01 December 2014

10 Favs; 10 Years: Philanthropy & Environmental Change -- Should Social Capital Markets Take Over?

Back in October 2007, I had an exchange with my friend Lucy Bernholz about philanthropy as an agent of change in the environmental sphere (I was still working for The Nature Conservany). Lucy, as it happened, introduced me to my (then future) wife, Samantha, via LinkedIn a few days after this post with the immortal words, "You two should know each other." Thank God for social media...

Here is my post on "Philanthropy & Environmental Change -- Should Capital Markets Take Over?"

I'm taking up a friendly challenge here.

Lucy Bernholz, who writes the excellent blog Philanthropy 2173, and I started a blogalog (Did I just coin that term?) between our blogs about the state of philanthropy and environmental change.

The author, Samantha, and Lucy in New York, 2012.
It began in response to Lucy's listing of green blogs in the wake of Blog Action Day last Monday, and her noting the lack of discussion of philanthropy on the sites listed (including mine).

My defense stemmed from a concern about philanthropy and its effectiveness as an agent of change in the environmental sphere, which actually was the origin of this blog. I have grown increasingly concerned about the ability of traditional philanthropy to effect lasting change at a pace commensurate with the global challenges we face.

I expressed this concern in my essay for GreenBiz, "Confessions of a Green Skeptic," several years ago about the Earth Charter.

Back then (March 2003), I wrote, "we need to demonstrate how profitable being green can be, and how essential it is to a truly global sustainability. If we can turn the greed motivation to green motivation, effectively turning it on itself, does the means justify the end? Hard to say. But if greed isn't going away anytime soon, we are left with trying to redirect the motivation any way we can. Guilt has worked, but only gets us so far. 'Envy trumps guilt' every time."

This sentiment was influenced by Thomas Friedman's thoughts on the subject expressed in The Lexus and the Olive Tree, that "if conservationists are going to get ahead of the greedy we need to move faster. 'For now, the only way to run as fast as the herd is by riding the herd itself and trying to redirect it,' Friedman writes. 'We need to demonstrate to the herd that being green, being global, and being greedy can go hand in hand.'"

And it was echoed by Gretchen Daily and Katherine Ellison in their book, The New Economy of Nature, from which I quoted, "the record clearly shows that conservation can't succeed by charity alone. It has a fighting chance, however, with well-designed appeals to self-interest."

Things have changed quite a bit since I wrote that essay -- the world has gotten flatter, green has become the new black, Al Gore won an Academy Award and a Nobel Prize for his work on climate change, and the herd has started to move to greener pastures.

But a lot hasn't changed. In Philanthropy, as Susan Raymond points out in a two-part piece called "Does Philanthropy Scale?," the "vast majority of American nonprofits are small; 60 percent or more...have less than $100,000 in annual revenue." And, Raymond notes, "the average foundation grant to nonprofits is on the order of $25,000."

Raymond also points out that "the number of nonprofits with $10 million or more in revenue has increased by 73 percent in the last decade," and asks, "when $25,000 is the average grant, is philanthropy the answer to organizational growth? Indeed, is it even relevant as a source of capital?"

I'm going to quote one more thing from Raymond's essay: "The evolution of microfinance teaches that, when what had been a philanthropic initiative matures and proves its worth, alternative capital sources step in and redefine the opportunity. Is achieving scale, then, the clue for philanthropy to either evolve or exit? And, if so, do we need to rethink what we mean by 'philanthropy' for large organizations or proven initiatives in social markets?"

I quote Raymond's piece at length because it corroborates some of my own thinking on this subject. She rightly points out that the biggest advantage of philanthropic capital is its "ability to take significant risk, to seed a promising idea and recognize that all promising ideas can be failures."

So risk tolerance or tolerance for failure, playing on the field of ideas and at at the edge of problems "where the probabilities of success are unknown, is the key playing field for philanthropy."

For many ideas, perhaps chief among them those addressing environmental issues, it may be time for other types of capital to be brought to bear. I'm particularly interested in what Raymond describes as "a multiplicity of approaches to organizational finance in the nonprofit sector...for self-reliance, sustainability, and (yes) profit" to come to the stage.

This is not far from what Lucy refers to as "tri-sector solutions," such as the B Corporation she has described or the bond purchase strategy Raymond describes in her piece. (In the latter, Raymond explains, "'Donors' took on the role of guarantor rather than funder, and the resources flowed at levels that donations would never have been able to sustain.")

Elsewhere in the web pages of onPhilanthropy, John Bloom of RSF Social Finance, posits that "social finance holds that the purpose of money and finance is to support human initiative and to foster the evolution of new community."

And, Bloom suggests, social finance recognizes "the human and environmental consequences of economic activities...[and] presents a picture of a healthier sustainable future -- and one that leaves behind the industrialist model of philanthropy..."

I will continue this dialogue here on The Green Skeptic, because I think it is an important one, and part of an ongoing, evolving thought process for me that started over four years ago and which led to this blog. Thanks to Lucy for calling me out about it and fostering this dialogue.