By Thomas M. Kostigen
At the U.S. State Department's first-ever Global Impact Economy Forum last week in Washington, D.C., Secretary of State Hillary Clinton announced two new government-backed impact investment initiatives and voiced her support behind "an inclusive economic ecosystem that fosters this kind of investing."
"If we can open the doors to new markets and new investments, we can tap as many as 1.4 billion new mid-market customers with growing incomes in developing countries," Clinton said. "Taken together, they represent more than $12 trillion in spending power. That's a huge potential customer base, not only for American companies, which is my primary concern, but also for others."
In attendance were power players from the worlds of finance, government, business, philanthropy, and even a famous actress. The Forum, which had been delayed several times due to foreign affairs' calls to duty, was meant to promote the ideas of public-private partnerships abroad. Indeed, the State Department is dedicating $40 million "to focus on scaling up game-changing innovations that are cost-effective and sustainable," Clinton said.
The partnerships are being effected through USAID and its Development Innovation Ventures program, which provides a mechanism for identifying and testing promising development solutions, along with the Skoll Foundation, a leading philanthropic and social entrepreneurship organization founded by former eBay executive Jeff Skoll.
The partnership investments aim to be proactive rather than reactive. "It's important to provide humanitarian relief when people are starving because of bad government policies that undermine agricultural development or because of drought or other acts of nature," Clinton said. "But it's better to get ahead of the curve and to invest in new, more effective agricultural production. It's fine to set up clinics, to take care of people when they're sick or they're suffering from disease, but it's better to get ahead of it and to find interventions like bed nets that will actually prevent disease in the first place. So we're investing a lot of money in Development Innovation Ventures because we think it will save money. But we need private sector support and ideas as well."
Still, the big announcement for the financial services industry was the announced launch of Accelerating Market-Driven Partnerships, or AMP. AMP will bring a business eye to taking on social and environmental problems in developing markets. It will be launched in Brazil and focus on building sustainable cities by providing low-cost housing, offering skills training that builds capacity of local workers, and improving urban waste management systems.
Partners include Arent Fox LLP, Machado Associados, Grupo ABC, HP, the Rockefeller Foundation, the World Bank Group, and Mercy Corps. Representatives from all of these groups were in attendance along with others of note, including Sir Richard Branson, Chairman of Virgin Group Limited; Rosabeth Kanter of Harvard University; James Zhan from the UN Conference on Trade and Development; Dafna Tapiero from World Bank/IFC; Maria Bello, the actor/activist; Gloria Nelund of TriLinc Global; Keith Larson from Intel Capital; and Rob Katz from Acumen Fund.
The new AMP investment partnerships likely work in a similar fashion to the investment partnerships run by the The Overseas Private Investment Corp., the U.S. Government's development finance institution which invests hundreds of millions of dollars in overseas ventures.
Essentially, OPIC farms out the portfolio management of their investments to private fund managers. Fund managers can apply to manage the portfolio as sub-advisors, and accredited investors such as high net worth individuals, family offices, foundations, and endowments, etc. can invest through these entities. This models provides the opportunity for myriad financial players to get skin the game.