Moving the needle just a tiny bit

This summer has gone by so quickly. While I’m excited for school, it will be hard to leave my summer gig. Over the past ten weeks, I’ve learned so much from the people at CFR and from the projects I’ve worked on.

One of the more rewarding parts of the job has been helping clients navigate the more complicated parts of putting a clean energy deal together. It feels satisfying to enable a good thing to happen that otherwise might not have. Moreover, I believe that ensuring that today’s clean energy projects are profitable helps give confidence to future investors and customers that we can and should lean more toward renewable energy as a solution.

I felt that I was able to contribute to that cause this summer. For example, I helped a set of universities and a hospital understand how to value capacity. Here’s what I mean by that and why I think it matters.

Some regions of the USA pay electricity generators for the ability to be available in the event of an emergency. These payments can make up a quarter of the project’s overall revenues. They way they are paid out is complicated – there are primary auctions and intermediate auctions, there are bonus payments and penalties, there are different rules in the summer than in the winter, and so on. The rules for the mid-Atlantic was just entirely rewritten in a 100+ page document authored by the body charged with preventing blackouts in the region. Getting through it was no picnic. But, in some cases these revenues can make or break a project. In all cases, it’s important to understand them.

I was charged with understanding the new rule and turning those rules into a model in order to both predict what revenues might look like under different scenarios and help develop a strategy for bidding in capacity in these auctions. Ultimately, we worked with several other parties to develop new a new approach to hedge against some of the more severe penalty scenarios. All in all, we took a complex and dramatic rule change that is impacting nearly all the energy generation in the mid-Atlantic and were able to turn it into an opportunity that will most likely earn our clients an even larger profit than they had initially expected, thereby establishing a major solar project as profitable and resilient amidst a sizeable incentive and market shift. And that’s a good thing for this industry.

I spent most of my time for this project in Excel, reading regulations, and on conference calls. To some people, I’m sure that sounds miserable. To me, it sounds great because at the end, I felt like I moved the needle just a little bit toward a cleaner energy future. And that’s exactly how I wanted to spend my summer.

-Jaafar Rizvi

Bridging the Gap

The rise and expansion of small and medium enterprises (SME) makes a tremendous impact and contribution to the social and economic development of a country. However, due to the size of the deals and the risk profile needed, there are still some limitations to investing in smaller SMEs or SMEs located in developing countries. The financing gap to better support these type of enterprises remains a challenge and entrepreneurs that hardly receive support from traditional forms of finance have to turn to alternative finance in order to obtain funding. Nevertheless in most of the cases, these entrepreneurs don’t have a clear idea of where to start looking for investors, or how to approach them and present the businesses in an attractive way, making this gap even wider and more difficult to close.

My role during the summer working in IESC addressed these type of challenges. My team and I guided SMEs in developing countries through the capital raising process and helped them become investor ready. From business plan to financial projections and information memorandums, we provided support tailored to the client needs that facilitated the investment transactions, making the entrepreneur’s life easier, letting her/him focus in the business while we took charge of all the steps in the investment process.

During the eleven weeks of my internship, I worked with several clients around the world. Two of them where located in Latin America. One of them was a solar panel business focusing in reducing the traditional energy consumption in residences and small-scale businesses. They were looking for a $6.5 million investment which we successfully helped them obtain. The second one was an agribusiness organization looking for refinancing their current debt. The company supported 35,000 low income small-holder farmers by providing financing as well as technical assistance for improving the quality of the crops and by giving them market access buying their product at fair prices.

This was the first time I interacted with social entrepreneurs in a professional way and it was a completely refreshing and exciting experience for me. I found extremely inspiring how passionate each of these entrepreneurs are and the amount of effort and work they put into their businesses. I really enjoyed being able to provide some guidance and help them convey their mission and passion to investors in order to take their businesses to the next level.

These months in I also had the opportunity to be part of an amazing organization and team. I worked with finance and international development experts but more importantly with mission-driven and motivated individuals always looking to have a positive impact and contributing to create a better world.

Thanks SIIF for giving me the opportunity to experience this!

Andrea

Addressing the Opportunity Gap for Students in Newark, NJ

In the landscape of education reform, much of the conversation is about metrics like standardized test scores and graduation rates that define the “achievement gap.” What I have learned from my experience at BRICK Academy and with Education Pioneers, however, is that an “opportunity gap” precedes unequal achievement. For example, Newark, New Jersey is the state’s largest and one of its most densely populated cities. It has a poverty rate three times the state average and faces challenges, like a high crime rate, that are correlated with impoverished communities. Furthermore, only 12.7% of residents over the age of 25 have obtained a bachelor’s degree. It is in this environment that over 35,000 students and families navigate the state’s largest public school system each year.

Finding myself in this setting, I was grateful that my primary project for BRICK addressed the opportunity gap that exists for many Newark students at home. I spent the majority of my summer developing a business plan for a boarding facility to provide an alternate, healthy, and stable living environment for Newark’s most vulnerable children. With only a handful of existing models for public and charter boarding schools in other urban centers, I grew my knowledge of best practices from existing models. I met with key stakeholders at BRICK and in Newark, and interviewed leaders spearheading similar initiatives around the country. Underlying this work, I used my NYU Stern business acumen to produce a plan for a boarding facility. I am hopeful that my work will help close the opportunity gap for Newark’s students so that they can achieve more in their education.

My internship came to a close yesterday by greeting BRICK’s teachers for their first day of their Summer Teacher Institute, for which I coordinated logistics. I helped to cheer them on as they exited the elevators began the new school year. I handed out BRICK tote bags (designed by me and pictured above), post-its, and other supplies that teachers will find helpful. While I am sad to part with this strong community, I was reassured by sense of hope and positive energy among BRICK’s dedicated teachers. I am encouraged by the work that teachers and other education leaders are doing in Newark, and I am grateful to SIIF, Education Pioneers, and BRICK Academy to have been part of it.

Humbly,

Jamie Farris

Fixing the American Healthcare System

As I come to the end of summer intern at University of Vermont Medical Group (UVMMG), I feel proud of the fact that my work will continue to touch the lives of 750,000 people who will be serviced by hospital network for years to come.

I finalized my proposal to increase revenues by $50 million through sources other than insurance and government sponsored reimbursement. As discussed in my last blog, the reductions in Medicare/Medicaid reimbursements have affected hospitals ability to service communities due to financial constraints. My plan to use their capabilities for other sources of income would ensure the financial sustainability of institution.

Over the summer, I used frameworks and tools from Strategy, Corporate Finance, Financial Accounting and a number of other courses to analyze the complex organizational structure and market of healthcare delivery. Once I understood the UVMMG’s system, I mapped its core expertise with the opportunities available in market. I further refined these new business ideas to find strategically aligned options which fulfill the network’s vision to serve the health of communities. The discussions with CFO and CEO of Network to define the scope of these new business activities helped me learn the thinking process of leaders to take a 40,000 feet view of organization.

I thank SIIF for making this wonderful summer possible; applying my skills to resolve inherent tensions between doing social good and ensuring financial sustainability of the organization.

-Shivansh

Controversy in Charity: The Debate Surrounding Donor Advised Funds

A Donor Advised Fund (or DAF) is a recently growing and popular charitable vehicle, allowing for philanthropic donations that the donor controls over time. So in theory, if you have a million dollars and you want to do good things with it, you give it in a lump sum to a DAF ‘sponsor’ fund, get an immediate tax deduction, and over your lifetime you choose when and how much to donate from that fund to as many charities as you please. The sponsor, meanwhile, actively manages and invests your DAF funds, helping them to grow. Although this seems rather simple, Donor Advised Funds are changing the landscape of both philanthropic and financial institutions in important ways. As Enterprise has been a longstanding player in the nonprofit and charitable world, part of my role has been researching and engaging with these entities. I am looking forward to watching how these funds evolve over time and have found the heated debates surrounding them interesting.

Primarily, whereas the top charitable institutions a decade ago in the U.S. would have been charities that you and I are familiar with like United Way, Salvation Army, American Cancer Society, etc., they now include Vanguard, Fidelity, and Schwab. Each of these institutions has created a charitable arm drawing DAFs, allowing their assets under management to increase by billions as they manage these funds. This is arguably a very good thing, as charitable money in DAFs has grown hugely over the past several years, totaling well over $50 billion nationwide. All of these funds eventually will go to charity, and as this popular vehicle continues to grow, it earmarks even more money for important causes.

Critics, however, are concerned that DAFs do not have many of the same regulatory guidelines that other philanthropic vehicles do. For instance, whereas foundations are required a mandatory minimum 5% annual payout of their assets, there are no such rules for DAFs. So theoretically, a person could put all of their wealth into a DAF, never request that a grant be made, and have it stay there indefinitely even past their death. This, many argue, allows for a huge amount of resources that would have otherwise gone to active charities to be locked up. The tax benefits have been realized, yet the funds are inaccessible to the organizations that desperately need them. Meanwhile, sponsor institutions managing the funds receive a small percentage of each DAF in management fees. Critics worry that this creates a perverse incentive for sponsors, as they benefit the longer the funds are idle and therefore may not encourage donors to make grants.

A small number of DAF sponsors are ‘self-regulating’ to change these policies and mitigate these concerns. For example, many have imposed their own minimum payout requirement of, say, 10% a year, or alternatively created a 10 year maximum lifespan of a DAF. It is possible that there will be other legislative or regulatory changes made, and some organizations are working for this policy change. As members of the social impact world, it is important to be engaged with this influential new tool that is steering a growing portion of charitable dollars. I hope that as many of us work in this space, whether as policy makers, nonprofit charitable beneficiaries, fund managers, (and, after we pay off b-school debt, donors!) we can continue to shape this debate ourselves.

-Haley

Reflecting on the Role of Business in International Development

This summer, as I was driving through the Peruvian jungle for my internship (see photo above), I reflected on my reasons for studying business at NYU Stern. In my previous work experience, I came to believe that business can and should play an important role in international development.

The intersection of business and development can look very different depending on the circumstance. Sometimes companies (and consumers) act indifferently toward the needs of low-income individuals in developing countries. Other companies build social responsibility into their core ethos and business model. And sometimes there are opportunities to leverage shared values – when a business’s own goals are aligned with development needs.

This summer, working for an international development nonprofit that trains cocoa farmers, I’ve had the opportunity to observe the last category – shared values – in action. Specifically, major chocolate companies like Hershey and Mars have pledged to purchase 100 percent certified cocoa by 2020, because they recognize the moral quandary and negative PR effects presented by child labor, which is appallingly prevalent in cocoa production. As a result, chocolate companies’ goals have aligned with those of small cocoa farmers. Everyone involved would like to combat unfair labor practices and buy/sell fair trade certified cocoa at a price premium.

This is a very positive development for the chocolate industry, for consumers, and for small cocoa farmers. However, I believe it’s important to think critically to ensure the success of development initiatives that leverage shared values. In the case of fair trade certification, there is an ongoing debate about how much of the price premium actually accrues to farmers (rather than traders and other intermediaries). Along these lines, certification organizations and chocolate companies must continue working to make these initiatives successful for the farmers they are intended to benefit.

As I wrap up my summer internship, I continue to believe in the importance of leveraging business to further international development, and I’m thankful that SIIF has provided an opportunity to observe the intersection between these two worlds first hand.

-Colin Miller

Focusing on Clean Energy Solutions

My approach to social and environmental issues has evolved in recent years. I began my career by focusing on stopping problems. Now, I’m trying a different strategy: working to develop solutions.

After graduating from college, I spent my time doing mission driven work both in the nonprofit sector and through policy centered consulting. Typically, my employer or client would identify what they thought would be a disaster and task me with preventing that disaster from being realized.

For example, the University of Georgia has a coal plant on their campus that is adjacent to a daycare center for the children of faculty and staff. Asthma and other repertory issues are much more common the closer you live or work to fossil fuel based power plants – a trend intensifies for children. This old plant was slated to close soon, but some were angling to extend its life. So, the Sierra Club sent me to work with the local community to make the case to decision makers that it should get shut down. In short, there was a public health and environmental problem, and I spent my time working to prevent it from getting worse.

Through my time on that project and others like it, I became progressively more interested in questions such as: What would replace the coal plant? Would it be better or worse? How would it be implemented? Slowly but surely, I began to think about turning these questions and thoughts into a career.

To make this leap, I knew I would need to get a better understanding finance, markets, and data – the areas of clean energy that I believe are driving the most progress. This line of thought is one of several that led me to apply to business school and ultimately to my current summer internship.

Now, I’m working for a consulting firm, CustomerFirst Renewables (CFR), which focuses on helping nonprofits, governments, and large corporate clients transition toward using renewable energy.  As it turns out, this process is complex and full of barriers.

Despite being some of the country’s and world’s largest energy consumers, few large institutions have personnel with the technical expertise and knowledge of energy markets to pull of a large scale renewable energy transition in an optimal manner. But the desire to do so exists – more institutions are becoming aware of their impact on the environment and are realizing that using clean energy in almost all cases lowers costs and reduces commodity price risk.

This summer, I have already helped several businesses and universities determine their ideal clean energy mix, find partners willing to develop solar or wind projects on their behalf, negotiate energy contracts, and navigate the complex regulatory frameworks that govern our nation’s energy systems.

I may deal with the same general issues as did before NYU, but it feels like a completely different world. I’m excited to spend my time focused on solutions.

-Jaafar Rizvi

Human Rights in the Supply Chain

This summer, I am working for a sustainable, all-natural, luxury skin care start-up called Peet Rivko. The company seeks to translate the slow food and slow fashion movements of the last decade to skincare, a highly unregulated industry in which concepts like “all-natural” are virtually meaningless.  My role has been to launch a social impact strategy for Peet Rivko that ensures the highest level of social and environmental responsibility.

As companies move away from traditional corporate social responsibility–characterized mainly by philanthropy and grant making–towards more strategic and operational social responsibility, supply chain management and transparency become increasingly important. I have, therefore, focused much of my work this summer on assessing the human rights and environmental risks associated with Peet Rivko’s global supply chain.

As Peet Rivko engages new suppliers, asking questions about manufacturing and production, social responsibility, and environmental impact is essential, but it is not easy. As a small start-up, we often find ourselves questioning suppliers about these topics with little leverage. While some suppliers are unwilling to address issues of human rights and environmental impact, others have been much more forthcoming. Even with open suppliers, however, assessing adherence to labor and environmental standards can be difficult. While a well-meaning supplier may believe that it sources from a responsible manufacturer, this may not be the case. Consequently, third party verification against a set of accepted standards is critical for ensuring a responsible supply chain.

An exchange with one of Peet Rivko’s suppliers highlights this point. Early in the summer, we were searching for a supplier of nylon travel bags to pair with our travel-sized products. We reached out to a Brooklyn-based company to inquire about their products. They explained that they manufacture through a factory in ShenZhen, China, that “is ethically and humanely run,” and that they “check in frequently” to ensure this is true. In fact, the CEO of the company had just visited ShenZhen in the winter to see the factory first hand.

While this explanation was welcome, it was simply not enough. As businesses push to uphold human rights and sustainability in factories across the world, third party verification of standards is the only real way to ensure responsibility. As a result, we posed three pointed questions to our supplier:

1. Has the manufacturer been assessed by a third party?
2. What standards are used to ensure the social and environmental responsibility of the manufacturer? (One example is the set of standards outlined by the Fair Labor Association.)
3. Does the supplier have a social/environmental audit of the manufacturer available for examination?

Luckily, this supplier addressed our questions and provided audits and resources for us to examine, instilling confidence in our decision to source from them.

These three questions above are a few of the many questions companies should ask suppliers as they move their strategy and operations towards social and environmental responsibility. Over the course of the summer, under the guidance of Sarah Labowitz, co-Director of the Center for Business and Human Rights, I will be creating a set of guidelines and key questions—including those above—that Peet Rivko will use when assessing suppliers’ social and environmental practices moving forward. As companies continue to demand transparency by asking for specific, verifiable information about suppliers and manufacturers in its supply chain, we can work together to set higher expectations for social and environmental responsibility.

-Nicole

Numbers with Purpose

As many other students at Stern, I came to NYC to take my finance career to the next level. As a former central banker, my background consisted mostly in financial markets, securities, interest rates and financial models and I was convinced that Stern was the place to continue enhancing this expertise. But, I was also looking for something different, an experience where I could increase and apply my knowledge and skills while giving back to society, because no matter how much I enjoy crunching numbers in spreadsheets, throughout my life I’ve always felt that those numbers need to have a stronger and bigger purpose.

With this in mind, I started the famous recruiting process. Trying not to get distracted by all the food and wine served in corporate presentations for the “traditional” career paths, I tried to focus on exploring all the opportunities and exciting industries in the intersection of money and social impact. The more I found out about this industry, the more I got excited about the possibility of using my day to day work to make a positive impact. This is how I ended up pursuing a summer internship in impact investing. Certainly, the search process was not easy, but finally I decided to move to DC in order to join the Capital Advisory Team at the International Executive Service Corps (IESC).

IESC is a nonprofit focused on private sector solutions for global economic development. As part of the Capital Advisory team, I work with social entrepreneurs in developing countries all around the globe that seek capital from the U.S. Government’s Overseas Private Investment Corporation (OPIC), other development finance institutions or from impact investors. We guide our clients through every step of the financing process, help them determine the optimal capital structure, the best sources of funding and build their capital-raising package to present their businesses to investors. Throughout the summer I have been able to interact with entrepreneurs in countries like Paraguay, Costa Rica, Liberia, Cameroon and Mexico across different industries such as agribusiness, clean energy and education.

This amazing experience has all been possible because of SIIF. My main objective for the summer was to have a hands-on experience, work in real and relevant projects, and interact with social enterprises all around the world. SIIF’s support allowed me to eliminate the economic compensation variable from the equation and gave me flexibility to choose this opportunity based solely in terms of maximizing my learning experience and impact.

Thanks to SIIF I’m having a great summer in DC. I’m looking forward to sharing with you more details about my day to day work at IESC by the end of the summer!

-Andrea

Planning for “New New York”

During my orientation last fall at Stern, NYU President John Sexton described the University as “in and of New York,” its identity fundamentally tied to an urban center that is the most populous, the densest, and one of the most diverse in the country, and one whose institutions also influence both commerce and culture across the world. At New York City’s Department of City Planning, I have gained exposure to many of the formal mechanisms that shape the identity of the City itself through its economic development, its demographic shapes, and its natural and built environment.

The first thing one learns in government, at any level, is acronyms. Commonly referred to as “DCP,” this agency has a broad mandate: to promote housing production and affordability, foster economic development and coordinated investments in infrastructure and services, and support resilient, sustainable communities across the five boroughs for a more equitable New York.

New York’s sheer size makes this is no small endeavor. If each of the five boroughs separated and became independent cities, four out of five would rank among the top 10 most populous cities in the U.S. And they’re all growing. In 2014, the City as a whole grew to nearly 8.5 million people (+3.9% since 2010) and is projected to reach 9 million by 2040.

The same infrastructure that has enabled New York’s economy to endure and thrive despite the impacts of 9/11, the 2008 financial crisis, and Hurricane Sandy—all within just 11 years—is also straining under the increasing demand. The aging network needs significant repair to maintain fair quality of life for current users, as well as expansion to meet anticipated needs given population growth and climate change.

Jointly written by DCP and NYC’s Office of Management and Budget, the Ten-Year Capital Strategy is a public document meant to address this challenge by outlining where the City plans to allocate long-term capital investments in infrastructure and services. Like the infrastructure to which it refers, the Ten-Year Capital Strategy, too, is due for an update and expansion to allow the Administration and New Yorkers to more clearly understand how capital projects are being evaluated Citywide.

As a SIIF Fellow in DCP’s newly formed Capital Planning Division, I will propose recommendations on how to better align the Ten-Year Capital Strategy with Mayoral priorities such as those outlined in documents like OneNYC, which increasingly reflect non-financial themes. Through desk research and interviews, I have been learning how other City agencies and practitioners in the field have been integrating economic, social, and environmental objectives with capital decision-making and operational performance management. This will be paired with analysis of internal data to attempt to identify linkages, gaps, and quality issues related to so-called “triple-bottom-line” outcomes and relevant capital project attributes. Ultimately, the goal is to develop a framework to help the agencies describe the possible economic, social, and environmental effects of the Ten-Year Capital Strategy, as is mandated in the City Charter.

My research thus far seem to confirm that this is largely at the forefront of city planning conversations, and in a way, represents the proverbial Holy Grail. In other words, everyone wants the perfect solution though it does not (yet?) exist. In my past life as a management consultant, I confronted a similar challenge with a major corporation seeking to integrate environmental sustainability considerations into its long-term project portfolio management systems and processes. Through that experience, I learned that incremental progress in translating the so-called “triple-bottom-line” is necessary to build the foundation for much more sophisticated thinking by establishing a common language among key decision-makers. At DCP, we are helping New York take steps in the right direction in the same way.

It can be a highly abstract and academic exercise – not what an MBA typically relishes. Layer on the cross-agency bureaucracy, isolation, and sensitivities that are natural to any large organization (not just the public sector), and it makes for a challenging and dynamic summer. But more importantly, I have a chance to influence how New York achieves its vision of a more equitable, sustainable, and resilient home for millions. This is the kind of opportunity that made me choose NYU and that SIIF then made possible.

-Simon Lim, MBA-MPA 2017

NOTE: You can find a link to New York’s latest Ten-Year Capital Strategy, including more data on New York’s growth, at this link: http://www1.nyc.gov/office-of-the-mayor/news/298-15/fact-sheet-mayor-de-blasio-releases-fiscal-year-2016-executive-budget-ten-year-capital-strategy#/0.