From The Green Skeptic Archives: Philanthropy & Environmental Change: Should Social Capital Markets Take Over?

Deep SEA. Photo by Mickey Rosenau

[Note: While on hiatus this week, I'm posting selections from The Green Skeptic Archives. This one was originally posted on 23 October 2007.--SEA]

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.

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 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.

Omidyar Network Relaunches Itself, Turns ON

Omidyar Network today launched a new brand, including a new logo and website. The web site is much easier to navigate and to find their areas of focus, background and multimedia on their investee organizations and portfolio companies.

Omidyar Network (ON) has been a unique experiment and it is exciting to see the changes that Matt Bannick has instituted since taking over a short time ago. ON, like google.org, seemed to struggle with focus and clarity until recently.

Now, as illustrated by this new site, the focus of ON is clearer. And more good news: innovation is not lost for the sake of that focus. ON is a hybrid investor, taking equity stakes in some ventures as well as providing early stage philanthropic risk capital for social entrepreneurs or Small & Medium-sized Enterprises (SMEs) in emerging markets.

Some of ON's investments include Ashoka, Unitus, MicroVest, DonorsChoose.org, Common Sense Media, Digg, MeetUp, GlobalGiving, Seesmic, Endeavor, CellBazaar, and WITNESS. (For a full portfolio, click here.)

"The new brand brings our work into sharp focus for the constituencies that we serve," said Matt Bannick, Managing Partner at Omidyar Network. "The logo embodies what we stand for, and the website offers greater insight into how we work and how our investees deliver social impact."

Omidyar Network was started in 2004 by eBay founder Pierre Omidyar and his wife Pam. They say it is dedicated to the idea that every person has the power to make a difference.

I like what the new logo says about turning "on" that power, encouraging people to improve their lives and the lives of others. The logo also, as ON says in its press release, makes reference to the transformative power of technology, which many of ON's investee organizations use to amplify and accelerate their impact.

In addition to in-depth descriptions of each investment area, Omidyar Network's new site features profiles of ON's investee organizations, which helps raise the visibility of those organizations and makes ON's investments more transparent. It also provides a better picture of their overall approach and strategy.

There's also a "VentureLoop" portal for users to search and apply for job opportunities at Omidyar Network portfolio companies, as well as all the financial and investment information a user may need to evaluate ON's investments.

Check it out: Omidyar.com


(Disclosure: The author was formerly VP of Global Development at Ashoka, an Omidyar investee organization. He is not affiliated with either entity at this time.)

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Review: Climate Change: What's Your Business Strategy?

No matter what your company does or where it's located Climate Change is going to have an impact on your business.

As CEO, it is imperative you understand the potential impacts and opportunities presented by the issue.

But with the tremendous amount of noise out there, on both sides of the issue, it may be difficult to sift through it to find the right information to inform your business decisions and strategy.

Along comes a slim volume in Harvard Business Press' Memo to the CEO series, Climate Change: What's Your Business Strategy? by Andrew J. Hoffman and John G. Woody.

Short enough to read on your next transcontinental or international flight, this book provides all the background, current thinking about impacts and opportunities, and upcoming policy decisions that will affect your business.

You will also learn how some of the most successful companies are getting ahead of the game. Companies like SwissRe, which has come up with a three-tiered approach to reducing greenhouse gas emissions (GHG), or Duke Energy, which is anticipating regulations to come and making sure they have a seat at the table when they are secured.

Hoffman, associate director of the Erb Institute for Global Sustainable Enterprise, and Woody, a deal associate at MMA Renewable Ventures, have devised a simple, three-step approach for you to follow to best position your company.

Beginning with understanding your company's carbon footprint and taking action to reduce its size, Hoffman and Woody walk you through assessing the business opportunities and how to influence policy as it's being developed.

"Some business associations and lobbyists still dispute the science of climate change, but their numbers are dwindling," the authors conclude. "And businesses themselves are focusing on the undeniable economics of the problem. While some companies are adapting out of near-term operational necessity, others are acting to mitigate long-term strategic vulnerabilities, and the most forward-thinking are seizing on new business opportunities created by climate change and devising ways to make money from clean energy and efficient technology."

Pick up Climate Change: What's Your Business Strategy? and read it, have your management team read it, and then decide what your company needs to do to stay ahead in the game.

Clean Tech: Market Folly's How To Play Energy in the Intermediate Term

My blogging pal over at Market Folly (check out his in-depth series on Hedge Fund 13F's here) has been dipping into alternative energy stock analysis now and again, and we've swapped interesting companies to watch and some sector research.

His recent post caught my eye because he's reviewing both the recent Economist special report, which I have read, and a piece in Forbes, which I haven't. And because I'm on vacation in Alaska, I'm going to reblog his post here in hopes that my readers will find it useful:

Check out Market Folly's How to Play Energy in the Intermediate Term. And subscribe to his RSS feed for future reading.

Clean Tech: Water, Water Everywhere; Time to Wade In?

Smarter minds than mine have been wading into water this week.

It's a part of the clean tech space that I've neglected thus far. Time to get a toe in the water and test it out.

Looking into TTEK, AMN, and CCC, thanks to @jmclarty.

Also taking a look at SWWC, AWK, and WTR.

I'm hoping the water is warm...

Wondering what ever happened to eMembrane, which had an interesting nanotech filtering technology.

And curious what's happening with Water Health International.

For another take on water and sanitation, check out Ashoka's Changemakers and Global Water Challenge competition, which just announced its winners: Tapping Local Innovation, the most innovative approaches to providing access to safe drinking water and sanitation.

(And you must check out India's Oscar-wiining director Shekhar Kapur, ("Elizabeth" and "Elizabeth: The Golden Age," who blogged on "Paani" (Water), his new film about the daily struggle for drinking water in the slums of Mumbai.)

(Disclosure: The author is an employee of Ashoka, but does not work directly for its Changemakers initiative. This post is for informational purposes only and is neither intended to be investment advice nor an offer, or the solicitation of any offer, to buy or sell any securities.)

Social Entrepreneurs: Bill Gates Talk on "Creative Capitalism" at Davos

Readers of The Green Skeptic know that I believe in the concept of market-based social change or doing good and making money; what Muhammad Yunus is now calling "social business" and what Bill Gates spoke about at Davos this week, "Creative Capitalism." Here is the video of Bill Gates from Davos:

Clean Tech: New Energy Finance Reports New Clean Energy Investments in 2007 Totaled US $117.2 Billion

Source: Clean Edge News

The clean energy sector powered ahead in 2007, according to analysts New Energy Finance. In spite of difficult conditions on the credit markets, the amount of new money invested in the sector grew to $117.2 billion, up 41% from 2006's $83.0 billion*, and more than $20 billion ahead of predictions.

The clean energy sector weathered last summer's credit crunch well, partly because nonfinancial drivers such as regulation, political will and fears over energy supplies remain strong. It was also helped by a shift in focus from more mature wind and biofuels markets in Western Europe and the US towards Asia, Brazil and other developing countries. Wind power continued to lead the way, but the year also saw strong growth in solar power and energy efficiency. Investments in biofuels fell back from 2006's record year, hampered by surging feedstock costs.

*The biggest portion of investment funds went to asset financing, up 40% on 2006, at $54.5 billion.

*The highest growth rate was in public markets, where investment was 80% higher than in 2006, at $18.9 billion, the biggest portion being the $6.6 billion flotation of Iberdrola Renovables (Iberenova). If this IPO is excluded, public market new investment grew by a more sedate 17%.

*Venture capital and private equity new investment grew by 27% to $8.5 billion. Investors retreated from later stage investments and returned to early stage deals, as their familiarity with the sector and technologies grew and the pipeline of commercialisationready opportunities dried up.

*The year was marked by the launch of clean energy funds by several high street asset management companies, including HSBC, F&C, Schroeders, Virgin and DWS.

Michael Liebreich, Chairman and CEO of New Energy Finance commented: "At the start of 2007 we said that the clean energy industry had to deliver clean, cost-effective power and fuels in large volume in order to justify investors' enthusiasm. That remains just as true today: investors' enthusiasm still outstrips the industry's current contribution to solving the world's environmental and energy security problems. However, progress is being made on scaling up a number of sectors, particularly wind, solar, biomass and energy efficiency. The wave of liquidity washing through the sector shows no signs of abating and, despite the dark clouds still massed over the world's credit markets, 2008 looks set to be another banner year."

Asset financing

Clean energy asset financing was resilient in 2007 in the face of turmoil on the world's debt markets, with a record $54.5 billion invested. Investors were forced to shift their emphasis from project finance deals to on-balance-sheet financings, which made up 64% of total asset financing activity, up from 44% in 2006. Much of this came from the South American biofuels industry and wind, biomass and waste-to-energy deals in China.

Wind investment accounted for nearly half of the total new investment in projects, or $24.8 billion. Much of the growth in wind investment in 2007 took place in Asia and Oceania, whose $8.4 billion of deals outstripped the Americas ($6.6 billion) while investment in the EMEA region grew to $9.8 billion after falling by $1.5 billion in 2006. The remaining $29.7 billion investment was largely in biofuels projects ($14.5 billion); biomass & waste ($7.1 billion); and solar ($5.9 billion).

The 30% increase in investment in biofuel assets contrasted with 2006's 171% growth, which was driven by the US's love affair with corn-based ethanol. In 2007, much of the activity took place in South America, chiefly in Brazil, while the US ethanol industry stalled under difficult market conditions, with many producers shelving plans for capacity expansion. The ratification in December of the US energy bill, with its ambitious renewable fuels standard that calls for 36 billion gallons of alternative fuels by 2022, should considerably improve the outlook for US ethanol. New investment in biomass & waste grew by 51% from $4.7 billion in 2006. As with wind, most of the surge took place in China, where the government has great hopes for biomass.

Solar project investment of $5.9 billion was 82% higher than 2006, as Spain and Italy continued their drive for larger photovoltaic projects. Spain has seen a great rush as investors tried to push their projects to qualify for the a 400MW subsidy cap. Greece and France are largely markets-in-waiting, constrained by bureaucracy and the lack of mature building-integrated photovoltaic products.

Public markets

In 2007, $18.9 billion of new money was raised by clean energy companies on the public markets, up 80% from $10.5 billion last year. Much of the increase was driven by one deal: the landmark flotation of Iberdrola Renovables, which raised $6.6 billion, six times more than the previous record deal, REC of Norway's $1.1 billion IPO last May. Although the IPO was priced at the bottom end of its lead coordinators' price range at €5.30 per share, it represented a hefty market capitalisation of €22.4 billion ($33 billion) at the start of trading on 13 December.

Solar companies raised $5.8 billion of new equity on the public markets during 2007, once again chiefly Chinese cell and module makers listing on US markets. Biofuels groups managed to raise $1.0 billion, almost $2 billion less than in 2006, and energy efficiency groups caused excitement,by raising $0.8 billion, led by EnerNOC and Comverge, as policy makers and investors realised the potential of the sector.

The WilderHill New Energy Global Innovation Index (NEX), which tracks the fortunes of 88 clean energy companies worldwide, rose nearly 60% in 2007, taking its increase over the past two years to over 110%.

Venture Capital / Private Equity

In 2007, venture capital and private equity investment increased to $8.5 billion, up 27% from 2006. Early-stage VC made strong gains, increasing to $1.8 billion from $0.8 billion in 2006 as investors found it harder to find value in later stage deals due to greater competition and were driven to make earlier-stage bets. Late stage VC was the only investment stage to attract less money than last year, falling by a little over $100m to $1.1 billion. Solar became the leading sector for VC and PE, attracting $3.0 billion of new equity, and biofuels decreased slightly on last year to $2.0 billion. The two other leading sectors were wind ($1.8 billion) and energy efficiency companies ($1.2 billion).

Much of the increase in solar investment was down to young US solar companies attracting early-stage VC investment. In 2006, just $181m was invested in such firms, in 2007 this increased to $702m. In Europe, where the solar industry is more mature, a meagre $59m of early-stage VC found its way to solar companies. Some of bigger solar investments worldwide were in thin-film technology, which offers a way around the currently limited supply of solar silicon. HelioVolt raised $101m, while Solyndra raised $80m and SoloPower attracted $30m. Solar installation companies also featured prominently, pushed into the spotlight by Arnold Schwarzenegger's California Solar Initiative. Early stage venture investment in energy efficiency companies more than doubled in both North America and Europe, to $316m and $96m respectively.

* Note: The previously reported figures of $71 billion to $75 billion for 2006 excluded certain categories of investment such as solar water heating, which are now included – hence the restated 2006 figure of $83.0 billion.

[Green Skeptic note: as you know, I like to hyperlink to companies listed in my posts; but since this is a straight pull from Clean Edge, I will try to do so later...)

Clean Tech: New Cycle Capital, Profits and Social Benefits

Readers of this blog know I am interested in innovative approaches to making social change while making money.

One of my best readers pointed me to a Venture Beat story about a new venture capital firm designed to maximize profits and social benefits. The guys behind New Cycle Capital want to prove that companies that are doing good can make money too. Very cool.

Two Silicon Valley venture capitalists are creating a new venture capital fund that aims to produce competitive profits and also “social benefits.” The fund, to be kicked off next year with at least $50 million, will focus on the “green economy,” as well as financial and other services that help low-income groups.

Called New Cycle Capital, the firm is led by Josh Becker (pictured left) and Benjamin Black (pictured right), both investors who have worked for mainstream venture capital firms. Becker spent time at Redpoint Ventures, while Black worked at Maveron and Rosewood Capital, and was VP of corporate development at Harris Interactive.

Becker has long been socially active in the community, serving on the board of the Full Circle Fund, a San Francisco group of executives that fosters relationships between businesses and non-profits.

Early this year, the two began to raise the fund, after they realized it’s wrong to assume that investments in companies that provide tangible social benefit don’t make as much money as other investments, Becker said. They want to focus on early-stage companies, producing stellar returns in areas such as the ecosystem of services around clean-technology.

New Cycle Capital, LLC specializes in early stage investments. The firm seeks businesses that protect the environment, reduce economic bifurcation, and transform exploitative industries.

Read the full story: Venture Beat

Clean Tech: Another Record-breaking Year for Investments

The Financial Times reports today that 2007 was another record-breaking year for investments in Clean Technology:

"Nick Parker, chairman of the Cleantech Group of analysts, said: 'There is no doubt this year will break records in terms of the amount invested. But this year will also be notable for the amount of commercial take-up of clean technologies.'

"Last year, more than $4bn (£1.9bn) of venture capital was invested in environmental technologies such as renewable energy, water technologies and carbon reduction technologies. The sector is now the biggest recipient of venture capital funds in the US, and in the first three quarters alone about $3.8bn of venture capital was invested, Mr Parker said."

"Such large flows of capital are now pouring into clean technology in response to record high energy prices and governments' perceived willingness to regulate carbon. Total investment, not just venture capital, in 'clean' or low-carbon technology reached $74bn last year, according to Michael Liebreich, founder of New Energy Finance, a consultancy."

Read the full article: Financial Times

Microfinance: Silicon Valley Microfinance Network Hosts Calvert Foundation & eBay's MicroPlace

I wish I lived in Silicon Valley, if only to attend the meetings of the Silicon Valley Microfinance Network (SVMN). Better still, perhaps someone should start a Greater Philadelphia Microfinance Network. Any takers?

Meanwhile, I can live vicariously. SVMN is sharing slides from their meetings on their web site. Here is a link to slides from the November 5th SVMN meeting, featuring Shari Berenbach from the Calvert Foundation, and Karl Wiley from eBay’s MicroPlace: SVNM Meetings

Clean Tech: Cramer's Mad Money Green Week

I'm a Cramer fan and was pleased to see he's hosting a Green Week series on his favorite Green stocks, including one of my favorites, First Solar (FSLR) and a surprising feature, Wells Fargo (WFC).

Check it out if you haven't already on CNBC (cnbc.com). (I'll update this post with a real link and tags when I get to my computer.)

And one of these days I'll post a model Green Skeptic portfolio.

P.S. Here's the link: Mad Green

Philanthropy & Environmental Change: Should Social 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.

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.

Clean Tech: Tyler Hamilton Interviews Vinod Khosla

"What is a material 'climate solution' in [Vinod] Khosla's world?"

That's one of the things Tyler Hamilton asks Khosla, founder of Khosla Ventures and a long-time partner with venture capital titan Kleiner Perkins Caufield & Byers (and one of our favorite social capitalists in his Toronto Star column today.

The answer: "What's clean, cost-competitive, can be deployed on a large scale and is capable of dramatically reducing greenhouse gas emissions?"

Among the other insights Tyler shares: "Khosla more or less divides clean-technology investments into two camps: those that can make real but relatively small changes and those that can make huge changes to the world's environmental problems, most notably climate change.

"'There's a difference between a good green investment and a climate solution,' he told me last week in an interview. 'I came into it from the point of view that asks what the large solutions are that actually matter to climate change.

"'I love PV (solar photovoltaics), and we have investments in PV, but I don't think it will be relevant to climate change in the next 20 years.'"

We have to stop playing with toys, Khosla tells Hamilton, who is also author of the Clean Break blog.

"Khosla, in addition to his other green investments, is placing a big bet on solar-thermal technology – what he considers the best weapon in the 'war on coal power generation.' To a lesser extent, he's also increasingly drawn to the potential of enhanced geothermal power.

"'Solar thermal has been ignored completely in favour of sexier photovoltaics,' he says. 'When I started looking at solar thermal early last year, I couldn't find anybody who was paying attention, which sort of surprised me. It's a great technology, and about one-fourth the cost of PV with the kind of reliability that utilities actually like.'"

"By solar thermal," explains Hamilton in a sidebar, "Khosla is referring to concentrating solar power, as opposed to solar thermal technologies used to provide space heating and hot water in buildings, or conventional solar power, where the sunlight strikes a PV cell and is converted into electricity.

"Concentrating solar power uses parabolic mirrors to focus the sun's energy on a single point, creating high temperatures that generate steam from a fluid. The steam spins a turbine, just as it would in a coal plant, which in turn generates electricity."

Khosla is also ahead of many others in his consideration of another important investment area: next-generation, ultra-high-voltage DC transmission technologies and infrastructure.

To Khosla, suggest Hamilton, "getting off coal and other fossil fuels means playing to our clean-energy strengths and connecting our energy sweet spots to a large, trans-national grid that can efficiently carry power over long distances."

This irks many extreme greens -- and bothers some NIMBY opponents of big alternative projects. But it is a solution that needs to be investigated and invested in.




Read more: Sun to Shine on Solar

Read Tyler Hamilton's Clean Break blog

Clean Tech: The Clean Tech Revolution, Reviewed

"Remember President Jimmy Carter by the fireside in his cardigan sweater in 1978, urging Americans to turn down their thermostats?" asks Ron Pernick and Clint Wilder in Clean Tech Revolution: The Next Big Growth and Investment Opportunity, published last month by Collins. "Wipe that image from your memory banks."

Today's clean tech is not about "cutting back and 'going without'," but about "doing everything we already do, but doing it cleaner, smarter, better," argue the authors, who also write the popular Clean Edge web site and manage the leading research and publishing firm of the same name. They argue that this revolution is less about going green than about building the biggest potential multi-billion dollar industry on the horizon.

The book is a resource for gap investors (if you're not into clean tech already, you're behind the curve), potential entrepreneurs, recent business school grads, and consumers who want a quick study of what's been going on in this space.

While the audience is broad, Pernick and Wilder do a good job explaining the basics and setting the stage for what they see as the most promising ideas and businesses out there.

The trouble with a book like this, however, is that the industry is moving at the light speed and printer's ink still runs slow as molasses. The clean tech landscape is changing so fast that a traditional book quickly goes out of date. The authors' Clean Edge and Clean Tech Revolution sites, along with Tyler Hamilton's Clean Break blog, will continue to be essential. They are closely watching this space and have learned how to spot the trends and pitfalls.

Pernick and Wilder have an easy, engaging style that has adapted well from web to print. While at times it seems their enthusiasm for this space gets the better of them -- my "booster" alarm went off more than once -- in the end, the book is well organized and useful for its insights.

The various sectors in the clean tech space -- wind, solar, biofuels, etc. -- are given their own chapters and companies to watch are listed at the end of each, which proves a handy reference.

In addition, the authors identify what they see as "Breakthrough Opportunities" throughout, such as "Building-integrated Wind," "Integrated Photovoltaics," "LED Lighting," and "Automated Meter Readers." And each chapter ends with a consumer-focused sidebar highlighting a couple of next stage products or services to watch.

"We'll look back at the beginning of the 21st Century and see it as the tipping point for clean technology," the authors write Let's hope the authors are right.

Meanwhile, if you're looking for a primer on the clean tech space, look no further than Ron Pernick and Clint Wilder's Clean Tech Revolution.

Microfinance: Does Microfinance Really Miss Its Mark?

"Are people going to be better off sitting all day in a pineapple canning factory?" asks Liam Collins of Green Microfinance, LLC, in response to my questions about Aneel Karnani's article in this summer's Stanford Social Innovation Review, "Microfinance Misses Its Mark."

"Not everyone is," Collins asserts. "And those of us who aren't deserve access to capital in order to pursue our dreams no matter how big or micro they may be."

Karnani, professor of strategy at the University of Michigan, Ross School of Business, examines some of the failures of microfinance to argue that creating jobs not self-employment is the best way to alleviate poverty.

Criticism of microfinance is not new. The debate has been going on for decades within the development community. And no doubt some of the criticisms, especially about charging high interest rates to poor customers and questions about tracking and reporting loan repayment rates, are valid.

But is the question of scale missing the point?

David Bornstein, author of The Price of a Dream: The Story of the Grameen Bank, writes, "The most common criticism aimed at the bank was that its loans were used primarily for small-scale, low-yielding activities that would ultimately lead to diminishing returns for villagers...borrowers were not 'scaling up' their activities."

Karnani suggests that funders should "reallocate their resources and energies away from microfinance and into supporting larger enterprises in labor intensive industries."

"A surer way to end poverty is to create jobs and to increase worker productivity, rather than turning to microfinance," Karnani posits.

Karnani makes some broad claims, but I'm not convinced he's made his argument.

For instance, he claims that the impact of microfinance on women may be overblown. "Overall," Karnani writes, "microcredit does empower women, but only in noneconomic ways."

But, as Bornstein notes in The Price of a Dream self-employment is advantageous because it brings "women into the income stream without the usual sacrifices required under wage-employment situations."

Karnani argues that creating jobs offers a better solution to alleviating poverty, illustrating "two alternative scenarios: (1) A microfinancier lends US$200 to each of 500 women so that each can buy a sewing machine and set up her own sewing microenterprise, or (2) a traditional financier lends $100,000 to one savvy entrepreneur and helps her set up a garment manufacturing business that employees 500 people."

I have concerns about these solutions, however. Is a wage-earner really better off than the independent entrepreneur? What happens when the woman can't show up for work because of a family illness or medical emergency? What happens to her spot on the assembly line when she must stay away from her job to tend to an issue at home? Will she need a union to help her keep her job? What about building equity versus the stability of a job in a factory?

Collins, who has over a decade of experience in development and microfinance in five continents, likens microfinance to the mortgage industry in the United States.

"Wouldn't it be easier for banks to give loans to large corporations to buy houses and then rent them out," Collins offers. "Instead we have an economy that makes getting a loan for a home easy for a large segment of the population."

For Collins, the debate really goes deeper, into economic theory. It's about "keeping things small [and] local, taking advantage of comparative advantage versus large, economies of scale and protecting industry through unfair trade practices."

So, does microfinance miss its mark? The jury is out.

As I was preparing this post over the past few weeks, I sought comments from Nobel Prize winner Muhammad Yunus and others from Grameen. They were preparing their own official response on Karnani's article and were unable to provide comments in a timely fashion. (I may continue this thread in future posts.)

I think it is safe to say that microfinance is a flawed system, but one of many effective, direct responses to help alleviate poverty. And it's too soon to be tolling the death knell for what is more than just an economic movement, but a social one as well.

"It is easier to give larger loans to larger companies to create jobs," Collins notes, asking, "does this mean a better quality of life?"

Social Entrepreneurs: Philanthropy and the Changing Business of Giving

Over on the Enterprising Ideas blog, part of the PBS NOW series on social entrepreneurs, they are talking about the latest report on giving in America. According to the report, charitable giving by Americans rose 4.2% to $295.02 billion in 2006, setting a record for the third-straight year.

Great news, of course. But what really got my attention in this blog post comes from blogger Lucy Bernholz, who writes the excellent blog about the "business of giving" called Philanthropy 2173. I track Lucy's blog and am always intrigued by her observations.

The blog post begins with commentary from the Enterprising Ideas staff, following up on a description of "product and service innovation" and the "commercialization of philanthropy."

"Not surprisingly, social entrepreneurs —- entrepreneurs with a humanitarian mission -— are also behind many of the new projects that facilitate donations and investments. Bernholz said social entrepreneurs are playing a major role in how the tools and mission of philanthropy are changing:

'There’s this whole industry of giving that social entrepreneurism is a part of largely because very smart businessmen have entered the field and are very excited about it.'

The post goes on to say, "Now that it's becoming 'more and more possible to make money by doing good,' as Bernholz puts it, there should be more willingness to invest in social entrepreneurs and their projects. After all, the social entrepreneurs are the people who are creating financial opportunities for doing good, says Bernholz. Like Muhammad Yunus’ Grameen Bank in Bangladesh and South Shore Bank in the Midwestern United States."

“'We’ve entered a period of philanthropy like no other,' explains Bernholz, 'because the federal government has gotten out of the business of funding domestic programs.' Foundations and individuals are picking up the slack by providing resources to projects—and many social entrepreneurs. Even if the government increases its commitment to domestic programs, Bernholz believes social entrepreneurship and its hybrid approach—drawing on strategies from the market as well as the public sector—to solving serious problems is here to stay:

"'The problems people are trying to solve are not caused by any single sector so no single sector can solve them.'"

Read the full blog post (and check out other posts and information about the program): Enterprising Ideas and Better Ideas.

And check out Lucy Bernholz's Philanthropy 2173 (You can also find out why it's called what it is...although Woody Allen fans can probably make a good guess.)

Investing: ISS Introduces Sustainability Risk Reports

Institutional Shareholder Services (ISS), the world’s leading provider of corporate governance and proxy voting services, last week announced the launch of its global Sustainability Risk Reports database.

Drawing on an extensive set of over 400 environmental, social and governance (ESG) factors, ISS offers in-depth company profiles rich with qualitative analysis and a relative scoring system to help investors assess a company's ESG performance and compare it against industry peers.

As environmental and social issues such as climate change, energy use, labor and human rights begin to assume a higher profile among mainstream investors, there is a need for more extensive sustainability considerations for deeper analysis.

Leveraging the analysis and scoring embedded in the ISS Sustainability Risk Reports enables investors to analyze the potential sustainability-related risks and opportunities of portfolio companies.

“Shareholders not only expect their asset managers to know whether companies are acting as good corporate citizens, but also to consider ESG performance when managing their portfolios,” said John Deosaran, ISS Vice President of ESG Analytics. “With ISS’ Sustainability Risk Reports database, investment managers can identify those ESG factors that best align with their client-driven mandates, and determine appropriate investment weightings, turning compliance priorities into a competitive edge.”

Building upon its proven corporate governance model introduced in 2002, ISS is the first to deliver a reliable, objective and transparent scoring system for environmental and social performance. The breadth of the ISS sustainability scoring factors encompasses key areas such as carbon emissions, energy use, labor standards and ethics. ISS also analyzes each company’s disclosure practices, adherence to ESG policies and its Board’s oversight of ESG issues.

Investment managers can leverage ISS reports and scoring model to identify sustainability-related risk in portfolio companies and to manage client-driven mandates related to environmental, social and governance screening.

“Investors are asking increasing numbers of companies to provide more information around their ESG efforts, yet disclosure practices vary widely,” added Deosaran. “To obtain a comprehensive picture, investors need a consistent framework to evaluate ESG practices."

ISS’ global coverage universe for its Sustainability Risk Reports database includes the S&P 500, TSX 300 and European MSCI EAFE companies.

To learn more about ISS’ ESG services: ESG.

Global Climate Change: HSBC Backs $100m Climate Partnership

From the BBC Wednesday: HSBC is setting aside $100m (£50m) for an initiative to tackle climate change.

The funding by the UK's largest bank will help charities and environmental groups to research some of the global causes and effects of climate change.

The partnership will look at ways to protect the world's most important rivers and identify how cities can respond to environmental threats.

HSBC also said it would create "a green taskforce", to ensure climate awareness was central to its own business.

HSBC is the latest UK company to pledge changes to the way it operates in the face of calls for big business to do more to prioritise environmental concerns.

HSBC is teaming up with climate campaigners the Climate Group, environmental groups the Earthwatch Institute and the Smithsonian Tropical Research Institute (STRI), and the conservation charity WWF in a five-year partnership

"We believe we can tackle the causes and impacts of climate change," said HSBC chairman Stephen Green.

HSBC, which will spend $5m of the $100m on managing the project, said it would enable the four bodies to expand their climate-related research and undertake work in new countries such as China and India.

Read the full article in BBC: HSBC Climate

Global Climate Change: Energy Giant Backs Climate Trading at APEC Forum

Angela MacDonald-Smith of Bloomberg News reports that Russell Caplan, chairman of Royal Dutch Shell in Australia called for global carbon trading to set a price on carbon and allow for investments in new energy-supply projects while reducing emissions. According to the article, which appeared in yesterday's International Herald Tribune, Caplan said Monday at the Asia-Pacific Economic Cooperation energy business forum in Darwin, "that while the European Union's carbon trading system is 'a good start,' a worldwide plan is required."

"'Market mechanisms are likely to be the most effective means of implementing change,' Caplan said at the forum. 'Trading needs to become global to become truly effective and establish a clear market price for CO2 that will be factored into the investment evaluations of the new technologies and energy conservation measures that we need for a low-carbon future.'"

Read the full article here: Energy

Access Mr. Caplan's speech: Caplan

Innovation: GE Ecomagination Turning Green Into Green

Mary Milliken reports in Reuters/Planet Ark that GE's Ecomagination unit is beginning to pay off, proving that green can generate green:

General Electric Co. Chairman and Chief Executive Jeffrey Immelt said his "green" ecomagination unit was gaining steam and it launched 11 new products and services Thursday, including a hybrid locomotive and a carbon offset company.


Arguing that "green is green" -- environmental technology can generate serious money for GE -- Immelt said demand for green products and services exceeded expectations as awareness about global warming and energy conservation snowballed.
"Green is now becoming pervasive. It is becoming universal," Immelt said at a event at his group's Universal Studios.

"Work on energy efficiency, working on emissions reductions, conservation, clean water is simply good business. In our case, it has always been about growing the company."

Ecomagination has backlog of orders worth over US$50 billion and chalked up US$12 billion in sales last year. Despite the expanding market, Immelt has stuck with his sales target of US$20 billion in 2010.

"We are on our way to US$20 billion and I am convinced we can exceed that number and expand as time goes on," he said.

Among the ventures launched Thursday was the carbon emissions offset partnership with energy company AES Corp. to produce offsets for 10 million metric tons of greenhouse gases a year by 2010.

With Union Pacific, GE unveiled hybrid locomotive that recycles energy and stores in in on-board batteries.

In the automotive sector, GE has also invested in the battery company, A123, which is working on the next generation of battery technology for hybrid and plug-in hubrid electric vehicles.

Wal-Mart Stores Inc., which says it is the largest private consumer of electricity in the world, has announced that more than 500 stores will use GE light emitting diodes (LEDs) to slash energy consumption in its refrigerated display cases.

And oil company BP Plc said it is forming a global alliance with GE to develop 10 to 15 hydrogen power projects that will cut greenhouse gas emissions from electricity generation.

"This is no longer a fringe topic. This is a niche topic. This is a mainstream topic that is being driven across the broad economy," Immelt added.