its existence, providing small, strategic grants and advice to organizations like the Makutano Community Development Association, whose legitimacy is ensured by wide community ownership of its actions, guaranteeing the accountability of leaders to the wider community. Partnership To join top-down efforts with the views of beneficiaries so that different interests see what they have in common, particularly by developing horizontal relationships between community organizations. We can learn from the example of the Community Foundation for Northern Ireland, which has used external money from aid agencies to bring together divided communities while connecting both with marginalized

1 Matthew Bishop and Michael Green (2008) Philanthrocapitalism: How the rich can save the world, Bloomsbury.

Developing a programme A programme is currently being devised to tackle these issues systematically and approaches are being made to a number of different funders to take it forward. The Global Fund for Community Foundations will play a part alongside other global partners to ensure that the practice of community philanthropy becomes mainstream. The main outline priorities for the programme are: X Map successful community philanthropy activities and learn what works about them to strengthen the evidence base of the field. X Strengthen the international infrastructure for community philanthropy, paying particular attention to organizations like the Global Fund for Community Foundations. X Support the development of regional networks of community philanthropy organizations and leaders, especially in Asia where the infrastructure is weak. X Support good practice examples in community philanthropy that have potential for learning and demonstration. X Influence international development donors to support community philanthropy. For more information to download The Value of Community Philanthropy, go to

Alliance  Volume 17 Number 1 March 2012


Focus on . . .

Resilience investing

A decade for the Earth’s security alejandro Litovsky and dana Lanza As this special issue of Alliance goes to print, record droughts in Mexico and the Horn of Africa are affecting millions of people. The failure of harvests, along with higher food prices, raise fears of famine, mass migration and political instability. 2011 was another year of records for extreme weather events, wreaking havoc in places like Australia, Brazil and Thailand – with up to US$45 billion worth of damage in Thailand alone. Seven countries had all-time temperature highs: Armenia, China, Iran, Iraq, Kuwait, Republic of the Congo and Zambia. Two new protagonists in this arena – re-insurance companies and military forces – are each in their way looking at climate change as a defining factor of risk and instability. Water availability and food security top the agenda as possible drivers of political and economic risk. Alejandro Litovsky is founder and director of the earth Security Initiative. email alejandro@

Dana Lanza is CeO of Confluence Philanthropy. email dana@confluence

But the resilience of our food system (its capacity to cope and adapt to these changes) is not just affected by climate change. It is also critically affected by the loss of biodiversity and by desertification. These three trends – climate change, biodiversity loss and desertification – are interconnected in rather straightforward ways. In 1992, the Earth Summit in Rio de Janeiro devised three separate UN conventions to deal with these global problems. This year sees the 20th anniversary of that event. Despite some positive developments, we have consistently failed to take decisive action on all three accounts. The world will gather in Brazil in June to celebrate ‘Rio+20’, where an optimistic focus on a ‘green economy’ could disguise the unprecedented risks we face. As fragile ecosystems, food production, water availability, health systems and shelter are set to become strained in many regions of the world, we believe that building resilience is about to become a defining principle in everything we do: from the allocation of capital and investment to the management of natural resources, economic supply chains and human

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settlements; to basic accounting principles in business and government. We have coined the term ‘resilience investing’ not as an attempt to create another buzzword in an already jargon-heavy sector, but rather to initiate a discussion of how the impact investing sector, and the philanthropy world at large, can now embrace the notion of ecological and resource limits and resilience as a central way of defining its ‘impact’. We identify three ways in which this agenda can now develop, and have invited a broad range of contributors to this special issue of Alliance to provide their views. First, to translate data on ecological trends in such a way that investment by countries and companies is increasingly guided by resilience indicators’. Second, to direct investment to proposals that build the resilience of communities and ecosystems in critical regions. And third, it is especially critical to reallocate capital to influence industries that are accelerating the loss of our resilience, in areas such as energy, food and agriculture. A spotlight on commodities Global investors and an agribusiness industry that is driven by global commodity markets are not helping to manage these long-term risks. According to investment analysts, the now decade-long climb of commodity prices (see graph) is likely to continue given a growing demand for raw materials pitched against the reality of limited resources.

focus on resilience investing

A shift is underway where international investors perceive that owning what grows on the land – or better still, owning the land itself – may be a safer hedge against the risks of more volatile financial markets. For asset management funds in London and New York, fertile land is becoming (in the words of a London-based fund manager) the ‘new gold’. But for countries like China and Saudi Arabia, where water scarcity is already compromising domestic food production, ensuring the steady supply of resources is a matter of national security.


A decade of rising commodity prices These two trends combined are resulting, for example, in large-scale acquisitions of land in regions where the soil is still fertile and water is still available. In sub-Saharan Africa alone, in just 10 years over 100 million hectares have been reportedly leased to investors for agricultural development by host governments often accused of ignoring the interests of communities living on their ancestral lands. In places like Sudan, Mozambique and Ethiopia, land deals are raising widespread concerns over forced evictions and social vulnerability. In the process, a new geopolitical map is being drawn. This pressure for access to resources will continue to challenge the protection of forests, wetlands and, in the case of fisheries, the oceans.

Pakistan flood from above. By mid‑August 2010, the extreme monsoon floods that had overwhelmed northwestern Pakistan had travelled downstream into southern Pakistan. The top image, acquired by NASA’s Landsat 5 satellite on 12 August 2010, shows flooding near Kashmor, Pakistan, just before the second wave of the flood hit. The lower image shows the region on 9 August 2009.

A decade‑long rise in commodity prices: the great paradigm shift 100 33 Commodity Index World War II Effect

World War I Effect

Post‑war Depression

Great Depression

Great Depression Part 2

‘The Great Paradigm Shift’

Inflationary Oil Shock

–1.2% Annual Decline ???

10 Jan 1900






Source GMO, as of 28 February 2011







Upgrading country risk profiles In this special issue of Alliance, Major General Muniruzzaman (Retd) from Bangladesh’s army explains why the military in developing countries is paying growing attention to climate change and resource scarcity. As many as 25 million Bangladeshis are likely to be forced to migrate due to rising sea levels, soil degradation and desertification in the next 40 years, according to the Intergovernmental Panel on Climate Change’s conservative projections. The problem stems, among other things, from the unsustainable use of rivers across the Himalayan basin, aquifers and soil. For the government, security concerns include the growing tensions over a (now militarized) Indian border, and the limited capacity of the state to cope with a perfect storm of pressures on its water, sanitation, health and food systems. Despite millions of dollars being poured into Bangladesh in aid funding, very little of it seems to focus on building this type of resilience. Haiti, for example, shows what the consequences of losing ecological resilience may look like in practice. The loss of Haiti’s forest cover due to deforestation is a well-documented factor in the devastating effects Alliance  Volume 17 Number 1 March 2012



of the earthquake, the inability of the soil to retain water and the collapse of its food production capacity. It will take many decades for Haiti to recover. For countries like Pakistan, the US Army contends, high deforestation rates are raising its vulnerability to extreme floods, further stressing an already volatile region. In fact, most of the areas that have a strategic military importance to the US, from Afghanistan to the Arctic, are facing some kind of ecological stress that could amplify security threats. The collapse of fisheries off the coast of Somalia due to overfishing by foreign industrial fleets is now understood to have been a critical driver that turned fishermen to piracy. The Horn of Africa is a neuralgic point for the world’s trade routes. With now over US$2 billion invested in counter-piracy naval operations, the stewardship of fisheries by the Somali government could have been a more cost-effective measure. However, neither the UN Security Council resolutions nor the naval interventions consider rebuilding the fish stocks as a long-term solution. The new security threats we face due to the Earth’s limits cannot be dealt with using traditional defence solutions. The article by Joshua Reichert, which talks about a mission to establish very large-scale marine protected areas, should also be read against this context. The case of Somalia suggests how we could connect an increasingly important ocean security agenda with an urgency to protect marine resources. For most countries around the world, the substantial risks posed by the loss of natural capital are not Alliance  Volume 17 Number 1 March 2012

USS Chosin, the flagship of Combined Joint Task Force 151, a multinational task force established to conduct counter‑piracy operations off the coast of Somalia, patrols the Gulf of Aden.

military but human and economic, and are not properly understood. This ranges from the loss of topsoil in Australia to deforestation in Amazonia, where the reduced rainfall will affect Brazil’s electricity generation sector, 70 per cent of which depends on hydropower. Drawing attention to these risks is a first step to mobilize capital in the right direction and create short-term political incentives to act. Risk rating agencies, on whose opinion most large investors base their decisions, do not take ecological and resource limits into account in the rating of country risk. According to a recent report by the Earth Security Initiative (ESI), failing to manage natural assets – from soil nutrients to freshwater – must be more closely correlated with a country’s long-term stability, competitiveness and security. One of the areas where we see this being played out, which may be a ‘make-or-break’ for biodiversity, human rights and resource limits, is the global rush for farmland. The ESI is now convening a group of investors to seek to influence the calculation of sovereign risk ratings in financial markets and its effect on politics. We see future risk indices incorporating data and information on how well countries are managing issues like water limits, soil erosion and land rights. We also envision new coalitions being formed to advance a security agenda where responses are concerned with building resilience. The availability and transparency of information is vital to plan for resilience and to influence the underlying politics.



Considering natural capital in the production of food. Growing sweet potatoes in the Ngurumo Village in Kenya.

We see hope in the fact that main- Investment capital must stream investors are beginning now begin to move towards to understand, for instance, how issues like soil erosion may jeop- projects that increase the ardize agricultural investments. resilience of ecosystems For investor Jeremy Grantham, the and communities and away co-founder of a fund that manages US$93 billion in assets, soil erosion from those that compromise figures among the main concerns our long‑term security. in commodities investments. ‘In Australia,’ he wrote recently, ‘where records go back into the nineteenth century, it is clear that more than 70 per cent of arable land has been degraded to some considerable degree. For the planet as a whole, soil losses are certainly higher than replacement, and for some areas, notably in Africa, they are disastrously higher.’

family farming in Africa. Mburu sees the continued support for ‘Green Revolution’ solutions as a negative trend. For a few decades, this boosted agricultural productivity by relying on the heavy use of chemicals, mono-crop intensive cultivation and reduced seed diversity. But precisely these factors now threaten to do away with biodiversity and natural nutrients, on which the food system ultimately depends for resilience to extreme weather events. A less diverse system is a less resilient system. Preserving soils through traditional means and looking to indigenous seeds and small-scale agriculture derived from Africa’s own biodiversity, says Mburu, must be seen as a resilience strategy, focused on both feeding a growing population and adapting to climate change.

In some cases, as with water limits in given regions, the data already exists but its ‘translation’ from science to investment and politics is weak. The Earth Security Initiative is working with Confluence Philanthropy, a membership network of foundations that seeks to inspire committed funders to align the investments of foundation assets to their missions. We now see an opportunity to jointly create an informed discussion on how to strategically allocate foundation assets within a paradigm of resilience.

Ecological limits are forcing farmers everywhere to acknowledge the importance that a healthy environment has on long-term agricultural productivity. For example, sustaining the microbial diversity of the soil through organic farming methods not only boosts soil fertility, but also helps retain water and sequester carbon dioxide. The article in this special feature by Eko Asset Management and the David and Lucille Packard Foundation envisions a virtuous cycle between agricultural productivity, investment and carbon dioxide sequestration.

Natural capital as a factor in investments Part of this paradigm shift means viewing the fertility of the soil and the diversity of supporting ecosystems as natural assets that must be taken into account by investors in agricultural projects, as well as those funders supporting food security policies. In an interview in this special feature, Gathuru Mburu of the African Biodiversity Network (ABN) sees a failure of governments and foundations to recognize the role that biodiversity plays in the resilience of

Enter impact investing Investment capital must now begin to move towards projects that increase the resilience of ecosystems and communities and away from those that compromise our long-term security. A wave of experimentation is currently underway, from solar and wind energy to organic farming and new ideas to monetize the value of standing forests as offsets to carbon emissions. As with most experiments, these solutions are not without risks and unintended consequences. w Alliance  Volume 17 Number 1 March 2012

Madhubani community restarts livelihoods after the Bihar flood in August 2007.

The article by Sergio Oceransky, founder of the Yansa Group in Mexico, describes how the interests of large-scale capital investment groups in wind power in Mexico may have negative impacts on indigenous communities and social sustainability, where land is owned communally. ‘Conventional risk and return concepts,’ argues Sergio, ‘cannot be applied uncritically to investments in “life-supporting assets” in territories inhabited by disadvantaged communities.’ Yansa Group is developing utility-scale community wind farms where communities are the owners of the capital. The idea that equity remains fully in the hands of the community could make many ‘impact investors’ uncomfortable, but their support is needed to advance this model. We welcome this cognitive dissonance, which could help increase the sophistication of the impact investment sector. As with other groups pioneering these capital ownership models in Latin America, this can be ammunition for a real ‘capitalist revolution’. Equity, after all, means both ‘social justice’ and ‘capital ownership’ and these two definitions, we think, could be critically interconnected. On the other hand, the interview with Arnold Schwarzenegger, former Governor of the State of California, suggests that where national governments are slower to commit, regional governments can step in to play a catalytic role in encouraging more investments in renewable energy. Schwarzenegger is the founder of the R20, a coalition of regional governments seeking to take immediate action on climate change. Thinking in terms of regions can provide a new way to aggregate investment opportunities. In Alliance  Volume 17 Number 1 March 2012

five years, Schwarzenegger hopes to see at least a quarter of the world’s economy represented by R20 members. Who will provide the finance? For Ben Caldecott of Climate Change Capital (CCC), one of the world’s first funds dedicated to low-carbon investment, planetary resilience depends on unprecedented levels of infrastructure investment in clean energy. But this will not happen, he argues, without the availability of low-cost capital below market rates. To address this, he has been working to create a series of self-sustained ‘perpetuity funds’ that provide loans for clean energy projects with better terms and interest rates than those available on the market. Fixing the markets to encourage these investments may require smart coordination. Carl Mossfeldt of Tällberg Foundation describes the work he has been doing with the Self-Employed Women’s Association (SEWA), a social movement of 1.3 million women in India, to develop an operation that will involve the sale, distribution and technical service of close to half a million efficient cooking stoves and solar lights by leveraging SEWA’s networks. The recipe for the deal has involved European funders; it is financed through a domestic commercial bank loan of US$14 million, repaid through micropayments and backed by a public guarantee. These experiments are among the hundreds of people and investment funds playing into more sustainable markets which may include new models of waste management, recycling and ‘cradle-to-cradle’ industrial innovation, architecture, water conservation, sustainable agriculture, clothing, transport and so on.

focus on resilience investing

While people may think about extreme weather events instinctively in terms of aid to help recovery, the contribution from Mihir Bhatt from the All India Disaster Mitigation Institute (AIDMI) reminds us that this seldom increases the resilience of vulnerable people. Less than 1 per cent of India’s population is insured against extreme weather disasters. AIDMI has devised an insurance Humanity is only beginning policy for vulnerable communities, to understand how much which provides a comprehensive cover against disasters for as little it depends on nature’s $4.50 per year, with potential ben- capital (a stable climate, efits of around $1,560. The scheme rainfall and freshwater, has already reached thousands of people throughout India. We see oxygen, fertile land, etc) in impact investors stepping in to order to survive . . . A new scale up insurance programmes as paradigm of investment in a part of this agenda.

resilience must take root in


Reallocating capital the philanthropy and social The transition towards a resilience paradigm does not only depend investment community. on finding new niches to allocate progressive capital. It also depends, perhaps more importantly, on reallocating existing capital to influence those industries that are eroding our resilience. This ranges from the active shareholder power that individuals may have on companies building coal-fired

energy plants to diverting public subsidies that are sustaining practices like overfishing, the rapid clearing of forests or food-based biofuels. Philanthropic foundations have a critical role to play. The public subsidies that sustain overfishing may be one of the ‘make-or-break’ obstacles to their sustainability. The interview with Kristian Parker, Chair of the Oak Foundation, touches on what it may mean for funders to engage with these topics, by funding advocacy and taking more risks. His work increasingly considers shifting to places where new political visions are more likely to emerge, like Brazil or China, and where there may be more openness from political champions to understand how losing natural capital may threaten the security of a nation. We are also encouraged by the new generation of philanthropists who are bringing new energy to the sector. ‘We are inheriting the responsibility for the stewardship of money,’ says Sonja Swift of the Swift Foundation in her contribution to this special feature. She suggests that foundations may in fact be key players in accelerating the reallocation of capital that we must now embark on: ‘Foundations need to put their money where their mouths are by shifting their focus from the 5 per cent – grants – to what they do with the much louder and larger 95 per cent: their endowments.’ Humanity is only beginning to understand how much it depends on nature’s capital (a stable climate, rainfall and freshwater, oxygen, fertile land, etc) in order to survive. One day, resource scarcity will incentivize entire new industries associated with greater efficiency. Today, however, it is accelerating a global competition for access to raw materials, increasing the pressure on forests, oceans and freshwater resources and eroding the very capital on which we depend. A new paradigm of investment in resilience must take root in the philanthropy and social investment community, as a way to ensure the prosperity of people and places around the world. We hope that this special issue of the Alliance will help set the tone and the direction for many more people and foundations to get interested in this agenda.

The Earth, taken by NASA’s most recently launched Earth‑observing satellite: Suomi NPP (4 January 2012). The picture has already been seen 3.1 million times on the Internet. Alliance  Volume 17 Number 1 March 2012



focus on resilience investing

Major General Muniruzzaman Interview

How does this matter to Bangladesh’s national security? The biggest threat we face is the loss of landmass, which is expected to result from rising sea levels. The IPCC 4th Assessment established that a sea level rise of just 1 metre means a loss of 17–20 per cent of Bangladesh’s landmass. When that happens, it is expected that anything between 20 and 30 million people will become refugees. The prime minister already refers to a figure of 25 million people, in the context of a high-density population (around 170 million people).

The growing attention of military forces to resource scarcity and climate change is changing the terms of the debate. What are the threats? Why is the military involved? Why is resilience so important? Major general Muniruzzaman (Retired), who has served in Bangladesh’s army for over 38 years, is among the leading non-western military voices in this agenda, now as founder and president of the Bangladesh Institute of Peace and Security Studies. In this interview with Alejandro litovsky of the earth When people being displaced move inwards, they Security Initiative he explains the issues, and why funders and put stress on a weak system. Bangladesh’s internal impact investors might want to start thinking in terms of security. regions are already under stress. The worst-case First of all, why is the military interested in climate change? There is an important distinction to make: the militaries of western countries see climate change as a threat to international security and stability, a so-called ‘threat multiplier’ in already conflict-sensitive regions. On the other hand, the military in developing countries like ours is looking at this from the perspective of being called to respond to extreme events within our borders and the security implications with our neighbours.

‘The first thing I think philanthropists should do is to cut across funding themes. . . . The security focus can help do that.’

In Bangladesh this is of special concern. Some 25 million people are likely to be internally displaced by rising sea levels and floods in the next few decades. This will put pressure on weak water and sanitation systems and weak food production systems, and possibly lead to the emergence of pandemics, famine and lack of shelter. Military assets are by far the most important assets we have to respond to these threats, for example in the ‘lift capacity’ needed to move large numbers of people from point A to point B. In Bangladesh the military has by far the largest field mobilization capacity to act on short notice, and will therefore be called to play multiple roles.

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scenario for Bangladesh, which has been identified by military analysts in the US, is of ‘state collapse’. This means you are facing climate-induced conditions on a large scale with multiple stresses happening all at one time on multiple fronts: food insecurity, lack of water, collapse of health and hygiene provision and rising pandemics, habitation shortages, loss of livelihoods – all obviously reinforcing each other. The state may be totally incapable of dealing with these simultaneous pressures.

Then there is the spillover migration across boundaries. In our case, the only possible route is towards India. We share a land boundary of 4,400 kilometres. Except for a small stretch shared with Myanmar, India is our only other neighbour. This border is already extremely hot and volatile. In anticipation of these impacts, India has decided to fence the complete border with Bangladesh, and has already fenced 2,500 kilometres. It is not an exaggeration to say that the Bangladeshi population is being caged. This border is also among the world’s most lethal, because Indian border guards continue to kill Bangladeshis who approach the fence. According to Foreign Policy magazine, between 2001 and 2009 Indian border guards killed over 1,000 Bangladeshis. The mass displacement of people expected will destabilize the delicate situation.

focus on resilience investing

In the US military’s simulations of the climate security scenarios, Bangladesh is a case in point. The US Assistant Secretary of Defense summed it up well when she said: ‘things can get really complicated really quickly.’ What sort of timeline are we talking about? According to the IPCC’s usually ‘Unless we can come up conservative projections, the with new regional plans loss of landmass due to rising sea levels may start anytime from we’ll be boxing ourselves 2050. We’re not very far away; into national boundaries many of the people who will have that aggravate the to cope with these risks have already been born. situation. In south Asia

I don’t see a regional How do you see these challenges playing out across south Asia? approach to the problem; A common misconception about quite the opposite, tensions internally displaced people is that over water resources are they can eventually go back to their homes once a crisis situation being escalated.’ has been solved. With the type of issues we are dealing with, in reality, most can’t go back. I’d like to call them permanently displaced people instead. Three or four years down the line, people displaced by cyclones in Bangladesh continue to live in very inhumane conditions. When people depend on nature, as is the case with the Sunderbans mangrove forests, they cannot support themselves when conditions in the forest change. This is playing out across south Asia. Pastoral lands in many parts of China are the same. Due to desertification in China, those people that depend on grazing cattle are becoming people on the move. In dealing with these risks, most countries tend to become inward-looking. The real problem is that most of the climate impacts will happen across borders and beyond a nation’s capacity to respond. For example, most of the trans-boundary rivers in the Himalayan plateau are being fragmented. Upper basin countries like China and India are building hydropower dams and diverting water and affecting lower-basin countries. This is the primary cause of the growing desertification of Bangladesh’s Ganges area, which in turn reduces our resilience to deal with the risks I mentioned. Why is the loss of resilience so important? This loss of resilience triggers the security impacts: agricultural production is being affected because of a lack of water for irrigation. As many subregions face

desertification, greater quantities of underground water are being withdrawn in a completely unplanned manner and aquifers are therefore being polluted with arsenic. The problem is extremely grave. The Lancet, a medical journal in the UK, calculates that 77 million Bangladeshis are already suffering from arsenic poisoning because of this. The World Health Organization calls this the largest mass poisoning of people in the world. The root cause is the growing desertification we face due to pressure over scarcer water resources. This is becoming a widespread phenomenon across all of south Asia. The second trend affecting water availability is salinity intrusion due to rising sea levels. As rivers have less force to discharge their waters, there is an inland movement of salt water into agricultural lands. There is a marked drop in food outputs due to the loss of land to saline conditions, as well as losing river fisheries in sweet water. Security analysts tend to think in terms of ‘hotspots’ of climate security. In this case, where should we focus our attention? Here the security hotspot is the Himalayan plateau. We must quickly agree to manage these trade-offs among the plateau’s nations. For example, Bangladesh shares 54 rivers with India, which flow from the Himalayan area. We currently have only one agreement for one of those rivers (the Ganges), which is not being well implemented. In the other 53 rivers there is a very low level of cooperation, which is horrifyingly dangerous. In the case of the Hindus, India is planning to build dams upstream that will affect Pakistan. India and Pakistan already have their ‘Nuclear Red Line’ to manage, and the broad fear in the region is that the issue of water may slip into the nuclear deterrence thinking in the subcontinent. There is also a new kind of tension growing between China and India, in particular driven by both countries’ energy security concerns. The Chinese, according to Indian perceptions, are planning to withdraw water from the Brahmaputra, plans currently denied by the Chinese. These perceptions are a symptom of the climate of tension we are living in around these issues. Climate change and melting glaciers are stresses on this already stressed situation. Unless we can come up with new regional plans we’ll be boxing ourselves into national boundaries that aggravate the situation. In south Asia I don’t see a regional approach to the problem; quite the opposite, tensions over water resources are being escalated. w

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focus on resilience investing Major general Muniruzzaman Interview

Does the greater involvement of the military mean a greater emphasis on conflict and war? I completely disagree with the alarm that is being raised in the NGO and academic community. I’m often asked this question: is this a new military excuse to get new toys? I have talked to militaries around the world and the reply is that their hands are full already, and they don’t want to take responsibility for issues they have little idea about. In places like Bangladesh, it is not the military driving this agenda but the government, which sees that its military assets will have to be involved. The problem is so large that states will struggle to cope. It will need a whole-state approach that defies our coordination capacities.



Flooded streets in the district of Satkhira in southern Bangladesh, where people travel by boat to reach the local shop.

How can philanthropists and impact investors help build the resilience of populations? We clearly need new ideas. There is a lot of foreign aid assistance flowing into Bangladesh, but very little of it is preparing for this agenda. There is therefore an opportunity for impact investors to make way into this agenda to develop and test new ideas.

The challenge is that the strategy planning for preparing for these interconnected risks is very weak. A strategic plan is needed in order to ensure the right level and type of involvement of the military. There is an ongoing debate on the issue of ‘securitization’ of climate change, mostly in academia. But whether we like it or not, climate-induced effects touch on the security agenda, especially as it challenges the overall failure of the state. However, the military is usually a very large and complex machine and can’t be equipped without proper foresight and training, the skill-sets required, etc. You need to make the military ready for a reasonable degree of operational success.

The first thing I think philanthropists should do is to cut across funding themes. There is funding for peace, funding for environment, funding for development, but there is little funding that is trying to work across these themes, and across nations. The security focus can help do that.

Can these tensions be resolved in a peaceful way? To maintain peace and cooperation we must look at this problem holistically, considering the resilience of the regional ‘ecosystem’, beyond national boundaries. The Himalayan cooperation system is a weak regional management system. It must be better at coordinating the various economic and demographic pressures that push water withdrawals. The usual channels of government funding are not going in this direction and there is therefore an opportunity for philanthropists that are more visionary about this agenda to seek to disrupt these processes and create a new momentum.

We know that 20 to 25 million people will be driven to become climate refugees in the next 40 years due to the loss of their livelihoods. A question that philanthropists interested in the environment should be asking themselves is whether the Sunderbans ecosystem can withstand climate changes and continue to provide protection against cyclones. If so, there should be a substantial amount of energy and money directed to that aim.

Importantly, we must work across boundaries. I see three areas of priority: first, water security and the framework for effective management of limits through cooperation. The second is to fully understand what the human security implications are from climate change in the region. Third, we must prepare to manage the displacement of people in a peaceful way inside and between nations. Right now these are topics of tension; we must view them as opportunities for cooperation and prosperity.

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One practical area is funding that can help create greater understanding across various actors of these trends and what they mean for particular subregions. For example, much of the funding that is going into the Sunderbans mangrove forests from foundations, even those that are funding the conservation of tigers, should be incorporating a security perspective.

This would also need to involve philanthropists interested in pro-poor development. Investing funds in building greater cooperation between nations like Bangladesh and India is also essential, and this is something that the funding earmarked for ‘climate adaptation’ doesn’t take into account. We need philanthropists to step in. Thinking in terms of security can help focus funders to deal with the interdependent priorities and to be creative regarding the responses we need. For more information Contact Major General Muniruzzaman at or visit to learn more about the action agenda, visit

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Arnold Schwarzenegger Interview Founded in November 2010 by governor Arnold Schwarzenegger and other global leaders, the R20 Regions of Climate Action is a coalition of regional governments determined to take action on climate change now, rather than waiting on national government commitments and global climate agreements. R20 founding chairman Arnold Schwarzenegger sees this as his ‘next crusade’, as he explained to Dana lanza and Alejandro litovsky. In five years’ time, he hopes to see at least a quarter of the world’s economy represented by R20 members – no mean ambition. Please tell us about the R20 Regions of Climate Action and how it came into being. As I reflect back on my tenure as Governor of California, I am extremely proud of all the many important things we were able to accomplish – most notably our efforts to put the golden state on track towards a green economy and to be the clean economy engine for the world.

The R20 is not just another NGO or network of regions, it is much more than that. It is a real coalition of forces which believe that climate change and green economic development can be tackled at the subnational level. The brilliant thing about the R20 and what differentiates us from other organizations is that we are a coalition made up of governments, finance, NGOs, academia, clean technology developers and business. This allows for us to develop a truly integrated action plan to develop a low-carbon, green economy everywhere. I want regional leaders to know – you don’t have to wait, you can join us. The R20 teaches regional governments about the different technologies that are available and connects them to the right companies. And we are aware that it isn’t just about the know-how, it’s about finance. There is tremendous opportunity for foundations, philanthropists, social/impact investors and others to be part of a real solution by joining this unprecedented group of partners.

The R20 is in a way a matchmaker – you bring the investment capital I recognized very early on that ‘I’m extremely optimistic or grant funding and we connect real action takes place at the state you to a willing government and that we can solve the climate and local level and I was fortunate technology partners that can to see first-hand that by bringing crisis and in doing so can successfully implement low-carbon together diverse stakeholders build a truly sustainable projects. I believe this is an we really do have the ability to approach that could be the catalyst global economy. It’s my transform our economy and fight for real change. Imagine removing climate change. next crusade.’ the barriers to bringing finance In November 2010, our third Governor’s Global to the picture and you will see the rapid deployment Climate Summit in California brought together of clean energy projects that will improve the global subnational governments from around the world economy, lower emissions and provide new jobs. and showcased their efforts to build sustainable The government members of the R20 are eager to economies and reduce our dependence on fossil open the door for investment in order to facilitate a fuels. After many discussions and through variety of projects like renewable energy production, first-hand experience it was clear to us that states boiler efficiency upgrades, waste-to-energy projects, and regions were rolling up their sleeves and and replacing old street lights with efficient getting the work done, and not waiting for action solar-powered LED lighting. at the national level. Talking to other governors and premiers, the UN, clean technology developers, Through the mechanism of the R20 governments will no longer have to walk away from important projects financial institutions and NGOs, it was agreed: a new organization needed to be formed to accelerate because they don’t have the financing. This is why I believe the R20 enables new, bold opportunities for this action. investors to really make a profound difference. w Alliance  Volume 17 Number 1 March 2012



focus on resilience investing Arnold Schwarzenegger Interview

You mention California as being an engine for the world’s green economy. Can you highlight some of the accomplishments that enabled the state to assume this role? California has a long history of implementing bold environmental policies and of course in recent years promoting a low-carbon economy. There have been many successful ‘You can have the best programmes in the state including project in the world but California’s visionary leadership if you don’t promote and on energy efficiency. I was fortunate as governor to continue market it the right way, no this tradition by implementing one will buy it.’ several groundbreaking efforts. For example, the Global Warming Solutions Act of 2006 was created not only to put a cap on greenhouse gas emissions but also to promote renewable energy development, alternative transportation fuels and even carbon trading, which all serve to boost the economy and create thousands of new jobs. Another major action I was able to take as governor was to sign an Executive Order which created a plan to expedite the availability of hydrogen fuelling stations and products that use hydrogen. The plan was developed through a collaborative process with input from more than 200 stakeholders from energy, auto and technology companies, environmental organizations and local, state and federal government agencies. In 2006 I also signed the Million Solar Roofs bill into law. This law was implemented to help California achieve the goals of building a million solar roofs in ten years and of making solar power a mainstream energy resource over the coming decade. In the US the issue of climate change has taken a back seat to the many other pressing issues, for example the economy and jobs. How do we fight climate change in the context of today’s economy? If we want to fight climate change, if we want a green energy future, we must do a better job of communicating. Too many environmentalists think the only way to fight climate change is to talk about melting ice caps and rising sea levels. These are important arguments but don’t always work. Some people can’t relate to them. Some people don’t even believe in them. We have to talk about things that matter to people. We should look at this like a four-legged stool; right now we’re using a one-legged stool. A one-legged stool is unbalanced. A four-legged stool is strong. The first leg is jobs. Who could be against this? The second

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leg is national security. For decades, industrialized democracies have been in the terrible position of having to purchase oil from foreign countries, sending vast amounts of money outside their borders. A green energy future would end this dependence and give us energy freedom. The third leg is health. Pollution kills. One study by Cornell University concluded that a staggering 40 per cent of deaths worldwide are caused by water, air and soil pollution. Why is there no uproar? Because we are failing to communicate – it’s our job to get that message out. And the fourth leg, of course, is climate change. You can have the best project in the world but if you don’t promote and market it the right way, no one will buy it. The R20 addresses all four legs of the stool. In partnership with the foundation and investment community, the R20 is well poised to be the driving force to take full advantage of new technologies in order to strengthen local economies, improve public health, create new green jobs, lower GHG and reduce our energy consumption. On a personal level, how did you gain an appreciation for these issues and what are the criteria for success looking forward? As a child growing up in Austria I acquired a great appreciation for the natural environment. I have carried this appreciation and passion with me throughout my life both as an actor and as governor. As governor, I was able to pass laws and inspire other states to expand the use of solar power and new technologies like hydrogen-powered cars. But I learned in my career as a bodybuilder and an actor that no matter how good your product may be, you have to get out there and promote it so that people embrace it and make it more popular. That’s how it is with clean technologies. You can pass laws, but you need to inspire people to buy the new technologies and show them why that’s a better way. Looking forward, within five years I would like to see at least a quarter of the world’s economy represented by R20 members so we can start to make a real difference. This is not at all unattainable. In the last year I have had the privilege to speak to groups all over the world about the R20. The feedback I receive is not surprising: people are recognizing that we have a formula that is focused on real action and real results. I’m extremely optimistic that we can solve the climate crisis and in doing so can build a truly sustainable global economy. It’s my next crusade. For more information

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Kristian Parker Interview The Oak Foundation is among the largest and most strategic environmental funders in europe. Over the past 15 years, its chair, Kristian Parker, has played a leading role in shaping Oak’s environmental agenda and has encouraged other funders to get more involved with issues like the sustainability of the oceans. In this interview for Alliance, he speaks to Alejandro litovsky of the earth Security Initiative and takes stock of his work so far. As environmental limits begin to suggest a planetary crisis, where should foundations go next?

jurisdiction is a main reason for this. But we are also seeing overfishing even in international waters, and this phenomenon seems to be strongly correlated to funding subsidies to large commercial fisheries for the fuel they use in their long journeys. What is ironic is that solutions for improved fisheries management are now well known. Some bright spots can be seen. For example, we have observed improvements in fisheries in the US after the passage of national legislation on this issue, and also in New Zealand and Australia. However, in Europe the situation is dire, and we are very concerned by the fact that the current Reform of European Common Fisheries policy, which is under way, will not lead to much progress. Among the developed world, Europe has one of the worst records on fisheries management, and it is truly a matter for shame.

The oceans, and now climate change, have a prominent role in your strategy. Why? In 1998 our family foundation was beginning to define its agenda for the environment. At the time I was doing my PhD in biology and marine ecosystems and I was given a fair amount of leeway from the family to find the direction for the environment programme. The oceans agenda was a natural direction, given my education and ‘We are now shifting our contacts. As we went along, that interest was reinforced by the fact focus to places where that few funders were focused there is political vision and on the oceans, and we saw an will, such as the emerging opportunity to have an impact.

economies of Brazil, India

Have I had moments of frustration and China.’ over the last 15 years? Definitely. Working in Europe has been frustrating: the science is clear enough and policy solutions are clear enough, but political will is missing. It is more difficult to convey the sense of urgency about the oceans to the public than, say, deforestation. One satellite image can convey the annual destruction of the Amazon; there isn’t such a simple visual representation of the degradation of large marine ecosystems. However, we now have a fairly good understanding that the time window to create change is relatively short. What has happened with the oceans agenda over the last 15 years? In the past 15 years we can certainly say that the overall situation of the world’s oceans has deteriorated markedly. Poor management of fisheries in ocean waters under national

But it is also becoming clear that this is not just about biodiversity but also about human security, including whether we can sustain the production of food for a growing population. We forget how much of the world’s food protein comes from the oceans.

It is not just that billions of people depend on fish for their diet, which is a major issue in its own right. The number of people needing food is increasing all the time. Now that we’ve reached 7 billion people on the planet, if we let global fisheries collapse, we can’t expect the food we get from the oceans to be replaced with food from land-based agriculture – that would be disastrous. If this was the case, you could forget about terrestrial conservation altogether, as millions of hectares of pristine habitat would have to be destroyed to make room for agriculture. The fisheries of the world are in bad shape; and as the world population continues to grow, we will need more – not less – food. How will we meet that challenge? We need a greater focus on protecting ocean resources as an issue of human security. If we did think this way, the sustainable management of fisheries would be a top priority. But Alliance  Volume 17 Number 1 March 2012


focus on resilience investing Kristian Parker Interview

is far from being at the top of the global agenda at this point. Far from it. The broader security issues now need to come on to the map as well. For example, the oceans are not yet part of the climate negotiations even though they are the primary regulators of global temperature and oxygen production. We need more awareness of the pivotal role of marine ecosystems in the global system; their resilience to the current pressures and global warming is a critical issue. How did climate change come on to your radar? Being a biologist, it wasn’t difficult for me to see that small changes in average temperatures will have cataclysmic effects on ecosystems. Organisms are defined in terms of their tolerance to temperature and oxygen levels. Now here we are changing global average temperatures, which means that a great number of organisms will be challenged to survive. Beyond the obvious increase in water temperature, we are also observing that the oceans are becoming more acidic, as some of the carbon that is emitted into the atmosphere is absorbed by the world’s oceans. Ocean acidification makes the process of skeleton-building much more difficult, creating an added major threat to marine life. From a biological point of view it is easy to understand why carbon abatement is so important.



It took me a long time to get my mind around the magnitude of the impact that CO2 emission will have on the oceans. Ocean acidification is poorly understood, but the consequences it will have on food chains and the oceans’ ecological services like oxygen production will be of massive proportions. Here I see a need for champions at a political level who can begin to see the issue of defending the oceans and take it to the climate negotiation table. Australia could be one of those champions if they can get their heads around how much value they derive from the Great Barrier Reef. I don’t think we are fully prepared to deal with the security implications of climate change. Think about the changes in rainfall patterns – the droughts, floods and diseases. The knock-on effect on humans is massive. You can argue that biodiversity has no value, but you can’t argue that the stability of agricultural systems has no value. I see the mission of our foundation as helping to shift the focus of the climate debate towards human security issues.

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Bundles of nets on the illegal driftnetter Nettuno’s bow in Port of Ponza, Italy. The picture was taken on an expedition to monitor illegal fishing in the Mediterranean, funded by Oak Foundation and carried out by Oceana. Their reports led to new rulings by the European Court of Justice enforcing the EU driftnet ban and the ultimate dismantling of the French and Italian driftnet fleet.

The low level of political interest in curbing emissions and preserving fisheries seems out of touch with this reality. What does this all mean to you as a funder? It means a few things. One is that we need to be flexible. We are now shifting our focus to places where there is political vision and will, such as the emerging economies of Brazil, India and China. We will focus less on countries that overall are on the right track and can fend for themselves, such as the EU, and those such as the US, which have been consistently declining to take their share of responsibility. It means that we have to go where the opportunities are; we can’t afford to bang our heads against the US political system for the next five years. It also means that foundations need to collaborate even more, and at a greater speed. We can do more and better through mechanisms like funders’ collaboratives. Ultimately, without scale our work won’t make a difference. One such example is our collaboration with Climateworks Foundation. In 2006 six foundations, including Hewlett, Packard, MacKnight and Oak, commissioned a study called Design to Win, which attempted to answer the questions ‘what is the role of philanthropy in reducing carbon emissions globally, where should we focus, and how much should the sector invest in order to meet the global climate change challenge?’ Beyond defining six key countries and six main economic sectors that should be the focus of the work, Design to Win led to the creation of

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Climateworks, which is currently the largest pool of philanthropy funding exclusively dedicated to carbon abatement. Local offices were created or enhanced in the major priority countries/regions, and a truly extraordinary amount of sectoral analysis, policy development and exchange of best practices is already taking place as a result.

What would you like to see philanthropists and social investors doing in the next five years? We as a sector need to take a step back, take a look at the trends, and see that they are not adding up to what needs to be achieved. We know time is short, and we need to be taking bigger risks for bigger ideas in order to generate political influence. I personally would like to take more risks, and we have to find more and better ways of doing that.

I’d like to see new collaborations between funders that are looking at the big environmental agendas, and hopefully establish a pool of funds among a few like-minded foundations or individual donors. Such a funding pool should award a few grants a year for the best high-risk, high-impact ideas to beat the deadline we have on the earth. I’d also like to see funders encouraging NGOs to think in riskier terms. The current excessive focus on accountability and on measuring and reporting project impact is having a somewhat negative effect on the way that NGOs plan their activities: they are becoming excessively concerned about not ‘over-promising’ or ‘over-committing themselves’. In the end, the projects they submit lack ambition and bold vision. We need to help reverse this trend by enabling an environment of creativity, boldness and risk-taking. A task for foundations themselves is to be more explicit about their agenda for risk; we need a new wave of risk-taking attitudes. But risk-taking is not just about spending more money in larger projects; it is also about being cleverer about the key leverage points, filling in eventual Oak Foundation funds organizations organizational gaps when a major niche is still that promote empty, etc. I would like to see this issue of risk and healthy and resilient big ideas being more prominent in the sector. ecosystems in

the Arctic. Photo taken near an ice fjord in June near Nuuk in south‑west Greenland.


Beyond our support for policy improvements, we also support fieldwork on issues that cut across climate change and marine biodiversity. We support increasing the resilience of two regions: Belize and the Arctic. There are common themes in the situations these areas are facing, such as the growing need for natural resources such as fish and oil respectively. I don’t believe that over the next 50 years oil can be explored in the Arctic without major disasters like oil spills. Can these ecosystems withstand these changes? Do we understand the trade-offs? Both areas are faced with climate change, and both have the challenge of remaining resilient in the context of rapid economic pressures; there are real risks. But we don’t have enough time or money to replicate these models forever – we must have new strategies, like the agenda of large marine protected areas (see p48). We must think big.

One option is to encourage risk in our partners that are doing the work. We must ask, ‘does civil society believe that philanthropic funding is supporting enough risk-taking?’ We also have to get civil society more comfortable with taking risks and thinking bigger.

We must find new ways of tackling difficult issues like subsidies, which are essential to the various destruction patterns we see. Tackling subsidies is one opportunity to act at a global scale. That’s one example of something that could be dealt with as a collaborative. Maybe we won’t control the World Trade Organization’s Doha round, but we must ensure that if Doha goes forward, phasing out the subsidies that support destructive practices is one of the main items in the agenda. At this time of over-indebtedness in the developed world and of concern over carbon emissions, for example, it seems to us that fossil fuel subsidies are not only an anachronism but an absurdity. The time is ripe for advocating a phasing out of such subsidies, and philanthropy should collaborate in order to enable NGOs to carry out that advocacy successfully. For more information

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Common interest: the key to investing in life‑supporting assets sergio oceransky During most of the year on the Isthmus of Tehuantepec in Mexico, the difference in air pressure between the gulf of Mexico and the Pacific propels the wind through a narrow gap in the mountain range that stretches from Alaska to Patagonia, toppling corn crops and, at times, lifting heavy trucks on its way to the sea. This wind energy is a colossal natural resource and offers a ripe opportunity for impact investment. The trouble is, such opportunities are often exploited for the benefit of the investors, not for the local community. However, in Tehauntepec, an innovative business model is evolving where communities, investors and natural resources come together on the basis of common interest.

Sergio Oceransky is CeO and founder of the Yansa Group. email Sergio. oceransky@yansa. org

This resistance is not directed against wind power, but against the takeover of indigenous land and resources. In contrast, when the business model puts communities at the centre, the sun shines brightly on wind farms, as exemplified in the Zapotec community of Ixtepec.

The general assembly of this 30,000-strong community decided not to lease any land to developers, and instead sought to develop a community wind farm. The Yansa Group is partnering with them to help them channel this resource for their social and economic benefit and In contrast to Europe or the US, Mexico does not of- on the basis of their continued collective control over fer direct financial incentives (such as tax credits or a their territory and resources. In the long term, this is a subsidized price for green energy) to wind farm devel- better business model than supposedly higher-margin opers. But the wind is so strong and constant that large private wind farms, since local common ownership companies, such as Wal-Mart, CEMEX (Latin-America’s provides an unparalleled level of resilience and inlargest cement producer), or the all-powerful Mexican vestment security. However, it requires financial Coca-Cola bottling company FEMSA, have decided to innovation, based on an understanding of what difsource their electricity from private wind farms, rath- ferentiates this sector from business as usual. er than from the public utility. The social idiosyncrasy of life‑supporting sectors

The Isthmus of Tehuantepec is home to deeply rooted indigenous communities. As in many places, they have been driven to live in the inhospitable margins and have fully adapted to these places, preserving the natural resources which are not only important environmentally but are also of growing economic value. Most of the land is also collectively owned. It is a perfect context for impact investment, where sustainability can be combined with collective social transformation. However, in most cases, the construction of wind farms is eroding indigenous rights, producing explosive social tensions and fierce resistance to private wind farms. This has recently resulted in the violent death of a man at a road blockade against a project in construction, and the representative of a large wind developer being locked up (and almost lynched) together with the mayor by more than 1000 angry indigenous farmers. They were released only after the mayor publicly destroyed the permit required to start building a large wind farm financed by, among others, the Climate Investment Funds through the Inter-American Development Bank.

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The troubles of private wind developers in Mexico are illustrative of the conflict between corporations trying to obtain access to territories rich in natural resources and communities asserting control over their territory in defence of their culture and livelihood. This pattern repeats itself in investments related to life-supporting assets such as renewable energy, water and food production, particularly in developing and emerging countries. In these sectors, assets are bound to living territories and to the communities that keep them alive. The relationship between stakeholders is normally very unequal, with the more powerful interests applying mainstream financial thinking and, in particular, conventional notions of risk and reward which often leads to abuse and exploitation. This is not just ethically wrong, it is ultimately also bad business for investments that are long-term by nature. Investments usually start with speculative capital under different names (venture funds or, in the wind sector, ‘developers’), whose primary concern is getting

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hold of assets as cheaply as possible, in order to flip them over quickly for a good profit. This often results in exploitative arrangements that are passed, together with the assets, as a ticking time bomb. It is only a matter of time before communities start to feel cheated, and fight back for full territorial control. In principle, this is an area where the emerging impact investment sector should have a competitive advantage over speculative capital. A primary focus on the creation of social value should result in more resilient and sustainable business practices. Unfortunately, the extent to which this happens is limited, because most impact investors replicate conventional practices on key issues such as ownership, value extraction and accountability, and take a flawed approach to risk and return.

Most so‑called impact investors are ‘financial‑first investors’: they expect to obtain market (or above‑market) returns and still generate positive social returns. However, in life‑supporting assets, you cannot have your cake and eat it too.

Impact investment’s flawed answers Most so-called impact investors are ‘financial-first investors’: they expect to obtain market (or above-market) returns and still generate positive social returns. However, in life-supporting assets, you cannot have your cake and eat it too.

involves investing in economically disadvantaged communities. Capital blending therefore ignores the most important factor distinguishing impact investment from business as usual. A key advantage of businesses that create social or environmental value is that, if properly structured, there is a common interest in their success, shared by many stakeholders beyond the investors. Common interest reduces risk significantly, but it also requires unconventional structuring of ownership and accountability, and modest financial return expectations. Risk and reward vs common interest Common interest is eroded when social businesses are owned and controlled primarily by investors who expect to maximize profit margins and/or seek profitable exit opportunities. It tends to disappear when the role of the community is reduced to an economic factor (supplier of workforce or natural resources) and accountability is skewed towards investors. Capital blending, while leveraging additional capital, often results in an increased eye to profit, which compromises social objectives, erodes the potential to cultivate common interest in the success of the social business, and therefore unnecessarily increases the risk of investments. Conventional risk and return concepts cannot be applied uncritically to investments in life-supporting assets in territories inhabited by disadvantaged communities. Here, investment failure is not just a problem for the investor. It adversely affects vulnerable social sectors and/or ecosystems, which might not be in a position to endure the consequences.

Even investors that are primarily committed to the creation of social value (so-called ‘impact-first investors’) often strengthen flawed investment practices. A common strategy known as ‘capital blending’ attempts to multiply impact by structuring deals in terms that attract financial-first investors, therefore leveraging additional capital. This gives financial-first investors a powerful voice in the definition of return expectations, and usually results in equity-based ownership of rights and assets, and in accountability practices that are primarily (if not exclusively) focused on investors. Most of the time, impact-first investors expect to exit the investments early on, in order to leverage further impact elsewhere, leaving financial-first investors alone in the driving seat.

The investors’ concept of risk and that of the communities’ are worlds apart. Losing control over an area may be no big deal for investors who transfer many kinds of assets on a regular basis. For indigenous communities, it represents a threat to their culture, livelihood and sense of dignity. Even the understanding of ‘success’, or of common interest, differs: for communities it often includes intangible aspects that cannot be added to conventional business plans or contractual arrangements.

When entering capital blending structures, impact-first investors often accept more exposure to risk without financial compensation, or accept a lower return in order to increase the return of other investors, or both. They do so due to the widespread, though often incorrect, assumption that impact investment carries more risk than conventional investments because it

This cultural mismatch is painfully obvious in the Isthmus of Tehuantepec. Developers often disregard the relationship of indigenous peoples to the land and blame local resistance on vested interests attempting to stop progress. Their response to protest is often to request repressive measures from government, bribe local strongmen or foster internal conflict within

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focus on resilience investing Common interest: the key to investing in life‑supporting assets

communities. Instead of understanding and nurturing common interest, they undermine it. Although common interest is of greatest importance at local level, it has consequences at national level too. A case in point is the evolution of feed-in tariffs (FITs) for renewable energy in Spain and Germany. In Spain the primary beneficiaries of FITs have been utilities. In Germany, Community ownership and communities actively participate balanced accountability in renewable energy production as boost local support for the a result of a deliberately inclusive policy. When FITs were cut back in project, reducing risk and Spain, the sector was unable to mo- financial costs in a process bilize allies. In contrast, Germany’s that we expect to eventually FITs enjoy widespread support.

attract substantial long‑term

In order to cultivate common interest and to reduce investment risk institutional investment. for the community impact-first investors need to change the terms on which they relate to other investors. This requires financial innovation, since most capital blending practices have the opposite effect: they de-risk investments for other investors and worsen the terms of the deal for the local community. Strengthening resilience and community involvement At the Yansa Group, when we decided to engage in large-scale social value creation and empowerment through the development of utility-scale community wind farms, we needed a financial model that lowers risk and reduces the cost of capital, and also places the community at the heart of value creation and management. We are building it by changing the terms and the timing in which investors with different motivations enter the project, and through a community-based approach to accountability and ownership of rights. Investors receive no equity at any point, and they will only receive a part of the financial returns produced by the wind farm. There are three investment phases with decreasing levels of risk, but with the same level of financial return. Such a counter-intuitive structuring is not only possible, but it may well prove to be a much more adequate strategy for investment in life-supporting assets. Here, briefly, is how it works. We are working on a 100 MW, US$200 million wind farm in the community of Ixtepec. A Community Interest Company (CIC), limited by guarantee and constituted in partnership with the community, will own the project. In the development phase of the project, we are sourcing our finance from impact-first investors who want

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to promote financial innovation. They invest relatively small amounts through low-interest, high-risk loans to produce a financial model that is, by design, bound to devote a significant percentage of future profits to the creation of social value, and has a strong potential to be scaled up and attract very large flows of capital. In the construction phase, which we expect to start in mid-2012, we will source finance from impact investors interested in a risk-adjusted social return. They will invest once we sign a 20-year power purchase contract with the utility and a turnkey contract with a reputable wind turbine manufacturer and construction contractor, and have all required permits and licences. They will constitute and own an investment vehicle that will give a loan to the Community Interest Company that owns the wind farm. They will receive a decent financial return and an extraordinary social return. The difference between the profit generated by the wind farm and the interest paid to investors will be divided in two. Half will go to a local trust, devoted to create social value according to the long-term vision of the community. The other half will be invested in a guarantee fund that will cover this wind farm and future community wind farm projects under the same financial model. This will enable us to decrease the risk of future investments, and attract further capital. Once the wind farm has been in successful operation for two or more years, the level of risk will be very low. We expect several institutional investors (pensions and sovereign funds) to be interested in taking over the investment vehicle, with the same financial return offered to previous investors. We also expect some of the impact investors to then move their money into the next community wind farm. Throughout its life cycle, the territorial control and the productive assets will remain under the control of a structure that is primarily accountable to the community, but also to investors, since they have recourse to the wind farm in case of default. Community ownership and balanced accountability boost local support for the project, reducing risk and financial costs in a process that we expect to eventually attract substantial long-term institutional investment. True sustainability and resilience are required to mobilize significant resources into life-supporting sectors. Community-based financial innovation is a key part of this process. At Yansa, we hope that growing numbers of investors will play an active part in this process. For more information

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Less than 100 per cent is not enough sonja swift ‘Only when the last tree has died, and the last river been poisoned, and the last fish caught will we realize we cannot eat money.’ Cree Indian proverb My generation and those to come are inheriting a precarious future. Peers of mine, all young trustees of the Next gen Fellowship in Mission Investing,1 are also inheriting the responsibility of stewardship for money set aside for social good. Our goal is to have 100 per cent mission-driven endowments because anything less is ultimately a contradiction.

Sonja Swift is an organizer in philanthropy/ mission investing. email sonjaswift@

losing 5 to 6 million hectares of topsoil annually3 and if global climate change is not quickly reversed the oceans are at risk of dying.4 Growing up with Google Earth Our generation has a culture more globally connected than ever before. ‘When you grow up with Google Earth it is harder to feel separated from the rest of the world. Environmental problems and other countries don’t feel so far away,’ remarks Graves. Young people are more interested in collaborating than maintaining control. We believe grantmaking and mission investing strategies should be integrated. This is a fundamentally different approach to that of traditional philanthropy. As we are inheriting the results of traditional philanthropy, if the older generation is not responsive now it is going to be harder for us to be strategic later on.

No time for dabbling at the edges Traditional philanthropy, with its 5 per cent payout, is clearly not sufficient, nor is mere dabbling in mission investing. The systems-wide restructuring that is required will not happen unless at scale. Mission investing must get beyond niche boutique firms. To give an example of how making this transition relates to philanthropy, Franklin explains: ‘Grant money can help support early stage entrepreneurs. Impact dollars In other words, conscious investing, not just grant- could then go to the growth and scaling.’ making, must become integral to philanthropy. Lindsey Franklin shares a perspective common to Foundations are taking an important step towards our generation: ‘The amount of grantmaking dollars aligning mission with values in moving cash from we have is no match for the scale of the problem.’ As corporate to community banks but it is just that Richard Graves points out, foundations and univer- – a first small step. They can play the unique role of sity endowments are the institutions designed to exist building up innovative triple bottom line business longest in society. Ironically, ‘while the concept of an models so pension funds and public capital can take endowment is to sustain into perpetuity, people don’t these alternatives to scale. Philanthropy can also set the precedent whereby, for example, decentralized invest like there is a future’. community-operated wind farms are prioritized With the rapid changes the earth is undergoing, we over centralized corporate operations. ‘Eventually know there is no option but to take corrective ac- the goal would be that this is called investing, not “retion now and yet we are often stifled in doing so. The silient” or “impact” investing, just investing,’ states worldwide Occupy protests signal the fact that young Rockefeller. The goal we share is a coherent approach people face an uncertain future which they have few under which our future is not compromised to make opportunities to help change, and those of us navigat- an extra buck. It has become impossible to pretend the ing the field of philanthropy have noticed the same earth’s resources are infinite. Everywhere one looks constraint. There are few young trustees in leadership they are being exhausted. There is no more time for roles and the older generation is not quick to pass on compromises and greenwash solutions. real decision-making power. They may be passing on money to their children but they are not passing on Towards an economy that serves society and the the commons: clean drinking water, fertile topsoil ecosystem, not vice versa or plentiful marine life. Instead, fracking for oil is The mentality of Wall Street is adolescent. The econocurrently exempt from the Clean Water Act,2 we are my has been cut from the root of all wealth: a healthy When I asked my peers how philanthropy must change to address the challenges of our times, the replies all centred around one thing. As Justin Rockefeller puts it: ‘Foundations need to put their money where their mouths are in relation to social and environmental change by shifting their focus from the 5 per cent – grants – to what they do with the much louder and larger 95 per cent: their endowments.’

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focus on resilience investing Less than 100 per cent is not enough

earth. This is why our enthusiasm for mission investing is less concerned with economics and more with how economic restructuring can create real solutions. ‘A really good investment is one where the way a company delivers the social good is really aligned [with the social good]. It’s not what they do; it’s how they do it,’ explains Richard Graves. Take the example of Pepsi, a company Whether intentionally premised on corn syrup, obesity or not, our ancestors and plastic, which has a socially conscious board of directors that made money often to the supports higher wages and union detriment of communities contracts. Investing in Pepsi, and and ecosystems. It is our mega companies like it, is not resilience investing. Mission investing responsibility, as trustees must take on a systems-level ap- young and old, to use it now proach where social good is not a for healing: healing our hastily added veneer, but integratfamilies, our communities, ed into each step along the way. Two companies that represent re- our planet and ourselves. silient investments in my eyes are Native American Natural Foods (NANF) and Guayaki Yerba Mate. NANF produces buffalo-based health food products and Guayaki markets organic yerba mate. NANF is a Lakota-run business founded on the Pine Ridge Indian Reservation in South Dakota, while Guayaki partners with farming communities in the Atlantic rainforests of Paraguay, Argentina and southern Brazil. Yerba mate is a native rainforest crop and traditionally revered as a sacred plant, so harvesting mate goes hand in hand with reforestation. The last time the Lakota people truly had a functioning economy, it was based on the buffalo, when the health of the people, the buffalo and the prairie were one. Today, NANF is trying to recreate a modern buffalo-based economy. Both business models were inspired by and depend upon healthy landscapes and communities. These are examples where the integrity of ways of life, ecosystems and a new economy meet. Alternative investing that accounts for more than the bottom line is nothing new but ‘it feels like younger people are an influx of inspiration giving fuel to old ideas’, as Lindsay Franklin comments. Turning the critique from capitalism itself to how capitalism is functioning opens up doors to more tangible economic change. ‘There is incredible synergy in challenging how the economic system works rather than challenging it in and of itself,’ stated Richard Graves. For many, this is a chance to let go of shame attached to companies that built their wealth on extraction and exploitation, wherein lie the root of most of the earth’s Alliance  Volume 17 Number 1 March 2012

cultural and ecological devastation. Owning up to the corporations we own, as stockholders, and admitting our responsibility is a way to honour our legacies. In this way it is empowering. Applying the concept of resilience to investing carries with it the notion of stewardship. If foundations actually believe that the next ten years are critical for addressing climate change and protecting the security of the earth then, as Graves concludes, we’d be doing two things: ‘Investing in groundbreaking climate solutions or spending down. We need both.’ Young people are inheriting the consequences of an economy that does not take future generations into account. Call us radical but I’d say our agenda is altogether sane. We want to take responsibility as stockholders instead of remaining submissive and perpetuating a financial system premised on fear, scarcity and finite resources. We need the older generation to hear us, trust us and work with us. It is high time to live and act coherently as stewards. Healing our families, our communities, our planet and ourselves Call it what you like, mission, impact or resilience investing is about transforming our economic system so it becomes more socially just and more respectful of ecological limits. It is about creating a more resilient economy by creating a more resilient world. The vision I hold personally is that this is a chance to heal our relationship with money by becoming true stewards of monetary wealth. Stewardship is about considering the whole of life and our whole response to it. To do so, one must have enough integrity to distinguish between what is life-giving and what is compromising of the future. Whether intentionally or not, our ancestors made money often to the detriment of communities and ecosystems. It is our responsibility, as trustees young and old, to use it now for healing: healing our families, our communities, our planet and ourselves. Please listen to us. We are open to change because we know there is no other option. From our vantage point, it is apparent that a more brave and holistic approach is needed to create a future resilient enough to last. 1 A one-year intensive peer-to-peer learning programme for trustees and individual donors seeking to align their philanthropic mission with the management of their assets, organized by Confluence Philanthropy and co-sponsored by Resource Generation.

2 fracking-laws-and-loopholes 3 content/8426 4

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Investing in insurance: reducing vulnerability and risk Mihir bhatt We instinctively donate for the relief of disasters, but while relief reduces suffering and helps recovery, it seldom reduces the risks faced by vulnerable communities. In fact, a growing emphasis on relief diverts attention from preventing future disasters, which perpetuates the vulnerability of communities at risk. Donors need also to start investing in reducing risk, and disaster insurance is one way to do it.

Mihir Bhatt is managing trustee at the All India Disaster Mitigation Institute. email mihir@aidmi. org

a disaster micro-insurance scheme emerged, designed by AIDMI with initial support from two regulated public sector insurance companies and called AfatVimo, which means ‘disaster insurance’ in Gujarati. AfatVimo covers five risks: (limited) losses of life, trade stock, livelihood assets, house and house contents of policyholders, with an annual premium of around $4.50 and a total potential benefit of $1,560 (not necessarily the maximum payout) across the various components of the coverage. The scheme covers damage or loss through 19 kinds of disaster including earthquake, flood, fire, cyclone, lightning strike and landslides.

The product was first sold in April 2004 to 3,700 policyholders from the at least 900,000 families who lost shelter after the 2001 Gujarat earthquake, and was later extended to another 3,500 people from among the 2004 tsunami victims in Tamil Nadu, the 2005 Jammu and Kashmir earthquake victims, and 2007–8 The majority of low-income communities at risk in flood victims in Bihar. As part of the relief and recovIndia are not protected from the loss of life, liveli- ery activities, the communities were informed of the hood and assets that results from their vulnerability possible ways to pool risk, and transfer it through into natural disasters. India’s National Policy on Disaster surance. AfatVimo is a financial tool for risk sharing, Management, drawn up in 2009, concedes that the reducing the policyholder’s underlying risks and offergovernment cannot compensate all the victims of a ing financial protection. In addition to the policy itself, disaster at a sufficient scale and speaks of promoting policyholders are supported with micro-mitigation new financial tools such as ‘catastrophe risk financ- measures such as fire safety, seismic-safe construction ing, risk insurance, catastrophe bonds, micro-finance practices and business development support. and insurance’ to cover such losses. However, this AIDMI is now looking to extend the policy to other policy is not matched with investment from private disaster-affected communities in India. In fact, interor public sources. est in AfatVimo and the way it could be implemented There is a great potential opportunity for the Indian market to absorb innovative and affordable micro-insurance products, something humanitarian donors can capitalize on. Disaster losses in India can be financed through the rapidly growing Indian economy, a well-established insurance industry and successful global experiences of risk financing through insurance. What is needed is a leap ahead by one or more donors to build on successful cases to increase the reach and incidence of this practice.

in their regions has grown up in six Indian states and 11 Asian countries, including Fiji, Indonesia, the Maldives, Nepal and the Solomon Islands.

This innovation addresses the problem of the perpetual risk to which poor communities are subject, not least by the unknowing humanitarian relief sector. Successful pilots and a proven financial model provide a strong case for protecting people’s lives and assets through insurance. The opportunity to scale up this model to new locations is substantial and inWhile most of the money raised through emergency dividual donors and philanthropic institutions can appeals in south Asia (as elsewhere) goes to relief and drive innovation where bureaucratic authorities or reconstruction, a few local organizations have success- project-focused agencies are slower to respond to fully demonstrated the value of promoting disaster opportunity. micro-insurance. One such organization is the All For more information India Disaster Mitigation Institute (AIDMI). A consul-‑transfer‑initiative.asp tation with communities in Bhuj following the 2001 Gujarat earthquake revealed that only 2 per cent of those surveyed had insurance of any type. From this,

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Innovations in climate finance give hope for our future ben caldecott Planetary resilience requires the rapid transformation of energy systems, which in turn requires investment at a scale not seen before in renewable and low-carbon infrastructure. We also need to dramatically improve our resource efficiency, which will involve thinking about how our economies work in a much more holistic, integrated way. Two innovations presented by Climate Change Capital to the recent Durban climate change meeting could represent a real breakthrough for climate finance for developing countries.

Ben Caldecott is the head of policy, advisory at Climate Change Capital (CCC) and directs the CCC thinktank. email thinktank@c‑c‑

for climate projects in particular. Without lower-cost capital, climate-compatible development projects that need to happen won’t. Unfortunately, traditional mechanisms for providing this, particularly though institutions like the World Bank, are often criticized and viewed with cynicism in developing countries. The perpetuity fund concept – which Climate Change Capital has begun developing with Fauna & Flora International, among others – could be part of the answer. Perpetuity funds are mission-driven revolving funds which could provide concessional finance (debt and equity) – for example, for solar energy in Sub-Saharan Africa, forestry in Indonesia or adaptation in Bangladesh. All returns would be reinvested in each fund, together with compounded interest, so the fund’s value would steadily build up, like a pension pot.

As with a pension, there would also be an end beneficiary – for example, the communities or country that hosted the financed projects. The beneficiaries would receive the value of the fund once it reached maturity, The transition to a sustainable, low-carbon economy is which would be when the fund completed its defined going to be complex and challenging. As we go through mission (for instance, financing 1 gigawatt of solar a sustained process of creative destruction, significant energy or 1 gigatonne of emission reductions) or its value will be both created and lost throughout the allotted timespan. In addition, because each perpetuglobal economic system. We will move from a system ity fund would be established with gifted money, its based on low capital expenditure and expensive, fi- required rate of return would be relatively low, so pronite inputs with dangerous externalities, to one with jects not able to achieve market-rate returns could still higher capital expenditure, but much lower marginal attract capital. For example, a perpetuity fund could costs and a fraction of the environmental impact. The have a mission to finance decentralized renewable enrole of progressive investors must be to support value ergy projects in Kenya over a 20-year period. If it were creation in sustainable sectors and stop condoning seeded with $100 million of aid money, it could start harmful ones. That’s central to our mission at Climate to provide capital (debt and equity) for viable projects at below-market rates. Change Capital.

One of the core functions of the international climate change negotiations – in addition to tackling the free-rider problem – is to create frameworks for capital to flow in a way that supports this transformation, particularly in the poorest developing countries. To enhance the impact of these and of limited public funds, we propose two significant innovations. The first is a new way of deploying low interest rate climate finance to enhance its impact, while the second can cost effectively generate the real cash flows needed to make environmental and developmental projects viable.

The fund would still need to make an annual return on its investments, otherwise it would not grow. If it achieved a target return of, say, 7 per cent after costs and inflation – a rate achievable in many developing countries – then the real value of the $100 million fund would grow to $197 million after 10 years and to a final value of $387 million after 20 years. Over this period it would also have catalysed many more millions of private investment into its funded projects.

After 20 years, the fund would be wound up and the proceeds shared equally among a number of beneficiaries, which could include the local community that Perpetuity funds – better concessional finance had hosted financed projects plus local and central Concessional finance – loans with interest rates and governments. The beneficiaries would be required to terms better than those available on the market – can help address the serious problem of capital availabil- spend this windfall on things that further support susity and cost in developing countries generally, and tainable development and climate change objectives.

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Beneficiaries Under this model, the beneficiaries not only get cheaply financed renewable energy projects contributing to clean development, but also gain a significant stake in the future success and value of each project. This ensures properly aligned interests between those that lend money, the organizations that develop projects and the communities and governments that host them. For climate change-related projects, this alignment is absolutely essential if projects and programmes are to succeed. There are also significant advantages for a developing country in having a fund created to work over the long term with a clearly defined mission, since it allows the fund to build better and longer-term relationships within the country, as well as to develop and retain appropriate expertise. Through such fund structures, government donors would be making a meaningful contribution to their climate finance commitments in a way that delivers ongoing value for money and high levels of leverage over many years. Donors could also top up successful funds and could potentially mobilize co-investment into perpetuity funds from other donors, philanthropists and even private investors. Philanthropic money put into a perpetuity fund on the same basis as the original donor money would increase its size and impact. Social investors could also deploy their capital alongside this gifted money, with the difference being the expected return, which could be realized when the fund reaches maturity or at pre-defined ‘exit’ points. There are a number of different ways to structure private co-investment into perpetuity funds once they are established, potentially with senior or junior tranches available to appeal to a range of different investors. It might also be possible to aggregate capital from small-scale donations and/or retail investors to crowd-source investment into perpetuity funds. Because the perpetuity fund model is inherently flexible – its mission, beneficiaries, targeted rate of return and sources of capital can all be tailored to the needs of donors, investors and recipients – it can be used successfully in a huge range of different contexts, in developing and developed countries alike. Results‑based climate finance Another instrument that could help to produce the income streams needed to make climate change projects economic, and therefore financeable, are Emission

Reduction Underwriting Mechanisms (ERUMs). ERUMs would provide payments for emission reductions in developing countries based on results. The guaranteed revenue streams involved would enable public and private actors in developing countries to raise capital against them. Again, these mechanisms would be tailored to the needs of countries, technologies or sectors. ERUMs could be offered for themes throughout the developing world, for specific countries or regions, or for sectors in countries or regions. As an example, the Green Climate Fund (GCF) – the new fund created by the international community to deliver $100 billion per annum of investment into climate change mitigation and adaptation in developing countries by 2020 – could offer an ERUM for 100 megatonnes of reduced emissions from forestry (REDD+) in Indonesia. Different public and private partnerships would bid to win the ERUM as part of a tendering process. If the successful bid is, say, $5 per tonne of CO2 abated and the contractors are paid by GCF for its achievement, this suddenly creates a visible, predictable and long-term revenue stream that can be invested against. As a result, public money and private risk capital can be deployed, knowing that it will be remunerated on performance in the future. All this is achieved through a transparent tendering process, ensuring that emissions reductions are secured by the GCF at the lowest possible cost, which is absolutely essential given the state of public finances in developed countries. Again, under this model philanthropists and social investors could co-invest with donor funds on the same or a different basis. This would increase the number of emissions that could be paid for and reduced. For private investors, participating in an ERUM could be a way to hedge against future carbon prices if an ERUM was linked to the production and delivery of tradable carbon credits. Sustainability for the environment and the beneficiary organization Both of these innovations – perpetuity funds and results-based payments – could be transformative and catalytic for capital flows, and can be structured so as to blend philanthropic money or private investment from non-governmental sources. Together this would make a significant contribution to mobilizing investment into climate mitigation and adaptation actions in developing countries. For more information

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Gathuru Mburu Interview In just a few decades, a green revolution radically increased global food production by relying on chemical fertilizers and pesticides and boosting single crop productivity. Today, these innovations seem to be backfiring as fertile soil is increasingly eroded and the loss of diversity is dramatically reducing the resilience of farmland to changes in the weather. The African Biodiversity Network (ABN) sees the continent’s future potential in its past: preserving its soils by traditional means and looking to indigenous seeds and small-scale agriculture derived from Africa’s own biodiversity to ensure the resilience needed to feed a growing population. gathuru Mburu, ABN coordinator, tells Caroline Hartnell why and explains what funders can do to support this. Gathuru Mburu is coordinator of the African Biodiversity Network. email mburu@ice.; mburu@ africanbiodiversity. org

right from the beginning there will be a dialogue on equal and very clear terms. It’s not hard for donors to reach the right people. People are well organized. They have community leaders and opinion leaders and small marketing organizations; there are government representatives at local level and local governance structures.

That sounds like an intensive process, consuming a lot of time and resources. Is there a way of retaining that bottom‑up input but scaling programmes so that scarce money goes further? I understand the scale of need, but First, let me ask what you mean by it’s good to do one thing right rather resilience? than spread yourself thin and do it We mean the capacity of the wrong. Climate change and the food communities we are working with crisis are obviously intensifying but and the ecosystems that support they have been there for a long time. their livelihoods to withstand I think taking time to discuss and the effects of climate change, and plan with beneficiary communities other internal or external stresses. will be worth it. The most important thing is not imposing yourself on What are the main challenges to a community because that’s where that resilience? things have gone wrong in the past. Instead of looking at our own With the best intentions, we have left resources and fostering indigenous communities worse off rather than species, we have tended to look ‘Failure to recognize the improving their lives. That’s a good for solutions from outside, often reason for taking some costly steps need for biodiversity in sponsored by business, which so that you do things right. does not necessarily have the family farming in Africa interests of Africa’s peoples and Is there a way a small‑scale is the cause of the food biodiversity at heart. What’s more, intervention could be used as a model problems most African African governments have failed for other communities? us, for example permitting the countries face today.’ Exactly. If you do it right in one area importation of genetically modified then you’ll have the confidence to material when the risks are not fully understood, move to other areas. We are calling this the potency and facilitating the takeover of community land for principle. You go into a community and you work with investments in agrofuels and food crops. them until you both agree that you have made it, and We look at resilience holistically. We encourage people to use indigenous seeds, to revive their soil in a natural way. New technologies can be beneficial but some can also be extremely destructive. People need to rejuvenate their local knowledge and their local ecosystems.

then that community becomes a learning centre for other communities nearby. Then, later, they go out and replicate. That ability to attract others to learn and to replicate is critical for us.

So this is grant funding. Is there the potential for social investment where a project has the capacity to generate How can philanthropists or social investors support this? revenue? They need to work out a programme with the With energy projects, the process needs to be sustained, beneficiary community. That will create buy-in, and with the customers paying something back, and maybe

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the income generated can also be used to pay back the source of the money. However, for me the most important thing is that investments do not support emissions. We have to try as much as possible to cut emissions. So you’re against the idea of carbon trading? I do not support it at all. I’m The AGRA programme is saying don’t emit, look for better ways of doing it. People argue that simply aggravating the clean development mechanisms problem. Africa needs can be more costly than what we to heal her soil so that are doing today, but we cannot people can get enough save the world without feeling the pinch. We have destroyed so food, but when the soils are much of the world that now we dead, you can’t rejuvenate are getting the backlash. So I don’t them by using more of the support carbon credits where you give a little money to some chemicals that killed them community somewhere to buy in the first place. your emissions so that you can continue emitting. If investments can pay back money, well and good, but we should avoid carbon credits and the like. In terms of resilience, are there development initiatives you think are doing the wrong thing? Yes, especially where food is concerned. People are lobbying for favourable bio-safety laws so that they can feed Africa with untested GMOs – that’s not right. There are people talking about using chemicals to rejuvenate the land and they are actually the same people who brought in the chemicals, the herbicides, which did the damage in the first place. People are talking about a new green revolution in Africa. Africa has already had a green revolution: since colonial times, Africa has been using huge amounts of chemicals. What about AGRA? The AGRA [Alliance for a Green Revolution for Africa] programme is simply aggravating the problem. Africa needs to heal her soil so that people can get enough food, but when the soils are dead, you can’t rejuvenate them by using more of the chemicals that killed them in the first place. We need programmes that rejuvenate the soil and use seeds that are suited to that soil. AGRA is promoting hybrid seeds and the use of chemicals; it is encouraging banks to offer credit to local farmers, which puts them in debt. When they lose their crop owing to unfavourable weather, the farmers default and the bank claims whatever they gave as security for the loan. We need to rethink all these solutions that are being promoted as saving Africa from the current crisis.


It’s a crisis that is being crafted from outside and the solutions are being brought from outside, so it’s really exploiting Africa. Perhaps the most important global challenge of the century will be to feed 9 to 10 billion people. We need to double food production by 2050. If the green revolution can’t deliver this, what is the alternative? And how will it deliver on the scale that is required? This takes us straight into the politics of food. ‘Resilience investing’ must be careful not to break the resilience of the majority poor in Africa and other developing countries while assuring bounty for the investing countries. The same selfish motivations that led to the scramble for Africa over a decade ago are re-emerging, and Africa is once more targeted to feed the 9 to 10 billion people because there is ‘idle’ land, the most scarce resource for growing food. To take an example, the Qatar government convinced the Kenyan government to give it 40,000 hectares of the Tana river delta to grow food. In return the Qatar government would construct the port of Lamu and a railway linking it to Tana delta. The Qatar government would then grow food in the Tana delta and transport it to Lamu by train, from where it would be shipped to Qatar. So these investments are about Qatar, not Kenya. Thousands of Kenyans will lose their land and fishing areas, just as happened during colonization. But surely AGRA is about growing food for Africa, on the scale that is needed? As I said earlier, AGRA is simply aggravating the problem. The hybrid seeds and chemicals it offers are too expensive for small-scale farmers, and you cannot revive soils killed by chemicals by adding more of the same. Basically, AGRA is a solution to the market problems of the chemical manufacturing and hybrid seed development companies, promoted as a solution to the problems of food in Africa. It is totally counter to the principle of food sovereignty, where people decide what to eat and how and where to grow it. That is why ABN promotes holistic ecosystems restoration so as to ‘detoxify’ the soil, protect water sources, indigenous crops and wild biodiversity, and ensure that knowledge about all this is preserved. Failure to recognize the need for biodiversity in family farming in Africa is the cause of the food problems most African countries face today. Maize and rice will not end hunger and famine in Africa, but a wide variety of crops will. For more information

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Creating the first generation of great marine parks Joshua reichert

Wallace Stegner, the celebrated writer and historian of the American West, once remarked that national parks were the ‘best idea we ever had’, a sentiment shared by countless others. For almost 140 years, since the establishment of the world’s first national park in yellowstone in 1872, successive generations have been able to experience and enjoy some of the earth’s most storied landscapes which, were it not for the decision to protect them, would long ago have succumbed to the axe, the pick and the plough. Today, more than 1,800 land-based parks exist in nearly 100 countries.

Joshua Reichert is the managing director of the Pew environment Group. email JReichert@

oceans in ways antithetical to marine life; and industrial fishing, which at present represents the most serious problem affecting ocean ecosystems. Each year, fishing fleets remove nearly 80 million tonnes of fish and invertebrates from the world’s oceans. In addition, highly destructive fishing gear causes tremendous damage to ocean habitat and kills a vast array of marine life including seabirds, sea turtles, sharks and many undersize fish that are simply thrown back into the sea either dead or dying. The overall impact of these practices is staggering, and has grown dramatically worse over the past 50 years. Increasing numbers of boats, using ever more sophisticated technology, are chasing a dwindling number of fish that have nowhere to hide. The most recent figures compiled by the UN indicate that, conservatively, 85 per cent of fish stocks are fully exploited or worse – the highest levels ever recorded.

The Global Ocean Legacy programme There is no single remedy for these problems, but one Setting aside spectacular areas on land from extractive powerful tool we have is marine reserves – special placactivities such as logging, mining, farming, ranching, es in which no fishing or other extractive activity is and the steady encroachment of cities and towns has allowed. Reserves help protect marine habitat and the long been accepted as an important way to protect life that depends on it: they increase fish production, some of the earth’s finest natural treasures. provide a laboratory for science and education, and Unfortunately, the same cannot be said of the world’s help to promote tourism. In many respects, marine oceans despite their critical importance to all life on reserves are the quintessential example of resilience the planet. Oceans cover approximately 72 per cent investing. In a warming world, the consequences of of the earth’s surface and are estimated to contain a which will be widespread, they provide an additional significant percentage of all species, many of which are buffer of protection that will help these places – and still unknown to science. They produce over half the the life they contain – to adjust and survive. oxygen in our atmosphere and absorb vast quantities Yet there are too few reserves in the world’s oceans. To of carbon dioxide. They filter much of the pollution help ameliorate this problem, the Pew Environment we generate, and play a vital role in the hydrological Group established a programme in 2006 called ‘Global cycle which regulates the earth’s climate. Over 250 mil- Ocean Legacy’. Its goal is to promote the establishment lion people depend directly or indirectly on fishing for of the world’s first generation of great marine parks, or their livelihood and oceans are the primary source of no-take reserves, encompassing a minimum of 150,000 protein for over 2.6 billion people worldwide. In short, square kilometres each; containing unique habitats the health of the world’s oceans is intrinsically linked and ocean life that are now, or are likely to be, threatto the health of the world’s human population. ened by extractive activity; and where nothing can be

Whereas land-based parks provide varying degrees of protection for almost 13 per cent of the earth’s terrestrial environment, only 0.5 per cent of the world’s Photo on p1 shows a Hawaiian monk seal, oceans are fully protected, although they cover more one of the US’s most than twice the amount of the earth’s surface. Moreover, critically endangered marine mammals. they are rapidly being degraded by chemical and nutriMost of its breeding ent pollution; continued dumping of massive amounts grounds are now protected in the of trash into the sea; destruction of coastal habitat and Papaha¯naumokua¯kea wetlands; global warming, which threatens to alter Marine National Monument. the basic chemistry and temperature of the world’s

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removed from the water other than a photograph. By 2022, we hope to have successfully promoted the creation of 15 such parks. Organized as a working collaboration between the Pew Environment Group and a growing number of partners,1 Global Ocean Legacy provides a remarkable opportunity to leverage investments that produce exceptional results that could not be obtained by any one institution. The programme’s administrative structure and costs are remarkably lean. Partners do not

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pay overhead. Every dollar invested is directly applied to programme work and leveraged at a rate of 5:1. Each initiative is staffed by a small team of host country professionals who work exclusively on one project until completion, and are supported by a coalition of recognized and respected local scientific and conservation organizations.

a great gift for future generations and a marvellous legacy for a small number of visionary philanthropists who, years from now, will be able to take pride in knowing that without their efforts, many of these places and the life they contain would not have endured.

1 Including the Oak Foundation, the Sandler Foundation, the Waitt Foundation, the Robertson Foundation and Lyda Hill, with support from the Tubney Charitable Trust.

The goal of these teams is to use the best available scientific, economic and public survey data to make the case why it is important to protect these unique places. Specific activities vary from site to site but often include constituent organizing; commissioning scientific and economic studies; and reaching out to different sectors, including the military, fishing and tourism industries, and other parts of the business community with vested interests in the marine environment.

Marianas Trench Marine National Monument 247,000 square kilometres encompassing the world’s deepest oceanic canyon and some of the oldest living organisms on earth. (Designated in 2009; US)

Finally, the goal of the programme is very specific: 15 world-class parks by 2022, pursued in three five-year phases, with five sites per phase.

Chagos Marine Reserve 544,000 square kilometres that include almost half of the healthy reefs of the Indian Ocean and more than 220 species of coral and 1000 species of reef fish. (Designated in 2010; UK)

Achievements to date Since its establishment, Global Ocean Legacy has played a critical role in more than doubling the area of the world’s oceans fully protected in no-take reserves. Among the initial five sites, three have been designated as reserves. Two of these, the British Indian Ocean Territory Marine Protected Area and the Papaha¯naumokua¯kea Marine National Monument, are the world’s first and second largest reserves respectively. The other two are expected to be completed by mid-2012. We have scoured the world to identify large areas of the ocean containing meaningful opportunities to create reserves. Regrettably, within national jurisdictions – which is where we focus our efforts because there are no protocols for creating reserves in international waters – not many remain. This realization lends urgency to our task. Given the projected expansion of the human footprint into some of the last untouched places in the sea, many of the areas that today are relatively undisturbed will not be that way 15 or 20 years from now.

pHA se 1 sites

Papaha¯naumokua¯kea Marine National Monument 362,000 square kilometres of islands, atolls and coral reefs in the northwestern Hawaiian Islands. (Designated in 2006; US)

Coral Sea Among the least impacted tropical marine systems on earth, containing 49 islands and keys, over 20 reef systems, 52 species of deep‑water sharks and rays, 28 species of whales and dolphins, and the world’s only‑known spawning aggregation of black marlin. (Pending; Australia) Kermadec Islands and Trench Contains the deepest trench in the southern hemisphere, more than 6 million breeding seabirds, and 35 species of whales and dolphins. (Pending; New Zealand) pHA se 2 sites tARGet COMPLetION 2017

South Georgia and South Sandwich Islands Located in the waters of Antarctica, these islands provide a temporary or full‑time home to an estimated 100 million seabirds. Bermuda the waters around this North Atlantic island are in the Sargasso Sea, often referred to as a golden rainforest for the colour of the floating Sargassum seaweed that serves as a nursery for a large number of unique ocean species. (UK) The Pitcairn Islands Located in the south‑east Pacific, and best known as the final destination of the HMS Bounty mutineers, these four remote islands, including Henderson Island, a World Heritage site, lie amid one of the most remote and undamaged marine areas in the world. (UK)

Easter Island Located in the south‑east Pacific, easter Island is the Ultimately, only governments have the authority to traditional home of the ‘Rapa Nui’, the westernmost settlement of create marine reserves within their territorial waters. Polynesians, and one of the most isolated islands on earth, with an Our job is to make the case why it is in their long-term ancient and largely unexplored marine area rich in endemic species. (Chile) interests, and those of their people, to do so.

We have an enormous opportunity to permanently French Polynesia Site selection still in process. protect some of the last great bastions of ocean wilderness left in the world, and in so doing to leave behind

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Cultivating a solution to climate change ricardo bayon and Walt reid

When most people think about the causes of climate change, they imagine cars, smokestacks, factories spewing out all manner of greenhouse gases (gHgs). In fact, between a third and a quarter of global gHg emissions come from the destruction or transformation of natural ecosystems. In other words, as we continue cutting down and burning the world’s forests, we emit vast amounts of greenhouse gases. And it isn’t only about the destruction of the Amazon rainforest. Many of these transformations are taking place much closer to home: in the farms and pastures that provide our food.

Ricardo Bayon is partner and co‑founder of eKO Asset Management. email rbayon@

Walt Reid is Director, Conservation and Science Program, David and Lucile Packard Foundation. email WReid@

only have a fund that invests in carbon projects, but we are looking at other ways that environmental realities might translate into investment opportunities. We see carbon-friendly farming as a core investment strategy for us. But before this investment strategy can pay off there are some fundamental questions that need to be answered: X Can we truly understand and measure the impact of agriculture on climate change? X How do we minimize that impact? X Should carbon markets pay for emissions reductions from agriculture?

C‑AGG – bringing the stakeholders together While the goals of mitigating climate change and enhancing farm production and income may be intrinsically aligned at the biological level – any decreases in carbon capture by farmers or increases in emissions of nitrogen simply mean that farmers are producing less and/or being less effective with costly fertilizers – they have more often been at odds politically. Farmers have In the US, agriculture accounts for an amount of GHG been resistant, fearing new regulations that would emissions equal to about a quarter of the nation’s force them to change their farming practices. In fact, transportation emissions or a third of industrial emis- the failure of climate change legislation to pass in sions. Agriculture and forestry also play an important the US Senate in 2010 owed much to lobbying from role in removing greenhouse gases from the atmos- farming groups. phere (a process known as ‘carbon sequestration’) Any approach to a solution would need to have the (see box). At first glance, the potential for agriculture support of at least five important groups: farmers, to play a central role in addressing the challenge of since solutions need to be practical to implement and climate change appears extremely attractive: emis- make economic sense at the farm level; agricultural sions could be reduced at low cost, carbon could be scientists, since it needs to be shown that solutions sequestered in the soil, and farmers could benefit eco- would result in real reductions in GHG emissions and nomically. In fact, technical, economic and political make agronomic sense; investors, since any policy barriers have so far prevented the significant involve- framework would need to mobilize private capital ment of agriculture in the climate solution. to achieve the sort of scale that matters; policymak-

From an investor’s point of view, resolving this question is attractive because it offers not one but two investment opportunities. First, as the threat of climate change gets more and more evident, the world will move towards forms of agriculture that are better suited to our new carbon-constrained reality. If investors invest in this type of agriculture early, there is a chance that these investments could pay off handsomely in the medium term. Likewise, if agriculture can be seen as a part of the solution to our climate change problems, it may be that emerging carbon markets will begin to channel money towards agricultural carbon projects. If so, investments in projects like this can benefit from revenue from carbon markets. At EKO Asset Management Partners, we are interested in new and emerging environmental markets. We not

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ers, since no solution could work without the right policy framework; and environmentalists, many of whom are concerned that the wrong policies might result in another subsidy for farmers without any real benefits for the climate. All five of these groups were represented at a meeting in 2009 convened by EKO Asset Management Partners, the Packard Foundation, the California Farm Bureau and the Environmental Defense Fund at Cavallo Point in California. The Cavallo Point meeting helped to clarify some key issues. First, there had been more emphasis on areas of disagreement (for instance, is climate change real?) than on areas where all stakeholders agreed (for example, lower emissions of N2O mean better use of fertilizers). But even the areas of agreement had not been translated into policy recommendations that could be

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put in place by governments at state and federal levels. Finally, methodologies and protocols did not exist that would enable accurate measurement of emissions reductions or carbon sequestration, and without those methodologies the solutions weren’t likely to be seen as ‘real’ by farmers, investors or environmentalists. The participants agreed to work collectively to address these The real breakthrough issues through the Coalition for will be when regulated Agricultural Greenhouse Gases, carbon markets such as or C-AGG.

There is much still to be done. The C-AGG discussions are still not ‘mainstream’ in any of the stakeholder groups. Within philanthropy, only a handful of foundations support work on agriculture and climate mitigation. Likewise, few investors see agriculture and carbon as an important area. Still, C-AGG and its related initiatives have demonstrated that climate policy and carbon markets, if properly designed, can help address climate change, enhance farmer income and bring the farming community into the climate change debate. It has also increased the recognition that there is an important role for the agricultural community to play if we are to address the problems of climate change. Not only can farming help sequester carbon but it can help reduce emissions substantially. Finally, C-AGG is demonstrating that there really can be (and must be) common cause between farmers and those seeking to mitigate and address the dangers of climate change.

C-AGG’s work also highlighted the emerging California the need for further work on un- carbon market or the EU derstanding and disseminating Emissions Trading Scheme the science and addressing the technical barriers to progress, so a find ways for agricultural sister organization, the Technical carbon projects to enter Working Group on Agricultural their markets. Greenhouse Gases (T-AGG), was formed. By providing a forum for multi-stakeholder For more information www.c‑ discussion, C-AGG is now actively contributing to For T‑AGG materials the design and implementation of new protocols for‑agg agricultural emissions reductions, pilot projects on farms, work within the retail sector to reduce the GHG emissions of suppliers of agricultural products, AgriCulture And ClimAte development of data and monitoring systems, and de- Approximately 6 per cent of US GHG emissions come from agricultural velopment of new policies and regulatory guidelines. practices, nearly half of this from the fertilization of crops. Not all of the fertilizer that farmers apply to their fields is absorbed by crops, and Progress to date one byproduct of the unused fertilizer is nitrous oxide – a powerful One tangible outcome of the C-AGG approach is that greenhouse gas with several hundred times the global warming potential over the last six months of 2011, two of the carbon mar- of carbon dioxide. Production of livestock is another major source of ket registries in the US (the Climate Action Reserve emissions from US agriculture through the release of methane gas (a and the American Carbon Registry) have approved byproduct of digestion and of manure decomposition), another powerful their first agricultural carbon market protocols/meth- greenhouse gas. odologies. This means that investors such as EKO now have ways of investing in agricultural carbon market In addition, agriculture and forestry can actually remove CO2 from the projects that might eventually be sold on existing atmosphere and sequester it in the soil. the natural carbon cycle consists of plants taking carbon out of the atmosphere, transforming it into wood carbon markets. and biomass via photosynthesis, and then giving off oxygen. Growth of The real breakthrough, however, will be when regu- forests thus removes carbon from the atmosphere and, with the right lated carbon markets such as the emerging California agricultural management practices, agriculture can do so too. Some of carbon market or the EU Emissions Trading Scheme the biomass produced is sequestered in the soil, building up its organic find ways for agricultural carbon projects to enter content, which provides a number of benefits to crops by retaining water their markets. There is currently no sign that the EU and nutrients in the soil. All told, US forest and agricultural land offset will ever approve such projects, but the regulators in some 15 per cent of our emissions each year through these processes. California have indicated that they would like to see agricultural projects enter their market in the near future. If and when that happens, we could see investments worth tens of millions, or even hundreds of millions, of dollars being channelled towards farming that is good for the environment, good for farmers and good for investors.

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Forming new coalitions to build resilience carl Mossfeldt

Structural deficiencies in the development landscape mean that private capital is not having the impact it could on boosting sustainable development. Some intermediation functions, not unlike those played by investment banks in commercial markets, are still missing. Bringing together coalitions of actors around a tangible common purpose seems to be a promising way forward.

Carl Mossfeldt is managing director of the tällberg Foundation. email carl.mossfeldt@ tallbergfoundation. org

The SEWA Haryali project involves the sale, distribution and technical service of 200,000 efficient stoves and 200,000 solar lights. It is financed through a domestic commercial bank loan of US$14 million, repaid through micropayments and backed by a public guarantee and a buffer of carbon credits. The project is one of the largest of its kind, with significant development benefits in terms of monetary savings, increased time available for productive work, and health. One million tonnes of CO2 emissions are expected to be avoided, in addition to reductions in deforestation and black soot. Importantly, the project could be replicated in different regions and different product areas. This is where the Tällberg Foundation is now turning its attention.

Such projects do not emerge organically because they need several partners working together. In this case, The Tällberg Foundation has for over 30 years worked IFC, the private arm of the World Bank, was engaged to help foster new thinking and institutional change to structure the bank transaction and complete the to meet the challenges of the day, most notably legal and financial due diligence. The risk to the lendthrough the annual Tällberg Forum. Starting in 2008 ing bank was reduced by 50 per cent through a risk with the global project ‘Rework the World’, the foun- guarantee shared between the IFC and the Dutch and dation has explicitly addressed the question of how Swedish development organizations, FMO and SIDA. to incubate development projects with a systemic de- The guarantee in turn is linked to social criteria so sign and a scale that match the urgency of the social as to align the interests of the lending bank with the and ecological crises and which can be commercially social objectives of the project. This is done through an independently developed social impact matrix. The financed. final business plan, including IT systems, product proWhile there is a growing amount of private capital curement and carbon management strategies, brings available for development, investment opportunities all these aspects together and was produced by SEWA that match the dual social and ecological crises in with hands-on support from the Tällberg Foundation. scale and scope are not easy to find. The problem is a structural one: the lack of intermediary actors that An essential part in this process has been the intercan create new investment opportunities that meet mediating role played by the Tällberg Foundation. investors’ expectations. Another side of the problem The coordination and process management required is that the big visions for change have nowhere to go. to take an effort like this to investable proposition is too arduous for a grassroots organization like SEWA, The project ‘Rework the World’ brought together while both donor agencies and foundations generally close to 150 projects with a resilience focus and see it as outside their mandate. Indeed, internal regulooked at how these could be restructured to take lation often requires both these kinds of actors to work significant investment. The first such success case is only directly with the end beneficiary – in effect delaynow approaching completion. The project is run and ing the emergence of efficient intermediaries to bring owned by a grassroots social movement in India, Self these partners together. Employed Women’s Association (SEWA). It relies on SEWA’s unique strengths in terms of values, manage- From a broader perspective, therefore, the crucial ment and membership of 1.3 million women. SEWA lesson from the Haryali project is the impact that can has been firmly in the driver’s seat in terms of devel- be created when a consortium of complementary acoping the details and structure of the project. The tors – private, public and philanthropic – is brought role of the Tällberg Foundation has been to incubate together around a common and tangible vision. It and nurture the grand vision, and also to act as the sets a new standard for cooperation between funding intermediary bringing together a coalition of part- agencies and donors, and one that is crucially driven ners capable of turning that vision into an investable by the needs of people on the ground. A lot more can be expected to emerge from this approach. proposition.

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conFerence reports

Extracts from the latest from Alliance blog Highlights of . . . Bellagio Summit Bellagio, Italy, 8–22 November 2011 ‘Day One of the Bellagio dialogue left me encouraged about the possibilities for bridging the “development/philanthropy” divide and creating a more joined-up community of practice across that divide. But it also raised some questions about the virtues of bringing the notion of “well-being” to the centre of our thinking about development and philanthropy. The Bellagio facilitators were reluctant to define “well-being”, encouraging us to embrace a diversity of interpretations (conditioned by culture, class and place) that may come into conflict with each other.’ Barry Smith, independent consultant, 14 November ‘Let me assume for a second that the added philanthropic “body” to the summit explains why there was more cheer and laughter throughout, both in the plenary and in the break-out groups (not that I want to make us look lightweight compared to the development sector) and why the plenary presentations were actually uplifting: “hey, this is what we do and what we achieve while the complexity of the world builds up around us”.’ Inga Pagava, CAF Russia, 21 November ‘Well-being seemed to take a lower profile than I had expected, almost falling off the agenda – in

some ways a reflection on the “agreement to disagree” about defining it too tightly. And therein lies a potential problem – that of trying to align all actors around a single definition. This aspect of the project probably remains the biggest challenge – building consensus on a common agenda around well-being.’ Charles Abani, ARK, Absolute Return for Kids, 22 November ‘Easily the greatest strength of the module was the participants, a diverse collection of committed and very smart individuals from the philanthropic and development sectors. As often is the case at these gatherings, one learns as much – if not more – in the in-between times, when the conversations are one-on-one and frank.’ John Harvey, Council on Foundations, 22 November ‘The Rockefeller Foundation people knew what they were doing when they invited us to Bellagio Center on Lake Como, with its sunny evergreens and breathtaking panorama. The place is so serene that you have no choice when you arrive but to take a deep breath, look around and pause – then you feel compelled to contemplate the big questions of life such as “is this the kind of life I want to be living?” and “will the collaboration between philanthropy and international development save humanity from destroying itself?.”’ Nilda Bullain, European Center for Not‑for‑profit Law, 23 November

in module 3 has been the idea that if we really aim to close the gap between listening to people (something everyone agrees we must do) and acting on what we hear (regrettably, seldom done), then measurement is not another donor-imposed burden but our new best friend!’ David Bonbright, Keystone Accountability, 24 November ‘I found a very interesting phenomenon during my participation in modules 3 and 4 of the Bellagio Summit – participants like to use different terms for a certain concept. So from time to time they had to stop to identify the exact meaning of a basic concept before further discussion could take place. Sometimes they couldn’t convince each other even after debating and insisted on using different words.’ Lu Bo, World Future Foundation, 29 November

‘On the face of it, it seems that the comparative advantage of philanthropy is to be agile, nimble and able to take risks, given that foundations and philanthropists have independent, secure money and are accountable to no one. But this wasn’t how other players perceived them, nor how the foundation representatives appeared to perceive themselves. Several people suggested that the emphasis on risk tolerance and the emphasis on impact and effectiveness undermine each other, with foundations aiming for impact unwilling to risk failure of any endeavour.’ ‘Evaluation, impact assessment Caroline Hartnell, Alliance and performance management are often wrongly associated with magazine, 29 November the supply side of philanthropy. One exciting insight highlighted

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conference reports

Highlights of . . . european Venture Philanthropy Association conference Turin, Italy, 16–17 November 2011 ‘The “soul” of this engaging conference was best represented by enthusiastic investors and dynamic social entrepreneurs sharing their stories – both successes and failures. The ventures showcased in Turin included: sporting programmes that serve disadvantaged children and the elderly; microcredit provision in immigrant communities; school-to-work


Social Impact Analysis Association launch London on 1 December saw the long‑awaited launch of SIAA, the Social Impact Analysis Association. Two and a half years ago, in May 2009, the idea of an association of non‑profit analysts was first mooted at a conference on ‘Valuing impact’. ‘My name is Martin Brookes and I’m a non‑profit analyst,’ said Martin Brookes, then CEO of New Philanthropy Capital (NPC). ‘Not many people can say that and not many would understand it.’

conference on VP in Europe – as have the numbers of members of EVPA. Investors – people, foundations and companies – have grown in numbers and in investment value, with banks and institutions now putting their money into VP – such as the funding from BNP Paribas for Oltre’s microcredits investee PerMicro. Sustainability was mentioned frequently. In an offstage moment Damon Buffini told me that people want lasting solutions for social problems, not an eternal round of charitable hand-outs . . . Social enterprise – so popular that it now has its own Twitter hashtag, #socent – is one of the futures that this ‘Growth and sustainability were common themes in the conference. conference focused on.’ Chris Carnie and Martine Godefroid, The growth is coming from all Factary, 1 December sides. The conference itself has grown – this was the largest ever transition supports for youth at risk; and facilities for addressing temporary homelessness. Participants addressed a range of topics they had faced in launching their ventures, including how to: maximize sustainable social impact; identify the appropriate mix of financial and non-financial tools; develop sectoral approaches; engage government in more effective approaches; advance their work through technology and social media; and establish measured, well-timed exit strategies.’ Chris Page, Rockefeller Philanthropy Advisors, 28 November

he idea of SIAA came partly t through reflection on the

example, creating a web forum for sharing approaches, evaluation differences between the for-profit designs and even evaluations and non-profit spheres. Economists, across different countries. Others seemed more readily attainable. risk experts and analysts in the for-profit world have qualifications Tris Lumley of NPC was confident that principles/guidelines to cover and a right to speak about their measuring, analysis, reporting and subjects and be listened to. But using analysis could be drafted there is no similar professional within a year. standard for analysis in the non-profit sphere. In December Some issues for SIAA: who will pay 2011, Andreas Rickert of Phineo, for all this analysis? Will funders the German equivalent of NPC, see it as their responsibility to was able to say, ‘I don’t feel alone ensure non-profits have the funds any more.’ And there is no need for they need to do it? How can the him to: SIAA now has around 110 views of beneficiaries be taken members. into account when assessing Finding out what the members want and setting the agenda for the newly formed association was what the SIAA launch conference was all about. So what is next for SIAA? An afternoon of brainstorming in small groups provided a rich menu of tasks for the organization. Some were clearly for the long term – for

social impact? Will SIAA be an organization for sharing tools and good practices or will social impact analysis eventually become a formal profession with formal qualifications? For more information

booKs screw business as usual Richard Branson Penguin Portfolio $26.95/£12.99 isbn 978–0753539798 Matthew Bishop and Michael Green

Matthew Bishop and Michael Green are co‑authors of Philanthrocapitalism: How giving can save the world and The Road From Ruin: A new capitalism for a big society. Bishop is New York Bureau Chief of The Economist; Green is an independent writer and consultant on philanthropy and development. emails MatthewBishop@ and shepleygreen@

A naked man running into a cactus bush is a pretty good description of what happened to the financial sector in 2008. It is also the misfortune that befell British tycoon Sir Richard Branson – the man who started out selling a student newspaper in the 1960s, went on to sign the Sex Pistols to his record label and now rules a corporate empire of more than 300 businesses – as he fled from his burning mansion on Necker Island in the Caribbean after it was struck by lightning in August 2011. Reflecting on that experience, in the opening pages of his new book Sir Richard tells us that we have an opportunity to build a new capitalism on the ruins of the old, just as he is rebuilding his mansion. ‘Never has there been a more exciting time for all of us,’ he exhorts, ‘to explore this next great frontier where the boundaries between work and higher purpose are merging into one, where doing good really is good for business.’ Screw Business As Usual is Sir Richard’s attempt to show what life beyond that next great frontier looks like. ‘It’s about revolution,’ he explains, not business as usual. This is not old-style corporate social responsibility or CSR, which he pretty accurately identifies with ‘a small team buried in a basement office’ in most companies. Nor is it a matter of corporate philanthropy. Money is the ‘least important bit’ of the Virgin Group’s do-gooding, he argues. Instead, his companies focus on ‘becoming a true partner for frontline organisations and leveraging absolutely everything we possessed in order to drive change’.

Screw Business As Usual is characterized by the boundless enthusiasm of its author, not just for what Virgin is doing but also for the individuals and organizations that he gets to hang out with. Many of these are familiar: he sings the praises of microfinance pioneer Muhammad Yunus and Jeff Skoll’s purpose-driven movie company Participant Productions, which made Al Gore’s Inconvenient Truth. But he tries to leaven the lump with tittle-tattle from the dinner tables of the rich and famous (the Oscar-winning actress Kate Winslet pops up on the first page). He also name-checks an army of non-celebs from his friends, family, colleagues and people he has met. Though some readers will find the name-dropping tiresome, this personality-based approach to telling stories does reinforce the sense of agreeableness and personal warmth that is so much part of the Branson brand.

South African president Thabo Mbeki’s ideas about tackling HIV/ AIDS. His views on the failed ‘war on drugs’ smack of a genuine radicalism. Screw Business As Usual is part of a wider intellectual movement, including Michael Porter’s recent work on ‘shared value’ and Jed Emerson’s pioneering of ‘blended value’, which is trying to create a vision for a more sustainable and socially responsible capitalism. But it is not an analytical book. The Virgin corporate motto, he tells us, is ‘Screw it, Let’s do it’. So, rather than mulling over exactly why businesses that are socially and environmentally responsible will do better in the long run than those that chase short-run profits, he simply talks a bit about ‘good karma’ and then throws in another story about someone he likes. The fact that Sir Richard has wholeheartedly embraced corporate do-gooding and made so much money means we should take him seriously. But Virgin is also very different from most businesses. It is a privately owned company with no shareholders to please, so it can play faster and looser with the bottom line than most others. Could the CEO of a publicly owned company report to shareholders that an initiative like The Elders is a good use of their money? We suspect not. But the idea that capitalism needs to take off the blinkers and think of success in a more holistic and long-term way is one that surely ought to become embedded in corporate boardrooms.

Sir Richard talks the talk, but does Virgin walk the walk? The book is littered with examples of how his companies are living out the ‘doing well by doing good’ philosophy. Some of them underwhelm, such as the pages dedicated to telling how he is backing five scholarships for poor South Africans at his alma mater, Stowe school in Sussex. Yet from tackling climate change with his ‘Carbon War Room’ to fixing failed states through ‘The Elders’ (an independent group of some the world’s most revered elder statesmen, including Archbishop Desmond Tutu and former president of Ireland Mary Robinson), Sir Richard can To order claim to be a leader in corporate the Amazon website at http:// philanthrocapitalism. He is at his Visit best when courting controversy, as he did when he criticized former

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book s

Impact Investing: transforming how we make money while making a difference Antony Bugg‑Levine and Jed Emerson Wiley £23.99/28/$34.95 isbn 978–0470907214 Uli Grabenwarter

Uli Grabenwarter is co‑author of In search of gamma: an unconventional perspective on impact investing. email u.grabenwarter@

It all starts off like a fairy tale in which a number of noble, brave people have chosen to invest their money and lives for the betterment of humanity. For a moment, you are tempted to believe that you have embarked on yet another preaching of the end of capitalism. But the wake-up call is just around the corner. What follows is a razor-sharp analysis of the impact investing space, its origins and objectives, and its current and future challenges. Unlike many other works that focus on the trade-off between financial return and social impact, Jed Emerson and Antony Bugg-Levine illustrate, in a very compelling way, how blended value can generate wealth beyond the ill-designed concept of an impervious dividing line between financial return and social impact.

The authors focus on the question of what it takes for impact investing to succeed, defining impact investing as part of a systemic change – which itself requires systemic change. It shows that impact defenders need to accept the legitimacy of financial profit in impact investing in order to maximize social impact. Impact achieved through philanthropy may be perceived as more ‘noble’ but it falls short of the impact that for-profit investing can achieve through scale. To the for-profit investor, impact may appear as constraining the pursuit of maximum financial return. However, the authors provide delightful evidence for areas in which social impact can become a catalyst for financial return rather than an obstacle.

Alliance  Volume 17 Number 1 March 2012

For impact investing to grow to scale, the authors convincingly argue that policymakers need to allow social enterprises to integrate social impact into true for-profit business models. The arguments put forward suggest that if social enterprises were to take over a large portion of public services, prejudice against for-profit investment in social enterprise would disappear. Such a course of action would not only preserve public spending power; it would increase efficiency and cure cases of state failure. The book rigorously demonstrates the benefits that all stakeholders can draw from a flourishing impact investing market, and what role governments and regulators can play in creating a viable framework for this emerging industry. On many fronts, impact investing collides, and will continue to collide, with preconceived opinions about how financial markets ought to function. The financial crisis since 2008 has demonstrated unambiguously, however, that we cannot rely on those assumptions any longer.

be solved by market logic are addressed by the for-profit space. Such a change will also necessitate the formulation of impact objectives, efficiency in asset allocation to such impact objectives, and transparency in impact measurement and performance. It will require investment management skills that segregate impact investment managers from impact posers and investment products that bring the work of pioneers to mainstream and retail markets; and it will require collaboration that widens individuals’ sometimes egocentric perspective on their own achievements to a view of impact achievable through scale.

The required change is also about a new form of leadership. The authors demonstrate that the dividing line between for-profit and for-impact mentalities is not confined to financial markets: it is present everywhere – in policymaking, in the design of school and university programmes, in the operating models of service providers and intermediaries – and the writers repeatedly show what we lose by holding on to this In contrast to traditional financial ‘bifurcated world’. theory, blended value maximizes Against this background, it is the value of an investment for forgivable that the last two society without necessarily chapters on potential funding compromising either financial sources for impact investing return or social impact. While read more like the charter of a pursuing blended value therefore religious movement. While that appears to be a powerful does not diminish the merits of alternative, it also requires radical Emerson and Bugg-Levine’s ideas, change. First of all, we need to we should not succumb to the realize that the pursuit of social illusion that impact investing is objectives can no longer be left a matter of belief: it is potentially solely to the limited resources the most powerful means we have of charities and philanthropic in the pursuit of sustainability for organizations and that even our society. philanthropic efforts are best To order served if social issues that can

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the ultimate Question 2.0: How net promoter companies thrive in a customer‑driven world Fred Reichheld with Rob Markey Harvard Business Review Press £19.99/$27.95 isbn 978–1422173350 David Bonbright

David Bonbright is chief executive of Keystone Accountability. email david@keystone

customer satisfaction industry, is If you identify, recruit and support these suspect that farmer promoters. measurement and I believe that in philanthropy management and development, we stand are the weak where the business world stood links in in the early 1960s, when, despite philanthropy initial scepticism from business and development today, then heads, customer satisfaction you will probably want to emerged out of market research read The Ultimate Question 2.0 as a separate field. It is one as soon as possible. It is a clear, of the profoundest ironies of well-illustrated explanation of philanthropy and development both the why and the how of that business managers care more ‘establishing accountability for the about customer satisfaction than customer experience’. Reichheld philanthropists and development and his colleagues have spawned a practitioners do about the views global movement of Net Promoter of intended beneficiaries. I define System (NPS) practitioners, and ‘care’ here as what one does this book will plug you into the rather than what one says, and key concepts, tools and specialist for evidence I look for a rigorous community that you need to practice of ‘accountability for introduce effective NP practices customer experience’. in your organization. This is the Let’s conclude with a quick look definitive resource, full stop. into the NPS toolkit. So what? You care about this because NPS is Net Promoter Score a proven way to predict consumer You get this by asking how likely it is that consumers would corporate growth and profits, recommend Organization X and organizations like Keystone to a friend or colleague (the Accountability believe that the ‘ultimate question’) on a scale of customer satisfaction approach is 0–10. Respondents are divided even more relevant to development into Promoters (score 9–10; loyal and social change than it is to enthusiasts who will keep buying business. This is so because those and refer others, fuelling growth); who are meant to enjoy the benefits Passives (score 7–8; satisfied but of change are key to bringing unenthusiastic; vulnerable to it about. Customer satisfaction competitive offerings); Detractors metrics allow you to see what those (score 0–6; unhappy constituents people really think. who can damage your brand We have known for 50 years that and impede growth through if you want smallholder farmers negative word of mouth). Your to adopt new practices – say, take NP score is the percentage of up a hybrid seed or introduce a customers who are Promoters new cropping pattern – they are minus the percentage who are far more likely to do so if a farmer Detractors. Once you know where they respect is the one suggesting your constituents sit on this scale it. What we can now do, thanks you can take steps to increase to the insights of Reichheld and Promoters and decrease Detractors. those who came before him in the


Good and bad profits For NPS, bad profits are those made from practices that boost short-term profits but antagonize customers – like mobile phone tariffs that trap you in for long periods. Good profits by contrast derive from such a good-quality experience that customers recognize the value in the relationship and become Promoters. I don’t care that my Apple MacBook Pro costs more than some other laptops. I know that it will have everything that I need, that the service quality on it is fantastic, and that it is aesthetically pleasing. Net promoter economics By analysing the costs, savings and profit margins associated with the different behaviours of Promoters, Passives and Detractors, it is possible to make the economic case for investing in NPS. It takes into consideration factors like retention rates, effects of word-of-mouth, cost efficiencies, customer spend and profit margins. Each of these concepts has a direct analogy in development and social change programmes. Keystone has found that asking slightly different questions from the business sector’s ultimate question can uncover these analogues. It is still early days, and we find that different questions work well for different contexts. The key point, however, comes straight from the NPS playbook. The data collection process needs to be quick, easy and continuous. NPS is a tool that puts those who are meant to benefit from philanthropy, development and social change at the heart of measurement and management practice. If this sounds like something you would like to see, you can’t get a better start than by reading this book. To order

Alliance  Volume 17 Number 1 March 2012


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blueprint 2012 Lucy Bernholz Lulu Publishing £6.43/$9.95 isbn 978–0984781119 Charles Erkelens

Lucy Bernholz has written an interesting industry forecast for the philanthropic sector for 2012. As in previous years, Blueprint 2012 aims to give those involved and potentially involved in the sector a view of the themes that may be important this year. The overall document of approximately 40 pages contains a number of interesting annually recurring items like the predictions and wildcards for the new year and the review of the previous forecasts in the light of the actual events of the past year. Although the work is thought-provoking and insightful on trends in the sector, I am not sure whether the material’s presentation in book form – rather than just through Bernholz’s excellent blog www.philanthropy2173. com – is justified. The different sections are of unequal length and depth and do not add up to a coherently structured book.

Charles Erkelens is director of the erasmus Centre for Strategic Philanthropy at erasmus University Rotterdam. email

Blueprint 2012 starts off by introducing a (new) term, ‘social economy’. Without giving a strict definition, the social economy is taken to mean the use of private resources for public goods. However, confusion arises when the author suggests that public resources can also support the social economy and when a lighthouse is put forward as a typical example of a public good. The implication is that everything that is for the public good is included in the term, a vastness of scale which the author, possibly unintentionally, confirms when she goes on to

Alliance  Volume 17 Number 1 March 2012

describe the social economy as something that contains different galaxies (of non-profits, impact investing and political giving). Besides, the shift that Bernholz sees for 2012 – from philanthropic and non-profit to the social economy – seems to be one of definition rather than of interest. Everything that was there in 2011 will also be present in 2012. In a more interesting but mainly American context, Bernholz draws our attention to the impact that the Citizens United supreme court ruling of January 2010 will have on the 2012 election year in the USA. This widely criticized ruling is a major change to the political funding system, which will most probably influence not only the elections but also some of the related non-profits and the stream of donations in this year. The last major shift the author predicts is the growing importance of data for the sector and the way we operate as a whole. This is an interesting observation which indeed holds true for a number of areas related to philanthropy. Data can be useful to organize and improve non-profit work and is essential for reporting and evaluating organizations within the sector. Also, the (US) government is opening up more and making government data available, leading to an upsurge of volunteers helping to put this data to use. In all, this short book offers some interesting insights into present and possible future issues that the philanthropic sector will be faced with this year and beyond. For it to become an authoritative

annual industry forecast, I think the author should choose to expand future editions and make Blueprint into an even more coherent and informative whole. Lucy Bernholz is very knowledgeable on present-day philanthropy and her insights are a useful and valuable addition to the (US) sector. Her Blueprints deserve a structure that offers a detailed connection of the long-term trends affecting the sector with the short-term forecasts for the next year. To order


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