The world has become too mired in environmental problems to ignore treating its symptoms. Investments in environmental cause management—mitigation, conservation and preservation strategies—have manifest in an entirely new, multibillion-dollar investment sector: clean tech.
But what of the disastrous results already begotten by excess carbon emissions, land degradation, waste proliferation and the like? Those are symptoms. Prodigious investments are needed. And the Rockefeller Foundation is promulgating such adaptation and resiliency financing under a new, innovative portfolio of opportunities.
Until now, identifying opportunities, eliciting sophisticated investment criteria and utilizing the right financial mechanisms and peer group analysis have been rather sketchy propositions: too little supply, too little demand, a lot of both—and awkward means to effectively balance the equation. Enter the foundation’s Zero Gap, a series of new investment initiatives operating under one umbrella and whose activities began last year. Saadia Madsbjerg, the foundation’s managing director, is leading the charge.
“At Zero Gap, what we do is fund the early stage design and testing of mechanisms that in one way or another have the potential either to attract more money from the private sector to the development space—or to take that money that is already deployed and deploy it in more efficiently,” she says.
The mechanisms employed include everything from insurance-related products to securitized debt products to micro-finance vehicles.
The benefits of impact investment conduits such as these include creating less friction, which of course boosts capital flows and makes markets run more smoothly, Madsbjerg says. In turn, environmental and social challenges more easily get sustainable funding.
Conduits are important when markets are being created. They make sure capital gets from point A to point B and back again—from the investor to the investment target, with the return to the investor. In a perfect world they operate without much noise: no wobbly transfer issues, custodian issues, accounting problems, portfolio monitoring, etc.
Since the Rockefeller Foundation was instrumental in creating the impact investment market about eight years ago, it makes sense that it would employ more mature vehicles to address growing industry needs. Impact investing assets under management have grown to about $60 billion since inception.
“Capacity building facilities needed to be in place for that field to grow ... and that is a very important piece of the equation. But of course the need for more capital for social, environmental and economic challenges extend way beyond what that work was designed to do. And that leads us to the work that we have called Zero Gap,” Madsbjerg says.
All told, a funding gap of about $2.5 trillion needs to be filled to achieve the sustainable development goals (SDGs) in developing countries alone, according to Rockefeller Foundation research. That number comes from subtracting the $1.4 trillion that public and private funding cover annually from the $3.9 trillion the United Nations estimates is needed per year to keep the world on a sustainable course.
The figure encompasses 17 development goals the U.N. hopes to achieve over the next 15 years to make the world a better place, including ending poverty and hunger; protecting the planet from environmental degradation; economic equality measures for all persons; fostering peace; and promulgating global partnerships between the public and private sectors. These mission areas are further broken down into specifics such as quality education, gender equality, affordable and clean energy, clean water and sanitation, responsible consumption, decent work and economic growth and climate action, among other targets.
So how does the gap get filled? The Zero Gap initiative, as its name suggests, aims to answer the question.
Through a series of programs, Zero Gap is laying the groundwork for others to enlist in the battle for planetary health and human well-being. Here are some examples of the investment tools it is sharpening: