Fighting Climate Change Is a Capital Idea

By Gerry Boyle ‘78
December 4, 2019

Climate Investments

Graham Macmillan
Graham Macmillan ’97
Chief Executive Office, Visa Foundation

In coming years, action on climate may come from what some would consider the least likely direction—capital markets.

Where some people might consider the demands of capital markets to be at the root of social and environmental problems, Graham Macmillan ’97 sees market incentive as wielding powerful leverage to help bring about solutions to the world’s most vexing challenges.

Macmillan is chief executive officer at the Visa Foundation, a position he assumed recently after an eight-year stint at the Ford Foundation. Prior to that he helped manage impact investing at Citibank, where clients that include pension and sovereign funds take a long view of risk—including the calamitous effects of climate change.

“It’s not a black-swan event anymore,” said Macmillan, referring to the theory regarding the rare and unpredictable. “It’s more like a Canada geese event. You know [climate-related events] are going to come every year, and it’s more and more predictable. The cost of capital increases for an investor or a firm that doesn’t mitigate the effects of climate change is evident.”

In other words, thinking short term will cost investors money.

A history and international studies major at Colby, Macmillan speaks in sweeping terms (think TED talks) about systemic change and the forces that bring it about. He was profoundly affected, he said, by Professor of History James Webb, whose course Ecological Change in Human History caused Macmillan to understand the complex relationships between global forces—economic, social, environmental—that shape our world. “Holy Cow! I get it now,” he recalled saying.

He’s been “getting it” ever since, and helping others in a variety of communities to do the same. “I’m a translator,” Macmillan said. “My entire career is about translation among tribes. Tribes of social impact and environmental impact and caring about community, the tribe of business and capital markets and, increasingly, the tribe of technology. … I can’t code. I’m not a CPA. I’ve chosen not to become a CFA, and I’m not even a policy wonk. But I know about all that, and I know I have an ability to see the pattern.”

One pattern Macmillan has discerned is that the effectiveness of impact investing—for the environment, social justice, healthcare—would be exponentially greater if the same principles were applied to capital markets in general. “One has to be willing to let go of deeply held beliefs that impact investing is the only way. Learn from that, but take those lessons and embed yourself in the largest market systems that are out there. And work with the pension funds, work with governments, the largest companies.”

At both Citi and Ford, Macmillan was part of teams that provided millions in working capital to enable social enterprises to create healthy financial models that also contributed positive social and/or environmental impact, like off-the-grid solar for schools in Kenya. At Ford, grant support was provided to the Institutional Investor Roundtable, which counts as its members some of the largest institutional asset owners (as in trillions of dollars) in the world. The goal: to help large pension and sovereign funds shift to investing in ways that are ultimately more sustainable and inclusive.

At Visa, he oversees a new foundation (just two years old) with a $425-million endowment. His charge is to support entrepreneurs in emerging markets who otherwise lack resources they need to succeed.

It’s been rarefied air all along the way. At one meeting, for an organization that supports inclusive capitalism, Macmillan was in a room with people who collectively represented some $75 trillion of wealth. He’s met at 10 Downing Street, attended sessions of the Group of 20 [G20] in Buenos Aires, where he rubbed shoulders with then-World Bank President Jim Yong Kim and Christine Lagarde, chair of the International Monetary Fund.

These are the drivers of the engine of capitalism, he says, which have historically been the drivers of economic growth, and of health and educational outcomes. “That doesn’t mean that people don’t also need empathy and compassion, or that policy doesn’t matter,” Macmillan said. “But you can’t solve these hugely complex challenges with those approaches alone.”

The compass that points him in the direction of complex challenges today was in place early in his career. After Colby, he worked for the Helen Keller Foundation, the nonprofit that aims to prevent blindness, for a half-dozen years. When the 9/11 attackers struck just across the street from the foundation offices in lower Manhattan, he was moved to reassess. He went to graduate school for public service, and he soon became intrigued by the idea that efficient use of capital could generate an acceptable return for investors but also generate significant impact on social and environmental problems.

Macmillan saw that theory in practice when he subsequently went to work at Vision Spring, an organization that sells millions of pairs of eyeglasses through partners in low-income countries. Corrected vision results in increased productivity, which makes for better lives across generations. “The market overlooked them,” Macmillan said. “That experience was really profound for a number of reasons … and it really solidified for me that the market had a really important role to play if we created the right incentives.”

He recommends The Theory of Moral Sentiments, in which the Scottish 18th-century philosopher and economist Adam Smith argues that we are social creatures, and empathy and sympathy are elements of our innate morality. And that the power of capital markets can be used to help mankind and the planet.

Not that Macmillan minimizes the seriousness of the challenge. “This is not some fantastic, in the true sense of the word, vision of destruction,” he said. “This is coming at us like a freight train. Because of the overwhelming nature of it, one of the first reactions is to look away and close your eyes and point fingers and blame somebody else.”

And those who are tethered to struggling economies, and struggle to make a living day to day, may find it difficult to focus energy and resources on a problem that can be seen as a blip on the horizon.

That’s where 21st-century companies must understand that the impact they have is felt on multiple dimensions, and that the approaches of the past aren’t sustainable—for the company or the world, Macmillain maintains.

“You don’t have to be working at a foundation to drive positive social and environmental impact,” he said. “The point is that you have to bring purpose to what you do. My passion is purpose with capital, and how we use the capital to be more of a contribution and less of an extraction.”