‘What is venture philanthropy’s role in the emerging climate financing landscape after the Paris Agreement?’ Well, it’s long but at least you won’t be able to say you went to the wrong session because the title was ambiguous.
In that case, though, interest in climate financing must be low – and statistics would suggest that it is – because the session was relatively sparsely attended. Or maybe that was because it was the last working session of the conference and people were feeling the strain. Moderator Arnaud Gillin of Innpact led off by suggesting that the real role of venture philanthropy was not to provide the cash to fund the whole thing – trillions of euros were needed –but to support the innovation which was equally necessary. This was where public sector funders and private investors feared to tread for political reasons in the first case and caution in the second.
And with digressions, that was the central message of the workshop. He introduced the by-now-familiar format of three panellists, all active in the field in different ways. Julia Heller of the Canopus Foundation in Germany talked of the Solar for All contest Canopus was funding to find innovative solutions for micro-grids in emerging markets. The competition provided a shop window for successful projects.
In addition to developing the product, it attracted other mainstream funders. Canopus’ approach is catalytic, she said, illustrating Arnaud’s central point. ‘We look at need,’ said Heller, then at what the object is, then bringing together the finance and the know-how to do it’. Dale (there were some last-minute changes of personnel. The programme was now of no help. I only caught the first name of two presenters in this session) of US-based organization Rare said that they were trying to bring together public and private funders to invest in projects which would protect and hopefully maximise the incomes of local people from, coastal fisheries. Such projects would have an environmental and a social benefit. Rare does capacity building among coastal communities that rely on inshore stocks of fish and connects them and their projects with sources of funding.
Climateworks tries to provide both grantmaking and investment-oriented opportunities for funders who are just beginning to realize that new and emerging low-carbon industries need support, said Ilmi (see above). Portfolio risks are still underestimated, said Chris Varco of Cambridge Associates who advises foundations and family offices on how to protect themselves from climate risks. Last year’s agreement in Paris sounded a warning, but philanthropic capital is still not sure which way to run. Many investments which seem sound are less so if you take a closer look.
There are also opportunities, too, for funders who will venture. At the moment, he believes, risk is a bigger spur than reward. So what stops them taking the opportunity? Partly, ignorance – they don’t know what returns are available, nor what risks are at the bottom of some of their long-standing investments – partly, the old argument about fiduciary duty obliging them to get the best returns (which because of reason #1 they don’t know might actually be in low-carbon technologies) and, very likely, partly simple inertia. But the basic consideration for Ilmi is: once you set aside money for a social purpose, how do you make it do the most good? Many foundations especially big ones, are hampered by a sharp distinction between the investment and programme sides. Foundations need to create what he called a ‘shared operation’. All of those Climateworks works with have this capacity to at least some degree.
So a lot of what venture philanthropy can do here is about speed. Governments may well act, though they are likely to be slow to do so. Big foundations, too, can be guilty of ‘overprocessing’ as Dale put it. Meantime, the needs are increasingly urgent…
So there’s a role for mid-sized, self-confident venture philanthropy funds to identify what’s needed, get in quickly and take a chance on innovative projects and who don’t mind taking the odd one on the chin. They may be able to beat a path into innovation for the broader investment community. An interesting postscript to the session on learning from failure: One of the panellists who felt that that session had been more on shunning risk than on learning from failure said that failure should be part of the venture philanthropy model. That’s what the ‘venture’ bit means for him.
Andrew Milner is an associate editor, Alliance
For further reading, see the Alliance June edition on ‘Climate philanthropy after Paris‘.