 Okay. Is this on? I think it is. Good. Hello, everybody, and welcome to our session on embracing the trade-off. I'm Greg Nietzsche from Kennearth. My boss, Diane, will tell you a lot more about Kennearth, so I will not steal her thunder. But I do want to thank you all for coming to this very subversive session. I realized that I came into this room this morning, and there were chairs way back to the end there, packed in deep, and I thought, wow, that's great, we've got a big room. A lot of people may show up for this thing about concessionary or impact first or catalytic capital, but they clearly took away the chairs in an effort to try to ban our very controversial ideas, because as you all know, this is a scary concept in the industry today that there might be trade-offs, right? We are supposed to do well by doing good, right? It's not that attractive to do kind of okay, but do good, right? So today we have really a great panel of four investors who are focused on this part of the market that really needs capital at lower costs and needs capital to reach very deeply underserved communities and our investors who recognize the reality that you are not going to get rich by serving the poorest communities and are unafraid in many ways to pardon my language to say that is just bullshit and we as an industry need to think harder about how we're going to address those kinds of communities. So I'm really excited for this panel. I was, you know, when we submitted the panel, we didn't think it would get accepted. We, you know, we felt like, oh, you know, the sort of mainstream messaging has moved on from this, but really, really excited to have this on and to have you all join us. So I do want to keep this kind of lively. So, you know, every moderator says that and then proceeds to, like, moderate the most boring thing ever. So, you know, this will, you know, if you have a question, raise your hand. If you have a comment, make sure it's just short and good and we'll go from there. So I thought out of job security, I would start with my balls, but so I first sort of start the panel with Diane Osberg, the founder of KennyArth. And Diane, if you can, you know, give us some background on KennyArth and really talk a little bit about what impact first has come to mean to us. Thanks, Greg. KennyArth is a single family office that I founded six years ago to basically use the assets of my family. We are both a private family foundation and we also have unrestricted assets and we run that out of one office. I think that we're probably better known for some of the writing that we've done, but I'm beginning to realize people don't know the size that we are, so we manage about $500 million. We have a focus on rural livelihoods and underserved communities, primarily in, but not exclusively in Sub-Saharan Africa, but we work globally, our directs are primarily in Sub-Saharan Africa and we basically have started working in the United States as well in the five persistent poverty areas, as we have actually seen a lot of parallels between those communities in the US and in emerging markets, sadly. One of the things that we came to realize fairly early on is that there's a failure of the markets in these kind of communities, so market rate capital just isn't going to flow there because it doesn't work and because of the emphasis I think on double bottom returns, it's actually irrational that money isn't going there because there has been put forward the belief that these solutions will be able to market rate returns or double bottom returns will work to solve problems throughout the world, including with some of the poorest people in the world and it's clear that that isn't going to happen and if those of us who really want to start getting capital flowing in that direction, we have to look at what kind of capital does work. So after a couple of years when we came to that conclusion, we realized that we really needed to become impact first, look at the impact that we wanted to and then put return second and so we sort of played around with that and decided that what fit well with our strategy was to have something which I know is people use the phrase all the time, capital preservation. So we have capital preservation throughout our investments so we use it with both the foundation endowment and also with the unrestricted assets and the way that we look at it with the endowment because I think with foundations, people would assume then if we have a capital preservation strategy then automatically we're going to be having a shrinking endowment because you have to have a 5% every year that you spend but we also alongside that use our distributions through we have program related investments so because of that and the kind of investing we tend to do so we tend to primarily do debt investing and that really is because there's a real demand for working capital in the kind of markets that we're working in, we tend to see most of that money recaptured with the foundation so we almost have this sort of rolling fund that we are able to redistribute. So even if our endowment and it's really uncertain what's gonna happen with the endowment because with capital preservation basically it's costs and inflation so it's unclear whether it's going to marginally shrink over time but the point is that we're able to actually put far more money to work than we would have otherwise and with our capital preservation investing with the endowment over time because we're in the process of sort of moving that money towards full 100% capital preservation we will then have 100% of our money working towards capital preservation. And I'll just add one thing in terms of just specific numbers in terms of what we look for on return when Diane saying capital preservation we kind of mean that in real dollar terms. We are trying to generate some return we generate basically inflation plus expenses over time so we look for a modest two to 3% return on the portfolio at large so that we can continue to do this work but people always are talking in specific numbers about return so that's in reality that is what we are looking for on sort of an aggregate returns base doesn't mean that we don't turn down returns if someone comes if we're working in a community and the right contextual return is higher we're not gonna be suckers and say hey we'll just take lower cause we're just good people but anyway that's kind of numerical so I'll come back today and talk a little bit more about specifically what we look for in deals but we'll sort of turn to Lynn who's become a close partner of ours on many deals Lynn's the head of lending for the Candid group and the managing director of a new fund that Candid's launched called Almena so but it would be great Lynn if you give a little bit of background on the work Candid does and what this concept has come to mean to you of impact first. Sure great hi everyone so Candid group is a registered investment advisor based here in the Bay Area and we are advising high net worth individuals on how they want to manage their money and we're very fortunate that we work with some families who are incredibly socially progressive and understand that to move towards transformative change and accountability then we really have to look at the resources that we're putting in and also what an appropriate return is in these communities so we manage 65 investments right now I want to say it's about 50 million dollars and that's domestic and international across a broad range of different industries and we're really really focused on social justice and part of the strategy when we decided to launch the Almena fund was we had recognized that particularly domestically in the US there's a lot of organizations that are working in community and they can't get access to capital because of historic barriers and systemic exclusion so I read a statistic recently that a foundation per individual in New York will fund $4,000 and in Alabama that number is 44 and if you're looking at community development financial institutions that are really building out the ecosystem in some of these communities the big banks aren't in Alabama or Mississippi or Indian country in fact in Indian country they've been completely excluded because they're sovereign nations so the capital really isn't flowing there so what we did with Almena is we decided to make really key priorities that we would invest in these specific geographic areas and in these institutions because we believe that community knows the resources it needs and when they're giving those resources they can thrive we did not center the investor as part of designing Almena we centered the community and what it needed and the rate of return some people would say it's not a market rate of return but my question would be well what is a rate of return when you're talking about investing in social and racial justice so Candide has really been at the forefront of thinking through what return means differently in that lens of social justice and sustainability and we're really grateful to have partners like KennyArth who are also thinking that through the Almena funds about $40 million so it's not insignificant amount of capital and we're hoping to raise up to $100 over the next three to five years but it was very intentional we want people to buy into the values of the fund and not necessarily the return because if we're gonna talk about restoration and repair then we have to center all stakeholders and not just the investor. Great yeah super helpful background and we'll come back again to very specific examples of deals that would fit the funds mandate so Rick I want to turn to you CEO of Global Partnerships been a manager that we've at KennyArth invested in and this as an aside this is actually the easiest panel I've ever moderated since I don't think I've ever moderated a panel where everyone's either a real partner who done deals or a manager invested and so it made the prep really easy because we're all chatting anyway all the time but Rick if you can tell us a little bit about the history of Global Partnerships and what impact first has come to mean to you on your journey as a non-profit social investor? So Global Partnerships started just over 25 years ago actually as a family foundation doing grant making in the early days of microcredit and in 2005 we pivoted we realized that while philanthropy has an important role to play we would never achieve impact at scale by staying with a philanthropic model so we pivoted and became a fund manager for the first time in 2005. So we're currently an impact first fund manager whose mission is to expand opportunity for people living in poverty. We're managing about 180 million for active funds the bulk of that are debt funds but we also have a $5 million social venture fund making seed and early stage investments in startup social enterprises. We're investing in all insustainable solutions to poverty throughout Sub-Saharan Africa and Latin America and the Caribbean. And I think as a working definition what we mean by impact first is been captured by those others on the stage. So we're talking about maximum social impact subject to seeking capital preservation with a modest return to offset inflation so that tends to fall in line with the kinds of return expectations that Greg mentioned. So when we think about impact we think about it on four dimensions. The first is broadening opportunity so our understanding of poverty is that it is in part a economic challenge but it is an equal measure, a challenge around access to other things and so we value and invest in not just livelihoods but in education and energy and health and housing and sanitation kind of across all the different facets of poverty. The second for us is deepening inclusion so we tend to invest at the edge of the market where too many people are left behind so all of our investing is aimed at including people living under $5.50 a day. Most of it is inclusive of people living under $3.20 a day with a particular concern for impoverished women and the rural poor who are disproportionately excluded from virtually every form of opportunity. The third is serving millions so we value impact at scale and we're trying to invest in ways that don't just serve thousands or hundreds of thousands but millions of people. Last year our investments just attributable to our capital created opportunity for 4.8 million people and the last is improving lives. At the end of the day that's what it's all about of course and it's clearly the hardest to measure but we're only investing where evidence and direct experience suggest to us that the products and services that are being delivered to people living in poverty will empower them both economically or to otherwise to have concrete, tangible improvements in their lives. So we think about impact on those four dimensions while seeking to preserve capital on an inflation adjusted basis. And I think the reason, in a nutshell, the reason that we've chosen to be impact first is because we think it performs better on our mission. We think we can actually have higher impact expanding opportunity for people living in poverty as an impact first investor rather than as a return first investor and the reasons for that really boil down to two. One I would say what I would describe is the real economics of inclusion. In our experience it is sometimes sustainable and rarely highly profitable to serve poorer and more marginalized populations and the role of return first capital they either tends to ignore those populations altogether or it introduces economic incentives that tend to push social enterprises upmarket. So to move away from the more vulnerable people and seek to serve populations where it's easier to make money. And we don't have a ideological or philosophical debate with that. That capital is doing what it's doing but it isn't doing what we care about. And so that's the first reason. The second reason is the impact of capital on product market strategies. So in many cases what we find is that it takes a combination of products and services to have real impact. So for example, with small holder farmers there are 500 million small holder farmers in the world, most of them growing subsistence crops. In our experience, however it gets delivered there are three things that are needed to help small holder farmers. One is the access to the right kinds of inputs, the seeds and fertilizer. And the second is some form of technical assistance on what to plant, when to plant, how to plant, how to use inputs so that crop quality and yields go up. And the third is to the extent that families are using those crops not for family food security but for income generation then they need reliable access to markets. And what we find is that by way of example that return first investing tends to focus on those things where there's positive margin which tends to be the input sale. And they tend to under invest in the things in this case the technical assistance and the market access that are essential for helping small holder farmers really make progress. So both as it relates to inclusion and ultimately as it relates to achieving higher impact it's been our experience that impact first delivers superior results and that's why we do what we do. Great, yeah, that's very helpful. And this idea that you brought up about investing in impact where the evidence exists and we sort of follow that to sort of the end is something we'll come back to in thinking about how we all look for evidence and how we measure that impact over time. But last but certainly not least we'll bring in Richard Greenberg into the conversation. Richard is with OPIC soon to be renamed the US Development Finance Corporation any day or maybe any month now. And I think there's maybe no institution right now that is doing more for this sector of impact first investing than OPIC's doing at major scale. I think that a lot of private investors even those of us who have significant capital we can't come even close to the kind of check sizes that Richard and the team at OPIC are capable of writing. So they've been a really valued partner of ours and I think are doing a ton for the industry. So Richard if you could talk a little bit about kind of what OPIC does in this space generally for those who might not be familiar with the organization and then how you're thinking about this idea of impact first internally and sort of pushing your own thinking internally about how to get even more impact out of every dollar. Thank you very much, Greg. I appreciate those comments about OPIC and really our success. If we have success it's through Kenyar, global partnerships maybe Ken Teed at some point the partners that we have. But OPIC is the US government development finance institution. As Greg mentioned, we are transforming ourselves into what will be called the US international development finance corporation. We're gonna call it DFC for short. It was scheduled to launch actually in October one based on legislation that was passed by Congress a year prior. We have to wait for Congress to pass a budget for fiscal 20 to formally launch. So I can say a little bit more about that in a bit. But we OPIC and going forward as a DFC are charged with being a self-sustaining organization. That's actually, it was in the OPIC charter. It's not phrased that way in the DFC charter or legislation but our mindset is to be a self-sustaining organization like any other DFI or the groups here. I mean, we're an impact investor. That's why we exist is to generate development and turning a profit is not essential or a requirement. Having said that, OPIC I think prides itself if you will on having a track record over decades of always generating some profit which we return to the treasury. So any of you who are US citizens, there are no taxpayer dollars involved that need to subsidize the organization which I think is important. So we are self-sustaining and an impact investor. I think going forward, the direction is to, as Greg was alluding to, is to sort of enrich and enhance and develop further our model so that we can address, generate the impact that we all want to see. And we're doing that in a number of ways. In my team, which is the social enterprise finance team, we've tried to be innovative in developing products and tools and really the relationships that we build with the great social investors here to understand how we can provide capital that's additional. So for example, we've been working with global partnerships in a fund recently that is really gonna drive impact where we were an anchor investor and Kenny Arthur's a contributor as well. And with our contribution, I think we're helped and able to catalyze some of the other capital that's coming in for an impact first product. Now we don't just jump into these things lightly because we do have to use our government backed capital very prudently, of course. And the credit goes to Rick and his team at Global Partnerships for building a relationship with us over a number of years. We've placed capital in a whole series of funds, gotten to know them very well, have a great appreciation for their impact model and how robust and detailed it is. So that we know that when we're investing in a product or in a business or a fund that really is an impact first, probably has blended capital involved, different kinds of return requirements that it really is going to deliver that impact. I mean, on the other side of the house, we're working on a lot of large infrastructure deals. Globally, we have lots of agendas and lots of stakeholders that we need to serve and those deals are market return deals. And we always in any case want to start with a market return framework for ourselves but then not be averse to investing in companies. We do direct placements, funds, all kinds of intermediaries that are going to really drive the impact. And one last thing I'll mention is that as part of the transition to the new DFC, we've built out a new impact framework for ourselves. We always have had a model to assess each deal for what the impact will be but we've made it much more robust and sophisticated. We call it the impact quotient. And it just, I'll just mention briefly has sort of three pillars at the highest level for understanding what as we intake projects how we might look at the categories of impact that are going to be generated. One is growth, one economic growth, one is innovation and one is inclusion. And then under those categories of course there's a whole series of sub points to help us assess the impact and then create a score which we can use to benchmark. So let me stop there and happy to engage further on those topics. That's super helpful. And I think that impact framework is something we can also come back to. One point about the fund that you mentioned that I think is worth also clarifying in detail so this is a new global partnerships fund where Kenny Arth and W.K. Kellogg have put in combined about $5 million in junior money which has unlocked $50 million from OPIC. So leverage is something we care a lot about and our deals and getting 10 to 1 leverage is just extraordinary for private investors looking to scale these kinds of things. If I may Greg, let me just say that's not typical for what we've done. And we're gonna do three more of these together Rich. And I see some other fund managers out there that we work with that are probably taking notes right now. But as I said I wanted to note that that's it's a unique situation. It's a reflection of what global partnerships is able to bring and deliver alongside the other partners to that. Yeah, great. So I'm gonna have each of the folks talk about some very specific examples of what an impact first deal looks like so that everyone gets a sense of some of those deals and what we look for in those deals. But before I do that, does anyone, are there any background questions having heard these sort of introductions around impact first that are burning on people's mind that somebody's thinking I still don't get it. What's the difference between impact first and finance first? Or y'all are crazy that you're not just making loads of money. Any questions? Oh, yep. Discussion I had yesterday was a wonderful well-meaning individuals in impact investment spaces. I asked them a very basic question. What kind of return are you looking for? Oh, market rate return. And then why do you call it impact investment? If you're looking for market rate return, and I'm not kidding, the market rate return he asked, he said to me was 10% and I'm like, are you kidding? Sorry. But Diane said, Diane, I'm from Africa too. So Diane said something to the 3% or you just do it because you believe in what you're doing. I really would like you to clarify that notion of impact investment. What are we talking about when we talk about impact investment? If you're looking for a market rate investment, return on your investment, why are you calling it impact investment? Thank you. Yep. Well, I sort of think you answered your own question. I am in complete, I concur with you. So I sort of feel like if market rate money works, then sometimes I think people might have particular sectorial preferences or particularly, I think climate change, you could have a fantastic climate change portfolio that can be profit making. So if that's your area of interest and you are looking for impact, you can do that in a market way. Way and I think people, if they were more intentional with market rate investing, that would be fantastic and they could maximize their impact. I view impact investing as when market rate capital doesn't work and I think we've discussed some of the kind of blends of capital that can not only leverage, but actually is the capital that is able to serve that market best. And I think that what Rick was saying about market rate capital, when you introduce it into these markets, it doesn't work so if you have enterprises there, they just go towards the lower hanging fruit. So we've seen a lot of failures with that. And I think that also the technical assistance that was that Rick mentioned with agriculture, you have this with a whole bunch of, it's not just with agriculture, but it's with job creation and infrastructure and these most areas that really require far more than just capital. It's a much more complicated issue that we're looking at. So I do think that people need to be realistic about what they're trying to achieve with their capital. So I mean, for us it really isn't, even though Greg said it's two to 3%, it's really what is the capital that's needed. So we often will use capital in a way that it isn't just the return, it's where your capital's sitting. So we will often be subordinate as we've done with OPIC. We often will have long term like quasi equity capital that's sitting there because that capital is required to unleash other capital. So it's way more than just what your return means. Yeah, and maybe to sort of get into one of those examples of sort of quasi secondary capital, do you want to talk a little bit about maybe hope or, or sure, yeah, no, I mean, there's a bunch of different. Go ahead. For sort of, because this is an example actually, it's an Africa fund and it's cross boundary energy mini grid fund. So basically we have put in the patient, junior equity tranche, so we put in, well that tranche is a million and a half and that released from Rockefeller, five million, which is the subordinate debt, which then released, I think it's 10 million, something called Rep or Reap, which is a UK fund that's an energy fund. So they were able to, I mean that mini grid, like actually funding mini grids is really challenging because of the awkward payback period when we're talking about debt. So this is really like the first pilot fund to do this. So I think that's a really good example of us playing that sort of patient capital and the higher risk capital to unlock other capital. Yeah, great. So I think this blended idea of unlocking big pools of capital, I think that's a great example of impact first. I think another way to think about impact first is how are we bringing costs of capital generally down so that customers ultimately experience lower costs. Lynn, if you could talk a little bit about a deal we recently did together in the Hampshire Community Loan Fund and maybe how that's directly translating low cost into low cost for customers. Yeah, thanks Greg. So New Hampshire Community Loan Fund, funnily enough, is based in New Hampshire. Do, I don't know if there's any fans of John Oliver in here, but New Hampshire Community Loan Fund does a lot with a mobile manufactured housing, mobile home parks. And if anybody saw the John Oliver series episode where they're talking about how private equity is coming into these communities because people who are in mobile homes, they're basically just cash cows for these private equity investments. New Hampshire Community Loan Fund goes into these communities when they're looking to purchase their residences and sets up a cooperative structure in order that the people who are living then they're actually of self-determination. So they came to Candid and to Kennear to help do some financing for four major projects that were being sought after by private equity. And what happens when private equity goes in is they pay a price and then they put up the rents and put up the services and all of these things and the residents have nowhere else to go so they just have to figure out how to pay for it. And with our lower cost of capital that we could provide to them, it meant that those cooperatives was only minimal rental increases if any rental increases at all for those communities who are already there because these are populations that are forgotten and these are populations that are not generating the levels of income that we've seen in the Bay Area or New York or any of these major cities over the last 10 years. But one really amazing thing we did as part of this relationship building was we actually ended up lowering our interest rate and then increasing the amount of capital we were gonna provide to them so that they could then take out higher cost of capital which then brought down their overall blended cost of capital across the organization and has since led them to have the confidence to reduce the interest rates they're paying on their notes to their investors. So it flows through in many different areas when you can step up and say actually, I see you. I see what you're trying to do in this community. You are building community wealth amongst these stakeholders and we wanna help and support you through that and we can do this in many different ways and we actually offered them three alternatives as to what we could do and let them make the decision. So it wasn't us telling them like you should do this and this is like here's three things we think you could do, which option would you like to discuss? So that was in a really, really interesting way of thinking through what it means A to B in relationship, what it means for return and what it means to really help the people on the ground who are living this everyday reality that is so different from the reality so many of us live. Yeah, great. So Rick, maybe I'll ask you either for a specific example of a deal if you want or there's a multiple choice question you can choose which one to play. Or to talk a little bit generally about the kinds of deals you were seeing with your previous funds with a higher cost of capital that you couldn't do that you thought, boy, if one day we had this thing, this future impact first development fund with a lower cost of capital, boy, that's a deal we would have done, we would have liked to done and now we can do. Well, so maybe I'll riff a little bit on your second although I would say that we're deploying an impact first strategy across all of our funds and so what was unique about the impact first development fund is that it dropped the cost of capital by another 175 basis points. So I think we see several different types of investments where the cost of the capital or the nature of the capital allows for higher impact. So the first is like one would be the Smallholder Farmer Inputs example that I gave previously. If you lend a million dollars at 5% rather than 10% and then the enterprise has $50,000 a year to fund extension workers or technical assistance to Smallholder Farmers, you just took something where the farmers were just gonna get inputs to where they're gonna get inputs and technical assistance and that makes all the difference in terms of crop quality and yield. So that's where just a change in the interest rate when you run it through the operating economics of the social enterprise leads to higher impact. Another category that we do a lot of are in what I would call blended models where sometimes this is microfinance institutions that serve a range of different clients and from our perspective, we want them to be serving, for example, in our Women's Center of Finance with Education work, poorer women and coupling credit with access to savings and education which makes the enterprises more successful. So we size our investment, we lower the interest rate and we size the investment that we make in a given, in this case, microfinance institution based on how many people living under $5.50 a day and how many people living under $3.20 a day. So we're aligning the lower cost capital with their depth of penetration at the low end of the market. And I think there are likely to be what I would describe as hybrid social enterprises with multiple types of capital involved. That's just the nature of things but I think we would expect to, we've been doing some of that and I think we would expect to do more of that with more degrees of freedom to lower the cost of capital in this new fund. Correct. And Richard, finally, any sort of pet project sort of favorite example of? Well, there are a lot of examples and we're doing a lot of direct placements but also looking, of course, to the intermediaries where we can place capital but we feel it's important to really get our hands into still a lot of direct placements and we launched a program about five years ago we call Portfolio for Impact to stretch ourselves into the more earlier stage companies looking for say $1 to $5 million that were already invested in by great investors, social investors, mission aligned that needed that next stage of debt capital to scale up. But it's not just about taking the same product and applying it because now you're in a different kind of space and so we've had to see how we could innovate and place capital in the right way, in the right place and it's not just about the pricing obviously it's about the tenor, the structure, self-liquidating structures that are still debt oriented so that we could do that but nevertheless address what type of capital is really needed and we've learned some lessons the hard way as well in that regard in terms of not being in that position and companies taking on that type of capital at the wrong time or in the wrong amount. So that's really been important for us and then going forward under the DFC we're going to have equity for the first time which will place us finally on a level playing field if you will with all of our fellow DFIs as well as technical assistance. Now there's going to be a sort of a slow ramp up to how we can place that equity but we intend to use it for funds that need that type of capital and impact first oriented as well as selectively direct placements where we can play an added role and help to catalyze other capital. So the pricing is one aspect of it but we are trying to, we have to be very sensitive not to be competing with the private sector and maybe one last thing I'll say is under the small window for the portfolio for impact sometimes we get pulled in different directions with respect to pricing. If there are foundations or groups like yours involved that are looking to contribute at a lower price so that that benefit can be passed on then if we want to participate we need to price at that level essentially to match foundations and so on. On the other hand, if there aren't those types of investors we see deals where there are, let's call them impact oriented investors but are still looking to price more competitively let's say and then if we want to participate we can't undercut the pricing of those other investors so we get pulled actually in a higher direction. So it's been an interesting place when people ask about how we're pricing for these kinds of deals. Sometimes it's lower than we've done other times it's higher but that's okay for us in the context of a portfolio of 26 billion that we have right now and these tend to be relatively smaller deals that are really mission driven for us. Yeah so I actually want to follow that thread around the interplay or the interaction or intersection between whether it's finance first impact investors and kind of impact first, impact first impact, god we're just so lost impact first impact, god there's so much lingo. Anyway, but you know the sort of the tensions that I think can come up in these deals so I'm curious if anyone would want to jump in on an example where we've saw return first capital come into a market that maybe those of us had been investing in and sort of changed the dynamics and I'm not talking conventional I'm not talking the hedge fund example of mobile home parks I'm talking is there an example of return first impact investors interacting with us in a difficult way or a way that transforms what enterprises in that market might be doing? Well one historical example is the commercialization of microfinance and so what we observed was a divergence, an emphasis in more commercially focused return first enterprises on the highly profitable products and lending particularly if you're less concerned with consumer protection and as long as you don't spend any of your margin on things like education which tended to press margins that we saw dynamics in the microfinance industry which made it entirely about the loans sometimes harmful and in many cases less impactful even if it wasn't harmful than it would be otherwise because of the economic incentives that went with return first capital. As we watch that unfold the players that were more client centric which were out in front in terms of consumer protection and which tended to combine access to credit with savings because the two of them is more powerful but really with education so providing financial literacy business education as well as leveraging the last mile economics to also bring things like family nutrition and health education those were margin depressing things which were squeezed out of the more return the more purely commercial dynamics but which remained in the more client centered and impact first. I'd also say just from all the research I've done the community development financial institutions here in the U.S. I mean they were came out of the civil rights movement and redlining and all of these incredibly racial restricted racial covenants and really racist practices within the financial system and originally when the CDFI started they were funded by faith-based organizations and individuals and then the CDFI fund was created to unleash all of this capital from the government and force the banks to invest in these institutions and what it did was it moved these organizations away from their social justice roots because the banks are like well we'll give you this money but we want you to underwrite like how we underwrite we don't want the risk on our balance sheet we'll give you the money to do that but we wanna make sure that we're getting an appropriate rate of return and making sure that we're getting our money back and where we find that it's where we find community development financial institutions right now in America is the banks are actually offering less favorable terms and they're taking away their most concessionary capital like their EQ2s so what we're talking about doing is linking back with what donor advice funds for example could provide a new source of capital that is impact first to really change the dynamics of these organizations away from how the banks are forcing them essentially to be in right relationship with community. I have an example the energy access one of so this is solar home systems I'll use solar home systems in East Africa as the particular example so around five years ago that was actually our first entree into impact investing and there was huge amounts of money that was flowing into equity through Silicon Valley investors they were seeing this like ultimately I guess as a tech play but I think I would say there was an element of naivete or not understanding the market not understanding this ridiculous burn rate so in essence they were subsidizing this really rapid growth and the burn was just unbelievable and money kept getting poured in but because of that the model really wasn't a workable feasible model and eventually even those investors got tired and the tap got turned off and the people who paid the price of course were people who were living in the most remote rural areas who had invested in solar home systems and it was mispriced we saw that because we were primarily debt investors and at one point we probably had four different investments including one in a fund so we could see what was happening and the default rates were totally unacceptable so the story that was being told really wasn't reflected in what we saw on the ground and I personally felt a detriment that had done to these communities because a lot of people did actually end up with a stranded asset and these are some of the poorest people on earth so we're talking the most remote areas so that's where they started you know I think that solar homes system the whole sector has changed there's been I think there's been a lot of acquisitions at probably realistic valuations everybody's calmed down but also a result is that there's been a real focus on peri-urban and urban communities so you could say the lower hanging fruit or what works in a market based model so we still have the problem of how are we going to get affordable energy to these most remote poorest communities with lumpy incomes and those are the sorts of things that global partnerships work on that we work on so I think that's an example of where there was certainly a clash or a problem for us with our impact dollars Great, I think we'll talk a little bit about how we're all measuring impact but do we have any questions from, yeah, sure speak, I think we speak up because we don't have a mic so it's a good question and I think it brings us to the collective whining part of the, in a good way collective complaining part of the panel which is that there's not much of this capital I mean, I think that we all would want to see there be more I'm curious if anyone has a response in terms of number one, why isn't there more? And number two, where should people be looking for it? I'm happy to answer that I think I mean, because as someone who has both a foundation and we have unrestricted family assets I feel like certainly from the foundation perspective I think there's a lot of somehow fear that people aren't fulfilling their fiscal responsibility if they look at the kind of investing we do and I feel like there's no evidence of that the use of PRIs, first of all I want to preface this to say that I think there are some incredible foundations that are doing very focused grant making work so I really don't want a soul to start doing PRIs because I think that would be catastrophic and sometimes I worry a little bit like the double bottom line impact investing that a lot of foundations are getting a bit like oh we should be doing PRIs and people who have had really robust programs that are critical to certain communities just like our money is critical certain grant funding is absolute critical if that gets cut back that's gonna be a really serious problem but I also just feel when I want to I suppose call out what's happening with MacArthur and their C3 initiative which is something that is really focusing on the kind of capital that we are looking at they're gonna be doing similar things to what we've done with OPIC and with global partnerships and I think they're really trying to get people to see how critical the kind of capital that we have is and when you have a large foundation like that leading it I hope it will sort of encourage other foundations to start looking at how they can use their money more catalytically and more effectively and leverage money in another way and I think a lot of it also has to do with boards being quite conservative and the friction there. With high net wealth individuals I find that a challenging question for me because I can't see what else we possibly could do if we have the objective to move capital where we wanna move it which I've explained to you where that is. I guess my plea would be to get if only some kind that wealth families and individuals would like just dip their toe in this and somehow get excited I get really excited like the 10x leverage we have to me that's like a unicorn. Like I truly get excited this makes me I think this is amazing because we're able to unleash all this money. If people had that reaction towards impact that they had towards making money I think it would be transformative and since this is impact investing you know it would be kind of good if that's what we started measuring. You know so my plea is some of you out there just like give it a try and maybe that'll feel just as good as that 10x financial return that you don't actually need because you're rich. So. Right. Right. I'll come to you in one second. Any other responses to where our friends should be looking for or why there's not more of this capital around? Well I mean maybe just what could we do better to increase the flow. You know my observation is that impact investing is at a really early stage in its development and the market has not clarified and segmented yet and just the fact that we are talking about impact first versus return first I think is useful. So I think the sharper we can get about what we mean by impact investing and what some of the different segments are. My own view is that as it becomes clearer that impact first is different than return first that a growing number of individuals religious institutions and certain foundations and development financial institutions will make an allocation just like there's an investment capital in philanthropy today there could be three. So that would be, so it's just recognizing that it's an early stage in its market evolution. I think we can do a better job on getting product to market. I mean there's, I just don't think there's that much product out there that's genuinely impact first and every time more products come on then there's more opportunities for investors to engage. And then I think we need to be much clearer about what we mean by impact and better at measuring it which is probably some topic that we'll get into a little more here today. But I think it's unfair for a fund manager or anybody else to ask people to make the financial return sacrifice without being really clear about what the intention is on the other side and over time what the data is on the other side that suggests that these are effective. Yeah, cool. So there's like, I wanna respond to something Diane said but I also, when you're talking about the expensive capital and like changing hearts and minds I'm just like, the question I would have is like, well whose hearts and minds are you trying to change? Because if it's the banks, like that's just not something that they're gonna sign up for. It's really interesting if you look at like the big banks of the world in terms of like an Indian country for example, they, a lot of the investment that flows there, the grand capital comes from the foundation doesn't actually come from the bank and because the banks are siloed, like the foundation will do like the really fun makes you feel good stuff but it doesn't actually change the culture of banking. So until the culture of banking can be influenced by that I think it's gonna be really, really hard for that expensive capital if that's where it's coming from to come down. And you know, I love, I hate the term impact investing because I feel like when she used the term investing it drives certain behaviors and I don't know if those behaviors are good. What I really enjoyed what Diane was saying is about high net worth individuals dipping their toe in it but I also think high net worth individuals have an obligation to go out there and tell their story about their money journey and how they've gotten there so it doesn't seem as scary. I work, I'm very fortunate I work with one client in particular who is really wrestling with where her money came from or inheritors who are wrestling with where their money came from. I think if more high net worth individuals to actually reconcile with how their money was made they might have a very, very different approach to what they do with their money now. Yeah, can we? Oh, we don't, they somehow ran away with it. Yeah, great, so specifically to Richard and actually if you can maybe talk a little bit too about 2X and how their women focus initiatives rolling out. Sure, I appreciate the question. I don't have the data to cite for you a colleague of mine is at the conference and I think he may be able to provide that so if you see me afterwards. But we, I don't know if you've heard of the OPIC 2X initiative which is our women's gender lens investing. We've I think been fair to say a leader among impact investors, among DFI's in trying to establish guidelines and criteria. If you look at the website 2X challenge you'll see what a group of DFI's led by OPIC and others have come up with to establish the criteria for what could qualify as gender lens investing. And I'm not the one who designed that or led it but there are many aspects to it. Women led companies, how many women and employed products and services that are delivered to women. And what we've been doing over the last year or so led by someone in our organization named Katie Kaufman some of you may have met who's been a real incredible leader on this globally is training ourselves and helping to train others and understanding how we need to think about this and approach companies in discussions to help move them in that direction. So it's not just about picking out the company like oh yeah there's a women led company so that one is a good one for us to invest in as a gender lens strategy. But any company that could be doing things that would improve women's benefits from the project or women opportunities within that company. So we now we have all of our deal teams coming to us with this is a 2X project and sometimes actually we've had the officer problem saying well wait a minute really let's examine carefully what qualifies that because we don't want to just put that 2X label on anything because then that would really dilute the meaning of it. So we've come up a learning curve and we're really hopeful that that's gonna move the needle. Yeah, question in the back. Good question. Isn't that like half a trillion under management now? I don't know. He's saying from an impact first. He's saying from yeah. I mean I don't think I don't know that and I don't know if anybody knows that but I wanna to the point of need you kind of have there's this huge need and Rick might have a number but I feel like you need to also realize and I know you don't like the word investment we could find some other word but what is traditionally known as investment ready. So it's just because you're working with entities that the market they're not gonna have a market rate return or they may not even have we're just working for sustainability or they may even be a big grant portion in there. If they're not ready for investment either by a foundation or by impact first capital it's gonna be it's gonna fail and that's a big issue in all these markets because we really which I think Rick was alluding to you need to have investable products and I think that the amount of money that's gonna have to flow that way is huge and I feel like we haven't even started that discussion and we see a lot of that because this is all we do so. Yeah, so Rick do you wanna take. Sure, in our case we don't combine grant making with our impact investing. What we do is engage on a kind of targeted set of issues with the social enterprises that we're investing in and those two issues tend to be around the quality and precision of their understanding of impact and how they can use various tools to clarify that and improve that over time and the second is their investability. So our debt team is not only making the initial credit decisions but also often working with those partners to improve their own understandings of their balance sheet and their P&L and their growth plans and how that will make them more investable in the future and so those are the two forms of kind of what might be described as technical assistance that we do and I but I see in the space of wide variety sometimes there are grants made sometimes there's specific to other types of specific technical assistance that just happens to be ours. Great, one more and then we'll go over there. I'm happy to tackle that. Well I'll use global partnerships as an example and I'll quickly use one acre fund as well which we're invested in both. So global partnerships as Rick alluded have had multiple funds. They've returned every single dollar on the funds that they've, so usually people worry okay they may not wanna go into a fund that's first time fund by the time third time fund they've got a great record. You know I'm sleeping, I have no problems because I feel there's very little risk there so I'm delighted to be able to invest in global partnerships. I feel the same way about one acre fund so we would do that out of capital preservation as in our family assets because I feel that's pretty de-risked as well because they have a huge amount of debt that's required. They have a really, really low default rate with all their farmers in multiple countries. Again, I sleep easy. Other people, other foundations really have to do that out of their PRI budget. So that's how we perceive risk. We also are invested in funds where there may be real greater risk and there's a huge use with a lot of development banks so KFW which is the German Development Bank of first loss. So we're in a fund called the Blue Orchard Climate Change Fund. There's a huge first loss piece in there. I believe it's $50 million for $150 million fund. You know what I think that I am taking way less risk than some people are in developed market funds. So we just have a very different view on this. I would just add two quick things. I think it's really different on the debt side than it is on the equity side for obvious reasons. You can, on the debt side you can see what's already been de-risk and what's proven and so on. On the equity side with our social venture fund it's all about capital efficient de-risking of business plans. So what are the major risks and how do you de-risk them in a capital efficient way so that your capital destruction is simply less. And so those are the kinds of disciplines that we try to use when we're going from C to A round. The other thing I would note is there's a lot of conversation about financial risk and risk adjusted financial returns. There's a directly analogous set of risks around impact and what I would observe is that those require as much thought and careful management as the financial ones were better collectively at the financial because we've been practiced at it longer but the impact risk is just as high and some of the moving up market versus staying down market evolutions and product market strategy there are a whole host of those. So I just would suggest that those are equally important things to consider. Right. Just real quick chime in that we're that's where we start risk adjusted returns. We have been managing as an organization for over 50 years to that and as Rick said and others that we will be willing to modify our approach from that depending on a specific tangible and measurable and reportable impact by people that have shown the track record to enable to do that and deliver on that. Correct. I think we're gonna have to wrap here just because of time but I hope the panel gave everyone a good sense of how folks in this impact first world are differentiating ourselves from others in the impact investment space and I hope they don't ask you to attend some sort of reeducation session about doing well by doing good on the way out but if they do just say you learned oh you do well you do good and they'll probably let you pass. Anyway I wanna thank all the panelists for coming out. Thank you for coming.