Impact Capital — opportunities to solve problems we all face

/\ How Bill Gates missed the boat on Climate Change /\

Even if today’s weather is beautiful (and if it is, why are you staring at a screen when you could be outside?), how we face and grapple with the “climate crisis” reveals true character. By now, most of us are taking direct action and committed to doing whatever it takes.

But for some, climate change still seems a far-off “some day, maybe it will affect me” sort of problem. Or perhaps you are amongst the dwindling minority that doesn’t believe there is a “problem” at all (planning a move to Mars when things get really bad?). We tend to rely on what’s most familiar, … which can become problematic at times of change like, well, this. Thanks to the hammer/nail syndrome, the pandemic explains that hammers will just become as scarce as toilet paper.

Still, there are nonetheless quite compelling reasons to build a better, healthier more sustainable world. We have enough existential threats these days, how about if we take at least one of them off the list of “things to be frightened of”?

Impact Capital Comes of Age

Impact Investing now encompasses a diverse swath of social and environmental issues worldwide. As asset managers, Californians (not uniquely, of course) have been talking about the need for such change since the 1970s. Talk is cheap. Some act in accordance with values and beliefs since day one. Now the UN and many impact-oriented investors have come together to put the need for change in this decade together with available capital across “all sectors of society” to mobilize change on three levels, global action (such as the SDGs), local action, and people action, including by youth, civil society, the media, the private sector and other stakeholders. The purpose is to “generate an unstoppable movement pushing for the required transformations.” Here, here. ( more )

It isn’t like there’s a proscribed set of behaviors we’re supposed to uphold, and yet, radical change must happen. But what does this mean? What type of change, along what dimension(s) of behavior, will “get the job done”? We must figure out what part of this we can address? A great transition is already underway, leaving behind the legacy of extractive capitalism to the well-admired framework of a circular and sustainable economy, using the triple bottom line as the proving ground.

Why radical? Won’t incremental change be fast enough? Suddenly, at some point during the pandemic, the [LED] lightbulb went on for hubs of influence globally, not just the scientific community (by itself, apparently, solid science has not been enough to light a fire under the butts of global leaders), but then thousands and thousands of investors, corporations, zillionaires, and ordinary Main Street working stiffs like, uh, Bill Gates, got woke? Yep, that is sometimes how well-guarded non-secrets get heard. Not at all, until there’s a roar of piling-on that takes place.

Is this a good thing? Mostly. But do see Bill McKibben’s NY Times reply to the other Bill’s February 2021 book release here. More on that dueling Bills, below.

“It is far too late and things are far too bad for pessimism.”
– Dee Hock, CEO emeritus of VISA

Through In3’s Impact Investment Strategy, together, we do our part fixing a broken economy, redirecting underused talent into better-paying jobs, caring for humanity’s basic needs (access to food, water, energy, healthcare, sanitation, housing, mobility), extracting value from so-called waste, and yes, turning unsustainable practices in food production, packaging, power generation, and countless other “waste intensive” industries that often delivers substantial financial gains (profits) as well.

We’re a “boutique” private investment firm, not a megalithic institution, but what we do consistently, sustainably and profitably, really multiplies. Tapping market forces is key to scale. Add incremental value is not going to cut it. We need bold but well-planned moves to meet the meet moment. And we also must be certain we’re scaling what is “ecological” in systems thinking terms. Some major players, like World Bank Group’s IFC, pay little attention to the wider ecology, such as with natural gas fracking or large-scale hydroelectric power, where redirecting waterways can wreak havoc, displacing people and blocking fish spawning routes. Both of these ecological downsides are entirely avoidable.

Even with the private sector mobilized and now building full-scale “impact projects” as fast as you can say “infrastructure, stupid”, we still have some seriously heavy lifting to do. For one thing, we have to change the way our food is produced because the current mainstream practices (characterized by GMOs, overfertilization with cheap synthetics NPK in hopes that some of the nutrients will “stick”, overdrawing aquifers) are decidedly unsustainable, causing the global loss of topsoil ever since the introduction of so-called “modern” ag. This same problem can be transformed into part of the solution, but apparently Bill Gates and his advisors did not receive that memo, and prefer to develop risky “new, new tech” as a habitual and forlorn attempt to save us from ourselves.

We’re certainly not against technology per se, when it is implemented ethically, responsible, holistically, in line with physics laws and nature’s rules, using the precautionary principle to guide decision-making. We’re against using bad science and false evidence appearing real (FEAR) that, left unchecked, could easily drive us over a cliff. We’re already heading toward said cliff, so we need to think and act differently, reconsider our role, so that we don’t make a bigger mess in the process. It doesn’t matter if the “bigger mess” is unintended; normally, such experimentation on us human guinea pigs, essentially gambling with our future, is of sufficient scale to matter. But if Bill Gates and others remain misguided, the scale of future mistakes will multiply at an unacceptable rate. Further, we need to row in the same direction.

We already have reasonably safe solutions at hand, with their implementation in progress, and definitely need to quicken the pace of deployment, so why am I speaking up now? Too much is at stake. We simply do not have the luxury of overreliance on some future “great white hope” as a technological cure. How has that worked out for users of MS Windows, or organic farmers trying to avoid GMOs/Roundup, waiting and hoping that the perpetual “next release” will fix these and many other systems problems? It doesn’t work like that. We put the authority outside ourselves with solutions too far removed from nature, and natural cycles. Such technology is unreliable (unpredictable is an understatement) and it is misguided to expect a different result in this regard from doing the “same thing over and over.” We need an entirely new OS, one that draws from the power and wisdom of biology and natural cycles, was not “invented” in a lab, and is probably unpatentable.

In sharp contrast to Microsoft Windows and GMOs, nature and biology are as reliable as the seasons and the sun rising and setting and living things thriving or dying due to their environment, the microbiome, access to resources, freedom from pollutants and natural disasters like CO2 escaping from rocks that were never meant to be a dumping ground for our earlier mistakes. Sorry, Bill, you missed the mark, misinterpreting the science on “How We Grow Things” (Chapter 6 of his new book). You are no doubt quite intelligent, but bias and thought habits (what’s familiar isn’t always what’s true) tend to filter out new information when it doesn’t agree with preconceived ideas.

We can debate the details, but nature will win out. We may or may not be around to appreciate this fact. The time to act boldly, and allow for proper refutation of wrong-headed facts, is now at hand.

Biology is messy, but predictably so. We can be inspired by it, but try to harness its awesome, inherent power, like trying to ride some ginormous “monster” wave, and … well, better be a very good swimmer or not take your own self-preservation too seriously.

Everybody can have their own opinion, but (as the saying goes) not their own facts. Trees and forests, for example, aren’t just “pretty things” as Mr. Gates would have us believe, but elegant ‘machines’ or complete systems that sequester massive carbon, both above and below the ground, provide no waste, play well with others, provide for their families.

Aside from being an overused metaphor, trees and their various roles provide an essential part of the solution set, including afforestation and reforestation along with keeping existing forests (what remain of them) intact, agroforestry, silvopasture, cultivating bamboo and bamboo-related value chains, and “closed loop” handing of waste woody biomass. The same technologies can be used to pyrolyze other biomass (plant or animal origin), plastics, rubber, and other calorie- or nutrient-containing materials instead of letting them accumulate in the biosphere. This is now well-proven and quite a competitive space.

Nature, the Original Equal Opportunity Employer

Nature chews up and spits out rich and powerful, or penniless, … without discrimination. There’s little point in trying to harness her awesome power, when cooperation with nature, aligning with principles, laws (gravity isn’t just a good idea), will set you free with few of the downside risks, shown over our brief history as failed experiments. Why try to dominate and own a perfectly amenable partner? Habit, I guess.

Taking calculated risks is fine, and the old adage “nothing ventured, nothing gained” applies with a major exception, when fundamental designs (like collecting renewable energy from the sun and wind, converting abundant waste, or rebuilding topsoil as a massive carbon sink) are already proven and working, thus there’s no need to tinker and reinvent alternatives. The risk/reward profile spells out future disasters that are easily avoided. What’s next, an experimental bat virus without strict safety procedures? Oh, right.

Point and case: the requirements for certain genetically modified organisms (especially open-pollenated, “Roundup-ready” GMO crops that use glyphosate on effectively dead soil) bring more environmental harm than the good of increased food crop yields. The unintended consequences have to be factored in, from the loss of soil carbon (and the loss of the soil’s capacity to support healthy plants that don’t require the spraying of toxic chemicals in the first place) then the inherent downstream risk of runoff of synthetic fertilizers, overwatering, oceanic dead zones, and the effects of “monster” food experiments unleashed on unsuspecting populations. Is more of that ecological collapse an acceptable bet for our future?  

Just as unreliable and dangerous: Gates’ hoped-for “safe” nuclear power, or injecting CO2 into concrete or asphalt (we’ve already covered enough of the planet with materials that prevent water from passing back into the soil and recharging aquifers), with effective water resource management already critically important to bouncing back from climate change. Let’s head in the opposite direction by cleaning up polluted waterways, eliminating toxic compounds at the source (don’t make stuff we can’t rid of as it will end up in landfills or the oceans), so we can all play pivotal roles in restoring and regenerating our home. We don’t want more desertification, we want food forests instead!

Shout out to John Rulac’s article Making America’s Rivers Blue Again: Connecting the Dots Between Regenerative Ag & Healthy Waterways

The reason some of the Sustainable Development Goals are considered “wicked” problems — almost unsolvable without something radically innovative — is that there are often unintended consequences, or even remote systemic effects, to taking the seemingly “right” action. The idea is to clean up the mess without making a bigger mess in the process.

Not to squelch anyone’s creative impulses to invent a better mousetrap for CO2, Bill Gates or otherwise (sincere efforts by Breakthrough Energy Fund and many others), but as McKibben pointed out back in 2017, “the technology exists to combat climate change”, and he asks therefore, “What will it take to get our leaders to act?” This is the challenge of our lifetimes. This is our moment. We can do this. Indeed, we must. Let’s creatively solve this together so that we can win it while there’s still time.

How? Bolder and more aggressive plans of action are essential. 2050 targets are meaningless if that plan includes doing very little or “almost nothing” to make a real difference until 2030 or 2040. This is why the call for transparency and accountability has increased, soon with regulatory frameworks to hold accountable those who can and will have the greatest impacts. But even more important, on the social side: working together toward drawing down the carbon already present, which is not so much a matter of technology (as Bill Gates and others might have you believe) but a low-tech or no-tech blueprint we already have, sometimes now called “natural” climate change solutions or “nature-based” or “bio-inspired” approaches, where practical. Soil itself serves humanity as a fantastic, reliable, life-giving carbon sink. We need not be “in charge” of a technology that enables us to build a machine to conquer climate change. Fast-growing plants fix carbon and maintain or regenerate healthy soils (as opposed to the way modern agriculture “treats the soil like dirt” — as just a growing medium with synthetic fertilizers and plants addicted to pesticides/herbicides/fungicides because they’re not healthy enough to stand on their own without them). This is also an underappreciated fact of science — water cycles and living plants have a symbiotic relationship with the soil, and contain and sequester more carbon that dessertified bare soil.

Related articles and a presentation to elaborate on these points:

• Regeneration Starts at Home
• Mitigating Climate Change — going beyond low carbon and zero carbon (emissions reduction) to carbon negative
• Recorded Jan 9th 2021 “livestream” of climate change rockstars HH The Dalai Lama, Greta Thunberg and key scientists (the team that authored the Nobel Prize-winning UN’s IPCC reports and earlier warnings) here or see below.

• More on collaboration skills.
• Daniel’s course on “Breaking Down Silos to Effective Collaboration” (Lorman Education)

Business Opportunities to meet the moment

Here is a 9-minute video introduction to this topic, thanks to Companies for Zero Waste, where I was featured as a speaker at a recent session … below that, we describe six immediate business opportunity areas.

Here are six business opportunity areas, in no particular order, except that they’re all needed “sooner or later” so … probably now would be good:

1. Regenerative Agriculture and Sustainable Food Systems: more about regenerating soils, preserving and rebuilding topsoils than the controversy around cattle as a source of protein, this one sector is arguably the key to restoring water cycles, drawing down atmospheric carbon into soils, and restoring health and prosperity to a sector that seems unable to save itself. Farmers that are surrounded by land with no topsoil remaining continue to farm as if that’s reasonable. It isn’t. They’re confusing Mother Nature with a Fairy Godmother.
2. Waste-to-Value: Dealing with accumulating garbage, waste materials that don’t “go away” (there’s been no “away” since the 1990s or perhaps even earlier) on their own. This includes both toxins like plastics that escape from captivity, as well as biological nutrients that are displaced, often a source of methane or other greenhouses gases (GHGs). Anyone that can secure sufficient volumes of waste rubber or plastics, or biomass wastes (food waste, sawdust, manures, etc.), can make a profitable business.
3. Electrify / Decarbonize Transportation: Electric Vehicles (EVs) are slowly emerging as an advantageous form of passenger vehicle transportation, but there are known issues (fears) that have delayed adoption. Some say they’re waiting for a breakthrough in mobile device storage (batteries remain relatively expensive and heavy, so could hydrogen fuel take on new importance?), while hybrids and charging infrastructure expand in most markets. Air travel is also ripe for innovation, ushering in the “greening” of that sector, alongside electrification of airports, trucks, buses and commercial transportation generally.  Definitely an opportunity, as the transition is happening, albeit much too slowly.
4. Renewable Energy: Shift power generation to renewable sources, end the “fossil folly” and gradually de-commission Coal, Gas-fired and Nuclear Power plants. Petrochemicals have similar downsides in that they’re finite and the supply chains are “dirty” with few disposal options that help clean up the mess we’ve already made. At best, this shift to renewable energy will help slow the rate of destruction of habitat and healthy soils, air, water … so we must switch over as fast as impact capital can allow, but do not mistake being “less bad” for being “good” — assuring that we will draw down enough atmospheric carbon to move the needle toward cooler and more stable temperatures. Renewable Energy is simply Ground Zero for meaningful change. It is working well in most markets, with massive job creation and emissions reductions, with power generation replacing the need for new fossil or nuclear plants entirely, but so far with limited penetration. Will this trajectory continue and grow? This flourishing needs to take over and multiply even more quickly, globally, especially in poorer countries that rely on dirty fuels like kerosene or diesel for cooking, lighting or power. Using electricity derived from renewable sources rather than fossil fuels to cook eliminates the harm caused by the by-products of combustion of both liquid fuels such as nasty kerosene or solid fuels like charcoal. Such distributed energy can “leapfrog” over lack of infrastructure in these cases and eliminate the need to import petroleum or CNG from other countries.
5. Decarbonize Buildings: The number of unhoused persons makes a strong case for more affordable, efficient and smaller homes, but also ones that will last (fire and earthquake resistance), are truly livable (in safe neighborhoods, tightly insulated, excellent air circulation, free from toxins and pathogens, etc.) and if we’re extremely clever, that also sequester carbon and/or repurpose waste materials as part of the design. Rapid deployment would help, too.
6. Smart Cities, Energy Efficiency, Lighting & Controls, whether new construction or retrofits, can lead to “impact” or “sustainable finance” opportunities that are quite lucrative and deliver better places to live and work. I’d also throw on this pile decarbonizing the major polluters within cities, namely waste-intensive and energy-consuming production of cement, steel, and industrial chemicals.

Consider market timing along side basic business model “design” for triple bottom lines of people, planet and profit. This is our shorthand definition of “impact”, where In3 offers access typically to as much capital as needed, and probably more than most people can imagine that’s already committed under attractive terms & conditions. Access is simply a matter of pre-qualification.

Although we focus mostly on project finance (see In3’s mid-market project investment strategy), we remain open to compelling, game-changing new ventures with strong potential in these areas. Otherwise, what’s the point? The “single bottom line” of just making money is out, as seductive as that may seem. There’s actually no reason to focus on minimizing environmental or social harm when being “good” (effective designs) are no less profitable in the mid- to longer run. Making a “flash in the pan” profit may feel good for a short time, but is that good enough for you? It is greed and profiteering without a conscience. There’s no room in today’s marketplace for such ethical impairment and irresponsible behavior. Fine to crawl before walking or flying, if that’s what it takes, or blending a desire for great wealth and affluence with social and environmental benefit, not far behind, but never take your eyes off that longer-term prize.

Bill Gates 2021 interview about his investments in climate change mitigation on 60 Minutes: “How the world can avoid a climate disaster”

His new book came out Feb 16, 2021. True to what he knows, he over-relies on science and technology, but at least he and many other billionaires are now passionate about taking action, not giving up. He recognizes that there is hard work to be done. Energy poverty in developing countries through the Bill & Melinda Gates Foundation work was eye-opening and made them impact investors and realize the importance of achieving Net Zero (net negative, anyone?).

BBC reading of the first 14 minutes of book here

If you have a breakthrough innovation for climate change, consider funding via Breakthrough Energy (of course there are many other capital providers that maybe more practical). We can help you prepare. We want to keep this crew busy so Bill doesn’t write and promote another wrong-headed book. I’ll be right back … I have to reboot my PC … again. :>)

Is such “breakthrough” technology actually necessary? Gates and his uber-wealthy compatriots have already invested in innovative solutions to some of the world’s toughest problems – global poverty, disease, and the coronavirus pandemic, so far, nearly $2 billion. Would someone please send him some grass-fed meat so he can stop complaining about flatulent cows? more

Postponing the essential actions is no longer an option

Yes, timing is everything. Collaboration takes patience and skill. We only make it harder with further delays. What are the conversations (including and especially those with whom you disagree) that can get you down the road furthest, the fastest? There’s no point trying to convince mules, but … most of the time, the “bark is worse than the bite” syndrome applies. What new partnerships or relationships offer you the richest potential rewards? I guess I’d better write Bill Gates a letter. :>)

We need all hands on deck, now more than ever. See February 2021 interview of In3 founder Daniel Robin online at Companies for Zero Waste.

Title: Greta Thunberg, HH the Dalai Lama, and IPCC* scientists discuss urgency for natural climate solutions; now’s the time to develop, implement and scale, clean, sustainable, circular solutions; here’s how…more on this recent webcast

The Dalai Lama with Greta Thunberg and Leading Scientists

Parting thoughts: Sailing the Seven C’s of Collaborative Business Relationships

* IPCC = United Nations Intergovernmental Panel on Climate Change, the body for assessing the available science related to climate change.