Yep, we now have new "ugly baby" from two nasty parents: "climate change" and "gentrification."
What is it?
The displacement of often non-white communities of lower socioeconomic status by new real estate (re)developments that cater to higher income populations and that capitalize on more climate-resilient locations (e.g., city neighborhoods at elevations higher above sea level).
As an article from MIT Sloan put it: "Prices in environmentally safe but historically affordable areas are skyrocketing — displacing vulnerable residents."
So, which cities are most at risk of climate change impacts, and potentially climate gentrification, if policy, finance, community, and business leaders don't get ahead of this problem?
Via Climate Central, here's a list of the US coastal cities most at risk from sea level rise. Hint: If you're in Florida, beware. Also, New York and Charleston make this dubious ranking, too.
To understand climate gentrification in its various forms, below is a graphic from a 2018 study from Harvard University.
As Entrepreneurs for Impact, what might do we do with this information?
Consider business solutions to climate gentrification (e.g., risk transfer mechanisms, cost sharing structures, investment opportunities)
Locate your infrastructure in climate resilient locations (for more on the $1 trillion in climate risk facing the world's biggest companies, check out this CDP summary)
Last night, I judged a business plan competition at Duke University. That's not unusual.
But the unique part was this...
Undergraduate and graduate students across the university were competing to go on to the next level in the international Hult Prize to win $1M.
OK, so that's cool, but why does this matter to Entrepreneurs for Impact?
All business plans -- from 1,500 campuses across 121 countries -- have to focus on "(1) a positive net impact on the environment with every sale completed, dollar earned, and decision made, and (2) a million consumers impacted within a decade."
So why the inspiration?
These students were rockstars relative to where I was at their age.
They were going above and beyond classes, combining environment and business in ways that took me years to learn post-graduation.
Their ideas were exciting.
Hydroponic urban agriculture
High tech to increase crop yields and reduce methane generation from rice fields in India
SMS-enabled market exchanges to turn waste products into fertilizers for niches in Africa
Smart tags that reduced food waste by telling consumers when their meat had gone bad
Apps to help Chinese Millennials to make more environmentally responsible choices and earn credits to exchange for cash-equivalent goods and services
Art exchanges that took trash-enabled creations of beauty to web platforms for monetization and building awareness of waste issues
And, moreover, the Hult Prize website made me aware of statistics suggesting the future leaders will behave differently when it comes to balancing environment, human health, and business.
80% of Millennials are looking for brands which provide solutions to both improve their lives and benefit the larger society
75% of Millennials will purchase more environmentally and socially responsible products among competitors
73% of Millennials are willing to pay more for sustainable products
Maybe instead of looking to those older and more experienced than us for guidance and mentorship, we should sometimes look in the other direction, to those younger than us.
All joking aside, I think this super cool, and it deserves attention for a three reasons.
1. Meat alternatives are a big business opportunity
Barclays reports that the market is projected to grow from $14 billion today to $140 billion by 2029.
Imagine that one cell from a blue fin tuna could produce an infinite number of tuna meals. (When the taste and texture are up to speed...)
2. The meat industry creates big environmental impacts.
According to research cited by Project Drawdown, greenhouse gas emissions could be cut 63% percent by adopting a vegetarian diet, and lower health care costs and lost productivity could amount to $1 trillion in savings.
Importantly, it's not necessary to be 100% vegetarian to create these benefits. Some is better than none.
3. One way to grow new businesses is by combining expertise from multiple, disparate fields
How many farmers and agricultural scientists are thinking about 3D printing?
Probably not too many. Hence, the niche opportunity.
As Entrepreneurs for Impact, how are we doing the same? Perhaps by hiring for diversity in gender, degree, ethnicity, and prior work or personal experience?
But, there are some cautions...
Consumers need to be convinced that "laboratory grown" food is still "read food" that they should eat.
If only more consumers were aware of how processed food is made...
In addition, some "origin stories" may never go mainstream: Meat alternatives from the cells of maggots, anyone?
For inspiration, here are a few companies in the meat alternatives sector:
In my role as professor at Duke University and UNC Chapel Hill, one course that I teach MBA and environmental graduate students focuses on corporate sustainability strategy, specifically reporting and certification programs.
What are examples?
LEED green building certification
GRI (Global Reporting Initiative)
SASB (Sustainability Accounting Standards Board)
TCFD (Task Force on Climate-Related Financial Disclosures)
CDP (formerly, Carbon Disclosure Project)
Another important way that an increasing number of companies are reporting on their environmental and social KPIs (key performance indicators) is the United Nations SDGs (Sustainable Development Goals).
Is this just about doing the right thing?
According to a report by The Business and Sustainable Development Commission, reaching the SDGs could unlock $12 trillion in business opportunities in these sectors: (1) food and agriculture, (2) cities, (3) energy and materials, and (4) health and well-being.
To learn more about how the SDGs might inspire changes in your business, check out these resources:
169 SDG Targets, with 232 unique Indicators (link)
How 17 companies are implementing the UN SDGs (link)
See how dozens of US companies are using the UN SDGs for their corporate goal setting and reporting (link)
In case that photo above is hard to read on your phone, here's the list of the UN SDGs, with more information behind each link.
(Just kidding. It's a blog, so please keep reading.)
A man walks up to three different bricklayers at work, and he asks them what they are doing.
"I'm laying bricks."
"I'm building a wall."
"I'm building a cathedral."
All of them are correct, but it's likely the third bricklayer who brings more commitment, passion, joy, and skill to the job.
Similarly, John F Kennedy supposedly asked a janitor at NASA what he was doing.
The answer: "I'm putting a man on the moon."
And the question for us Entrepreneurs for Impact is this:
What mission are we communicating to our team members so that they feel like their job is about more than the day-to-day blocking and tackling, and instead about doing something bigger, something to make their kids proud?
Thanks to Siobhan Kukolic at HuffPost for reminding me of these pithy stories.
It's been well received by my wife and mother. So, what other proof do you need? As a smart man, my answer is, "None." :)
Aside from the shock factor, the point of the book is to encourage readers to be more conscious of how they make use of...uh...their "Holy fucking trinity: Time, energy, and money."
That is, if you're not careful, other people's priorities or expectations soon become yours. And then you're less happy and off-track when it comes to meeting your personal and business goals.
So, if you're looking for a good laugh (I mean, serious LOLing), and if you want a reminder that your needs and desires should come first sometimes (remember who gets the oxygen mask in an airplane when traveling with a child), then it's worth a read.
As a teaser, here are some chapter topics:
You need to stop giving a fuck about what other people think
Threat level red: The hardest fucks to stop giving
Old fucks, new fucks, borrowed fucks, blue fucks
Fuck the haters
If your ears are bleeding, then...Oops.
But there is a lot of value in helping us Entrepreneurs for Impact prioritize our precious resources — time, money, and energy — to increase our impact and profits.
"Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.
Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians.
In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8%.
Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.
The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies."
From McKinsey & Company (#2): (link) - more pictures and graphs here
"Companies in the top 25th percentile for gender diversity on their executive teams were 21% more likely to experience above-average profits.
We found a positive correlation between gender diversity on executive teams and both our measures of financial performance: top-quartile companies on executive-level gender diversity worldwide had a 21% likelihood of outperforming their fourth-quartile industry peers on EBIT margin, and they also had a 27% likelihood of outperforming fourth-quartile peers on longer-term value creation, as measured using an economic-profit (EP) margin.
Companies in the fourth quartile on both gender and ethnic diversity are more likely to underperform their industry peers on profitability: 29% in our 2017 data set."
"Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19% higher than that of companies with below-average leadership diversity — 45% of total revenue versus just 26%.
These organizations also reported better overall financial performance: EBIT margins that were 9% higher than those of companies with below-average diversity on their management teams."
A passive approach [to increasing diversity] is guaranteed to fail. (In fact, even active efforts don’t always succeed. BCG’s recent research on gender diversity shows that 91% of companies have a program in place, yet only 27% of women say they have actually benefited from it."
So, now your left brain can finally support what your right brain (or heart, gasp!) has been telling you to do for years.
New focus for impacts: Most climate change risk to date has focused on financial implications. This report, however, focuses on physical risk to buildings and infrastructure, essential components of any city and most businesses.
Geographic precision for risk estimation: Physical risks have historically been hard to measure, but "advances in econometric research, data processing, and scalable cloud computing make a rigorous, evidence-based, asset-level accounting of physical climate risk possible." So we're not talk about physical risks for, say, the Southeast region of the US. Now, analysis can get much more granular.
Rigorous scientific foundation: Their scenarios analysis builds on 21 global climate models and peer-reviewed science to analyze future risks.
Syncing with TCFD (got FOMO, yet?): Their research aligns with the Task Force on Climate-Related Financial Disclosures, perhaps the leading authority on how to report to investors on the financial risks of climate change.
New business opportunities: With validation from the investment community via BlackRock, more companies will be paying attention to the climate change-related physical risks to their assets -- real estate, bridges, highways, water treatment, power production, and more.
And if you need more proof that investors care about the risks and opportunities in climate change, check these out:
Global Investor Statement to Governments on Climate Change - aka, The Investor Agenda(link)
475+ investors representing well over USD $34 trillion in assets. Globally focused.
United Nations Principles for Responsible Investment - (link)
1,750+ investor signatories from over 50 countries representing approximately USD $70 trillion in assets. Globally focused.
IIGCC – The Institutional Investors Group on Climate Change (link)
190+ investor members with €28 trillion in assets. EU focused.
Talking about climate adaptation is synonymous with raising the white flag for some people.
I get it. Admitting that you're losing a fight is tough.
But to do the opposite is like the ostrich with its head in the sand. (For a run read on why that animal truism is very wrong, check out this funny and fact-filled summary from How Stuff Works.)
Experts agree that we cannot stop climate change. The question now is this: How much will the climate change?
Since that is true, a question for Entrepreneurs for Impact, might be this: How can I solve these coming challenges with business solutions?
From the United Nations Climate Change Adaptation Unit, here are the four priority areas you might think about (in their own words):
Ecosystem-based adaptation - Implementing projects (e.g., mangrove preservation) that utilize biodiversity and ecosystem services (e.g., coastline protection) as part of a holistic adaptation strategy.
Access to adaptation finance - Helping countries to gain access to finance for building resilience and national capacity. As examples, consider that city, county and state governments in the US have developed more than 100 adaptation plans, and the plan for New York City alone is expected to require almost $20B of investment.
Or, if this is confusing or too high level, ask yourself this:
What will homeowners and businesses need in a hotter future, where severe storms are more frequent and ?
The list is long, for sure. As an entrepreneur in this sector, you could literally be a lifesaver, while creating jobs and paying for your kids private college at the same time.
Wait...If all investments have impact, then why is impact investment different?
(And also, “How much wood could a woodchuck chuck if a woodchuck could chuck wood?”)
In a recent MIT article, impact investing is defined as “the practice of investing in companies, organizations, and funds with the intention of generating not just financial returns, but measurable social and environmental impact as well.”
While impact investing has been around in various forms for several decades, it is quickly moving into the mainstream investor’s toolkit.
Back in the day, it was SRI, or Socially Responsible Investment, and it was about negative screening, or eliminating stocks such as cigarettes, alcohol, and firearms from investment portfolios. But some data showed that these approaches limited financial returns.
Today, we’re in the realm of ESG, or Environment, Social, and Governance criteria. It’s also known as Responsible Investment and a host of other terms that make your head spin.
Here are three reasons why impact investing is hot right now:
1. More data now shows reduced risks and potential financial outperformance
As you’ve heard before…
"In God we trust, all others must bring data." (Edwards Deming, the father of modern quality management)
Investors, analysts, and fiduciaries need good data to make informed investment decisions.
Here are trusted sources of the increasing body of evidence linking ESG, in its various forms, to reduce risks and achieve equal or better financial returns.
(Note that many would consider impact investing to be different from ESG investing.)
Examples in this category abound. Consider just two:
The CDP (fka, Carbon Disclosure Project) represents 500+ investors managing $95+ trillion in assets, and asks the world’s largest 7,000 companies each year what they’re doing regarding climate change risks and opportunities (learn more).
The Investor Agenda represents 450+ investors representing$34+ trillion in assets under management, and encourages the world’s governments to be more aggressive in addressing climate change (learn more).
Which ones feel like “blah, blah, blah,” running together with lots of other lofty corporate speak?
On the other hand, which might really motivate employees to get out of bed excited to come to work on purpose?
Which ones allow you to know if you’re making progress towards your goal?
Here are a few that caught my eye:
Back to the Roots – We’re on a mission to make food personal again and inspire families to ask “Where does my food come from?”
Conscious Brands – To help support the transition of 1,000 brands from the old economy to the new economy by 2020
CSRHub – To foster access to sustainability and corporate social responsibility (CSR) information. We aim to be an engine of transparency that encourages more consistent and actionable disclosure from all types of organizations.
Futurepreneur – To play an integral role in the entrepreneurship experience of Canadians 18-39 by providing financing, mentoring and tools that will help them build sustainable businesses and create value.
Green City Growers – Green City Growers transforms unused space into thriving urban farms, providing our clients with immediate access to nutritious food, while revitalizing city landscapes and inspiring self-sufficiency.
IceStone – To transform waste glass into something beautiful while taking care of our employees and the planet at the same time.
Plum Organics – Plum’s mission is to get the very best food to little ones from the very first bite. And we mean all little ones.
As Entrepreneurs for Impact, what does this mean?
Know exactly what you’re after. Find and communicate the “why” of your business. Don’t get lumped into the rest of the pack. There’s only one you. Own “your crazy” (good intentions).
Lest I begin to feel like your mother, I’ll stop there.
What can I say? I have two boys who keep my head in the gutter sometimes. Luckily, our little girl balances out their crudeness to some degree.
What we’re actually talking about here is the conversion of excess solar and wind power into renewable natural gas via ancient microbes called a methanogenic archaea.
That’s a mouthful, so let’s unpack that.
When the sun shines bright or the wind blows strong in states with a high penetration of renewable energy, that supply of clean electricity often exceeds the instantaneous demand from homeowners and businesses.
As such, it is often curtailed, or not brought onto the grid. It is wasted. (Gulp.)
There are ways to store it today. Pumped hydro, lithium-ion batteries, or longer distance transmission lines. But all of those pose challenges from a siting, cost, or timeline perspective.
Enter methane-producing bacteria that have been around for more than a billion years. (Drop the mic.)
After multiple years of partnership among Southern California Gas, the National Renewable Energy Laboratory (NREL), and Electrochaea, a German startup bringing these bacteria to the private sector, a large-scale bioreactor has been built, and this technology is progressing towards commercialization.
As for the actual process, the solar or wind power will be used to run a low-temperature water electrolyzer to produce (“strip”) hydrogen from water. Then this hydrogen is fed to the bacteria which mix it with carbon dioxide in a wondrous chemical alchemy to produce methane, which can be purified and fed into natural gas pipelines.
So, why might this matter to Entrepreneurs for Impact?
First, it’s freaking cool. It reminds me of the spirit behind the science media company I Fucking Love Science, which for some reason changed its name to IFL Science!
Second, it’s a reminder of the need to be multidisciplinary, whether that’s training yourself to be “fluent” in various fields, or achieving that goal by building a diverse team. To the topic at hand, it’s unlikely that a team of only electrical engineers could have come up with this “engineering meets biology” innovation.
Third, it’s a great example of orthogonal thinking à la Peter Diamandis (physician, author, and founder of the XPRIZE Foundation), which can be described as harnessing ideas from many spheres to create unexpected solutions. Or similarly, think of it as synthetic thinking à la Peter Drucker (father of modern management), which can be described as drawing from many seemingly unrelated fields to solve complex challenges.
At one point in time, I thought biomimicry was going to be the focus of my life’s work.
It tied together my love of the outdoors, my training in environmental science, my work in real estate, and my passion to solve big problems.
As a graduate student, I was able to bring the two global leaders in biomimicry — Janine Benyus and Dayna Baumeister — to Raleigh, North Carolina, for a week-long, intensive Biomimicry at the Design Table workshop.
While my path turned more towards entrepreneurship and finance, I remain a huge fan and promoter of biomimicry solutions and their related business opportunities.
First, what is biomimicry?
The Biomimicry Institute defines it as follows:
“An approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies.”
OK, let’s make this real and tangible. Here are some examples:
Wind turbine blades made to match the fins of humpback whales in order to produce more wind power at lower wind speeds
Commercial office buildings designed with no air conditioning systems by mimicking the design of termite mounds’ use of thermal massing and natural ventilation
Japanese shinkansen bullet trains reconfigured to reduce noise pollution (“thunder claps”) by following the designs of kingfisher birds' aerodynamic beaks
Tsunami warning systems created based on the efficiency of dolphin communication systems (aka, “unique frequency-modulating acoustics”)
Super strong, yet flexible, steel substitutes made like spider webs
Who’s putting biomimicry to work in the “real world”?
And dozens of others
What does this mean for Entrepreneurs for Impact?
Perhaps your next business idea could come from the natural world. And the scientists and engineers who are most expert in the opportunity might just need the help of startup, marketing, operations, and finance professionals who know how to build and run businesses.
Second, can a sugary drink company join the cool club in town...the one for leaders in environmental and social sustainability?
A green bond is basically a form of debt whose proceeds are used to fund some environmentally friendly project, such as more energy efficient buildings, light rail systems, or renewable energy system construction.
In Pepsi’s case, the use of these funds includes “eco-friendly plastics and packaging, cleaner transportation,” and other business improvements that are aligned with the United Nations' Sustainable Development Goals (SDGs).
According to Bloomberg NEF, the issuance of green bonds globally was up about 40% during the first half of 2019 versus the last half of 2018.
Barron’s estimates that the issuance of green bonds will hit $250B this year, as more institutional investors seek “green” investment products across all asset classes.
But that $250B is a drop in the bucket relative to the nearly $6T global bond market. So, just in case you thought green bonds were the new popular kids in school, think again.
OK, now before you as Entrepreneurs in Impact get excited about using green bonds to grow your company, hit the pause button. For now, these are mostly only issued by the world’s largest companies or financial institutions.
But they are an indication of growing mainstream investor interest in energy and environmental business opportunities.
OK, to the second part of this microblog…
Can a company whose main products are sugary drinks and potato chips — “enjoyed by consumers more than one billion times a day in more than 200 countries and territories around the world” — be counted as a “company for good”?
In a purist sense, the answer might be no.
It’s too easy to shine the light on positive environmental activities while ignoring the negative health impacts from some of the company’s core business lines.
But in a more practical way, the answer could be yes.
As parts of the market still demand less than healthy food and beverage, some company has to meet their needs. And all the better that this company is choosing to reduce the environmental impacts of its water and plastic use, while slowly shifting to a more diversified product offering including healthier options.
Finally, if companies of this scale can move even 5% towards a better direction, their positive environmental and human health impacts could dwarf those of dozens of super awesome, but much smaller, B Corps.
Then 4-5 weeks later, the researchers asked them if they completed their goals, or were more than halfway towards their goal.
Below is a summary of the group’s approach to goal setting, and the percentage who were successful, on the two extremes.
Group 1 — 43%
Think about their goals.
Rate them as follows: “Difficulty, Importance, the extent to which they had the Skills & Resources to accomplish the goal, their Commitment and Motivation to the goal, whether or not they had Pursued this goal before and if so their Prior Success.”
Write down their goals.
Same rating as Group 1.
Write down action commitments towards their goals.
Same rating as Group 1 and 2.
Group 4 — 62%
Send their goals to a friend.
Same rating as Group 1, 2, and 3.
Group 5 — 76%
Send weekly progress reports to that same friend.
Same rating as Group 1, 2, 3, and 4.
Alright, Entrepreneurs for Impact, it’s time for us to…
Get out that journal, or better yet Microsoft Excel, or even better, Google Sheets.
Write down our goals.
Write down some action items for each.
Send them to a friend.
And send that friend regular (weekly) progress reports.
It was a Wall Street Journal Business Bestseller and Amazon Best Business Book.
I read it with gusto and sleep with the book every night, cuddling it close like a security blanket.
OK, not really, but it is near the top of the pile of business books by work area.
The big idea?
As The Economist put it, “Deep work is the killer app of the knowledge economy: It is only by concentrating intensely that you can master a difficult discipline or solve a demanding problem.”
And this skill is all the more important as more and more tasks become automated or outsourced to lower skilled (or lower paid) workers.
In one example, he tells the story of Carl Jung, the Swiss psychoanalyst who “founded analytical psychology” and spent months each year, seemingly chillin’ in at a lodge in the woods because he was so successful.
In contrast, Newport argues that because Jung spent months in deep work in the woods he was able to make major breakthroughs in psychology. That is, he was doing deep work.
My copy of the book is loaded with pen highlights of passages that I aim to remember and put into practice in my own work:
Blocking off 90+ minute chunks of time to go deep
Religious “calendar blocking” (with the occasional heresy of unplanned activity)
A old-fashioned preacher might tell you that it’s a sin to be wealthy.
But before I tell you why I think that’s wrong, let’s indulge in the ways a good Christian upbringing might ruin our entrepreneurial success.
“It is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.”
“For you say, I am rich, I have prospered, and I need nothing, not realizing that you are wretched, pitiable, poor, blind, and naked.”
“Come now, you rich, weep and howl for the miseries that are coming upon you.”
Luckily, there are other perspectives on this, both from religion and secular society.
As this Wired article on impact entrepreneurship points out, successful entrepreneurs are often the ones best positioned to do more good in the world.
Consider Elon Musk and Richard Branson as examples.
Or how about the author of Harry Potter, J.K. Rowling.
She apparently lost her billionaire status, in part, because she gave so much money away. In her words, “You have a moral responsibility when you’ve been given far more than you need, to do wise things with it and give intelligently.”
It’s also worth noting that she has written three books for charity and raised $30 million in the process. Another great lesson: Once we achieve “master status” through deep work and deliberate practice, we are able to use these skills to make money explicitly for giving back, in addition to growing our core business.
For me, I also want to make lots of money (I hear some of you cringing) so that I can do fun things like…
Catalyze the planting of 100,000 new trees each year
Lift 100,000 people out of poverty by investing in microentrepreneurship
Reach 1,000,000 people per year with tips, tools, and templates for solving environmental problems through entrepreneurship and finance
Can the pursuit of wealth be a distraction from what really matters? Heck ya.
But if impact and wealth are aligned, then Entrepreneurs for Impact can create positive environmental and social benefits through their core business, and then do it over and over with the profits they earn.