Diaspora Notes, a new initiative, endeavors to give an ambitious social initiative the shape of a “fixed income with variables” investment. But can social good really be translated into financial return?
At the recent Irish International Business Network's “OpportUnity” conference in New York, I moderated a panel featuring TD Jimmy Deenihan, Norman Houston of the Northern Ireland Bureau, Dash Boyer-Olson from Merrill Lynch, and Andrew O’Brien of the US Department of State.
We discussed the embryonic, ambitious plan to raise money from Irish investors in the US, to promote the economic wellbeing of communities back home in Northern Ireland. But the unexpected twist was that this was no charitable project. The money would not be raised from traditional philanthropists, but from investors, albeit investors who would be ready to take on a certain amount of risk if it meant helping a good cause.
“Diaspora notes”, that is, 3-to-7 years investment vehicles, would be created to that purpose. To my financial analyst mind, a note means a bond, that is, a low-risk investment from which I certainly expect to at least get my money back, and preferably, to generate a return. If the money is invested in social initiatives, how can a return be generated? The success of such projects can't be measured in dollars.
Or can it? Norman Houston evoked cross-community internships for at-risk young people in Northern Ireland. The idea is to fight back unemployment and crime in communities that are short on hope and opportunities and where religious tensions run high. Young people would be brought to the US for a period of several weeks to learn valuable skills that increase their employability. This would mean that they leave for a time an environment that can harbor negative influences, to discover a multiethnic, multicultural environment where they learn to adapt to and feel comfortable in.
On their return, their better skills and renewed self-confidence increase their chances of finding a job. If they do, this has very tangible financial implications for Northern Ireland: fewer resources spent on social welfare, and more tax income, both from newly employed individuals and more productive companies.
The non-quantifiable benefits would be enormous: young people, having expanded their horizons and ambitions with foreign experiences, could directly help their communities, become role models and agents for positive change. If this proposed pilot project worked, it could used elsewhere, and change the face of philanthropy and ethical investing forever. Diaspora notes could be ideal to raise funds where governments can't finance such social ventures, or when their resources are otherwise employed.
If we look to an existing organization, the Calvert Foundation issues “Community Investment Notes”, borrows the money from investors and lends it to various different portfolio partners all over the world which have a particular purpose to solve a social problem or achieve a certain societal aim. They subsequently use the money and repay it back to the Foundation with interest. Calvert offers a rate of return dependent on the term of the investment, of which they have had a 100% repayment rate to date. They became the managing partner of the International Diaspora Engagement Alliance in 2013. During the aforementioned panel discussion, I interviewed Drew O’Brien from the US State Department, who took the view that the Irish, as the second largest diaspora group in the US, would be open to raising the money for this fund. In fact, Drew and his office are working with the Calvert Foundation on their Investment Note idea, through helping to promote the concept through their IdEA partnership. They recognize that foreign investment plays a much larger role in driving economic growth and official development assistance from governments and multilateral organizations can help support this progress.
When social issues are solved abroad, this directly benefits the US. There might simply be a direct windfall in the form of a reduced need for foreign aid. But more generally, the US being a global power, it has a vested interest in global affairs. The last decade consists of a string of unfortunate examples where unrest, tensions and wars in distant lands directly affected the finances of the US, and the US taxpayer as a result.
Several concerns still need to be ironed out: for example, the need to generate a return might mean that only the shiny new projects are funded, to the detriment of long-term, less spectacular but much more impactful ones. Still, as an economist and investor myself, and not least as an Irish person, I have a keen interest in seeing how this unfolds.
Susan HayesCulleton is the Positive Economist, MD of international financial training company HayesCulleton Ltd. Register for her monthly newsletter and free podcasts at ThePositiveEconomist.com/subscribe/