My name is Kris Balderston and welcome to the Secretary’s Global Impact Economy Forum here at the State Department. I’m Secretary Clinton’s special rep on global partnerships here. It’s my great pleasure to welcome Secretary Clinton and Sir Richard Branson to the forum and to thank all of you for taking the time out of your busy schedules to join us. This is the culmination of a lot of work we’ve done with many of you within the building and outside of this building. A big thank you to our small but mighty team at GPI, and if they’re in the room, wave your hands so that they can – wave them high. (Applause.)
Our patrons – if you need them or need to complain, find them. Our patron saint of impact investing, Lala Faiz, is backstage so make sure to see her, because she’s brought many of you together, and we’re proud to say her mom is here today, so that’s very good. So be very nice to her. (Applause.) Also a big thanks to Roberta Jacobson, our new Assistant Secretary for Western Hemisphere Affairs, who is helping us on our project that the Secretary’s going to announce later, and thank you for all of your inspiration, support, and ideas.
Foggy Bottom has long been the home of bold public actions. Our first Secretary of State Thomas Jefferson took a risk and doubled the size of the nation with the Louisiana Purchase. Secretary George Marshall, in the aftermath of World War II, promoted the Marshall Plan that put Europe back on its feet. Secretary Kissinger normalized relations with China, which is – less than four decades, has become a major trading partner to the United States. Each of these actions by a Secretary of State, while controversial at the time, showed a bold step forward to expand America’s economic reach and global prosperity.
For over 200 years, the State Department has done a great job translating between languages and cultures and ideologies. It’s what we’re good at. Today, we’re at the point where we have to redefine the role of the State Department and begin translating between business and government and civil society. We need to break down these barriers and create uncommon approaches to common problems. That’s why we’re here today to talk about how we can break down barriers across industries and promote a new approach to doing business by advancing what we call the impact economy.
Now this is a label that’s been thrown around by many different entities. At the State Department, we’re defining an impact economy as one in which the government works with civil society, with the private sector to create social and environmental impact while generating economic value. This Administration is committed to promoting the impact economy and its benefits both domestically and internationally.
You may ask, why are we focusing on this now at this juncture in time? We simply cannot continue to grow infinitely on a finite planet with finite resources. The global population is set to reach 9.2 billion in the next four decades. As natural resources such as oil and water decline and the expectations of our customers, consumers, employees, and investors continue to rise, environmental and social concerns are no longer an issue of responsibility, but rather of significant business opportunity.
A number of companies have figured out how to harvest profits at the intersection of business and society, creating true, sustainable value for shareholders and stockholders. This transcends borders and industries because companies and investors that integrate sustainability into their business practices are finding that it enhances profitability over the long term. We consider private sector investments and innovation to be so important because the knowledge and technology developed are not only good for a company’s bottom line, they help us meet the challenges of our time – clean energy development, urban renewal, food security, efficient and effective government.
So when companies move forward with the kind of innovative initiatives I’m describing, they’re not just creating jobs. They’re helping the economy of the future. Designing socially and ecologically smart products and services is no longer just a philanthropic contribution, but a smart business concept as it provides for greater cost efficiency, access through markets, and better risk management. Today, official development assistance from government and multilateral organizations is no longer the primary driver of economic growth. Foreign investment in developing countries outpaces aid by nearly 10 to 1. In the 1960s, such assistance represented 70 percent of the capital flows going into the developing countries, but today it’s just 13 percent.
Simply put, as the role of development assistance shifts, we have to think differently about how the United States Government leverages its available resources. At the Forum on Aid Effectiveness at Busan, South Korea this past November, the Secretary articulated the need to not just provide philanthropy-driven aid, but to catalyze investment opportunities. We believe that the State Department can serve as a catalyst to spark self-sustaining progress by helping to reduce risks that prevent companies from doing business in emerging and frontier markets, by helping governments and domestic financial institutions expand credit to local small and medium enterprises, by working with governments to address the structural barriers to advancement, and by lending technical assistance that helps governments build their capacity to better serve their citizens.
As we see investment flows increasing, we also see new market opportunities. Ninety-five percent of the world’s consumers live outside the United States borders. The fastest-growing markets of the future are emerging in frontier markets. This is where growth is ultimately is going to power the U.S. economy and ultimately result in increased trade, increased investment and increased jobs and opportunities in the United States and abroad.
And now that I’ve talked a lot about why we need to focus on the impact economy, so the question is: What are we doing about it? At the Global Partnership Initiative, we seek to be a catalyst for change. In 2009, the Secretary launched this office to tear down barriers amongst partners, to usher in a new era of partnership that aligns the interests of our partners with foreign policy goals in innovative ways. This approach is evident throughout our work at the State Department and across government.
For example, as part of our International Diaspora Engagement Alliance, IDEA, we’ve launched idea market places in the Caribbean, Latin America, and Africa with our partners using a whole-of-government approach from USAID and OPIC. This is a business competition platform that will foster collaboration between local and global diaspora entrepreneurs to develop and expand innovative projects that will generate employment and economic growth. The Hudson Institute came out last week and reported $92 billion in remittances. That’s a huge number that we could be using. That would be three or four times more than U.S. foreign aid.
Another example is our Global Alliance for Clean Cookstoves, and we have representatives here today. This represents a $10 billion investment opportunity. These investments will generate real financial returns, but they will also address probably the biggest health risk you’ve never heard of. Half the world cooks on open fires, and 2 million women and children die annually from breathing smoke from dirty cooking stoves fueled by wood, dung, and solid fuels. Through our Partners for New Beginning project, we’re promoting business opportunities in Muslim countries. To date, we have 127 partnerships that have formed with the goal to create up to 20,000 jobs in the region.
But last but not least, and the reason we’re here today, through our State Department Investing with Impact initiative, we are addressing the critical ecosystem challenges and galvanizing sources of private capital to tackle social and environmental challenges through cutting-edge interventions and emerging market – frontier markets. In the last 18 months, we’ve burned your phone lines down, we’ve been working with many of the partners in this room to identify ways to address major challenges and roadblocks to scaling the impact economy. Based on these conversations and research and our travel, we’ve identified four key transitions that are required to expand and scale the impact economy. They will serve as the template for our forum today.
We need to first transition from aid to catalytic investment. We need to better understand how government and philanthropic resources can complement the resources of business to yield investment opportunities that result in economic, social, and environmental returns. We need to encourage business to look beyond short-term shareholder value creation to longer-term sustainable risk adjusted returns that will enable business to maintain their competitiveness, build brand equality, and capture new markets.
We need to stop working in silos and promote partnerships that align the assets of different organizations to create market-driven solutions in the world’s most pressing challenges. This means providing a platform for sharing knowledge and best practices, as there are critical knowledge and skill gaps across industries and sectors, and creating opportunities to create effective investment strategies and business models that meet core business interests and maximize social and environmental impact. But last but not least, we need to understand how to develop a more supportive policy, an institutional framework to incentivize investments and business models that yield attractive financial, social, and environmental returns rather than hinder them.
So today – and I have to slow up because we’re trying to do my timing here, otherwise I’ll be dancing in front of you until the Secretary gets here. (Laughter.) Today, we hear about how government in the private sector – and today, we have Morgan Stanley, TriLink Global, and Impact Assets amongst us. They are going to make some major announcements today. But this forum is also an acknowledgement we need to do more to achieve the full potential of an innovations-based impact economy. We need to have government institutions that are quicker and smarter. Imagine having over 180 entrepreneurial regional offices that we happen to call embassies helping us scale the impact economy.
Today, we have a diverse mix of public and private sector actors, including investors, corporations, entrepreneurs, foundations, and academics in the room. You will all have one thing in common – you’re all translators interested in collaborating with each other. We need your help, we need your innovation, we need your talent to help us create a more robust impact economy, and we cannot achieve this through half-measures. We look forward to hearing your thoughts and inputs throughout the day. We’ve made arrangements to have mad minutes. Where there are so many talented people in the room and when we have lulls in the conversation – we may have one pretty quick – we want to hear your thoughts. At the end of the forum, the Secretary fully expects a to-do list.
So those of you that work with me know I often quote Franklin Roosevelt on his bold, persistent experimentation. In the depths of the Depression, President Roosevelt gave a commencement speech at Oglethorpe University and used the phrase, “bold, persistent experimentation.” And I love the quote, and you could listen – the fuller quote now, but it could be just as relevant today. And I urge you to take a look at the speech, because you’d read it and you’d be thinking the current President could be giving this speech at a commencement in May or June.
President Roosevelt said, “The country needs – and unless I mistake its temper – the country demands bold, persistent experimentation. It is common sense to take a method and try it. If it fails, admit it frankly and try another, but above all, try something. The millions who are in want will not stand by silently forever while the things that satisfy their needs are easily within their reach.”
Let us use that notion over the next two days and beyond, and I’m going to go backstage and see where our favorite Secretary is. (Laughter.) Thank you very much. (Applause.)
Thank goodness I went to Arthur Murray Dance School – (laughter) – because I’ll be dancing for a bit. But I think we’re going to do our mad minutes quicker than we thought. The Secretary is next door, and evidently, these young children of State Department employees are asking very deep foreign policy questions. (Laughter.)
So actually, I really would like to open it up. And don’t ask me questions this early, please, but it would be great to get people’s impressions of what they’re looking for and if they have thoughts and ideas. I really don’t want to have a lull in our conversation. We have so many talented people in the room to give us their impressions. We have great panelists along the way, so maybe we don’t hear from the panelists but maybe hear from other people.
So I don’t know if we have microphones around or – oh, we have some microphones at the table, but I’m sure none of you are shy and you could just belt this out. So why don’t we – anybody have any thoughts or impressions they want to give before I call on you? (Laughter.) Maybe I’ll expand it to the panelists too. Here’s a gentleman back here. Thank you for helping me. (Applause.) And if you could just give us your name and --
MR. HERMAN: All right. I’ve never been accused of being shy, so thanks everyone for being here. One of the expectations I have is how, across all types of investing from fixed income to equities, hedge funds to commodities, and even where you park your cash like the Global Alliance for Banking on Values, what are the opportunities for investment so that investors of all types – pension funds, sovereign wealth funds, but more specifically families and family offices who can act quickly can invest.
So, I’m Paul Herman from HIP Investor. HIP stands for Human Impact and Profit. We’re a portfolio manager and wealth manager that quantifies impact and connects it to profit. And Kris, I just want to build off of your invitation for all of us to be translators. We can also be ambassadors. And so ambassadors do well at listening and bridging the language as well as the mutual goals, and then finding a way forward for both parties. Thanks.
SPECIAL REPRESENTATIVE BALDERSTON: That’s great. That’s very helpful. Thank you. We have a question here, or a comment. It’s very rare that we let people speak at the State Department, so you should take this opportunity. (Laughter.)
MS. VANDERBRUG: I’m Jackie Vanderbrug with Criterion Ventures and Women Effect Investments.
And one of my questions and hopes is that, as the Secretary has been such an ambassador for women and specifically for the role of women as economic actors, and that we’ve also seen this aspect that gender inequality is one of the biggest human rights crises of our time, so with these coming together – that gender, as we talk through the next two days, is not something that’s sidelined for a panel about women, but that it’s actually brought through all of the conversations, that the role of women as entrepreneurs, the role of women throughout the supply chain, and how companies value their specific leadership skills and their specific needs, and the roles of products and services, like you say, around cookstoves – that we’re able to translate that back so that investors who, say, 10, 15 years ago couldn’t say “I want to invest and I want to know how my investments change the sustainability of the world,” now can’t really say, “I want to invest and I want to know how my investments change the lives of women and girls because that matters to me.”
Can we together shift that? Because that will shift our planet.
SPECIAL REPRESENTATIVE BALDERSTON: That’s great, and I think you got the Secretary’s talking points. I think you’re right. Thank you so much.
MS. MORSE: Hi, I’m Adair Morse. I’m a professor at the University of Chicago. And just with this number of people here and all the private information, it would be nice to start to pull some information from a research point of view to actually do some serious studies that are across the board. And so I would hope that the government would facilitate a role in bringing some of this together, as this sector is so new and so important that there would be – I didn’t see much discussion of this, so just throwing it out as a wish list that academia would like to participate and, with the help of the State Department, to bring stuff together.
SPECIAL REPRESENTATIVE BALDERSTON: No, that’s great. That’s great. And I think we have one more quick dance. Go ahead.
MR. ORTMANS: Kris, Jonathan Ortmans with the Kauffman Foundation and president of Global Entrepreneurship Week. I hope as these discussions ensue over the next couple of days, we will not underestimate one of the things that we’ve learned in our campaign, where we now have 10 million bodies on the ground all interested in having an impact in their – on their communities as entrepreneurs, that there is an enormous grassroots network that’s ready to evaluate what kind of investments are going to be worthwhile. And I hope that as we go through this, we don’t underestimate the extraordinary power of the bottom-up movement.
We were honored in Liverpool last year to have Richard Branson as our keynote speaker at the Global Entrepreneurship Congress, and one of the things we had was 3,500 people from 125 countries who said, “Have confidence in us. This isn’t a top-down business. This is a bottom-up business.”
SPECIAL REPRESENTATIVE BALDERSTON: Thank you, Jonathan. And without introduction, I’ve had the chance to work for 11 years in the White House and the Senate and the State Department with Secretary Clinton, and she’s our boldest, most persistent experimenter.
So ladies and gentlemen, the Secretary of State Hillary Rodham Clinton. (Applause.)