Resources

• Acumen
• S4S Technologies – Solar food dehydration and food waste reduction
• Hatch (formerly EthioChicken) – Climate-resilient poultry systems in East Africa
• SunCulture – Off-grid solar irrigation solutions
• Acumen Academy – Training and resources for impact entrepreneurs
• GOGLA – Global Off-Grid Lighting Association
• GIIN – Global Impact Investing Network
• ImpactAlpha – Daily news on impact investing
• Stanford Social Innovation Review
• Harvard Business Review: Articles on social enterprise

Host and Guest

Host: Mike Toffel, Professor, Harvard Business School (LinkedIn)

Transcript

Editor's Note: The following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview.

Mike Toffel:

Jacqueline, thank you so much for joining us here on Climate Rising.

Jacqueline Novogratz:

Hi Mike, it's really great to be here. Thank you.

Mike Toffel:

So, you're the founder and CEO of Acumen, which has been around for quite some time now. And we brought you on to talk mostly about the climate resilience work that your organization is doing. But first, why don't you give us a bit of background on why you founded Acumen and how it's evolved a bit over time. And then we'll catch up to today.

Jacqueline Novogratz:

Sure. I started my career on Wall Street in the early 80s and learned very early how powerful I found the tools of the market, but also how low-income people were overlooked or sometimes exploited by market forces alone. And so that set me on this journey trying to understand how we use markets and investment in service of solving problems rather than just being beholden to those market forces. My next move was in microfinance in Rwanda in the early 80s, much more focused on microfinance, aid, philanthropy, and saw too much dependency. And I think it was these two strands. How do we take the best of the humanitarian ethos and combine it with the rigor and the discipline of markets, all in service of solving problems of poverty. And that was the birth of Acumen in 2001. Could we build a new model that we call patient capital that would use that philanthropy to back long-term investments, equity debt, 10 to 15 years in those entrepreneurs that were deliberately and specifically focused on solving a problem?

Stay with them, measure what we could count. When the money comes back, reinvest it. Since that day, we've expanded quite significantly, not only to using the patient capital model, but going behind it to angel investing to get people started. And then on the growth side, have created a series of blended capital funds, nearly half a billion dollars now and on a growth path so that you can actually scale those companies.

Mike Toffel:

And so, you mentioned that you started with philanthropist money. Is that still the focus of the investors that you gather, or have you gone beyond that to also commercial investors?

Jacqueline Novogratz:

We need philanthropists, it's critical. And if we get time, I'll talk about some of the models that we've used in the way that we blend capital, our latest, which is quite radical, where we're unapologetic about significant philanthropic capital, essentially to go in places where markets don't yet exist. So, you have to figure everything out. And I have some examples in agriculture and in energy or it's when there's an early-stage disruption that's needed and no other investors will come in. We just made our first off-grid solar electrification loan in Somalia. That required philanthropic-backed money so that we could actually give a company the time to build in a country that doesn't have a grid at all.

And that was what brought us to 2017, first in off-grid solar, then in resilient agriculture, where we realized that if we wanted to help our companies, which had started at zero or a couple hundred thousand dollars when we were first interacting with them, and now we're needing to raise 40, 50 million dollars in a round, that we could accompany them if we built the for-profit impact funds. And so, Acumen now works across the capital spectrum, from as I said angel investing to patient capital investing to the impact investing. Our stakeholders are quite varied by the type of capital and by geography.

Mike Toffel:

So, let's unpack some of the language that you just used. So, we talked about angel investors or angel investing, patient capital and impact investing. For those who are not familiar with this domain, can you just give a brief description of what each of those means and how they differ?

Jacqueline Novogratz:

Absolutely. So, angel investing is essentially that first capital where you've got an entrepreneur with terrific character, an idea, but not an idea that is yet proven. And so, you're betting on the idea and the person. Small amounts of money, early stage, go on the adventure. Patient capital is philanthropic backed, long-term in nature, as I said, 10 to 15 years, so that you can take equity and debt investments into those entrepreneurs that have a business model but are building markets that are not yet fully formed. And then the impact investing is capital and investment that seeks impact as well as financial returns not to get too confusing, but that also exists across the spectrum, you have patient impact investors that are very clearly impact first. And that would be Acumen, which is focused on solving the problem and then determining the right kind of capital in service of solving that problem and holding yourself to account for those expectations. Up to the other end of the spectrum, you might see a TPG RISE or some of the impact investing that BlackRock is doing, where they want to maximize returns in ways that also do good for the world. And sometimes that umbrella of impact investing can be very confusing to people because of that spectrum of capital.

Mike Toffel:

Interesting. And so, they're looking at different types of investments because they have different weights or lenses on investments that are attractive to them, given those objectives.

Jacqueline Novogratz:

Exactly, a more traditional impact investor that is seeking to both maximize returns and ensure that there's positive impact might invest in a major infrastructure project in Africa. For Acumen, our average customer makes a couple of dollars a day. We are going into places where markets have not formed capital markets are highly problematic. Infrastructure is poor or in some cases nonexistent. We have talent challenges, marketing challenges often, distribution challenges. And so, the kind of impact investing that we would have from earlier stage to growth is contending with more complex markets and lower income people.

That said, in terms of growth funds, particularly in the way that they are structured, we are very clear about the kinds of returns expectations that our LPs expect, and we hopefully deliver. But it's not, we are not a group that says there are no trade-offs. In our part of the spectrum, there are trade-offs between the kind of impact we create the risks that we take, and the capital that we deploy.

Mike Toffel:

And when we say patient capital, I'm gathering that there's sort of two elements to that. One, I think, but you correct me if I'm wrong. It seems like on the one hand, we're waiting longer to get the returns to manifest. And so perhaps instead of a three to five- or seven-year period, we're at 13 to 15 years. And also, I think it's the magnitude of those returns. Like are we looking for 10X or 100X or are we looking for 1x or 2x. Is that the way?

Jacqueline Novogratz:

With our patient capital, we're looking for 1x on a portfolio basis. Every time we invest, of course, we're hoping to get more than that. But on an overall portfolio basis, we expect to get 1x on the capital. The impact funds have a different relationship with LPs and a clarity around the expectations there. Probably an example will be the best way, Mike, to show you. So, way back in probably 2012, we met two co-founders who wanted to fully disrupt the Ethiopian chicken industry. Chickens is actually an important climate resilient play. And Ethiopia has gone through massive droughts and floods. And during times, especially droughts, chickens are important because they're foragers. You can sell your goat.

You can buy some chicken, they'll eat anything. The real innovation for Ethiopian chicken was that they also could breed climate-resistant chickens. And so they were going into a marketplace at the time where there was very little functionality. Government had mostly run the chicken industry. The average Ethiopian ate something like half a kilo of chicken per year. And there were no reliable systems in place, for smallholder farmers. They needed patient capital and at the beginning nobody would invest anything in them. These guys had no experience. They were taking on an entrenched status quo and to their credit with very little money they built a business model over a few years. Then they came to us as their first institutional investor.

It was still an unproven business model at that point. But we put equity into the, and debt into the company. And over the next probably five, six, seven years, watched that company perfect its business model, use that capital to grow, partner with government in ways that not only made it viable but showed the government how the private sector could help solve a public sector problem. The government has credited this company for reducing childhood malnutrition by 11 % in Tigray, the region where it started. About that same period, the company had ambitions to go across other countries in Africa. We then started a $58 million fund with a 50 % first loss so that we could protect the still risky segment of the marketplace, the investors. And long story short, today, Ethiochicken is now owned by a holding company called Hatch, which operates across six African nations. Last year, they...

They employed 2,000 people directly, 16,000 agents who sold 48 million chickens to 4.5 million smallholder farmers who then in turn sold nearly 4 billion eggs. The company has injected over a billion dollars into those markets and low-income people have a source of protein. And resilience as a result from this single company. And so that is how you can track from the patient capital, the philanthropy that would go where others wouldn't go, to the growth capital. But it's still a long-term process, but one that has really taught us the importance of using the right kind of capital to invest in the right entrepreneur with character, bring in the kinds of non-financial support and measure what matters.

Mike Toffel:

Yeah, super interesting. Now you mentioned in the beginning of that story that this was a climate resilient play of chickens. Can you say a little bit more about that?

Jacqueline Novogratz: (16:28.428)

Yeah, well... The whole notion of adaptation and resilience is so critical, and I worry that sometimes, like with so many words, they've lost meaning. But when you are working in East Africa, as we have now for almost more than 20 years, and you think about the small-holder farmers, their whole life depends on how their crop or livestock does in a single harvest. If they lose everything, they've literally lost everything. It's not just about 25 % of their portfolio income. It is their livelihood. And so how do you help a smallholder farmer become more resilient? Take on and prepare for those climate shocks that are now not only inevitable but expected. And yet they have so few resources. And so, the almost unintuitive approach with Ethiopian chicken was the recognition of the importance of some sort of livestock in smallholder farming communities in Ethiopia. And now we see many other nations as well. Goats and cows, are expensive to manage.

And so, it was really paying attention to the customers and letting the customers teach you to see them sell their goats, to buy chickens to get them through the drought season. And then of course with the innovation that you could find chickens that were themselves more resilient to high, high levels of heat, the company could begin to thrive. When you think about resilience for smallholders, the number one factor that helps them not only survive but thrive is income. And so, if you cannot just have a charity program but a company that actually gives farmers the tools and the inputs so that they can grow and solve their problems and earn more income, that will enable them then to buy the inputs, the food that they need to get through very difficult seasons. And that is the essence of what resilience is.

Mike Toffel:

Got it. Yeah. So, there's both the economic resilience and then the climate resilience elements you mentioned about drought and heat, for example, that this allows them to be more resilient. So, let's step up a level. This introductory case is really interesting, but I want to understand how this fits within the broader portfolio of climate resilience and agriculture that Acumen is arranging. You mentioned this 58 million, I think you said, fund. And I know that there's other investments that Acumen is gathering. So, can you tell us a little bit about how you have chosen the focal areas, especially in agriculture? But I know that agriculture is just one of the many things that you do.

Jacqueline Novogratz:

Sure. Well, so Acumen came into the world to solve problems of poverty and build a world of dignity. By that, we meant we were going to use business to find those ways to allow low-income people not only to move out of poverty, but to have freedom and choice and independence, by our definition is the essence of dignity. So that's your starting point. Then our four areas in which we operate are healthcare, education, for this conversation, agriculture and energy. Mike, when we started, we weren't thinking about the climate crisis. We were thinking about poverty. But over time, working in the markets in which we operate with the lowest income people, you have no choice but to acknowledge what climate is doing to their lives, pushing people back into poverty and keeping them there as they try to navigate these climate issues. The second thing we started to understand is that climate finance isn't scarce. We could solve these problems, but climate finance is scary. These are tricky markets. You are looking at low-income people and you are looking at massive climate events or droughts that can wipe out 30, 50, 100 % of crops, where macroeconomic events are happening simultaneously. Depreciation, inflation, and so to invest in these markets is not for the meek of spirit.

On the other hand, there is another narrative, which is that farmers themselves are very resilient. They have survived for many years. Continents like Africa have very high repayment rates and if we structure the right kind of capital to solve these problems and enable us to help build companies that really do build more adaptation and resilience, the farmers can take it from there. And we have many examples of it. The last thing I'll say is that on the agriculture side, we have $58 million Acumen Resilient Agriculture Fund. We're building a Pakistan facility, a second agriculture fund because the first one has done so well in East Africa. Work in Latin America, India, and then really early-stage work again. And combined we're on our way to about $300 million for adaptation and resilient investment in agriculture.

When that is closed, we will be one of the largest adaptation investors in the world for smallholders. And that is both an exciting story for Acumen and a tragedy for the world. This is an area where we need really smart investment, patient capital, impact capital, because there's such an opportunity to enable much greater resilience and adaptation. And remember, these are the people that grow the food we eat. Small holders account for more than 30 % of the food that comes to us.

Mike Toffel:

So, $300 million seems like a lot, but as you mentioned, it's small relative to the need. How would you size that need? In a sense, it's like the total addressable market of capital. So let's just say in agriculture in Africa for resilient.

Jacqueline Novogratz:

I don’t have the exact number with me, but it's actually one of my great frustrations is that we go to cops and other big events and people throw numbers like we need a trillion dollars, certainly for the energy transition that's the number that is put out. adaptation and resilience, I don't actually know the addressable need that the world uses. I do know that the reality is that most climate finance goes to mitigation, not to adaptation, and that that is something that we have to pay a lot of attention to. And when we do look at adaptation, we tend to look at the more developed markets when in fact it is the most vulnerable human beings amongst us that are hit disproportionately by the impact of change.

Mike Toffel:

Yeah, I mean, especially with the US stepping back from climate policy and the ripple effects that that's having on other countries' policies as well. It seems like adaptation is increasingly, already increasingly going to be needed to be focused upon, but ever more now with people, it seems like stepping back from investment in mitigation. So, I totally agree with you that it has always been surprising to me that the mitigation story has received so much more press and investment dollars than the adaptation side. Do you have a sense of why that is? I mean, is it a story of enthusiasm versus risk management and just generally people think enthusiasm is better and more exciting or I mean, because the stories you're telling are also about opportunity, right?

Jacqueline Novogratz: I would say that it's about a few things. I've had investors tell me that the mitigation story is the most ethical story and that if we truly believe that our job is to reduce emissions as fast as we can to keep the temperatures, I mean now no longer rise from 1.5 because we're passing it. And so that's where they want to go, where they can see big moves. There's a conceit in that because of course we need to do that. And we cannot live in an either-or world. And we must think about the people that we have overlooked and underestimated and where we are leaving, to your words, extraordinary levels of opportunity on the table.

And so, if you let me go into the energy world for a second, in addition to the agricultural adaptation and resilience that we work on, so have we focused on off-grid solar electrification. When we first made an investment, patient capital, in 2007, 1.5 billion people on the planet had no electricity access. 1.5 billion.

Through our companies, using patient capital and then growth impact funds, our companies have reached about 300 million people. It's been a big percentage of the people who've reached off-grid, which is a big percentage of the more than 800 million people who have gotten access to electricity in the last 18 years. It still leaves 700 million people without access to electricity. Of those 700 million, 250 million are what we would call the hardest to reach. These are people who live largely across 22 African nations. There is very, very little finance for this group of human beings. A billion dollars in total has gone into the off-grid solar.

To your point before, a billion. And so, something is wrong with this picture, in part because people think, well, Africa doesn't need climate finance. Africa only contributes 3.5 % of all emissions. What we miss there is that we're looking at them now. Africa is expected to double in population by 2050. Right now, the average African consumes one-fifteenth the amount of electricity you or I do. It's only fair that they increase their energy consumption by at least 5x over the next years. And so, the choice that we face today, when you look at what I would say is a false binary between mitigation finance that doesn't want to go there, and adaptation finance is that if we don't invest in solar today and recognize that these hardest to reach people are not going to be connected to the grid, but if we wait for them, but if we just hope that they get electricity in the way that it's going, it'll be fossil fuel based.

And then Africa will be the biggest polluter on the planet. And then we'll have a real mitigation problem. So why not recognize that yes, in the short term, off-grid solar is very important for adaptation, greater resilience, people have more control, they will have electricity, they will not have to use kerosene. But long term, this is about economic productivity, this is about the offsetting of emissions. And the statistics would show that if you got that bottom 250 million people access to clean, affordable solar, and you saw the kind of growth that I was talking about, we'd be talking about a billion tons of carbon averted. And so, it's short-sighted, it's a blind spot of ours to think only in terms of adaptation when it comes to off grid. I could make a lot of the same arguments for agriculture.

Mike Toffel:

Yeah, yeah, I'm sure. I mean, when you think about adaptation needs, there's this similar time problem where people may think today where these investments actually, whether they're hardscape investments or business model investments are, as you mentioned earlier, like a decade plus to sort of materialize and mature and the world will be different at that point. Yeah.

Jacqueline Novogratz:

The world would be different by then. And if we were smart about how we invested, we could solve these problems. A company called Sun Culture sells solar irrigation products to low-income farmers. Now, in a time when these farmers are suffering extreme drought, these solar irrigation products provide massive improvements to their productivity.

Yes, right now, some farmers can't afford it, but we could be very smart about carbon credits and subsidies to enable these farmers’ access. Because when they get that access, we see massive improvement in productivity. Therefore, more income, more resilience, more food, less pests, and carbon averted. Because, as farmers get wealthier, they don't have solar irrigation, they will go to diesel irrigation, which has been the traditional way that farmers have, with enough resources, have irrigated their land. So, Mike, I think that the whole space of adaptation offers so much creativity, opportunity, and frankly, financial returns. If we are smart about the kind of capital that we bring to bear on the solutions and there's some amazing solutions, I hope we have time to talk about some of them. We have the patience to ensure that these business models become more universally understood and accessed. And we then do the work of taking them to scale.

Mike Toffel:

So, let's talk about some of those examples of what you're saying are marvelous solutions. And it fits within a broader question that I was going to ask you, which was about the pipeline of investments. And so, on the one hand, you can imagine that you have a, sorry, my earpiece is messing up here. Let me just get that in.

On the one hand, you could imagine an RFP world where you have a council of experts that are saying are the areas where we think there are the biggest opportunities. And then you do an RFP or request proposals from the inventors and the businesspeople out in the field. And then you're trying to matchmake them with capital. On the other side of that is you scout and receive proposals from folks out there in the field, and then you decide which of those to fund. So first of all, where are you on that spectrum? And then how do you make the decision about which entrepreneurs and business ideas to fund and which ones to pass on?

Jacqueline Novogratz:

We are most decidedly in the second camp. From the beginning, we've had boots on the ground with offices in Nairobi and Lagos and Islamabad and Mumbai and Bogota and networks and now 20 years of not just pipeline but investments and entrepreneurs who know about Acumen in these places.

I am not someone who believes in the top-down only approach because so often people come in with assumptions of what solutions should be rather than actually starting from the perspective of the farmers themselves and building solutions from that perspective. That should be what drives the technologies, the way we use those technologies and sell those technologies and the way we invest in those technologies. And so, and that has proven the kind of pipeline that then creates the adjacent possible, right? You invest in a solar system and watch that solar system grows, get much better in terms of meeting consumer needs. And from that, you see a distribution system emerge. And then you can sell other goods and services that are related to that solar system that people are demanding. And 18 years later, you look around at an ecosystem that is not just a solar system, but radio and cell phones and televisions and solar irrigation and refrigeration and now we have solar motorcycles. Watching that evolution has been thrilling. In agriculture, it's starting, it's been a slightly slower start, but we're watching it now in ways that are also really thrilling. In part because we've got these long-term, frankly broken supply chains that see smallholder farmers as price takers, never price makers, and particularly in places like Africa that have depended on the smallholders to provide the raw materials but not add value themselves.

And so, we've kept farmers living perpetually in poverty in ways that is antithetical to resilience. And so, one of the things that's very exciting to now start to see along supply chains is more of that transformation on ground in the countries where the crops are being grown.

For example, near Mumbai, India, there is a company called S4S, Science for something, S4S. And it was started by these college kids who were obsessed with climate change and also the fact that food waste, 40 % of food is wasted from the time the crops are grown until the food actually reaches the plate. And so, they built a system of solar dryers, but again they knew who their customers were, that they knew they were working with very, very poor farmers so it had to be very simple, and they needed a decentralized approach. And so S4S takes science for society, S4S takes solar dryers sells it to one or two women entrepreneurs. Those women in turn source garlic and chilies and carrots and tomatoes and onions from smallholder farmers. Now those are very low margin crops for the most part. They collect them and then after the 85 % of the liquid is taken out of those crops.

S4S aggregates and transports the crops to centers where the products are cleaned and sorted and bagged. So, this is a company that today already saves about 37,000 tons of carbon a year. They work with 300,000 smallholder women farmers who are seeing their incomes increase. They have 800 micro-entrepreneurs that are operating these solar drying units, making sizable levels of income. They've already supplied over a million people with nutrient-rich food. And so, they have effectively lowered the carbon footprint of agriculture. They have increased the incomes and resilience of hundreds of thousands of low-income people. And they have significantly impacted on the savings of the actual food. We need more companies like S4S, and we need more investors who are willing to take the early risk and then help these companies grow. This is a company now that's well on its way, in part because it's the right technology, the right entrepreneurs, the right market linkages. But we're starting to see others like it.

Mike Toffel:

Yeah. So, if I love the operations and supply chains element to that, that's an area that I teach here at Harvard Business School. Let me make sure I understand the value added of this idea. So, it sounds like instead of shipping fresh vegetables, which are prone to spoilage and waste all the way to the factories that would then dry them and use them in other processes, there's this intervention that says, why don't we dry them closer upstream, give jobs to entrepreneurs, use the sun, perhaps instead of natural gas, to do the drying. And not only does that reduce waste, but also it reduces transportation because you're no longer transporting all that water, you were anyway going to dry out once it got to the destination. So that sounds like kind of a win-win-win story there. Do I have those details right?

Jacqueline Novogratz:

I wish I could speak as clearly as you do. It was beautiful.

Mike Toffel:

Well, you did. That's what allowed me to summarize.

Jacqueline Novogratz:

It's beautiful. And so, we're seeing processes, we're seeing technologies that are all using that same sort of framework. Another company is called KHEYTI, K-H-E-Y-T-I, also in India. And they had this insight that, you know, in parts of India, the temperature can get to 120 degrees, 15 degrees. And so again, farmers are getting wiped out. If not from drought, then from the pestilence. It's quite the scene. And so, they created what they call a greenhouse in a box. And it essentially is very small. You just need enough of a greenhouse to cover an eighth of an acre.

And with that, you can increase the productivity of your entire crop sevenfold. The farmers have found so much value in the greenhouse that they are willing to sell a buffalo to buy a greenhouse because they see more dependable crops now, food, income. By having a greenhouse, you don't need fertilizer, you don't need pesticides. The difference almost overnight is extraordinary. And you've seen farmers increase their income from about $150 to $450, so threefold. What's also been thrilling about the patient capital that was needed to prove this business model for some of the poorest farmers in the nation is that the government saw it and the government has an understanding that it needs to feed its people. And so again, this is good for the land, good for the farmers, good for the environment and good for the nation. And we look for those kinds of adaptation, resilience, and investments that can teach us what it actually means and how you actually build that. So, the farmers stay at the center. You're keeping them whole in ways that create a food system that is more just, more productive, more effective for everyone.

Mike Toffel:

So let me step back and talk about scale. So obviously Acumen's a lot bigger than it was in its journey. You've grown this organization substantially, and yet you said earlier, even so, there's so much more to do. And so, I imagine folks might think, well, what is the barrier to scale? And is it because, for example, there's not enough business ideas out there that you have more capital ready to deploy, but you can only find so many. Or is it that there's an abundance of such ideas, but the bottleneck is more on either the philanthropy or in the private sector? So where are the bottlenecks to scale?

Jacqueline Novogratz:

Thank you for asking me for that question. Number one, we must redefine risk. So many investors and impact investors are scared of these markets. They are scared of all the things we've been talking about. And so, they tend not to look for opportunities in more challenging markets despite the need for it. What they're missing is that we as a world can put together different kinds of capital to offset some of the risk for more traditional investors and make room for more of a blend of different stakeholders.

It's also important to recognize that risk is not just a financial concept. The risk is a social concept, it's an environmental concept, and it's a moral concept. And so, if all we do is look at money, and we clearly have plenty of money, then we're going to continue to get the same results that we have gotten with a world that is increasingly unequal, divided, and dangerous. If we think of risk in a more holistic way that takes into account who we are on this planet and more importantly, ask what the risk is of not daring. What is the risk of not investing? Then I think we have a different conversation. And so, number one, it's risk and associated with that is narrative. How do we show extraordinary opportunities and bring the right kind of capital together to make this work in ways that make more and more people want to be part of it?

Two we've already talked about is I think the false binary between mitigation and adaptation. And three, I think ego gets in our way whether you're a philanthropist or an investor. On the investor side, one of the conceits of impact investing is, hey look, I can make more money doing impact investing than I did making traditional investing. That is true in some cases, absolutely, not in all cases. But that means that those who are choosing to take on more difficult problems and adaptation sit right in the center of that.

Sometimes people think, maybe you're just not great investors. Rather than having to deal with issues A, B, C, and D, why don't we together as a world think about what kind of capital we can blend to make those companies viable? Maybe there's a role for smart subsidies so that we can enable our food system to be the food system that actually allows our people to be healthy and so that we can be food exporters and not just food importers. So, we need a conversation about ego on the philanthropy side where we need that risk capital to take the first loss, to bring in the kind of technical assistance that's needed, even tools to measure adaptation and resilience so that the impact investors can see the impact of their work. Sometimes philanthropists will say, “I really want to support this, is somebody making money?

And the answer is yes, because we need a system where some people make money. Nobody is making excessive money. And so, I think that part of it is the nuance that is needed to solve these problems. And frankly, it's where people like you and institutions like HBS have such an important role to play that in a post-AID world.

We need to think differently about the way that we invest and in the way that we solve problems. And we need to start with the problem that we are trying to solve with the people with whom we are trying to solve it. And then we're smart enough to bring the right kind of capital and the right kind of support around that capital to build viable companies. We've only invested, as in the ground investment, a little over $200 million. Those companies have impacted on more than 715 million people around the world, bringing in well over a billion dollars in additional investment into those markets. And as I was saying before with energy, what I would say about parts of the agricultural ecosystem, we've seen systemic change at breathtaking levels. That's the opportunity that we are leaving off the table by not recognizing the importance of adaptation, by not focusing on the small holders who comprise such an important part of our food system, and by frankly not deciding as a world that the moral framework that we should agree on has to stand and undergo the economic framework that we have lived with for a very long time. And that moral framework demands that we ensure that we include people who have been overlooked. And frankly, they have been underestimated. Because when you see these smallholders, once they have the proper tools and they are affordable, they change the world.

Mike Toffel:

So, you mentioned a “post-aid” world, which there's a few ways to define that. One is like the USAID, of course, being summarily dismissed by the current administration with, in a way, would say surprisingly little protest across the US with folks not even knowing that we had an AID or what it was about or how small it actually is relative to the news coverage.

And but also there's distrust and some well-known mismanagement at the United Nations level, another potential source of funds for these types of efforts. And I don't think people think that much about the World Bank or IFC. I think if they think about those, they think about those as large projects rather than investing in small holders or in entrepreneurial efforts. They think about maybe big dams or big power plants.

So, where are the biggest opportunities for the sources of the patient capital that really sounds like it's really required at least as a first step in activating these types of entrepreneurial venture?

Jacqueline Novogratz:

What happened when USAID shut down combined with our, the US approach to NATO is that the Europeans realize that they don't have a partner that is trusted. And so not only did you see aid go away in the United States, but Europe significantly reduced the amount of aid it was giving because they move that aid money into defense. There is real fear when you speak with European leaders about Russia, about their vulnerability, because they haven't invested in their own national security in those ways. And so that shift happened very, very quickly, which is why I call it a post-aid, not a temporary pause, world.

The real bad news about what we've all just experienced was the way it was done. Overnight, in a cruel, embracing way. There's always some good in these crises. And I don't want to excuse the way it was done because many, people already have died and will die because of just shutting off a lifeline.

But Acumen was started 24 years ago in part because we had seen aid create too much dependency, which is the opposite of dignity. And I do believe in the power of business if that business is clear on integrating low-income people into the supply chain in fair ways, is used to solve problems. And there are so many opportunities today to do that.

So, what I'm already seeing are new conversations coming out of Africa. How do we now, in a post-AID world, one, find the right kind of capital, two, structure the right kind of capital to solve the problems that are our problems, that we know how to solve, and not wait for someone else to come in with their solution and give us the kind of capital they think we need? And that's where I believe that so much of the work that we've been doing in resilient agriculture in off-grid solar has a lot to offer. So, the first resilient agriculture fund we built, now fully invested, started with 50 % first loss from the Green Climate Fund. That means that we could bring in more traditional impact investors to do very risky agricultural investments for smallholders in the area of resilience, which most investors didn't really even fully understand what it was nor how to measure it. But we could protect their downside risk. And that first loss that Green Climate Fund gave us really allowed that. Now that we're seven, eight years in, people have seen the power of companies like Sun Culture and Hatch, the chicken company, or East Africa Foods, which is now the largest banana distributor across Tanzania, where these companies are demonstrating resilience at a company level, at a food systems level, at a farmer level, most important. And so, there's a real opportunity to raise more blended capital for that. With the hardest to reach, we went even more radical in terms of what we had learned about how capital works and where it is needed. And so, in that case, we could raise 60 million just in philanthropy for that patient capital. And some of the development finance institutions as well as individual philanthropists were really interested in bringing that kind of risk capital to countries like Somalia or Benin or Malawi or Burkina Faso. And we've already invested $12 million and are seeing real results and repayment. And so hopefully this will be part of changing narrative. But side by side, that is $200 million for concessionary debt so that companies can stay in the countries in which they're operating. And that will have a $20 million philanthropic, almost a rebate program.

If I lend you money, company A, and your job is to make households more resilient by offering them off-grid solar, and you reach half a million people, you can reduce the interest you owe to Acumen to zero. And the idea is then we'll have a blueprint for where the private sector, using different sources of capital, can build profitable companies that help solve public problems in partnership with government because government now has a blueprint as well for some sort of a tax rebate system. That is what I think we need in a post-aid world. The recognition that markets by themselves are not simply going to work magically to solve our biggest thorniest public problems, particularly for the poor, particularly in an age of climate crisis.

However, we now are smart enough in a post-AID world to realize that we're all needed, that different sources of capital can come together, that we have technologies that truly can build resilience and better food systems, and that this is the great opportunity of our generation.

Mike Toffel:

Yeah, well, Jacqueline, you managed to transform what could have been a depressing question into a story of optimism and innovation needed on several fronts.

Jacqueline Novogratz:

Mike, I feel optimistic. I feel that we had a failure of leadership in the how. And it's forcing a crisis that is creating creativity and possibility. I know that we have tools to offer that. All of us do.

Mike Toffel:

Yeah, amazing. Well, let me ask a final question, which is for those interested in learning more about patient capital or impact investing or resilience, especially in impoverished areas, what are some tools or websites or conferences or resources that you might recommend folks tap into to learn more?

Jacqueline Novogratz:

Sure, thanks for that. There’s a daily newsletter called Impact Alpha that I would suggest people sign up for. It really keeps you abreast of what is happening. I'm a big believer both in Harvard Business Review and Stanford Social Innovation Review as thoughtful in terms of focusing on what's happening. The GIIN or the Global Impact Investing Network also has terrific resources on the topic. And I would start there looking specifically at off-grid, the GOGLA, the Global Off-Grid Lighting Association, has terrific resources as well.

And then finally Acumen has acumenacademy.org, which now has over 100 resources. These are very small courses, if you will, to learn from people in the field who are struggling probably with the same things as you are if you are a social entrepreneur that is trying to take on a wicked problem. And since we do so much work both in adaptation and resilience in agriculture and energy, you just might find what you're looking for.

Mike Toffel:

Jacqueline, thank you so much for spending time with us on climate rising. It's fascinating. I don't know much about this area, but I feel like this has been a lightning course to get me up to speed. So, I really appreciate you spending the time.

Jacqueline Novogratz:

Thanks Mike. Maybe we should find a way to get photographs as well when we talk about some of our solar drying systems and off-grid solar lighting systems. It might be hard for people to actually imagine them. When you're on the ground and you see the transformational impact of them for the human beings who we share this earth with, I think it starts to show just how solvable these problems are.

Mike Toffel:

Great, we'll post those photos as well.

Jacqueline Novogratz:

Wonderful. Thanks so much and you take good care. Bye.

Photos of Acumen Portfolio Companies Mentioned

S4S Technologies – Photo credit: Saumya Khandelwal

Hatch (Ethiochicken) – Photo credit: Jean Bizimana

SunCulture – Photo credit: Peter Irungu