Sunday, December 14, 2025

Debating the Future Role of U.S. Energy Subsidies

By
Gino Baltazar, MS Finance
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Seemingly lost in the confluence of recent news, whether those that are covering North Korea’s intransigence, Mueller’s investigation, or #memogate, is more substantive debate on how the administration’s “Tax Cut and Jobs Act” will now treat ongoing energy subsidies.

Will the new administration now reduce support of subsidies for renewables in favor of say coal? If so, by how much and what message will this now be sending to the science advocacy that supports the view that climate change is real?  What real costs are not being calculated into business rationales for continued subsidies of energy sources?  What are the trade-offs?

“No longer is there a trade-off between what you believe in and what you can make money off of,” Nancy Pfund, who co-runs DBL Partners, early investors in Tesla, and said in the New York times this time last year, weeks before the new U.S. administration’s inauguration.

Why This Matters

History of Energy Subsidies

U.S. government subsidies for energy is as old as the nation, says Ms. Pfund in her seminal report “What Would Jefferson Do?” on how subsidies, a form of taxpayer-funded government incentive, have played a major role in meeting the energy needs of the world’s second biggest energy consumer (China is the first).

The report traced energy subsidies and tax credits (or levies) to as far back as 1789, when leaders of the new nation slapped a tariff on the sale of British coal that slipped into U.S. ports in ship ballasts.

Significantly, the report also cited how subsidies for renewables have paled in comparison to those of fossil fuels.

Today, despite the progress made by the Obama administration, nearly $5 billion continues to subsidize the fossil fuel industry. Estimates by other analyses such as by Oil Change International say the subsidies might actually be higher, to the tune of $20 billion, if certain computations for tax credits or allowances are factored in.

Opposing analysis, such as by the Institute of Energy Research, an entity with known ties to the Koch brothers, suggest the higher subsidy numbers are overstated, arguing such computations outside of the U.S. system’s tax code should not be factored in.

However, what seems to be lost in the analyses are the real costs, or impacts, that those subsidies continue to make, and ultimately, taxpayers continue to indirectly fund. Those are nowhere in the current tax code. Should those costs be factored in at all?

Real Costs of Energy Subsidies

It’s been a few months since the autumn fires in California yet many outside of wine-country Sonoma or the Bay area seems to have forgotten. The fires caused nearly $12 billion in damage.  Shouldn’t this cost be factored in as well?

Extreme heat that perenially now floods Pakistan costs the country by as much as $9 billion, according to some estimates. Shouldn’t this cost be factored in as well?

“The biggest climate threat facing Pakistan today is national security – the possibility of climate change and environmental factors destabilizing Karachi,” Sualiha Nazar an expert in Foreign Policy says.

A firefighter extinguishes a flaming palm tree in California. Source: Stuart Palley for The Washington Post.

Hurricane Maria cost Puerto Rico $45 billion to $95 billion in damage just two months ago, according to some estimates. Shouldn’t this cost be also factored in?

Alcen Renewable CEO Tao Kong put it best when he said price comparisons don’t take into account one of the most basic concepts in economics, which is externalities.

“Fossil fuel energy imposes real costs on society that are not priced into the cost of the fuel  – the costs of pollution, air quality or of climate change,” Kong adds, “and is already making parts of the planet uninhabitable.” Parts of Puerto Rico, as of this writing, still remain without power. 

What’s Needed – Real Debate, More Tools

Over five years ago, G20 nations called into question what role fossil fuel subsidies ought to continue playing to fund old energy projects.

Many called for its retirement then, saying that not doing so encourages investors to put resources into the fuels that are driving climate change, an assertion that is true. Globally, subsidies that support fossil fuels as energy sources surpass $600 billion, and dwarfs the $90 billion spent on renewables.

And so, as with the recent launch of a Tesla into a Falcon Heavy’s orbit by SpaceX last week, perhaps continued debate, visible action, and purposeful investment now remain in the hands of private markets.

SpaceX, as was Tesla, were in part funded by subsidies, so arguably, subsidies can still work to fund projects that benefit the social good.

What might be needed are systems to price in say, credible carbon price signals, as the innovative blockchain-based peer-to-peer carbon trading platform CarbonX is trying to do, along with more specific numbers on the costs or negative incentives, or impact created by fossil-fuel subsidies.

This way, the markets – pensions, institutional investors and perhaps even retail investors – will have better tools to decide, and act.

“Long History of Energy Subsidies,” Chemical and Engineering News, December 2011.

“Dirty Energy Dominance,” Oil Change International, October 2017.

“Vox and OCI Miscontrue Subsidy Landscape,” Institute for Energy Research, October 2017.

“Meet the 28-year old who is Building Utility-scale Renewable Energy Projects,” Medium, May 2017.

“Federal Support for Developing, Producing, and Using Fuel Energy Sources,” CBO, March 2017.

“What Would Jefferson Do?” DBL Investors, September 2017.

“Why We Need to Abolish Fuel Subsidies,” WEF, November 2014.

“Can Personal Carbon Trading Take Off on the Blockchain?” Fast Company, October 2017.

Backers Say Go “More Digital” but Funding is the Real Challenge, Study Says

By
Gino Baltazar, MS Finance
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As many as 164,473 social enterprises are operating in the Philippines. Source: The British Council, Philippines.

A recent December gathering of accelerators, foundations and social enterprises stressed the need for social entrepreneurs to go more digital, to play to the growing expectations of stakeholders who today are more connected, more mobile and more used to “instant access.”

The gathering, called the Sinag Accelerate 2017 and hosted by the Bank of the Philippine Islands (BPI) Foundation, awarded ten small and medium businesses that are not only financially sustainable but have also made significant impacts in their communities throughout the ASEAN nation.

Why This Matters

It is the dawn of 2018, nearly eleven years since the Apple iPhone was first announced and nearly forty years since Bill Drayton first put the words “social” and “entrepreneur” together in 1980.

In a way, social entrepreneurship’s birth was sandwiched between entries into modern society of the personal computer in 1975 and the smartphone in 2007, two inventions that have really revolutionized the individual’s relationship with their devices.

These have led to the current reality where digital is pervasive, influencing all aspects of humanity’s lives whether in the realms of politics, social, economics and industry.

As children of the same period (1980’s), it is not surprising that social innovation and technology are influencing, even “interacting” with each other in ways that are elevating persistent human issues, like the ill-treatment of children in third-world countries over social, and democratizing ways to mitigate those issues, such as, say, the rise of crowdfunding and peer-to-peer digital lending and payments (bypassing traditional banking).

As a result, social entrepreneurship continues to blossom, connecting practitioners in remote corners of the world with an ecosystem of academics, policymakers, volunteers and most importantly, funders, all supporting these entrepreneurs in their efforts to change the world.

Yes But …

More than half of social enterprises in the ASEAN country continue to struggle not because of excluding digital but because of difficulties in obtaining capital, in a survey published in October 2017 by British Council, the European Union, and the United Nations Economic and Social Commission in Asia and the Pacific.

“A rapid assessment of the data would show that the nature of the most pressing issues for social enterprises in the Philippines are financial or monetary. This is followed by human resource concerns,” a copy of the study, which is freely available online, read.

As to what constituted a “substantial barrier to growth,” 53 percent of the social enterprises said it was obtaining capital, 46 percent said it was grant funding, while 32 percent said it was cash flow.

It thus may be tempting to divert capital to those social enterprises whose business models leverage the digital consumer or stakeholder, but it shouldn’t be at the expense of solving real problems rooted at causes that may not be solvable by the next innovations in Voice, Blockchain or Augmented Reality (AR).

The British Council study noted that in Southeast Asia, the Philippines included, the youth bulge, arguably the most digital among generational groups, potentially can bring demographic dividends but can also spell disaster if the young cannot find economic opportunities.

Read More

“Reaching the Farthest First”, British Council, October 2017.

“Study: Getting capital is biggest barrier to growth of PH social enterprises”, Inquirer, November 2017.

“Rise of Voice and AR among key digital trends that companies should take note of in 2018, Ogilvy says”, Inquirer, December 2017.

“BPI Accelerator Reveals Top 35 Social Enterprises,”  Phil Star, August 2017.

Investing in our Children is Investing in our Future

By
Gino Baltazar, MS Finance
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The 'End of Childhood Index' evaluates countries by events that disrupt childhood, such as food insecurity, violence, teen pregnancy and lack of education. Source: Save The Children Foundation.

About 25% of children worldwide, or at least 700 million, see their childhoods end too soon, according to a report over the summer by the non-profit group Save The Children.

Malnutrition, conflict, child marriage, early pregnancy, economic exclusion and child labor – “childhood enders” – are among the many factors that impede children’s young lives across all regions in the planet.

Dr. Jill Biden, former U.S. Vice-President Joe Biden’s wife and Save the Children’s board chair, and Carolyn Miles, president and CEO of the non-profit, highlight the significance of their findings (watch their video).

Why This Matters

An Existential Threat

These conditions constitute an assault on the future of the world’s children and is, in a way, an existential type of threat to the future of humanity, the report’s authors say.

Depriving the world’s children today degrades humanity’s overall capacity to supply tomorrow’s minds with abilities to solve its biggest questions and toughest problems.

An investment in today’s children represents an investment in the future.

Communities across all countries, rich and poor, can do a better job of ensuring every child enjoys the right to a childhood, the report urges.

Using a “Childhood Index,” the non-profit has ranked 172 countries on who are succeeding, or failing, to provide conditions that nurture and protect their youngest citizens.

Source: Save The Children Foundation

The United States ranked #36 in the list, below most other western nations in Europe and – a surprise – even below other countries like Bosnia or Qatar and just a notch above Kuwait and Russia.

The Eight Enders

Among the statistics cited, are what the report calls the eight “childhood enders.”  They are:

  • 263 million are out of school
  • 168 million are in child labor or are in exploited, hazardous work
  • 156 million under age 5 are stunted in growth
  • 40 million girls marry young (15-19 years old)
  • 28 million are children-refugees
  • 16 million are young mothers (15-19 years old)
  • 8 million die prematurely (0-19 years old)
  • 75 thousand die by homicide (0-19 years old)

Challenges to childhood are most pronounced in West and Central Africa.

The top 10 countries with the highest child homicide rates are all in Latin America or the Carribean.

The top 10 countries with the most children refugees are the same countries the current U.S. administration has issued travel bans against – Sudan, Yemen, Iraq, Somalia and Syria.

Calls to Action

The report urges a number of broad actions, placing most of the burden for “child-ender” solutions squarely on governments, although there is certainly room for donors, philanthropic innovators and private parties to pitch in.

    • Invest in children – governments and donors need to raise the necessary resources to invest in basic social services, education, financial security and social protection.
    • Treat children equally – end discriminatory policies, norms and behaviors such as preventing girls or minorities from access to health services or education.
    • Count children accurately – to help measure progress, data collection systems should be standardized to ensure no child is left unreported. This would include data by age, economic group, gender, sex, race, ethnicity and geography, immigration status.

Read Some More

“End of Childhood Report,” Save The Children Foundation, 2017.

“Jill Biden Named Board Chair of Save The Children Foundation,” Delaware Online, February 2017.

“Children On the Move,” UNICEF Series on Uprooted Children, 2017.

Highlights in the series:

        • Among the millions of Rohingya refugees who have fled Myanmar, more than half, or 300,000, are children.
        • Nearly 2.2 million Yemeni children are acutely malnourished, and an estimated 460,000 children under 5 suffer from severe acute malnutrition.
        • 1.75 million Syrian children are no longer in school and some 2.5 million are living as refugees or on the run in search of safety.
        • An estimated 850,000 children have been forced to flee fighting in the Democratic Republic of Congo’s Kasai provinces. Of those, 400,000 severely malnourished children are at risk of dying.
        • In the Philippines, 1.8 million abandoned children live in slums in the NCR, in areas like the “Smokey Mountain” trash hills in the capital.

Beating Pakistan’s Changing Weather

By
Gino Baltazar, MS Finance
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Flood victims scramble for food rations as they battle the downwash from a Pakistan Army helicopter during relief operations on September 13, 2010 in the village of Goza in Dadu district in Sindh province, Pakistan. Officials say as many as 22 million people were affected during Pakistan's worst flooding in 80 years. (Photo by Daniel Berehulak/Getty Images)

“We have an opportunity to support each other in building more resilient societies, a more resilient world,” says Jacqueline Novogratz who runs Acumen, during a visit to one of Acumen’s investments, Nizam Bijli, a company that brings affordable solar electricity to low-income communities in rural Punjab Pakistan.

Affordable solar electricity in Punjab’s rural country helps its population weather the region’s extreme heat which at 110F can be withering.

Mind-numbing Heat

Beating Pakistan’s Heat  

“Most Punjab households consist of eight people sharing a room or two,” according to Ms. Novogratz, who has invested up to $32 million in the region. “The heat can be so intense as to make you question your humanity. It saps your strength.”

Nizam Bijli helps Punjab families power fans that help children sleep through the night, become better students and feel that their lives are improving.

Debates about climate change in Washington, in Paris or in Seoul matter less to these people at times than how to simply get relief from relentless heat in the region.

Nizam Bijli, who makes the low-cost solar products that help power the fans in Pakistan’s remote, underserved communities, says their goal is to provide clean, reliable energy to one million people in the next five years.

“I am a big believer that third world problems will be solved by third world people,” Nizam Bijli’s founder Usman Ahmad has said.

“As a social enterprise, Nizam knows what the market wants. Sure, we’ve made mistakes, but we know what we need to achieve to build something sustainable. We’re not going to waste your money with administrative costs. We want to change the entire space. There is an energy revolution in the works and it’s not just going to happen in Pakistan — it will be global.”

Pakistan’s Changing Climate 

As with the raging fires across the world in California of late, Pakistan’s pattern of increasingly hotter days is just one symptom of the world’s changing climate.

A firefighter extinguishes a flaming palm tree in California. Source: Stuart Palley for The Washington Post.

“Perhaps the biggest climate threat facing Pakistan today is national security – the possibility of climate change and environmental factors destabilizing Karachi,” says Sualiha Nazar in a post on Foreign Policy.

Karachi, Pakistan’s economic center with a population of approximately 17 million people, is also Pakistan’s main port city, and where its central bank and stock exchange are based. The city generates 50% of Pakistan’s tax revenue and accounts for 42% of its total GDP.

Geographically, Karachi also sits close to the Indus River Delta, where the Indus flows into the Arabian Sea. Rising sea levels have made the delta almost at the same level with the Arabian Sea, threatening land erosion, increased salinity into creeks flowing from the Indus, and increased overall ecosystem instability.

Most importantly, increased sea level now floods increasingly larger and more populated areas.

Usman Ahmad, CEO of Nizam Energy, Acumen’s new investment in Pakistan providing rural, off-grid communities with solar solutions. Photo courtesy of Nizam Energy. Source: Acumen

“Do you think you’re successful?” Usman Ahmad remembers Jacqueline Novogratz once asking him. “In Silicon Valley, no. In Pakistan, yes.”

“If we’re able to do what we’ve set out to do, there’s no reason we shouldn’t be a global company. It’s been a very exciting journey. I mean, my family and friends hate me. I have no social life, but these days I lie in bed at night thinking – we’re doing something right. Just keep going.”

“Building a Resilient World,” LinkedIn Pulse, May 2017.

“Bright Future – How One Man is Bringing Power to His Community,” Medium, 2016.

“Pakistan’s Big Threat Isn’t Terrorism, It’s Climate Change,“ Foreign Policy, 2016.

“The Blue Sweater: Bridging the Gap Between Rich and Poor,” Novogratz, Jacqueline, Amazon, 2010.

The Blue Sweater draws its inspiration from an encounter Ms. Novogratz had during her stint in Kigali, Rwanda.

Ms. Novogratz had spotted a boy who was wearing a blue sweater that, upon closer inspection, (her name was on it) turned out to be the same blue sweater that her mother had given to Goodwill a decade earlier.

This encounter led Ms. Novogratz to realize the interconnectedness of our world, which influences her work to this day.

Billionaires Pool Their Assets and Resources to Scale Impact

By
Gino Baltazar, MS Finance
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Olivia Leland at the Skoll Forum in 2014. Source: Skoll Foundation.

A group of the world’s wealthiest and most visible philanthropists has launched an arrangement called “Co-Impact” to pool their assets and resources in ways it says will help scale and maximize the impact to the world’s largest problems.

The effort is backed by the Rockefeller and the Skoll Foundations as well as by Warren Buffett’s The Giving Pledge and by Bill and Melinda Gates. Olivia Leland, formerly of Rockefeller and the Gates Foundation, will helm Co-Impact.

Read More

Why This Matters

Private philanthropists have helped solved many of the most important social-impact issues in the 20th century, ranging from making polio extinct globally to providing free lunches to  all needy schoolchildren in the U.S.

The prolific Bill Gates, formerly of Microsoft and a Presidential Medal of Freedom awardee, has made indirect or personals investments to fight Alzheimer’s, better track philanthropic grants, and build smarter cities.

Yet despite their seeming successes, increasingly deeper pockets and willingness to achieve change, many remain challenged with the type of engagement, partnerships and commitment that are often needed to solve larger problems, and achieve change at scale.

Many of humanity’s largest problems need efforts at-scale and sustained effort, often more than 20 years, to achieve visible change. Source: The Bridgespan Group

Few philanthropists on their own are able to offer specialized expertise and capacity in diverse areas such as policy, law, technology, marketing, and performance management, according to Leland.

With increased collaboration, philanthropic partners, networks and donors can accelerate systems change in a way that can scale to meet humanity’s toughest problems. Co-Impact aims to build a platform to connect donors together while curating which opportunities to fund.

Co-Impact’s founders say that while Giving Pledge, by comparison, has been focused on the “how much” of philanthropy, the new arrangement will be focused on the “how”.

Source: Stanford SSIR

Timetable 

The group is moving quickly. $500 million has already been committed by Bill Gates, Jeff Skoll and other signatories of Buffett’s Giving Pledge Group.

Announcement of first grants is expected by the end of 2017. Flexibly-structured grants up to $50 million will go to address health, education, and economic opportunities for underserved populations across the planet in the next five years.

Read Some More

“A New Model for Collaborative Philanthropy,” Stanford SSIR, November 2017.

“Billionaire donors Agree to Pool Philanthropic Resources,”  Financial Times, November 2017.

“Nilekani and Bill Gates Announce the Formation of Co-Impact,”  Siliconeer, November 2017.

“How Billionaires are Pooling Assets for a Bill Gates Philanthropic Fund,” Forbes, November 2017.

“15 Success Stories of Audacious Philanthropy for Large-Scale Social Impact,”  Bridgespan Group, August 2017.

SOCAP turns 10

By
Gino Baltazar, MS Finance
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Rise Fund Partner Maya Chorengel at SOCAP17. Source: SOCAP

Ten years later, participants at this year’s October SOCAP in San Diego feel that they have made strides from turning what once was a niche audience of 600 to now more than a well-attended, 3,000-strong event.

However, despite evident momentum, some feel disappointed that the ecosystem, infrastructure and volume of capital moved has not moved far enough.

Read More

Growing Pains

Sustainable and Responsible Investing or SRI has grown to $23 trillion in 2016 from just $18 trillion two years earlier, and now accounts for 26 percent of total managed assets, $88 trilion globally, according to a newer study by McKinsey.

Customers are increasingly tuning in to any ESG information that can shape their investing decisions. SOCAP panelists noted that while there is this evidence of increasing demand, systemic issues persist: many intermediaries have not come on board and there is still debate on what constitutes impact and between private and public capital. Bias still remains.

Moving The Needle

Intermediaries, such as those that consist of asset management firms, brokerages, wealth management firms, could be more motivated or engaged, panelist Mark Newberg of Womberg, Rice, et al LLP emphasizes. Metrics today is still “.. hard, and are made harder by non-standard definitions of what ‘impact’ is.”

Mark Newberg, Director of Impact Strategies at Womble Carlyle Sandridge & Rice. Click on the image to view SOCAP’s video. Source: SOCAP

Recognizing demand potential may help as well. Capital markets will continue to take a traditional role in funding enterprises that are solving a social good, panelist Maya Chorengel of the Impact Fund concedes, but the “leading edge of that will come from the mainstream rather than the impact side.”

In other words, for momentum in the space to continue, some consumers will need to lead their own wealth advisors to purpose-driven investments, instead of the other way around.

Chorengel, like Newberg, also emphasized that impact measurement needs to be more  crisp, and that incorporating the costs of ESG measures in portfolios need to be more standardized, and formalized.

Additionally, the U.S. may need to do more in terms of guidance on regulation. One good example legislation was 2015’s ERISA clarification, which gained for fiduciaries protection of the law weighing not just shareholder interest but the ESG impact of their decisions.

Read Some More

“Impact Investing and SOCAP turns 10,” Huffington Post. October 2017.

“SOCAP signals SDGs as a Declaration of Interdependence,” Impact Alpha, October 2017.

“What you missed at SOCAP 2017 – roundup,” SOCAP, October 2017.

Betting on Women – Wharton’s Project Sage

By
Gino Baltazar, MS Finance
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Project Sage's Findings. Source: Wharton

A considerably diverse number of venture funds are increasingly and deliberately incorporating women, or gender lens, into investment analyses and decisions, a report called “Project Sage,” by the Wharton Social Impact Initiative concludes.

The Wharton team has found that the funds have raised a sizeable $1.3 billion and is now backing more than 650 companies.

Read More

Why The Study Matters

Suzanne Biegel, Wharton

As recently as five years ago, according to Suzanne Biegel, its lead author and Senior Gender Lens Investing Advisor at Wharton Social Impact Initiative, funding options via gender lens were few or non-existent. The network of investors, key players and knowledge-owners was small, limiting access and opportunity for investing using the approach.

Today, impact investing is a market sized at over $23 trillion, so there is ample opportunity for the investment strategy to capitalize on the potential of women to help effect significant change to persistent problems across the world.

Finally, consider the backdrop of the study’s results against today’s news of harassment claims against prominent men like Miramax Film’s Harvey Weinstein, tech evangelist Robert Scoble or Uber’s former CEO Travis Kalanick. Despite persistent biases, many of today’s generation of women are game-changers and speaking out more.

Dig Deeper

The average size of the nearly 60 funds studied was $36 million with a wide range between $1 million and $400 million.  Nearly 60% of all the funds had all-women partners.

Technology, health-focused companies and companies with a positive environmental impact dominated fund portfolios, prioritizing businesses that served the “aging market,” “deep tech,” “agtech,” or “disruptive tech.”

Vehicles for directing capital were also as varied, from traditional venture and private equity, “collaborative” angel funds (i.e. group of angel investors, also called “sidecar” funds to angel group) to flexible loan structures that allowed loan drawdowns or redraws (i.e. ability to borrow the minimum to minimize interest on the borrowed funds or ability to reborrow loan payments made on top the minimums already paid).

Post Hoc

Biegel concludes Project Sage with an invitation to research more questions. The hope is that her team’s work will provoke deeper discussions and uncover more opportunities.

“What financial and social performance are each of these funds aiming for? What are they really delivering in terms of gender outcomes? Are their gender criteria creating issues in sourcing and selection? How have their criteria evolved? What are their motivations for backing these funds – social change, good market opportunities, or both? How much of the capital deployed comes from women limited partners? What’s happening with exits?”

Read Some More

“Project Sage – Tracking Venture Capital with a Gender Lens,” Wharton Social Impact Initiative, October 2017.

“World’s 100 Most Powerful Women,” Forbes, November 2017.

“Investors put pressure on Google and Starbucks over gender policies,” Seattle Times, October 2017.

“Millennials and Women Are the New Faces of Giving,” Wealth Management, October 2017.

“Gender Lens Investing Gains Ground — But Can It Conquer Wall Street?,” Knowledge at Wharton, July 2017.

Funds Mentioned

More Ethical Businesses are Valued More Highly, Study Says

By
Gino Baltazar, MS Finance
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Average EBITDA margin premium contributions by ESG, by industry. Source: Boston Consulting Group

Boston Consulting Group’s new study of 300 of the world’s largest pharmaceuticals, consumer, oil and gas, technology and banking confirms a positive link between responsible business practices (ESG) or Total Societal Impact (TSI by BCG), and a firm’s bottom line.

EBITDA or earnings before interest, tax, depreciation and amortization were 3.4 percent higher among responsible oil and gas companies compared to those that did not have, say, better health, safety or environmental practices. Among pharmaceuticals that practiced sustainability or had higher ESG scores, EBITDA was up to 8 percent higher.

Go Deeper

Why This Matters

Investors are increasingly scrutinizing data on a firm’s sustainable and responsible business practices before buying long, in an attempt to limit long-term exposures from ESG related issues.

Employees, millennials specifically, not only want their employers to have a greater sense of purpose but also seek active roles in firm’s sustainability efforts.

Additionally, perhaps most importantly, customers are increasingly tuning in to any ESG information that can shape their buying, or selling, decisions.

Sustainable and Responsible Investing or SRI has also grown immensely, to $23 trillion in 2016 from just $18 trillion two years earlier, accounting for 26 percent of total managed assets, $88 trilion globally, according to a new study by McKinsey.

Long Story Short

BCG’s study is a big deal. It is basically saying that investing paradigms are shifting from what was, just a few decades ago, one where environmental, social or governance concerns were always subordinate to net income priorities, to one where those concerns matter materially now.

“If we look at the news over the past few weeks, we see prime examples of what happens to established names such as Bell Pottinger, KPMG and Miramax (Weinstein scandals) when ESG issues are ignored,” says Fiona Reynolds, managing director of the UN’s responsible investment initiative, the UNPRI in the Financial Times. “The damage can be irreparable.”

Read Some More

“Companies with Strong ESG Credentials Make Better Investments,” Aliya Ram, FT (paywall), October 2017.

“Total Societal Impact is the Key to Improving Shareholder Return,” Bob Eccles, Forbes, October 2017.

“Total Societal Impact – A New Lens for Strategy – Summary,” Boston Consulting Group, October 2017.

“Total Societal Impact – A New Lens for Strategy – Full Report,” Boston Consulting Group, October 2017.

“ESG No Longer a Niche as Assets Soar – Brief,” Institutional Investor, October 2017. 

“ESG No Longer a Niche – Report,” McKinsey, October 2017. 

Chilean wind farms grab US$135M in investments

By
Gino Baltazar, MS Finance
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Rubens Romano, CEO of Aela Energia, sits second from left at the signing of the commitment of the wind farm projects. Source: Dev Finance

Chile’s Atacama Desert and Los Lagos Pacific regions won financing of US $135 million to continue its momentum towards building more renewable wind energy projects from the Inter-American Investment Corporation (IIC), the private arm of the Inter-American Development Bank Group (IDB).

Aela Energía, a renewable energy firm based in Chile, is expected to operate the projects.

Get Smarter

Why This Matters

Non-conventional renewable energies currently represent around 18 percent of the Chile’s energy, 47 percent of which is represented by solar energy.

By comparison, non-conventional renewable energies in the U.S. accounted for just nearly 15 percent of its total energy in 2016.

“Last year, 55 percent of all financing funds were for renewable energy,” said Aela Energía’s commercial manager, Daniel Garrido. “Many markets in the world have seen that unconventional renewable energies are very competitive and banks are very interested in participating in the financing of such initiatives.”

Energy 2050

Once completed, the financed wind projects will have a combined installed capacity of 332 megawatts. The Latin American country, ranked #2 globally by Climatescope second to China, has a total installed power capacity of nearly 20 gigawatts.  Annually, the new wind farms are projected to supply approximately 907 gigawatts of electricity to Chile’s grid.

This follows Chile president Michelle Bachelet’s push to ensure her country’s citizens have continuous and quality access to energy services via Energy 2050, a set of policies and goals she started for the country in December 2015.

Related Wind Farm News

Amazon’s new wind farm in Texas could add 1 million megawatt-hours to U.S. electrical grid.

Scotland’s Hywind offshore wind farms, with turbines anchored to the sea floor, could provide energy to 20,000 homes.

Ireland’s Connemar just commenced commercial operation of its own offshore wind farm operation.

New York’s Empire Wind that is being revived will also be offshore.

Indonesia’s offshore wind farm will be online in 2018.

Hawaii in the U.S. ought to take note, and get smarter.

Blockchain for Social Impact November Event in NYC

By
Gino Baltazar, MS Finance
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How Blockchain Works Source: Thomson Reuters

Consensys is hosting an event called “Blockchain for Social Impact” in New York next month on November 17th.

The inaugural event promises to be an interesting one, aiming to get a view of the current state of work being undertaken by “NGOs, charities, technologists, impact investors and social entrepreneurs on the ground.”

Blockchain was the featured technology showcased by solutions over 60 teams built during the summer in Consensys’s Blockchain for Social Impact Hackathon.”

Get Schooled

What is Blockchain and So What

Without diving into more details, Blockchain is a distributed, immutable recorder and ledger technology that has the potential to decentralize and disintermediate today’s agencies, including institutions like banks, corporations, digital aggregators like today’s Facebook and Google and on a large-scale potentially even nation-states.

Fully realized, blockchain promises to eliminate any necessity for any central governing authority.

Authority and responsibility passes to the hands of the many instead of remaining in the hands of the few.  Think of how your records and transactions are recorded today – your assets, money, voting, taxes, driving records, health data, personalized browsing and buying data – and imagine how Blockchain will change all those.

Money Streaming In

Blockchain technology has attracted approximately US$1 billion in venture financing over 2015 and 2016 according to the State of the Blockchain Report in December 2016.

Source: State of Blockchain Report, December 2016

This year in Q2, crypto-entrepreneurs have managed to raise a striking $291 million through ICO’s and $187 million in traditional venture funding in blockchain technologies (Q3 research note from Goldman Sachs).

Source: Cumulative Blockchain Investment, June 2017 ©Coindesk

Big agencies are aiming to get their skin in the game and some like banking conglomerate JPMorgan have started their own blockchain-based cross-border payment networks.

Search giant Baidu has recently joined a blockchain consortium to help lend input and presumably develop future open platforms based on the blockchain.

And according to Consensys, while there are approximately 5,000 blockchain developers today, by 2020, over 500,000 will be needed.

Still, the promise of blockchain aside, many big name investors like Buffett and Wilson have advised caution around initial coin offerings (ICO’s) which do run on blockchain. The SEC has also weighed in recently.

Notable Use Cases

BitHope (fund-raising)

BitGive by GiveTrack (donations)

Clean Water Coin (clean water)

FairMarket (marketplace using FairCoin)

Democracy Earth (sovereign governance)

Provenance (supply-chain)

RootProject (anti-poverty)

UNWFP (food-aid to refugees)

Read Some More

“What is Bitcoin?” (Nathaniel Popper, New York Times, October 2017)

“How Does The Industry Invest In BlockChain?” (Etienne Brunet, Medium, September 2017)

“Bitcoin, Blockchain, Ethereum, ICO, Tokens: Why Should Anyone Care?” (Preethi Kasireddy, Hackernoon, July 2017)

Ethereum and Blockchain Resources at Consensys 

“The Blockchain Man”  (Taylor Pearson, Ribbonfarm)

Cryptocurrency Resources at Taylor Pearson’s site

Blockchain Revolution book by the Tapscotts

Ethereum Blockchain Assets at TokenMarket

And Some More 

Coincenter – non-profit focused on the policy issues facing cryptocurrencies like Bitcoin.

Ark Invest – offers strategies to investors who seek to capture long-term capital appreciation and alpha.

Smith + Crown – original research, reporting and analysis for cryptofinancial markets, bitcoin, blockchain technology, and digital currencies. S+C is based in Portland.

A good introduction to Blockchain by Gavin Wood, one of the founders of Ethereum

Visual introduction to parts of a cryptocurrency, by 3Blue1Brown

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