Exciting news from Xylem Capital!
In late May, my Xylem Capital partner Matthew McGarvey and I attended the Global Finance for Nature Summit in Edinburgh, Scotland. Organized by UNDP, the government of Scotland and the Global Ethical Finance Initiative (GEFI), this small conference grew from a realization that on one hand small and medium enterprises (SMEs) will be key to achieving the UN's Sustainable Development Goals (SDGs) but lack capital, and on the other hand many large banks and investment funds have pledged to support the SDGs but have no capacity to finance SMEs. The question we discussed over two days was "How do we build bridges between Big Capital and small social enterprises?" At times the gulf seemed too wide to bridge. We heard from bankers with trillions of dollars under management about how they "don't get out of bed for less than $100 million deals," how SMEs need to scale rapidly (i.e. not be SMEs) in order to be investible, how only the largest firms have the capacity to provide sufficient data for impact reporting, etc, etc. Their message, in short: it's up to social enterprises to meet the requirements of investors. That seemed odd to me. After all, the reasons we need SDGs is that the status quo of the global economy has not solved many social and environmental problems, and one could argue that global capital markets have actually financed and profited from some of those problems. So wouldn't it make more sense for local innovators who are working to achieve the SDGs to explain how commercial capital needs to change instead of vice versa? (I had a few flashbacks to the Copenhagen climate talks in 2008, where I sat in on sessions of the International Emissions Trading Association and listened to the architects of a global financial crisis that was still unfolding explain confidently how their innovative carbon trading schemes would solve the climate crisis.) In fact, there were also people at the meeting who articulated the needs of social enterprises and SMEs, and there were investors who were willing to listen. The team from UNDP and GEFI deserve a lot of credit for creating an atmosphere in which people could be honest and constructive. And we had a chance to meet people from around the world who share Xylem's values and challenges:
- Conexsus, a new Brazilian organization supporting nature-sustaining business initiatives by communities, cooperatives and associations, with a focus on the Amazon.
- Assist Social Capital, a Scottish group that helps third sector organizations harness social capital as a tool to fulfill their missions.
- Banca de Inversion Sostenible, which works with indigenous forest-protecting communities in Mexico, Peru and Colombia to realize diverse revenue streams from forest products and forest conservation.
- Project Heather, building the first regulated investment exchange focused on businesses that are making measurable positive social and environmental impact.
From those conversations, we decided that we should continue learning from and supporting each other, and that collectively we might also be in a better position to engage larger sources of finance than any one of our organizations would acting alone. So at the final session of the Summit, we announced formation of the Global Coalition for Natural Capital. In coming weeks we will develop a formal Memorandum of Understanding and web presence, but for now, you get a photo: