The Basics: What Are Big Finance, Big Tech, Social Finance, and Wicked Problems?
Letâs begin at the beginning with some common language and concepts. What do we mean when we say Big Finance, Big Tech, social finance, and Wicked Problems? First, letâs follow the moneyâwho makes it, manages it, and who is doing good with it?
For a start, globally, the International Finance Corporation (IFC)âa member of the World Bank groupâestimates there is as much as $269 trillion in financial assets held by institutions and households (IFC 2019). These assets are managed by banks, pension funds, Development Finance Institutions (DFI), private investment firms, foundations, and family officesâwe collectively refer to these institutions as Big Finance. (Money hidden in a mattress doesnât count.) In addition to the traditional financial returns, Big Finance is also using capital to achieve social and environmental returns, and the commitment is growing thanks in large part to client pressure by Generation Z, millennials, and women. This is a potentially transformative period in finance aligning interest of clients, the needs of private investors, and the call for funding of the UN Sustainable Development Goals. IFC, the worldâs largest DFI, estimates that âinvestor appetite for impact investing is as high as $26 trillionâ$21 trillion in publicly traded stocks and bonds, and $5 trillion in private markets involving private equity, non-sovereign private debt, and venture capital âŚ. Private impact funds currently total around $71 billion. Larger amounts are invested by DFIs, including more than $700 billion by those following harmonized measurement metrics, and in green and social bonds (over $400 billion outstanding). In addition, a share of the $8 trillion dedicated to activist investing in public markets may be managed for impact âŚ. Green bonds have grown from around $10 billion in 2013 to $183 billion in 2018â (IFC 2019).
With the growth in the demand for new green and socially responsible investments comes the growth in âgreenwashingâ and the potential for deceptive claims (Financial Times 2019). There are efforts to develop principles for stopping âimpact washing.â For example, the IFC developed Operating Principles for Impact Management to avoid problems in the field (IFC 2019). These principles are being adopted by watchdog advocacy organization, Accountability Counsel, calling out negative impacts in the international development and impact investing space. It has encouraged IFC to expand its principles and give greater community voice and oversight throughout the life of an investment to ensure safeguards for vulnerable communities. There is a growing call for greater scrutiny and more principled money with the rapid growth of the social finance market principles and the drive to leverage the trillions needed in private capital to achieve the SDGs with integrity.
What About Big Tech?
Forbesâ 2019 âGlobal 2000â ranking of public companies calls out the largest and most successful companies on the planet, and tech businesses âaccount for more than $9 trillion in market value, $4 trillion in assets, and nearly $3 trillion in salesâ (Ponciano 2019). In 2000, tech companies continued to grow in value, making up 10% of the top 100 firms. The five biggest tech companies in the worldâAmazon, Apple, Facebook, Microsoft, and Googleâs parent company Alphabet are collectively worth hundreds of billions of dollars, exceeding the value of economies of countries as big as Saudi Arabia. As well as these United States-headquartered brands, there are Asian companies such as Tencent and Alibaba that are part of the powerful Big Tech mix.
Big Tech companies drive Big Finance. Apple continues to be in first place as the most successful tech company in the world with an estimated $267 billion in revenue in 2019. In the end, this massive amount of money is managed somewhere in the world by big financial institutions.
There are dark and light, negative and positive sides to how Big Techâs resources are used. Well-known tech companies are tackling challenging social and environmental issues caused by lack of consistent global regulation of internet technology and ease of criminals avoiding detection online. For an example of Big Tech working for the common good, we can look to 2018, when major technology companies agreed to work with World Wildlife Fund through the Global Coalition to End Wildlife Trafficking Online. Twenty-one companies including Alibaba, eBay, Etsy, Google, Instagram, Microsoft, Pinterest, Shengshi Collection, Tencent, and 58 Group pledged to work together to collectively reduce wildlife trafficking online across platforms by 80% by 2020 (WWF 2018). In collaboration with WWF, TRAFFIC, and the International Fund for Animal Welfare (IFAW), each company has been developing and implementing policies and solutions to help end wildlife trafficking online. According to WWF, bringing industry together offers the best opportunity to close the web to wildlife traffickers. Inconsistent policies and enforcement allow for trafficking ads to be removed from one site to pop up on another. Illegal sales run from elephant ivory carvings to live animals such as tiger cubs. Further, the sales are in breach of a siteâs rules. WWF finds that because the Internetâs global connectivity and relative anonymity of sellers, combined with rapid transport, enable wildlife traffickers to buy, sell, and ship animals and wildlife products with an online transaction. There is a further worry that as traders and consumers move online, it will be critical to ensure that social media and e-commerce platforms cannot be exploited by the loopholes to detection created by wildlife traffickers (WWF 2018).
The estimated annual value of wildlife crime globally is $20 billion. Approximately 20,000 African elephants are illegally killed each year for trade in their tusks, and nearly three rhinos are poached each day in South Africa alone for their horns. WWF claims that countless species are under threat from trafficking, accelerated by online access to consumers, most of whom are unaware that the product they are buying could be devastating species populations and funding crime gangs (WWF 2018). This illustration shows the yin-yang of the impact of technology and the planet. According to the UN Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, wildlife protection is critical: more than 1 million species could be extinct within the next few decades (IPBES 2019).
But Big Techâs dark side can appear more pronounced than its contributions to social or environmental good. A 2020 edition of MIT Technology Review pointed out that Silicon Valley didnât equip the United States with the infrastructure and technology it needed to fight the COVID-19 pandemic. It hasnât provided many solutions to climate change. Its gig-economy platforms contribute to weakening labor protections, and its social media sites spread misinformation that weakens democracy (MIT Technology Review 2020). The dark side of Big Techâs impact on the worldâs most vulnerable is illustrated in a Financial Times headline: Tech giants sued over child deaths in DRC cobalt mining (Dempsey 2019). A landmark legal case was brought against the worldâs largest tech companies by families living in the Democratic Republic of the Congo (DRC) who say their children were killed or maimed while mining for cobalt used to power smartphones, laptops, and electric cars (Kelly 2019). Apple, Google, Dell, Microsoft, and Tesla were named as defendants. Cobalt is needed to power rechargeable lithium batteries used in millions of products sold by popular brand ...
