The Win-Win-Win of Impact Investing

By: Nathan Sell*

Ask not what your investment dollars can do for you, but ALSO what they can do for others, and the environment. That’s the idea behind Impact Investing, an emerging paradigm shift in philanthropy. This form of socially responsible investing generates both measurable social and environmental impact as well as returns on investment. Mark Tercek, CEO of the Nature Conservancy and former Managing Director at Goldman Sachs is at the forefront of linking business and the environment for a better world as he discusses in his recent book “Nature’s Fortune.” Tercek, and the new wave of impact investors are proving that your investments can make money AND do good.

Impact investing in the environment is quickly coming to scale as the value of ecosystem services to clean air and water, armor shorelines, as well as climate change mitigation and adaptation is being realized. Cities like Philadelphia are leading the way in green infrastructure investment. Over the next 25 years, Green Stormwater Infrastructure will help the city to combat the extreme weather patterns as well as prevent Combined Sewer Overflows resulting in greener cities and cleaner waters for which the initiative is named.

Novo Nordisk entered China in 1994 and immediately noticed that a diet high in starch was leading to diabetes in a large portion of the population. Combined with rapid pathogen spread due to urbanization, the health of the people in China was (and continues to be) at risk. Novo Nordisk put their efforts toward alleviating some of these health concerns. By training doctors in diabetes care and prevention, the company has helped to save over 140,000 life years. The shared value of impact investment ensures companies like Novo Nordisk remain profitable while helping the communities in which they work.

Impact investing also has the potential to bring promising technologies to scale. Without investment, it’s possible that companies like d.light may never have gotten off the ground. With the help of investment, this for-profit social enterprise has been able to sell affordable solar lamps to those without reliable power. The result? D.light is bringing safe, bright and renewable lighting to people around the world, allowing students to do their homework, families to cook, and an overall better quality of life to over 34 million people.

Impact investing may prove better for people and the planet than charitable giving. Investing in businesses that do good by people and the planet can ensure the success of their mission, allowing for long term solutions, rather than a potential band-aid in the form of a grant or gift. If your investment could benefit the triple bottom line, rather than just YOUR bottom line then you’ve found the rare win-win-win scenario. The next time you invest, think strategically about what your money can really do.

*Nathan is a recent graduate of the Master of Environmental Studies program at the University of Pennsylvania and a current ORISE Fellow with EPA Water.

Urban Water Justice in the Developing World

By Urmila Malvadkar* 

In the developing world, a lack of sufficient clean water is both a cause and consequence of poverty.   Informal settlements—housing up to 60%  of the population of some cities in the developing world– face unique obstacles to water access.  New infrastructure is difficult to install in dense, unplanned communities.  Many governments ignored needs of these communities in order to de-legitimize them and discourage rural-urban migration.  Further, residents are often rural migrants who stay for a few years  and do not advocate for investing in their community.

Where cities are unwilling or unable to provide water, residents can spend hours a day to purchase water from private vendors who charge 10 to 20 times more than tap water.   Some of these vendors in large cities such as Jakarta and Nairobi, have ties to organized crime, collude to cause artificially high prices, refuse to serve certain ethnicities,  and threaten utility workers with violence.

While some official policies– even pro-poor policies–can reduce access to water among the very poor, some programs focusing on improving service to the most indigent communities profoundly improve lives.

Agriculture and Aquaculture in a Changing World

Author Jaivime Evaristo is a graduate student in the Master of Science in Applied Geosciences program at the University of Pennsylvania. This post is adapted from his conclusion of a paper he wrote for the IGEL Student Research Briefs series. Opinions represented in blog posts and research briefs represent the opinions of the authors only, not of Wharton, Penn or IGEL. Click here to read the whole paper>>

In industrialized countries, the area given to agricultural activities has fallen by three percent between 1961 and 2007.  In developing countries, however, it has risen by 21 percent (FAOSTAT 2009). However, although the aggregate output is quantitatively greater than the aggregate food demand, it is unfortunate to note that one in seven people today still do not have access to sufficient food, primarily in the developing world, while an equal number are overfed (Godfray et al. 2010).

The Nature Conservancy Does Wonders Via Third Party Verifications

Kimihiko Takamatsu is a graduate student at the University of Pennsylvania in a Master of Environmental Studies (MES) program, with a concentration in Environmental Policy. He hails from Japan, and earned a Bachelor of Laws from Keio University in Tokyo in 2011. Prior to his graduate studies at Penn, Kimihiko worked as a secretary at the Tokyo Office of Skadden, Arps, Slate, Meagher & Flom LLP,  one of the largest law firms in the U.S. As an MES student at Penn, he focuses his studies on International Environmental Treaties and Sustainability Management. Kimihiko is currently working as a research assistant at the US-Japan Institute, which is a non-profit research organization, based in Philadelphia, PA.

I had the opportunity to listen to a speech presented by Ms. Sarene Marshall, the Managing Director at the Nature Conservancy. The Nature Conservancy is the largest environmental non-profit organization in the U.S., and Ms. Marshall has led many projects relating to sustainability management in developing countries throughout her career at the organization. A graduate from the Wharton School with fluency in Spanish, Ms. Marshall introduced two case studies in terms of deforestation for this occasion: the logging industry in Indonesia and the soybean business in Brazil.

On the regulation front, many laws are put in place in countries around the world to prohibit the sourcing of products that are contributing to the deforestation, especially timber, but also other agricultural products. Brazil has a far-reaching legislation that has been on the books for decades but little has been enforced until recently, known as the Forest Code. The law requires that private landowners in the Amazon retain 80% of their land near forest cover so companies won’t farm, ranch, or pare down the trees there.

The Forest Code had been the biggest tool in fighting deforestation in Brazil until a high-profile report of Greenpeace came up accusing the soybean business of eating up the Amazon. The report indicated that the deforestation occurring in Amazonia lead to the growth soy beans that were then fed to chicken and finally ended up in fast food chain restaurants like McDonald’s. This incident sparked a wave of outrage from environmentally minded consumers, and as a result, Cargill, an American multinational dealing in agricultural commodities, had to scale down their soybean business in Brazil.

Against this backdrop, Ms. Marshall and her team at the Nature Conservancy initiated a pilot program in Brazil to ensure that suppliers are in compliance with the law, and also consumers can know where the soybeans that they buy are coming from. What Ms. Marshall did with her team was to apply mapping technology to create graphical maps showing which properties are in compliance and which were not. In creating the maps, they used databases in state agencies and the ones Cargill produced, and combined the geo-referenced information and delivered it to a variety of stakeholders. This project ended up as a great success, and currently Ms. Marshall’s team has covered 128 million acres of forest using their program. Furthermore, their maps have provided vital market access for farmers as well as increased Cargill’s transparency, resulting in a mutually beneficial outcome.

The second case study on the logging industry in Indonesia is also a success story outlining how to make supply chain more sustainable. The Nature Conservancy has been committed to the timber business in Indonesia for decades with a program funded by the U.S. Agency for International Development (USAID). They have been working with local timber concessionaires, primarily in Borneo, to show how they can change their felling practices to more environmentally conscious ones, while trying to enhance community engagement with the local people living near timber concessions.

One of the things that the Nature Conservancy has been involved with is to advise local loggers to use the monocable winch system. The monocable winch allows loggers to drag one log at a time instead of, say, a powerful bulldozer carrying a bunch of logs while knocking down whatever plants or vegetation that come in its way. This saves a lot of innocent trees, reduces tons of carbon emissions annually, and keeps the timber concession viable for future use so that they can go back later and fell newly grown trees. At the same time, they also make efforts in engaging the local community and whereby they identify important areas that are culturally and spiritually rich, so that the certification process for timber concessions works smoothly and without much antagonism between loggers and locals.

“Each year, about 36 million acres, or roughly the size of New York State, of forest are lost,” warns Ms. Marshall. To the surprise of the audience, myself included, 80% of carbon emissions come from deforestation, according to her. Yet, many developing countries still rely on carbon-intensive fossil fuels for energy production, in pursuit of economic development comparable to the levels achieved by developed countries. While many multinational corporations try to exploit the so-called “bottom of the pyramid (BOP)” consumers, whose number is said to be somewhere around 4 billion today, it is essential that third-party organizations get involved in their supply chains, with a critical eye toward their long-term sustainability.