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Social Hedge Fund - Team Proposal D21-17
In Concept notes
Ed Marriott
EWB UK
Feb 19, 2021
Hey Team D21-17! Apologies that this is late in the day. To make up for lost time I've compiled some feedback from the Engineers Without Borders UK Staff Team involved in writing the brief so I hope it's useful! First of all, we think your proposal is fascinating. You've identified that the problem is not one of demand but supply and the gatekeepers of funding are shutting down innovation, especially that which might be more socially useful than profitable. It would be good to see a little more details on the mechanics of this fund in your final submission, including oversight, funding paths and how it differs from similar projects. The questions we have for you to think about are split into some key categories; 1. Distinguishing it from similar efforts. Aggregating small amounts of money from a large group of contributors is a great way of shifting power away from large, institutional investment. But how would this differ from crowdfunders like kickstarter and what would be the added benefit? Crowdfunding sites have similar issues to social media in that smaller, less "trendy" options get sidelined. Could your proposal include specific recommendations for how to avoid this? There are similar things that exist in this space such as the Green Angel Syndicate. Do you have an idea on how to distinguish yourselves from them? For example they don't appear to have much transparency or democratic participation in terms of what receives funding. 2. Funding Financing for the hedge fund coming from smaller contributors is excellent. Would these be in the form of investments or donations. In the case of the former, people will expect a return on their investment which will make it difficult to fund unprofitable but socially useful innovations. In the case of the latter you will need to solicit donations which can be a resource-intensive exercise and you would need to avoid becoming in hock to wealthy donors. Some more detail on how you would raise funds and how you would mitigate or avoid this issues would be useful. It is fairly common knowledge that it is relatively easy to find very small amounts of start-up funding, but a larger, second phase of funding that allows start-ups to scale is harder to come by. Are you able to compile any evidence of this and other gaps in the funding that's available and how you would address it? Similar to what's been mentioned above. Large corporations tend to provide quite a lot of financing through Corporate Social Responsibility (CSR) programmes, which may be interested in this sort of investment. Potentially even pooling their funds to become major funders of the hedge fund. This could have risks and unintended consequences such as providing them with undue influence over the fund, either through hard power (e.g. corporations being involved in decision-making) or soft power (being hesitant to fund opportunities that might be in conflict with the needs of a large corporation). Could this be avoided? For example through charters that would block major donors? (note, CSR in general and the issues associated with it might be an interesting thing to explore). All this is based in the idea of this being funded by the private sector or private individuals, have you considered a potential role for the state in this? Things like Sovereign Wealth Funds like that of Norway which take public wealth and invest it in publicly beneficial projects (at least in theory) and the returns are then either re-invested or provided to the public as dividends or public services. Norway's Sovereign Wealth Fund, for example, took the money from decades of oil and gas production in the North Sea and used it to build public wealth. This was far from perfect, but now is providing a huge amount of funding for their transition to zero carbon Similarly there are pension funds. Again these are investors that would require a return, but can be invested with a longer-term vision and a more steady interest rate (rather than the traditional hedge-fund model of high-rick, high return). These could be Ethical Pension funds (warning! "ethical" means very different things to different pension funds!). Or state or local governmental pension funds, e.g. Greater Manchester City Council alone has £1.3 billion invested in fossil fuels through it's pension fund. Divestment campaigners and activists have been working to get the Council to unlock this financing to spend on ethical or green investments. 3. Oversight The key thing that can distinguish this from any other hedge fund, angel investor, charity or accelerator would be democratic and participatory decision-making. This is harder than it sounds, because it's not as simple as just producing a Steering Group of stakeholders. It would need to be deeper and more meaningful than that. If this fund could be investing in areas that are socially useful and would benefit the majority instead of the wealthy minority, how could you include those people in the decision-making? This would help to resolve a number of the contradictions I have outlined above and model democratic public ownership. I would take a look at the Ownership Futures report from the Common Wealth Thinktank or this article about it in Open Democracy. A couple of other useful resources; Common Wealth - a thinktank with a tonne of potentially useful research in this space Video about CSR and its weaknesses Ted Talk about Charity and reform Hope that is useful! Your idea is great and we're really impressed that you have chosen to focus on the economic factors that are causing the issue instead of techno-fixes to its impacts. Really looking forward to seeing your final submission! Ed will be keeping an eye on this until around 5pm. So if you have any questions in that time just pop them up and he'll try to answer them Engineers Without Borders UK Staff Team
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Ed Marriott

EWB UK
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