Deploying Technology to Secure Land Tenure: SSG Wins LTS

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Rights to land and resources are at the center of poverty reduction, food security, conflict, urbanization, gender equality, climate change, and resilience. An estimated 70% of land in developing countries is not documented due, in large part, to the complexity, cost, and time required. Under its new USAID Land Technology Solutions (LTS) contract, SSG will work to combat insecure land tenure through the use of accessible technology solutions. SSG hopes to pilot, monitor, and scale the USAID’s Mobile Applications to Secure Tenure (MAST) technology suite in up to ten countries – deploying participatory technology approaches to map and document land resources. This delineation will be an essential step toward creating incentives for investment, broad-based economic growth, and good stewardship of natural resources.

SSG Advisors to Support MCC on PPPs and Shared Value Partnerships

SSG Advisors is pleased to announce that it has been awarded a new five-year Blanket Purchase Agreement (BPA) to provide technical, analytical and advisory support to the Millennium Challenge Corporation (MCC) on public-private partnerships (PPP) and shared value partnerships. McKinsey is a subcontractor to SSG on the BPA.

According to SSG’s Steve Schmida, “We are simply thrilled to have this opportunity to support MCC as it seeks to develop new, innovative approaches to driving private capital into critical MCC-funded investments.  This is our first engagement with MCC and we are excited to support its unique operating model in frontier markets.  We look forward to working with our colleagues from McKinsey in making this BPA a success for MCC and the countries it serves.”

SSG Awarded Prime IDIQ contract to Support USAID’s Management Bureau

SSG Advisors (SSG) is pleased to announce that it is one of three companies awarded the Management Excellence for Operations (MEO) indefinite delivery, indefinite quantity (IDIQ) contract worth up to a total of $40 million by the United States Agency for International Development (USAID).

MEO is designed to support the Management Bureau (M Bureau) with strengthening operations and performance management and contributing to USAID’s corporate objective of being a strategically managed and operationally effective development partner.

Under the five-year contract, SSG may provide services such as analyzing operations performance data, processes, and management issues to improve USAID’s efficiency and effectiveness; providing surge capacity, support, and technical assistance to USAID operating units to comply with internal and external requirements related to operations performance management; and improving the Agency’s internal and external communications, products and information management, and monitoring and reporting on operations performance management.

 

SSG looks forward to working with our partners Social Impact and Development Gateway to support USAID’s M Bureau with these important initiatives.

Reaching the Sustainable Development Goals with Connectivity: SSG Hosts Event at Microsoft

by Dominica Zhu

Despite advances over the last decade, more than four billion people around the world still do not have access to the Internet, and the vast majority of those who are disconnected come from poor and marginalized communities in some of the least developed countries. If left unaddressed, this digital divide could increase the inequities between and within countries, leading to an even greater development divide. Through strategic targets like the UN Sustainable Development Goals (SDGs), the international development community has begun to focus its attention on achieving universal internet access by 2020.

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SSG Advisors, along with United States Agency for International Development (USAID) and the Digital Impact Alliance (DIAL), hosted a conference at Microsoft Innovation and Policy Center in Washington, DC, to launch a new report: “Connecting the Next Four Billion: Strengthening the Global Response for Universal Internet Access.” The report serves as a call to action for universal internet access to become a foundational element in socioeconomic development.  More than 100 representatives convened at the center from policy organizations, implementers, private sector companies, donors, and impact investors to discuss connectivity and access for rural and marginalized communities around the world.

The event featured expert speakers, including James Bernard, Director of Strategic Partnerships at SSG Advisors; Jane Coffin, Director of Development Strategy of The Internet Society; Lance Condray, Infrastructure Strategist of Facebook; Jonathan Dolan, Team Lead of Digital Inclusion of USAID; Jonathan Donner, Senior Director of Research of Caribou Digital; Paul Garnett, Director of Affordable Access Initiatives of Microsoft; John Garrity, Senior Connectivity Advisor of USAID; Beth Gertz, Senior Strategy Advisors of DIAL; Priya Jaisinghani, Director for the Center of Digital Development at USAID; Samia Melhem, Global Lead of Digital Development from The World BankPaul Mitchell, Director from the Center for Digital Development at USAID; Nilmini Rubin, Vice President of International Development of Tetra Tech; Kate Wilson, CEO of DIAL and Christopher Yoo, Founding Director of 1 World Connected and Professor of University of Pennsylvania.

Connecting the Next Four BillionConference participants discussed a broad range of topics, from the barriers to connectivity, learning from past successes and failure, growing trends in the ICT industry, and amplifying innovative business models and technologies.

In the report, SSG Advisors made three primary recommendations for helping connect the next four billion people.  In order to achieve this, it’s critical that the international development community:

Mainstream access into the development agenda, so that donor- and government-led investments across all sectors (health, agriculture, education, etc.) include an access component;

Amplify new business models that allow access to those at the bottom of the economic pyramid;

Develop more consistency in approaches to digital access, so that we can learn better from past successes and failures.

As one participant said, “Technology is providing new pathways out of poverty.” SSG Advisors is pleased to be a part of a global community that will contribute to the discussion of how government, development agencies, and technology companies can come together address the global digital divide.

The “Connecting the Next Four Billion” report was also highlighted in a Devex article, titled “How to Fill the Gaps in Response to the Digital Divide” and in “On the Issues,” blog post by Microsoft.

If you would like to discuss the report’s findings or would like to play a role in increasing connectivity and access, please contact James Bernard at [email protected].

Universal Internet Access

Strengthening Global Efforts to Connect the Last Four Billion

The internet is a critical part of the daily lives of many people around the world: it has become essential in much of our work, daily communications, and many other aspects of our lives. Despite remarkable increases in connectivity over the past decade, fewer than half of the world’s population currently has access to the internet, and the vast majority of the unconnected are the urban poor, marginalized groups, and rural communities around the world. This digital divide is becoming a development divide that if left unaddressed, could substantially increase inequities both between and within countries.

On February 22, the U.S. Agency for International Development (USAID), SSG Advisors, and the Digital Impact Alliance (DIAL) will release new research at the  Accelerating Progress Towards the SDGs Through Universal Internet Access event, hosted by Microsoft in Washington, D.C.  SSG Advisors assessed the landscape of global efforts to accelerate access to the internet, with a view to identifying gaps and understanding how those could be filled. The outcome of this analysis is Connecting the Last Four Billion: Strengthening the Global Response for Universal Internet Access, which offers three recommendations for global actors to take more and more collective action to accelerate internet access and adoption by the most vulnerable populations.

Children in a Danajon Reef community utilizing the internet access in their village due to a TV Whitespace project with the Philippines government and Microsoft. The project has created access for over 20,000 Filipinos.

Many organizations are already working to address gaps in internet access. For example, Microsoft’s Affordable Access Initiative is supporting local innovations for affordability and last mile connectivity in a variety of ways, through grants to help scale business models, and education programs to support digital literacy. New businesses, such as Mawingu in Kenya, and AirJaldi in India, are using new technologies, including long-range Wi-Fi and TV White Space to increase access. In addition, USAID’s Digital Inclusion program is working with the public and private sector to extend rural broadband coverage by leveraging funding at the country level and by crowding-in private sector investment.  Increasingly, organizations such as GSMA’s Connected Society program and the Alliance for Affordable Internet tackle a variety of barriers to access, including lack of availability and infrastructure, issues of affordability and cost, and insufficient digital and internet literacy.

We’ll discuss opportunities to advance and build upon these promising activities on February 22. In addition to releasing Connecting the Last Four Billion: Strengthening the Global Response for Universal Internet Access, USAID will release and describe findings from a second piece of research, Closing the Access Gap: Innovation to Accelerate Universal Internet Adoption.  This study, prepared along with DIAL and Caribou Digital, provides examples and insights on business model innovations for improved access and adoption by the underserved. We invite you to join us for presentations, panels and discussion from 8:30am-1:00pm, at Microsoft on 901 K Street in Washington, D.C.  Please register via EventBrite to RSVP.

Five Key Concepts to Build Partnerships and Create Purposeful Technologies for Frontier Markets

by Dominica Zhu

 

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Every year, innovators in international development from across the Pacific Northwest convene at the Global Washington Conference in Seattle. This year’s theme was Allies for Action. The conference celebrated effective public-private partnerships, shared lessons learned from failed projects, and brought experts together to discuss the future of multi-stakeholder methods in global development.

James Bernard, Director of Strategic Partnerships at SSG Advisors, hosted a panel discussion titled Tech for Good: Inspiring Purpose Driven Technologies, with a goal of stimulating conversation on how appropriate technology can be developed and implemented for frontier markets to create sustainable impact. The panelists included: Anay Shah, Head of International Partnerships of Remitly; Charlie Matlack, Co-founder and CEO of PotaVida; Emily Bancroft, Vice President of Village Reach; and Maurizio Vecchione, Senior VP of Global Good and Research and Intellectual Ventures. Each panelist brought a unique perspective on collaborative partnerships and lessons learned through past and current development projects.

Five Key Concepts from the Tech for Good Discussion

The panel explored a range of subjects including the appropriate use of technology in development, collaborative processes for both the development and implementation of technologies for good, effective business models, and how to develop measurable goals. The discussion raised five key concepts that international development practitioners should consider when building technology programs or projects for good:

  1. Harness the power of technology for outcome- rather than output-based measurements: It is critical that international development organizations push for accountability and the measurement of development outcomes rather than outputs. Technology’s ability to rapidly collect and analyze data offers the promise of better outcome measurements and informed action. However, unless programs are set up to measure the right outcomes and people on the ground are empowered to act on the insights that data can provide, organizations risk not taking full advantage of the real power of technology.
  1. Create the right tool for the right job: When designing new technologies, organizations need to keep in mind the three “A’s”: appropriate, affordable, accessible. Technologies should be built for the demographic and community they are serving, with appropriate features and usability for the context. For example, health applications that require high levels of literacy and numeracy may not work in communities with low education rates. This may even mean working with local groups to design and test features, rather than assuming that what works in Western contexts will work elsewhere. It goes without saying that technologies must also be affordably priced for local customers, and should be geared to use available connectivity speeds to make them accessible. As one panelist said, “Are technologies built to solve a problem, or is this a technology in search of a problem?”
  1. Failures can be expensive but are crucial for success: The panelists shared lessons learned from past technology failures, such as computers that sit locked in a closet in the back of a classroom, or mobile products that serve a purpose but not a market. Learning from market and technical failures, is extremely important and the key to understanding new approaches using purpose-driven technologies. By developing and testing multiple iterations of a technology, organizations can improve its usability, market value, or ability to solve a social problem.
  1. Collaboration, especially with community-based organizations, is fundamental: It is easy to collect the most brilliant minds in science, innovation, and research to solve a problem, but it can only get so far if there isn’t a strong focus on the communities that the technology is meant to serve. “Collaboration and collaborative efforts are the key to understanding,” said Vecchione. “It can make the difference between spending considerable time on a project to really making a focused impact.”
  1. Understanding learning and communication styles is crucial in stimulating behavior change: In considering how technology can be used to influence positive behavior change, it is important to assess variables such as the literacy and numeracy level of the community so technology education can be designed accordingly. With the understanding of how members of the community learn and understand concepts, welcoming and adopting new technologies is much more likely. It has been found that the importance of adoption of technology is highly dependent on the role of community and how the benefits are translated through storytelling. With the support and role modeling of respected community members, novel solutions can be integrated and positive behavior change can be realized.

The conversation continues as organizations and technology experts study best practices and set their own precedents with inventions, strategies, and partnerships that are designed to improve the quality of life and address some of the world’s toughest problems. There is still much work to be done. With the new technology innovations and greater connectivity,  now is the time to come together to create collaborative partnerships and solutions that address the technology access gap that currently affects billions of people in the developing world.

Growth in a Time of Climate Extremes

Can the Philippines Get Its Act Together?

by Lawrence Ang

In my last blogpost, I outlined the current environment shaping the Philippines’ climate and energy future. Since then, SSG Advisors together with the Ateneo School of Government, concluded its joint undertaking to consult sectoral stakeholders, including regulators and major companies in the energy arena, and has now proposed policy guidelines for the Philippines to “Get Its Act Together” and align leadership along the domains of climate, energy, and an enabling environment. The complete policy briefs as well as executive summaries can be found here, much of which have been very well received by policy makers and the press alike.

I end this blog series with the most salient points of the policy studies—that of the intersection between climate change and the pursuit for an optimal energy mix in the Philippines. Excerpts of this article were published previously with my co-authors Atty. Tony La Vina and Atty. Teresa Ira Maris Guanzon here.

 

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The Philippines at the End of the Marrakesch Climate Conference

The Marrakech climate change conference, held early in November 2016, ended on a high note. The “Marrakech Action Proclamation for Our Climate and Sustainable Development” signals a shift towards a new era of implementation and action on climate and sustainable development.

According to the Proclamation: “The Marrakech Conference marks an important inflection point in our commitment to bring together the whole international community to tackle one of the greatest challenges of our time. As we now turn towards implementation and action, we reiterate our resolve to inspire solidarity, hope and opportunity for current and future generations.”

Governments hailed the Paris Agreement, noting its rapid entry into force and its ambitious goals. The Proclamation acknowledged the great momentum on climate change worldwide, a momentum that is unstoppable, driven by governments, science, business, global and local actors.

In a parallel meeting in Marrakech, the Climate Vulnerable Forum, which includes the Philippines, committed “strive to meet 100% domestic renewable energy production as rapidly as possible, while working to end energy poverty and protect water and food security, taking into consideration national circumstances.” They promised “to help each other with our respective transition plans to transform our energy, transport and other sectors, and together ensure support is made available in terms of capacity building, financing and technology.”

This CVF call is exactly right for the Philippines.

While President Duterte has already announced his decision to ratify the Paris Agreement, the Department of Energy (DOE) is not yet on board. This is because Energy Secretary Alfonsi Cusi is concerned that the department will not be able to fulfill its mandate to ensure energy security for the country if we implement the Paris Agreement.

In our view, this is a misappreciation of the Paris Agreement. In fact, if implemented properly, the Paris Agreement will lead us to a more energy secure future.

Moving forward, when we ratify the Paris Agreement, we should accompany it with a declaration that the Intended Nationally Determined Contribution we submitted in Paris is not yet final. The wording of that commitment actually implies that but we should be explicit that we will finalize our reduction number by 2018 after a bottom up process where government departments will submit their contributions to the mitigation commitment based on their respective numbers. That should give comfort to the DOE whose first order of priority should be to ensure sustainable and energy access for everyone in our country, for the private and business sector and for poor and local communities. To achieve that, the right way forward is implementing an optimal energy mix.

 

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Towards an Optimal Energy Mix

In the past months, much has been said and is being done about the country’s optimal energy mix.

The government has called for a review of the unofficial but widely known 30 coal-30 natural gas-30 renewable energy-10 oil energy mix policy to assess whether it meets quality, security, reliability, and affordability – the foremost considerations of this administration.

The current energy mix is composed of coal, renewable energy, natural gas, and oil. Coal appears to be highly favored because it is the cheapest (at least for now) despite opposition mostly from environmental groups. The supply of indigenous natural gas is under threat because of the depletion of the Malampaya reserves.

Renewable energy (RE) (at least solar and wind) costs are rapidly decreasing while the feed-in tariff allowance charged to consumers has surged by 200% (and still faces the possibility of increasing). These are some of the numerous issues facing the varying energy sources of the country amidst the national objective of achieving a rebalanced high-income economy by 2040.

“Optimizing our Energy Mix”, part two of the three-part policy brief series “Getting Our Act Together”. zeroes in on the importance of energy in economic growth, and how an energy mix policy can support that growth. The brief reviews the current energy mix of the country using the internationally accepted standards of the energy trilemma (security, equity, and environmental sustainability). Afterwards, it advocates initial steps for an easier transition towards an energy mix characterized by security, equity, and environmental sustainability.

The country’s energy mix is dominated by coal at 44.51%.

In the short term, coal addresses security (the resource and the power plants are accessible and available) and equity (it is cheap at Php 2.9 to Php 3.5 per kWh) but not sustainability (its external cost to the environment and health is Php 2.78 to 2.82 per kWh). In the long-term, coal fails to satisfy all three components of the energy trilemma. Majority of the coal is imported, and 70% is imported from just one country (due to the lower freight cost). It is more expensive when operated at less than 60% capacity factor (specifically its cost increases to Php 4 to Php 4.8 per kWh).

Still, the country expects a coal-dominated future (with 54% coal in the capacity mix and 66% coal in the energy mix by 2022). This compromises energy security, equity, and sustainability.

Following coal in the energy mix is total RE at 25.44% comprising both of conventional (hydropower and geothermal power) and emerging (solar, wind, run-of-river hydro, and biomass) RE. In the short term, RE addresses sustainability but not security (due to its intermittency and uncertainty) and equity (at least for emerging RE since the cost is pegged to the feed-in tariff rate).

In the long term, RE satisfies all three components of the energy trilemma. Advancements in RE (i.e. capture, collection, and storage technology) have emerged to cope with intermittency and uncertainty. Also, quick developments in technology are bringing the cost of emerging RE down (solar and wind are expected to decrease to about Php 4 per kWh and Php 3 per kWh respectively by 2020). This is followed by the question of whether or not FIT is still needed for solar and wind. It is important to note that conventional RE, which makes up 23.92% of the RE share in the energy mix, has not received any subsidy.

The third largest share in the energy mix is natural gas at 22.91.

In the short term, natural gas addresses the energy trilemma. It is sourced locally, is ideal as a mid-merit plant because of its flexibility, and can compete with coal when the latter is operated at less than 60% capacity factor. It also produces only one-third of the carbon emissions of coal. In the long term, natural gas fails to satisfy energy security (because the country will have to import natural gas once Malampaya is depleted), environmental sustainability (since it is after all a fossil fuel), and possibly equity (just like imported coal, imported natural gas exposes energy supply and price to volatile international market conditions).

The smallest percentage share of the energy mix is oil-based technology at 7.14%. In both the short and long term, oil based technologies fail to address the energy trilemma. Oil is imported. It is the most expensive among the fossil fuels, and its price is extremely volatile. Moreover, it is at par with coal when it comes to greenhouse gas emissions. Still, oil plants are vital because they serve missionary areas and satisfy the peaking requirements of the country’s portfolio (although simple cycle gas plants may equally be capable of doing so.)

 

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Addressing the Energy Trilemma

Considering the Philippines’ growth objectives, the government’s mandate to establish an energy mix that addresses the trilemma, and the current energy mix, it becomes clear that government’s priority should be to diversify.

Three immediate courses of action are required:

  1. Reduce over-dependence on coal to address security and efficiency issues (insofar as coal plants that do not operate as baseload and/or operate at less than 60% capacity factor);
  2. Increase, if not maintain, the share of natural gas (since it addresses the duck curve caused by intermittent RE); and
  3. Set the stage for a flexible environment to capitalize on swift market and technological changes in RE.

Optimizing the coal share in the energy mix and reducing the use of imported coal can be done through the following policies.

First, set a cap on coal plant endorsements using a portfolio based approach. This can be done by limiting the endorsements of new coal plants to the projected baseload demand of each region taking into account the changing needs of the economy.

Second, create a gold standard for coal plants. The gold standard for existing plants would be in the form of (1) performance guards because as coal plants age they become more inefficient and thus more expensive, and (2) implementation of Sec. 13 and 19 of the Clean Air Act. For new plants, the gold standard can be a policy that only ultra-supercritical plants can be built.

Third, compliance of new plants with BOI environmental criteria set in the Investment Priorities Plan and BOI Memorandum Circular 2015-01.

 

Allowing Natural Gas to Compete

Once coal’s share is reduced, natural gas will be allowed to compete and optimize the mid-merit or at the very least, maintain its share in the current energy mix given the expected depletion of the Malampaya reserves.

First, a comprehensive natural gas policy and legislative framework has to be legislated to attract private sector investment. There is a natural gas bill filed in the Senate. Hopefully it will be enacted into law, unlike natural gas bills in the past Congresses.

Second, support for the construction of natural gas infrastructure has to be given. A low hanging fruit would be streamlining and fast tracking the processing of applications for permit for the construction, expansion, operation, maintenance and modification of pipelines, transmission and distribution related facilities of natural gas.

Third, other indigenous natural gas resources have to be explored, developed and produced, and each Philippine Energy Contracting Round (PECR) has to be swiftly resolved. An existing roadblock to the past PECR (and any future PECR) is the tax issue of the Malampaya consortium with the Commission on Audit.

Reducing overdependence on one energy source increases the flexibility to take advantage of rapid RE developments. Increasing both conventional and emerging RE can be done through the full implementation of policies in the RE Act, which include net metering, FIT, renewable portfolio standards, and the green energy option.

Also, incentives and government assistance for development and construction of conventional RE can be provided. Nuclear power can be explored as a new resource in the energy mix since it is reliable and efficient, and can counter the intermittency of variable RE. However, there is a high set-up cost and long-term skill base required for nuclear plants, while special precautions must also be undertaken to avoid any radioactive leaks and/or accidents.

All of these set the stage towards achieving a quality, reliable, affordable, and more sustainable energy mix, which can be easily adjusted to meet innovations in technology, and even unexpected changes in economic growth and population.

It is the responsibility of the government to provide these aforementioned policy directions as it works with the market (contrary to the view of letting the market decide) in order to attain a high-income economy, and energy security, equity, and sustainability.

It’s time to ratify and implement the Paris Agreement. For energy, we begin with aiming for an optimal energy mix.


Lawrence1.jpegLawrence Ang is Director for Asia for SSG Advisors. He brings nearly ten years’ experience at the nexus of sustainable development and private sector engagement in the region.

Technology with Purpose

How Companies, NGOs and Communities Can Make a Better World

by James Bernard

 

image001Technology is changing the way in which individuals and markets interact worldwide. It has become the medium in which information is being transferred and plays a critical role in how we navigate the creation of new systems and processes in our communities. With our new Seattle office, SSG Advisors is now able to engage directly with many leading technology companies, NGOs and philanthropies on how a ‘purpose-driven’ approach to technology can improve the lives and livelihoods of people across the developing world. As we prepare for the annual Global Washington Conference next week, we are excited at the prospect of highlighting innovative examples of how organizations like VillageReach, Remitly, PotaVida, and Intellectual Ventures are making use of technologies to deliver lasting impacts in the developing world.

What Distinguishes Purpose-driven Technologies?

So, what distinguishes a purpose-driven technology approach from other types of technology projects? These are technological tools that address some of humanity’s toughest problems and improve quality of life. Of particular interest are technologies that are accessible for use in low-resource settings, fit into the local cultural context, are affordable, and can stimulate development. This type of impactful use of technology can have a profound impact on critical global development challenges, such as food security, climate change and education. Purpose-driven technology solutions create lasting impact, whether it is using cutting edge TV Whitespace technology to connect outlying fishing communities in the Philippines or employing the Internet of Things (IoT) to transform water conservation at a public utility in Uganda. It is important to note that purpose-driven technologies are not limited to ICTs, since many innovations can come in the form of physical devices, such as cook stoves, or business models that can allow projects to scale.

The Key to Success

The key to success and sustainability, is to work from the ground up, both from a design and implementation standpoint. Creating partnerships between private sector companies companies, NGOs and communities is key. As an African proverb states, “if you want to go fast, go alone. If you want to go far, go together.” Working together, partners are able to develop new business models that create economic opportunities and enhance sustainability. The result is that the responsibility of improving the lives of people and the communities they live in – things that are sometimes neglected — become a priority for each partner.

“If you want to go fast, go alone. If you want to go far, go together.” – African Proverb

Over the last decade, SSG Advisors has enabled a wide range of clients – companies, donor agencies, NGOs and foundations – to build these collaborative partnerships in more than 50 countries around the world. We have enabled our partners to make smart use of technologies to enhance their impacts on communities, markets and the environment. That is why we are so excited to be taking part in the 2016 Global Washington Conference, where we can share our experiences and learn more about the amazing work Seattle-based organizations are doing at the nexus of technology and impact. Look for us on December 8, at 1:30 p.m., at the “Tech for Good” panel, and join the conversation!

“The Financial System We Need”–is it finally here?

by Lawrence Ang

“We always underestimate the change that will occur in the next two years as a change that will happen in the next ten.”    –Bill Gates

Last October 25-26, the biggest names in the global financial industry converged in Dubai under the auspices of the United Nations Environment Program-Finance Initiative (UNEP-FI). The setting could not be more apt. Dubai, a land of extreme heat—and, thanks to some clever government policies, extreme wealth—hosted the world’s leading central bank governors, asset managers, institutional investors, banks, insurance providers, and investment advisories, such as SSG, to check-in on an effort launched last 2012 at Rio+20, that is, to build “the financial system we need.”

In the early 2000s, it became apparent that financing sustainable development required a completely new paradigm—one that is able to drive inclusive growth while genuinely, and maybe even profitably, addressing sustainable development challenges. While the idea has long been floated in the nooks and crannies of UN conferences, in whispers in boardrooms and chants from the NGO sector, its urgency quickly rose into the mainstream with the advent of three major global events.

Three major global events signaling a changing financial system

  1. The landmark adoption of the 2030 Sustainable Development Agenda and the Paris Climate Agreement.
  2. The 2008 financial crisis driving public demand for a more resilient and effective financial system.
  3. The rapid evolution of the financial industry itself in light of post-crisis macroeconomic reforms, the increasing influence of developing and emerging countries, and the rise of disruptive technologies and new social expectations across the financial landscape.

“The Financial System We Need”

  • Overall, it will take an estimated USD 5-7 trillion per year to meet global sustainable development goals, of which 60-70% will need to be channeled to developing countries;
  • As one example, it will take about USD 1 trillion per year to decarbonize energy; USD 400 billion per year to ensure resilient infrastructure; and USD 50 billion per year to halt tropical deforestation;
  • Less than a third of these resources are currently flowing and will therefore need to come from private sources;
  • In contrast, banks alone manage $140 trillion of assets and institutional investors over $100 trillion. Capital markets, including bonds and equities, exceed $100 trillion and $73 trillion respectively.

In light of this major financing gap, re-engineering the global financial system now ceases to be an activity reserved for academics and economic theorists, but instead now serves as a marching order for multilateral agencies, central banks, and financial institutions if these same entities are to stay competitive and relevant to their clients’ new realities. As evidenced by the groundswell being orchestrated by no less than the top financial firms in the world, this transformation will require new thinking, new business models, new assets classes, new products, new services, and new tools possibly already existing within the current system. However, it will now need a long-deserved shot in the arm and some fresh political will.

Dubai Roundtable Sentiments Expressed

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At the global roundtable, key personalities from the financial industry shared how a quiet revolution is now taking hold across various pillars of the international financial industry. To paraphrase sentiments expressed:

  • Public debate has rapidly moved forward. Central bank governors, finance ministers and regulators, and finance sector executives are being pressured to explain their contribution to advancing sustainable development.
  • Public interest institutions are playing a more important role in shaping public debate, for example about the risks of ‘stranded assets’.
  • More members of the public are taking up the opportunities to redeploy their own capital aligned to their values and longer-term interests.
  • Sustainability is becoming a major driver in the development of the world’s financial centers, with global and regional centers including Hong Kong, Nairobi, London, Paris and Switzerland exploring how best to develop rules, fiscal measures and market leadership to guide competition in the midst of new opportunities.
  • Collaborative networks are multiplying, forging partnerships and establishing fora to share best practices, information and experiences, for instance, across responsible investment, insurance, and green infrastructure.

From Momentum to Transformation

But perhaps most encouraging are some of the concrete developments happening directly out of the public and private spheres that altogether point to a sea-change in thinking among financial institutions on how a new “financial system that we need” can indeed look like.

  • In 2009, the Financial Stability Board (FSB) was established under the auspices of the G20 to utilize monetary policies to better manage risk and introduce resilience to the global financial system in light of controversies surrounding the “excesses” of the “current system.”
  • In 2015, a dedicated task force to tackle climate-related financial disclosures was set-up under the FSB to dive deeper onto how the global financial system should be compelled to act on sustainable development and be held accountable for climate change.
  • In 2016, green bond issuances totaled an estimated USD 694 billion and growing, signaling the arrival of a new and truly “green financial product.”
  • In 2016, China, arguably one the world’s most powerful economic influencers, signs a national policy package to create a “green finance system” to transform its own financial system. The EU later follows suit with a policy to create its own green financial strategy.
  • As of 2016, 60 stock exchanges across the world have joined the “Sustainable Stock Exchanges Initiative” (SSEI) under the UN to systematically promote sustainable investment and ESG disclosures.
  • And the list goes on…

SSG Advisors’ Role in Developing Promising Solutions

SSG Advisors, as a global development solutions firm and impact investment advisory, is now participating in a series of cross-sectoral discussions between multilateral agencies and investment practitioners looking specifically at “Positive Impact Finance”—an approach which aims to “finance businesses seeking to make a positive contribution to one or more of the three pillars of sustainable development (economic, environmental and social), once any potential negative impacts to any of the pillars have been duly identified and mitigated.”

SSG’s experience in discovering new business models and facilitating innovative partnerships between the public and private sectors will be shared to the ongoing discourse of identifying practical solutions to solve sustainable development challenges hand-in-hand with businesses and the financial industry. Indeed, impact investing, venture capital, blended finance and environmentally or socially oriented market instruments such as green bonds and development impact bonds will be needed. But as many point out, these may all fall short if the kinds of projects or entities most capable of providing the most promising development returns are not equally capable of providing the typical risk/return profile the mainstream market demands. As part of its participation to the global movement to create “the financial system we need”, we enjoin our colleagues from the private sector to help us imagine creative and profitable ways to make the “unbankable” potentially attractive to mainstream investors as well as connect business to promising solutions in need of urgent financing.

 


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Lawrence Ang is Director for Asia for SSG Advisors. He brings nearly ten years’ experience at the nexus of sustainable development and private sector engagement in the region.


 

Smallholder Crop Insurance in East Africa: A New Way Forward

Smallholder farmers in East Africa are increasingly vulnerable to risks associated with changing weather patterns. Climate insecurity puts their livelihoods in jeopardy and discourages investment in new technologies. As recent studies have explored, viable business models for crop insurance have the game-changing potential to reduce risks for the 2 billion people that depend on smalholder farms for income and subsistence.

Despite the promise, attempts at developing crop insurance have been rife with complications. Pilot programs have failed to scale for a number of reasons, including: insufficient climate data, low uptake due to lack of affordability as well as poor product design, unfavorable policy environments, high operational costs, and lack of scientific research to determine risk. The few that show scalability, such as the R4 Rural Resilience Initiative in Ethiopia (R4) and ACRE in East Africa, have done so by building inclusive participatory processes with strong institutional partners and by integrating insurance into other risk reduction offerings, but they continue to face a number of challenges, especially with regards to data availability, high operati
onal costs for installing and maintaining independent weather stations, and independent risk assessment.

As an implementing partner with Tetra Tech ARD for USAID/Kenya and East Africa’s PREPARED Project, SSG has developed a comprehensive public-private partnership between Jubilee InsuranceEast Africa, Kenya Meteorological Department (KMD), Rabobank, UNFAO and others to design and launch an Index-Based Weather Insurance product referred to as “Kinga Kilimo” (“Protect Farming” in Kiswahili). The product is designed to provide ICT based Agro-weather advisory to farmers via SMS prior to climatic events to provide forecasts for land preparation, timing for planting, crop variety and cultivars, crop management (fertilizer, pesticide application, cultivation, water supplementing), postharvest management, and soil conservation. It also offers parametric Weather Based Index Insurance for risk management of crop production losses associated with extreme weather events.

Both the partnership and the product are intended to address the challenges and to incorporate lessons learned from the previous attempts at crop insurance. As such, PREPARED has designed the partnership around several critical innovations to maximize success in designing a crop insurance product:

Incorporate Weather Data: To overcome the limiting factors of data quality, the partnership provided capacity building to the Kenya Metrological Department (KMD) in order to produce a blended weather dataset that incorporates over 35 years of data. This dataset uses Potential Evapotranspiration (PET) and GeoCLIM – a geospatial climate data-management and analysis software tool that integrates observed station data with satellite-derived estimates – so as to address both ex-ante and ex-post risk faced by the farmer at farm level.

Few, if any, crop insurance schemes have had such a comprehensive investment in improving data collection. Mr. Francis Ngari, the Micro-Insurance Manager at Jubilee Insurance, explains the value-added from this approach, noting, “We see this shared value approach to partnership as a big breakthrough in designing crop insurance. Previously we have had challenges accessing climate data and engaging with the Kenya Meteorological Department in designing crop insurance products, however, this partnership has made this possible. Getting credible and more robust blended data from KMD has made our premiums lower and improved the credibility of our products.”

Improve the Service Provision of Government Partners:  Guided by SSG Partnership Specialist Polycarp Ngoje, the  PREPARED project has helped transform the culture of the Kenya Meteorological Department through PREPARED’s Quality Service Improvement Program (QSIP) to be service-oriented and to focus more on potential collaboration and partnership to enhance usage of weather data.

Peter Ambenje, Director of KMD, reflects on the importance of this shift in orientation, stating that “The innovative approach to the partnership design of the Weather Index Insurance Kinga Kilimo product has opened our eyes on how we can engage with the private sector and generate products that add value as opposed to just sharing climate data. The Quality Service Improvement Program (QSIP) has changed the approach and mindset of our staff as far as service delivery is concerned. We look forward to adopting this model in engaging with other partners moving forward.”

Mr. Ngari attests that this partnership is “a breakthrough in agriculture insurance.” The United Nations Food and Agricultural Organization (UNFAO), which has contract farming for legumes and pulses in Eastern Kenya, has also found this partnership approach useful to them for downscaled weather forecast and climatological zoning based on historical data and water requirement satisfaction indexing for various crops. According to Philip Mwangi in the program office in Machaon County, “the partnership has been the missing puzzle [piece] in the contract farming. The scientific tools and downscaled agro weather advisory tool is a great avenue to disseminate crop management information to the farmers from land preparation to post harvest management.”

The new product is being test-marketed in several counties in Kenya this fall with the goal of rolling it out across much of the country for the spring growing season. It is expected to reach over 15,000 smallholder farmers in these pilots alone. Perhaps more importantly, though, the lessons learned from this partnership – including the need to bring the right partners together, the importance of using proper climate data as a base, and the need for government agencies to understand shared value and service provision – could transform crop insurance across all of Africa.