Huge convoys into the Mediterranean, the great Allied armies under General Eisenhower, are kept supplied. As they go eastwards, the convoys get nearer to enemy sea and air bases. Navy men who escorted the famous mortar convoys make little of the comparatively small dangers today. America has recently paid a tribute to the services rendered by British liners, without which it would be impossible to move large Allied armies to their many theatres of war. Supplies for all the hundreds of thousands of men now under General Eisenhower unfailingly arrive. Well over a million tons of stores have been unloaded on these coasts since the original landings. It has all had to be convoys through dangerous waters, and the Royal Navy has done the job. Commodity, coal, now reaches the ports in adequate supplies. In exchange, the country sends Britain iron ore. Every warship in the port opens fire. The Navy sees that the Eighth Army is supplied with ammo, which is hurriedly landed onto lorries waiting to rush the supplies forward to feed the advancing troops. In pushed out of Gabis, and the work of repairing the roads blown up by the retreating Axis forces starts in earnest. Tanks and guns moves red lentlessly forward. Expressions on the faces of the townsfolk at the arrival of the British troops. There is no doubt that they are happy to be released from Axis domination. Lentless battering the Allied air forces and armies have given them during their headlong retreat from Alamein to Tunisia. Alexander and Montgomery meet the new Air Officer commanding the Western Desert, Air Vice Marshal Broadhurst. This meeting spells more trouble for the Axis. Fighters take off from an aerodrome somewhere in the Western Desert, this formation of bombers. The fighters are operating as overhead cover whilst the bombers do their stuff. Next thing on their program is a little grass-captured Axis aerodrome for the arrival of the RAF fighters. First mines must be cleared, then bomb craters filled up and the runways rolled out. They are busy getting things ship-shaped. Here come those fighter lads again. Their advance aerodrome is now ready for them and this quick changeover has made them so many miles nearer to the retreating enemy. The tremendous pounding of the Allied air forces and the devastating fire of our tanks and artillery wreaks havoc on these Axis trucks, tanks and guns. Since the Allied breakthrough on the Marith Line, over 30,000 of them have so far surrendered. General Eisenhower, Commander-in-Chief of the Allied forces in North Africa, visits General Montgomery to formulate future plans. At dawn the attack on Wadi Akkadit commences and after heavy fighting and continued air support, the position is captured. Troop ships come British paratroops, distinguishable by their special steel helmets. Against dewboats and shipping losses are serious. Nevertheless, the enormous demands of North Africa are being promptly made by umfant demonstration of British naval power.


The calmest cat breeds are the perfect match for an owner looking to chill with their feline friend. Whether it's hanging out on the couch or cuddling in bed, these cats typically have laid back temperaments. As you may know, cats spend a good chunk of their day sleeping. However, many cats like to get a little wild while they're awake, running around the house, scratching things, hopefully scratching posts and not your furniture, and vocalizing. After all, cats are naturally playful, and they need to expel their energy during their waking hours. Keep in mind that all cats are different, you may find that a stereotypically calm cat isn't as calm as you'd expect, or that your regular shelter cat is a total couch potato. We encourage you to look into adopting a kitten or senior cat instead of buying a cat from a breeder but recognize that many of the calmest cat breeds featured on this list are also some of the rarest cat breeds. With that in mind, do remember you can still get a sweet laid back domestic short hair from your local shelter, with plenty of love and care, any cat can become a lovely lifelong companion. If you're looking for your next friend, be sure to explore our guide to playful cat breeds too, or our affectionate cat breeds, the latter of which share quite a few breeds with this list. Maine Coon. Maine Coons are considered the gentle giants of the feline world, as they can weigh up to 25 pounds. While they can be very playful and curious, they don't tend to be hyperactive. Most people report that Maine Coons are also fairly laid back. They are very people-oriented and may follow you from room to room. British Short Hair. British short hairs are a popular breed owing to their beautiful appearance and calm demeanor. They're famous for being very mellow and undemanding, and would rather sit right next to you than climb up into your lap. British short hairs are very calm and attentive, but they usually prefer to observe from afar and can be quite lazy, you may have to encourage them to get active. Himalayan. Himalayan cats are beautiful and calm cats that prefer quiet homes. The cats themselves are very quiet and easy going, with many owners saying that they're incredibly sweet and affectionate, although they can be a bit picky about who gets their affection. While they can be energetic, they're often quiet and calm, making them the perfect companion for a Netflix binge. Ragdoll. Ragdolls are called ragdolls for a reason. They're incredibly gentle and laid back, and will literally go floppy in your arms like a ragdoll. They're incredibly calm and are considered some of the most docile cat breeds. Ragdolls are also very affectionate, making for great lap cats, and will probably follow you around, waiting for you to settle so they can snuggle. They will play fetch, and come when you call them, so they aren't just couch potatoes. Bermond. Bermons are the sacred cat of Burma, and they're also one of the calmest cat breeds you'll encounter. They're incredibly adaptive and don't need to be the only pet in the house, in fact, they love chasing dogs and other cats around. They can be playful, but they won't be too needy and are incredibly patient and gentle. Hello. This video is sponsored by Beamix Pets. Are you looking for high quality cat collars at an affordable cost? Check out BeamixPets.com. Use coupon code KittenLife, to get 20% off. Persian. Persians are as cuddly as they are fluffy, and are widely considered to be a very chill. Lapcats. The long haired Persian loves to curl up with its owners for some cuddles and affection, and they tend to be very well behaved. Persians are also very quiet and don't really make a ton of noise. Overall, they're relaxed, laid back, and not too clingy, even though they love affection. Japanese Bobtail. Japanese Bobtails are one of the oldest breeds of domestic cats. They're incredibly good-natured and affectionate, but smart enough to learn tricks and avid hunters. They adapt well to your routine, and will enjoy spending time with you, but aren't considered lapcats. Overall, Japanese Bobtails make great companions with their calm and measured demeanor. Ragamuffin. Persians are big and beautiful cats that are very calm and agreeable. They are very affectionate. Some people consider ragamuffins to be as cuddly as a teddy bear, so they make great family pets. They're intelligent, and can learn tricks, but also don't mind being carried around in your arms all day. Exotic Short Hair. The exotic short hair is a rare breed that's a mix of Persians and American short hairs. Many people consider it the lazy man's Persian, because they don't need nearly as much groomer thanks to their shorter coat. But just like Persians, exotic short hairs are sweet, docile, and quiet. They love a good cuddle, and make great family pets because they're so affectionate, but are also happy to be left alone. Selkirk Rex. A rare and fairly new cat breed, the Selkirk Rex is commonly referred to as a cat in sheep's clothing. They have curly soft hair and a very gentle demeanor. They are incredibly relaxed and docile, which means they love to be held and cuddled. As such, they're great with children. A Selkirk Rex can be a bit goofy and silly, but they don't tend to be hyperactive. They are incredibly social, however, and would prefer to be living with another pet if you'll be gone all day. This list may help you choose the best cat for you, but a cat's demeanor will always vary based on the individual animal. Talk to a shelter before bringing a cat into your home, and do your research to make sure it's the best fit for you. All cats are different and have a variety of personalities, but it's up to you to make sure they can have the best life possible in your home. Treat your cat with love and take care of them, and they'll show you some love in return. If you enjoyed this video, kindly press the like button. Also don't forget to subscribe with notifications on, so that you don't miss out on videos like this. Thank you for watching.


So this session is lessons from the UK. New models of accelerating the flow of capital to good. As you have read in your programme, the UK appears to have an innovative history of civil society activity. A significant amount of government support, both financially and legislatively. ac yn y cyfnodd cyffredig o ddilyn o'r sector yng ngyfaint yng Nghymru, a mae'n fyddech chi'n ddiddordeb yn gwneud y DU yn fany oedd. Felly mae'n gwneud fod yn ddiddordeb yn fawr o'u cyfeirio. Mae'r ddiddor llwyddiant yn y ffifolio yn gweithio'r cyfnod ar gyfer', ac mae'n ddiddor yn rhagwm yng nghyd, mae'n ddiddor yn ddiddor yn ddiddor yn ddiddor. Mae'n ddiddor yn fawr, mae'n ddiddor yn ddiddor yn ddiddor yn ddiddor. There's a huge amount that can be improved and there's a huge amount that can be avoided. We'll look at some of this now with our panel, who will introduce themselves as we go. The panel is going to be very short. Can I encourage folk right at the back, if you're going to ask questions that are engaged, to come down so we don't have to run up and down with the microphone all the time. The panel is going to be short. We're going to keep to less than 50% of the time actually presenting. We've got some slides. Really, we want to turn this over to the audience and have an audience-led session for the second, at least the second half, ideally a fair bit more. Please get prepared with succinct comments and thoughtful questions. Without further ado, I will hand over to Joe Ludlow from Nesta, who will present first. Hello, everybody. Nesta is the UK's foundation for innovation. We work both to support innovation in the UK to drive the economy, but also social innovation to tackle big, complex social problems that we face. What I'm going to try and do is say two or three things that hopefully put impact investment and social innovation in the same room and tell you why both of those things are very important to us and something about some of our work that straddles both of those fields. The starting point, I guess, is this idea that we face some very big, long-term, complex problems. They're big for us in the UK. They're big for many of the developed countries around the world. The ageing population, the need to help children and young people learn and progress into employment in a changing economy and one that's increasingly digital. The need to use energy and our resources more efficiently. To address all of those problems in a time when our public finances are really in a bad state, but also recognise, and that's the graph on the left-hand side. It's not very clear, is it? The UK's expenditure is the top line on the left-hand graph and it's public sector revenue on the bottom line. We've been running a deficit, a big deficit for a long time. The graph on the right-hand side says actually the effect of the demographic change and the ageing population is going to negate lots of the savings that we think we're putting in place. That for us creates a context where we've got big, complicated problems and not a lot of public money to address them, so we need some innovation. The other thing that's increasingly clear to us is that this old world where the private sector did its thing and supplied things to citizens and the state provided things that the private sector didn't or that citizens couldn't buy individually. The social sector just stepped in to mop up what the other two sectors weren't doing well, isn't really fit to innovate in the way we need it to address those problems. That's also in a context of falling trust in political institutions, in financial institutions, in the media. We need to think again. What we see in our work at Nesta really is that lots of the innovation that appears to be interesting and effective in tackling these issues comes where the world's collide, where private enterprise and the social sector are working together, where citizens are engaged in designing and producing and investing in innovations, where the state is both purchasing but also helping to design and also working with citizens to design solutions. All I want to say is just talk a few, two or three examples that really resonate for me from work that Nesta is doing. The first one that I'll talk through is abundance.  The ones that are on their doorstep. What you can do is connect up your utility bill to their web platform so as well as seeing how much energy is being generated by your investments, you can see how much energy you're consuming and get some sense of the connection between your wealth and your consumption. We are Cosmos, a lovely story of a charity that I knew several years ago with a great bullying that worked in schools to tackle bullying by getting kids to peer mentor each other. What they did was realise that they didn't have a scalable solution, but if they took it online and built a web platform, then their technology would be scalable and we are Cosmos for the result of that. The final point I wanted to make is that these big problems at being addressed where the sectors are coming together and technology is often the thing that's underpinning it. Putting all of that together is where we see as an investment opportunity. Thank you. As I said, we're going to keep this short and sweet and open it up as quickly as possible. Martin from Social Finance. Thank you very much. Good afternoon. Quick intro is Social Finance. We are one of the UK's leading financial intermediaries for the social investment sector. I'm the sales director, so I spend all my time talking to investors from the philanthropically minded trust and foundations, high net worths, right through to the purely commercially minded institutional pension funds and the like, and everybody in between trying to persuade them that the impact investment market is something that they should get interested in. Ben asked me to talk about social impact bonds, which is probably one of the best-known products that we've created to date. He's got a great sense of humour. I'm supposed to explain this thing in three minutes. Can I have a quick show of hands if you've heard of or think you know a little bit about social impact bonds? Keep your hands up for me for a second. Thank you. Keep them up. Keep them up if you know a lot about social impact bonds and take them down if you don't know very much. OK, great. Sorry, so I'm going to bore four people in the room for the next three minutes. The rest of you will probably manage it in 90 seconds. I'm going to explain it using an analogy. The analogy is simply this. Everybody knows prevention is better than cure. Or to put it another way, it's better to build a fence at the top of a cliff than to run an ambulance service at the bottom of the cliff for those who've fallen off. Problem is governments have to run ambulance services. And those are expensive. And the government would like to go and build some fences, but it doesn't have the money. It can't take the risk of building the fence with the money that it should be spending on the ambulance service because if its fence doesn't work, it still needs to be running the ambulance at the bottom of the cliff. And as we all know, governments actually are rather rubbish at building fences because fences need to be tailored to individuals. It's just not what they're very good at. They're running a one-size-fits-all ambulance type service. So the problem is we don't get much in the way of prevention. However, the private sector, social enterprises, charities, for-profits are very good at running interventional services tailored to individual needs. Be that in prison reoffending, be that in drug and alcohol abuse, be that in whatever issue. So we said, well, why don't we raise private sector money to build the fence? If we build the fence and the fence is successful, the government needs to run less ambulances at the bottom of the cliff. If we know how much it costs the government to run an ambulance and we know how many less ambulances are needed because of our fence, we have saved the government and we've saved the taxpayer money. We could share that saving. That way the government takes no risk, it puts no money in and it saves money only in the event that it runs less ambulances. The private sector takes all the risk and if we've done the sums correctly and we manage to reduce the problem sufficiently, we can give them their money back through their share of the cost savings. And actually if we keep going and we do more good, we save more money, we share more money, it means investors can actually get a healthy return and one can start to attract more and more investors. So that's what we did. This first scheme is at Peterborough Prison. Peterborough is about an hour north of London, a moderate-sized city. We raised £5 million, drop in the ocean really, but it's the first scheme from private trust and foundations and high net worth investors. That £5 million will be spent over six years on 3,000 individuals who are leaving Peterborough Prison from short sentences to less than one-year sentences. They currently receive no probationary services, no help whatsoever. They just get dumped back out on the street where they will re-offend 60% of the time within one year, 80% within two years, that's the official statistics, they lie, they're too low. Most of them will re-offend multiple times and will end up back inside. So we've raised the money, we are purchasing services from a number of organisations, some of them listed there upon the screen, and they are providing help through things like housing, education for helping them to find a job, making sure they get their benefits, mental health issues, drugs and alcohol abuse issues. Most of the people who come out have all of those issues and more besides. We provide co-ordinated services to interact with those folks. We then measure how many times they re-offend for a year after release, hopefully not at all, but even some reduction is a step in the right direction. We measure that against the national cohort that is 10 times bigger to give us a relative movement from the group that we work with versus what happens nationally. We have a contract with the Ministry of Justice and the Ministry of Justice will pay us based on the rate of reduction that we see happening. The project itself will take six years to deliver. It's an eight-year timeline as far as investors are concerned and the investors will, if we are successful and retrieve a 10% reduction in re-offending, we'll get a 7.5% annualised return. If we outperform that, that return can actually go up into double digits, so about 13.5%. So it's quite attractive. That's about as quickly as I can explain that if I lost any of you on the way I apologise. Very quickly, where are we now moving that? Well, what's happened as a result of that? The Ministry of Justice have just announced £20 million worth of funding, paid by results funding, for more schemes of the same. The Department of Work and Pensions have announced a £30 million set of funds. Half of that money has been awarded already. The second half is currently up for tender. That's working with youth not in education, employment or training. Needs, as we neatly call them. That was a joke. You're still there, excellent. There's a £5 million scheme just been announced in central London looking at rough sleeping and a small range of schemes just about to be launched looking at vulnerable children, kids going into institutional care. I'm sure it's the same in Sweden as it is in the UK if kids go into institutional care. Their futures are basically ruined. So we're trying to keep them out of institutional care. I think the question that we will come to address later on in the Q&A session is government innovation.  I leave you to ponder that. I leave Martin. Jeff. Click one, slide on. Hi, good afternoon. My name is Jeff Burnand. I work at social investment business and also investing for good. The amount of money that actually gets invested across the social investment space in the UK is estimated about 170-yard million. If you take out that which is asset-backed it's about 10 million. So it's pitifully small. So despite our reputation for being innovators not much money yet moves across that divide. So the problem we set out to address was the shortage of good quality investment propositions that would appeal and be recognisable to mainstream capital market investors. So this is the opposite end to the angel investment market. And if we were going to scale this thing the product had to be very simple. So a simple product is what we've developed. It is nothing more, nothing less than a medium-term note program commonplace in the corporate bond market and the innovation such as it is that is being applied to the charitable sector who are increasingly having to be more sophisticated about the way they finance themselves and the opportunities around government outsourcing of public service deliveries Martin has just commented on. So on the left-hand side here we have a screen graver prospectus by Scope. Scope is a UK charity dealing with disability and on the right-hand side we have its features. 20 million pound program. It allows the charity to issue tranches of debt. The first tranche they've issued and this bond will close at the end of May 2 million pounds, 3 years, 2% per annum small denominations going smaller for the retail investors in next issues unsecured, unrestricted and listed on an exchange. There's nothing terribly complicated about any of this. Our role here is to be the FSA so the financial services regulators approved arrangers for the program and also the placement agent. So we put the programs together and then we go and find the investors. In terms of pipeline for this product behind the Scope charity we have charities in the inner city regeneration drug rehabilitation, youth maybe age, financial inclusion so quite a big pipeline beyond that. The ambition is to have a portfolio of non-correlated fixed income products measured, assessed whatever on a blended return basis and placed with a variety of investors. For the Scope bond the interesting thing for us is being that the investors have come from public foundations, private trusts institutional fixed income managers and high net worths. So a pretty good range. Our general experience has been that well let me be blunt this product has been fantastic for flushing out who does the talking in this sector who does the doing. There is an inordinate amount of chat in this space and as I said not much money seems to move it across it. So we've spoken to about 130 different investors and they do oscillate between reticence around the mission, reticence around the yield, impact first, finance first or whatever but it's a great product for finding out exactly where the investment committees are in their understanding of this product. One of the things we've learned was our prospectus which was put together by lawyers which we're very grateful to was quite dry in the articulation of the mission. So future bonds that we raise will be far more telling the story around the impact. The way we measure our impact is what we're pretty comfortable with so I can talk a bit more about that later but generally although there's a lot of energy around impact most investors are screened out for risk anyway into this space. So what they want to know is there's an impact measurement process that's going to repeat year on year and they can track the changes. And just to maybe finish off quickly a couple of stories. The first was, we spoke to a big fixed income manager who came into the room and sat down his chair and went like this and he said, I run six billion fixed income portfolios. What can you tell me? It wasn't until we told him about the impact on the families that he really stood up and he basically said you could buy everything you've got because I really want to play in this space. So that was great and the flip side to that experience was talking to a private bank who said Jeff look I love your product, it's fantastic but I'm going to buy it in the secondary market. So I said why wouldn't you buy it in the primary market? And he said because it's always going to go down in value. All the sellers will just drive the price down and I'll pick it up when I can pick it up at a cheaper level. And I said well what about the impact? He said well I don't care about the impact. That's not why I'm doing it. What I've got from that is that as intermediaries in this process we need to be able to be more determining around the price that these bonds get issued at and where they trade because it will be a disaster if you like for the development of this market. These become two illiquid junk bond status and no one understands around the impact. So controlling the price of impact is something we're working on at the moment. Thank you. Brilliant, thank you. Over to Arthur, finally. Good afternoon. I have to admit I'm here through false pretenses as Ben will tell you. I've only spent two years out of my eight years in this sector. See if I can get the technology to work. There we go. I've only spent two years out of my eight years actually in the UK so I've got the accent but I'm afraid I'm going to use some international examples as well. We've been talking about money. We started off this morning talking about the cosmos, the universe and large elephants. We've ended up with at least two comments here saying there's not really that much money in the marketplace and we should all be really quite worried. Let me tell you one of my dark secrets. I spent five years as a US Aerospace Defence Analyst. Why do I say that? When I got up this morning I was thinking, what am I going to say today? It suddenly occurred to me that the total amount the United States spends on defence annually is roughly equivalent to the total endowment of US foundations. 98% of which is unaligned with social mission. We give 5% of that away to the traditional $50 billion which is that figure on the left-hand side. About 98% of that is invested in the foundation model. What is a foundation? It's a closed-end investment trust that gives 5% of its capital away for a tax break. It's crystallised in the American tax system in 1921 and for all intents and purposes it has not changed. So there is a trillion dollars worth of assets that is completely unaligned to social mission and then there is another $55 billion where for the most part we have an unleveraged, uninuitised model where if the blunt truth be told, the sector spends 50% of its time trying to raise money and anybody in the social sector here that tells me that they get the vast majority of their money like that, I will buy them a very large gin and tonic. So we spend an awful lot of time trying to raise money and the reality is when you look at these sources of money, I won't run through them because I haven't time, but we look at it really through these two sort of presents, the not-for-profit side here on the left-hand side and the for-profit model there on the left-hand side and the money allocated through SR is very large, it's roughly $10 trillion, but the amount that actually goes to what we would call high net and high net impact, high net worth is about measured in the hundreds of millions in total and that's one of the reasons that market is actually growing very fast and explains why the private banks are suddenly interested in it. So those are the sources of money. The interesting thing I would argue is the trillion dollars that is in the foundation money, how do we get our pause on that? Social impact bonds that I had some involvement in their creation at the very beginning. If you think about, somebody mentioned the word resilience the other day, the problems we face with that 5% of that 98% we don't allocate, the problems we face in terms of externalities, let me pick one. Sanitation, $500 billion in terms of externalities. Road safety, another $500 billion. Climate, $4.3 trillion. These are huge sums of money and if we can find ways of actually monetising that market, then potentially there's a major opportunity and I would argue that social impact bonds actually gives you the ability to do that. The other interesting capital market I would argue is around local pension funds in local markets, roughly $1.3 trillion worth of local currency in local markets. And if we can find mechanisms to leverage that capital and we're working on a $400 million structure to do that at the moment, anybody's got to spare $25 million to close the deal, we'd be very interested. And in essence that allows you to leverage that capital 15 times over a five-year period with IRRs of about 23%. If this particular structure works, it will be giving as much money as Gates does in about five years' time. So there's a whole range of financial innovation available in this market, but unfortunately what happens in our discussion, we've moved on from, this community has moved on from the foundation world, we understand the opportunity of social investment. But where we've ended up in terms of this financial innovation, around capital market innovation, is really within the context of a social venture capital, social VE model. And there's a whole bunch of these types of ventures we'll come to, and the basic premise of the argument goes, let's define it as social, we agree the metric, we'll have a legal structure called a BCOR, and hallelujah, the money will come. Now I'm sure some money will come, but I'm not completely convinced that it'll move in the scale we need it to. And in essence what is being ignored in this debate, and if you think of this from a product mindset, what Acumen was is the application of a fund management model to philanthropy. What social investment bonds are, and they're misnamed, is the application of structured investment product to this marketplace. What Lumini mentioned before is the application of an equity model to education. What Willie Foote's model is in third of foot capital, is the factoring of microfinance. These are all different models than a pure social venture capital model. And the nature of product development in a bank, and I've worked for ten years in a bank on product development, is that all you're doing is changing cash flow to change the incentive. And the nature and change of those incentives means that we've got to begin to think about mechanisms that begin to create collaboration and begin to move scale, given the scale of the problems we face. And this debate's appeared in the last couple of years. We are moving away from the UN system that looks at this through an input model. We each are 1%, and we're hallelujah, you are there, to how we think about a lot in this sector, which is how we bilaterally negotiate to capital towards outcome models. So how many prisoners re-infend? What is actually the pollution in this river? Those sorts of questions. And frankly, it's what we should care about. And once you begin to pay around outcome, not output, you begin to create collaborative structures. To do that, you need to have intermediaries, social finance, what Geoff is doing, what I partly do, what Willie Foote does, range of these things are these new intermediaries that work at place. Intermediaries that recognize that blending the expertise of civil society, blending government capital, blending capital market instruments is key. There are new types of instruments other than the traditional foundation, which as I say is based on a model in 1903. So new intermediaries are absolutely key. Legal structures, absolutely key. We can talk about blue in the face, about collaboration and working together, et cetera, et cetera. But unless you have a mechanism that allows you to engage for profit, not for profit, and governmental sector, within the same framework, each taking a different or indeed differing economic social return over a product lifecycle, we are singing in the wind. So writing those rules, changing the fundamental paradigm of for profit, not for profit, to create mechanism that allows you to have different players taking different economic social return because at the end of the day, all social finance structures are in essence cross subsidization structures. Cross subsidization from the corporate sector, it better be on your terms, and it better have the social mission hardwired in. Entrepreneurship, I work for Shokerm, this is what I came across, Ben's lovely red shoes that he likes wearing, is about a Shokerm, Acumen, Schwab foundation, there are a range of these players. Social entrepreneurship as we all know, unlimited in the UK, let's give a UK example, unlimited in the UK, is about the R&D of society, these new ideas that are bubbling from the bottom up, and being linked into the broader, broader system. And then the final part of the picture, which again you've seen develop over the last few years, is that essentially distribution. Grumine, and this is where we can actually learn something from the Far East. Grumine, BRAC, the Aga Khan foundation, these are organizations that have been around in many cases for hundreds of years and actually understand and come from those societies, and you are seeing them moving, beginning to think about from being a single product to actually a major distribution mechanism for social services, giving you the UK example, the Anglican church, which is just beginning to think about this. So those are when married to the corporate sector have an ability to deliver social goods at very low cost, and is an opportunity for the corporate sector in terms of engaging. Let me just give you a very quick opportunity, and you probably thinking, what else is this guy talking about? There are already models that actually fit within this process, which is where, as a society, we have collaborated across the sector. The Garvey deal, $3 billion deal essentially took the IFF as it's also known, took future government cash flows, spent out to 2030, brought them all forward, empowered the citizen sector to negotiate with the corporate sector that dropped injections for the developing world from $50 down to $5. It is all about collaboration and scale. The community reinvestment acting is a limited liability company structure with foundations taking the first loss, incentivized by a government tax incentive to bring private capital in. Huge provision of affordable housing in the United States, and what is more, critically, monitored by the Congressional Budget Office for the last 10 years, that tells you it is revenue neutral to revenue positive. Now, if you then marry that to a social impact bond, that is revenue positive, by definition. That is the language that government needs to hear. That what we are proposing as a sector can move in scale and can actually potentially be revenue neutral. So those are existing models that already exist. But let me give you, you can take that even further. The type of collaboration that I just mentioned where you're using social impact bonds based on the outcome that's created. If you then securitize that cash flow, you essentially have a liquid vehicle that could be traded on a social stock exchange. If you have an OPIC guarantee, you can do it internationally. You could franchise it again by another contingent model delivered by civil society that is ethical, such as the organizations I mentioned. And let me give you a final what if. How about if you married that contingent return based on the tangible outcome to that other structure I mentioned, a guarantee structure, so that in local societies you're actually incentivizing those local elites to deliver social goods to their own population in their own currency. Imagine how that revolutionary that could be. Thank you. OK. Thank you Arthur. Questions? Hands? Before we get into discussion, I just want to throw one idea up, which, well it strikes me Arthur, Jeff, that there is actually no such thing as innovation in financial services and impact investing. So the title, we got the title of the session wrong, didn't we? Grab a mic. I'm going to keep hold of that one. Well I think the innovation is where the price is for the yield to the investor. So we could place our bonds, our 2% yielding bonds if they were yielding 3 or 4% with any kind of investors. So the challenge of this is you've got a perfectly good structure, great credit risk, et cetera et cetera. Where do you place those at? And the first comment that comes back is if you ask me to take a subfinancial rate of return, how are you pricing impact? So the innovation then starts to come through around that. So when we deal with market makers and brokers who need to make a price, how they're determining what that price is, is where the innovation comes through. So you might think it's impossible, but I think my example being brand development. 20 years ago brands weren't valued in accountancy terms, now they are. So it's not easy to start working on the fact that we will end up with a more quantifiable metric around impact. And that to me is almost the most exciting part of all of this. Where does that sit? Everything else pretty much is fairly straightforward. The other innovation is slightly cynically, I can say there's two problems in the world. One is global poverty and the other one is converting the wealth manager and that challenge its own way. But I would say Martin, actually there's an issue around social impact bonds are considered a financial innovation, but they're not really, are they? I think Joe sort of posited the term a little while ago that it's an innovation in commissioning, not an innovation in financial services. I think it's ecclesiasties says there's nothing new under the sun.  At the end of the day all of these financial products are ultimately moving the risk and the reward process around and it's a transfer from, in this case, what the risk that government used to take or maybe didn't and paying for that according to the risk that somebody else has taken on for themselves. It is ultimately coming through as a change in the commissioning process undoubtedly and what we're seeing is in many ways the private sector providers of many of these services changing the way they commission. So I think one of the big challenges for us and social impact bonds in the UK is are we really going to create a new framework and new paradigm if I can nick that word from this morning where social enterprises, NGOs can play on an even field. What we're seeing is just the private sector providers are adjusting and saying well the rules of the game have changed we'll come along. We would be very foolish to expect them to not do that and as shareholder owned companies they have to do that that's what they're intended for. So I think that one needs to make sure that you keep a very open mind and don't just assume that because we're doing something that's got a social motive it's necessarily going to revolutionise the way the world works. Arthur, we heard about government innovation as an oxymoron financial services innovation as an oxymoron. There is nothing new under the sun at the end of the day. If you go back to October the 13th 1307 prior to that date we had a civil society banking system I'll chat to anybody if it was interested in the history of the data. So there is nothing new in some senses all product development in banks is moving cash flow backwards forwards to change the incentive structure. I'm sure we all go to lots of events on social finance and the academics love this. The conversation goes on for hours. The reality is it's very simple. All we are doing is injecting modern capital market techniques into the provision of social goods. We are moving on from a single product market the foundation system the debate has moved to some extent to social venture capital and now what you're seeing is a whole other range of these models which in the case of social impact bonds is essentially the application of multi-stakeholder models where something which is totally counter-intuitive to most people in the not-for-profit world the greater social impact you create the higher the economic return. That seems totally counter-intuitive but that's reality and you marry it to a legal structure you can create quasi-equity. So there is nothing new here at the end of the day but what is required is a change of mindset and a real change of mindset from our community ourselves and that's the challenge I throw at. If I go to another event where I hear somebody say well the bankers are going to invest in this sector well if our own sector has 98% of its assets in one financial product why do you expect a banker in London to do this?  So there needs to be more we need to move from rhetoric and I hear a lot of it there needs to be actual use and think about how these models can be applied in scale and it is nothing new it is just the application of what bankers in the city of London know and is their normal grist to the mill. Nothing new under the sun so we'll open up to the floor first question can you say who you are and where you're from? Gentlemen thank you very much for the discourse James Moliniam an entrepreneur and I don't have a background in finance but just out of curiosity wondering what your high level thoughts were on social impact stock exchanges such as the impact investment exchange in Asia and what those models mean or for the space as a whole Who wants to take that on? I can say very quickly in exchange you have to have something to trade and if you work in the markets you realise you can trade down Bloomberg you can ring an exchange up there's a number of ways of creating that exchange so the exchanges and there's seven of them that I'm aware of is to value I would argue potentially social impact bonds provide that because there's a cash flow tied to the achievement of the social metric so yes I think in terms of transparency and how you see those models they will be very interesting the nature of an exchange is fine but what are you trading on that exchange is the question Just pick up on transparency is the key word one of the biggest problems with this market at the moment is that those who need the capital can't find those who want to put the capital to work I think what an exchange does particularly one labelled as a social exchange is it creates an environment where people can come together where the rules of the game are understood I love the concept that you come in under a gate that says this is social investment that's why you're here that's why you're in this part of the market so I think in principle they're a great idea I think they're necessary they're an important part of the furniture to get this marketplace up and running but I think the point that Arthur makes is absolutely right this is very early stage there isn't enough product at the moment to make a fully functioning exchange The bonds we're involved with are listed on your MTF but the subsequent ones will dual list on a social exchange providing that exchange can demonstrate that it's properly valuing the price models around if it's not doing that then we don't need to list on that exchange it's quite, sorry Joe So about 18 months ago I was involved in a research project that Ipsos Morri did with a foundation called Fair Banking for us and I got to sit on the see-through side of a one-way mirror looking in on a focus group with high net worth individuals who'd never come across social investment products before and two insights one it's amazing how many very rich people will come along for £100 and sit in a room for three hours but the second more profound insight is that if you lock people in a room for three hours and go through painstakingly what social investment products are they might begin to like them but marketing doesn't work that way you don't have three hours with people and we've got to find a way of communicating this world in short, clear, understandable ways if a social stock exchange or similar does that then great but there's a number of other ways but we've got to get out of the kind of lab and start talking in the language of marketing Can I add to that because it's a very important point you've raised one of the problems in the sector is that issue by issue product by product we put very complex structures together I mean as Richard will tell you sorry Martin will tell you the social impact bond in the UK cost in pro bono roughly $450,000 to put it together so we do issue by issue product by product these very complex structures and the nature of the cost structure is that it wipes out replication to a large extent and it makes it very difficult it's a huge barrier to entry to scaling that innovation what I think you will see happen and it's based around a number of structures that people are playing with at the moment is you'll begin to see security structures that begin to essentially make that easy and accessible and until you can drive those costs down if we want to engage the banks for example they have to be able to put it on their system they have to be able to manage it in risk terms and they have to be able to sell it to their salesmen their sales organisations at the A and when you take any of these ideas to bankers and try to pitch them they look at them and they think small horrific parts of the world I can't get a decent lunch in horrendous in terms of due diligence it has everything a banker dislikes so until we can get to a situation of actually securitising I mean that in the broad sense of the word in a sense that these structures become large scale and replicable and transparent then you won't see the banks involved and that I think is when the role of the social stock exchange begins to come to play in terms of your trading on this market and there are a series of moral values or social values that are tied to it but it's early days really isn't it so exchanges started a few hundred years ago in coffee shops with people realising that they were losing one in three boats going round to India to pick up spices and other such there's no secondary market effectively there's no if you speak to invest now where's you going to exit then me and Arthur would share a bunch of boats and we realised we were better off and then somebody would be overhearing in the coffee shop and they'd come in but they'd come in at a rate that was slightly better for myself and Arthur so Joe and Martin come in and suddenly the private placement structure and then we're sitting there celebrating six months later and effectively you've got a secondary market and it's only going through that almost organic process that you can get to a strong arguably a strong exchange mechanism there are a few secondary market functions starting to develop in the UK one of them is in the room and I'm wondering if you might want to explain what's going on with shared impact Paul great Paul James from Shared Impact so one of the problems in the UK is the lack of a secondary market for the instruments so the creation of that will be important for the transparency of the market transparency on funds and their track records and opening up the social investment to the retail investor a question to the panel there is this tension around the long-term creation of social value and social innovation and investor desire to have an exit it's often hard to see what exits actually mean in the social sector to what extent does the panel see that as a fundamental problem in the development of the market I'll just make a first observation on that and hopefully my fellow panellist can come up with something more intelligent to say the the point of exit is if you look at a purely commercial transaction let's say you go and buy a share in BP or Shell or something the point of secondary market liquidity is that you know that at some point in the future you want those few pounds back to go and buy something or do whatever with that money you know that there's somebody there there's an exchange you will just be able to sell it so that is your exit the exit is just there so that you can realise that money of maybe a profit or a loss or maybe just a sideways move but you can get your capital back and move on the large company BP or Shell isn't concerned that because you want to exit not everybody's exited or the equity hasn't gone you've merely passed on the ownership because you now need that cash back to rework it so I think in a way we have to be slightly careful for some reason when we start talking about social enterprise exit we start almost thinking that it's like everybody's going to bail out and that entity doesn't now have a finance base if we were at the point where social impact markets and environmental impact markets were fully functioning then all it would be would be just the passing on of those assets to other people who wanted to invest at that point in time so that's the essence we have anything better to say now our answer has been to avoid the question so we just have debt that matures and has a yield and we avoid it because if we wait for a solution we're never going to get the investors in so it's not a very good answer but it's where we are it will be refinanced but maybe not from equity it may best be refinanced it's in with the JP Morgan Acumen report that Kevin Jones mentioned this morning that basically says that there has to be a concession on equity coming into the market in the short and medium and long term but there's less of a pressure in terms of a concession on debt so it's easier to go in on debt for our issuers they are well able to take on debt well able to repay it and the reason they take it on is it's cheaper than bank finance so they just pay down other more expensive debt and they're not in the equity position at all and they may never get to the equity position coming up this slightly differently if you look at the majority if you think about public service delivery certainly in the UK the majority of outsourced public service delivery is not provided by social sector entities provided by the private sector and I would argue that it's legitimate for an innovative social sector venture to sell its IP sell the business into a private sector organisation if that transforms the way they're delivering service that creates an exit for a social investor with the right parameters in place I think it also has potential to scale up the impact I'm going to talk to a slightly different position there are a whole range of models in this marketplace that can potentially make money and do make money from carbon, the conversation I had last night social impact bonds if you securitise that nice government cash flow you would have an instrument that would then trade as a function of the achievement of the social metric that generates a secondary market there are ways of doing this it is it is perfectly feasible to do the problem with our sector is that we're a bit myopic in terms of the VCP model and tend to think within that paradigm and there is a lack of economy of scale in some of these new emerging emerging structures and as anybody knows that's involved in the financial markets the more assets under management you raise the lower your unit management costs are and the more sophisticated risk management tools you can put into place the problem is we're asking for 500,000 a million here or there and the ability to put sophisticated financial engineering into it is actually quite difficult and it's an issue of economy of scale I would actually argue that if you really want to move away from this single product market I don't understand why more people aren't mad about the fact that 98% of our market isn't associated with investment I really just don't grasp it if you really wanted to change it I would suggest that we put 20% of all foundation money into program related investment by 2020 that would immediately inject 140 billion dollars into social investment and it would be revenue neutral to revenue positive to government and that is demonstrable I can point you to the CBO figures that would indicate that and with interest rates at about 1% or 2% of the markets where they are I suspect it wouldn't really have a major impact on the foundations in fact they might even make more money God forbid that we actually do stuff in the social sector God forbid actually that we have social impact bonds that we actually performed on and provide a higher uncorrelated return this is an issue of political will it is an issue of our own community seizing the initiative and I would argue it's pretty essential they do because at the end of the day where you have a capital market where the cost of adding that capital is 50 cents on the dollar the moment the bankers sniff that the 1.4 trillion dollar market is fragmented and they can access that in an easy replicable manner they will be providing that cost of capital a dam site cheaper than a foundation that has one product OK I'm going to I've got four now five questions lined up so I'm going to ask the panel to tighten up and go nope are you sure you're done OK so now I have to run right up to the top if you are brilliant you're going to come down and meet me halfway thank you hi my name is Bjarnes the increased I work in the city of Malmö with something we call sustainable regeneration of the city's tower block area so I have a question whether you have experience from social impact investment in the housing sector the background to that is that between 1965 and 75 Sweden built 650,000 apartments in multi dwelling buildings which puts us on a percentage of the total housing stock on the level of Poland and Bulgaria and as in many other European cities we have a high concentration of unemployment poverty youth crime etc in these areas and there is today very scarce financing you could make some return on energy investments but that would probably only cover 20% of the total necessary investments because these houses are more or less falling apart and if you have 47 million of these apartments in western Europe and 10 million in eastern Europe of course can you in some way provide finance that would also change the social situation create jobs, raise income levels in these areas and could you create some kind of financial instrument around that challenge a complete solution to housing and all associated problems in two minutes Martin it's very easy we've done it already very very good question in terms of the housing very quickly in the UK the problem we've now run into was historically the government would basically provide the equity for the build phase of social housing and then once you had the housing in place you had government income coming in in the form of housing allowance to the tenants maybe partly owned or maybe entirely rented then you had a funding stream that you could go to the bank you could refinance that equity back out and you just got long term bank financing of course the problem you've now run into is two fold won the banks are a lot more reluctant to lend the money to a completed project and more importantly with all of the government cutbacks in the UK the equity piece for the building of sorry social housing has completely gone so the market is almost ground to a complete hold what we need to be doing in the UK because you're absolutely right if you give these people housing you give them an area that they can be proud to live in regeneration zones as they're known in the UK many of the other good positive social issues follow the problem we've got at the moment is finding that equity to Arthur's point this is exactly the types of things that foundations who claim to be interested in social community cohesion and social growth they should be providing that type of capital using their endowments to make those types of equity investments yes they're risky but they're not that risky make that and then provide something that maybe they leave some equity and the rest can be refinanced through bank debt but that was a should it's not happening at the moment I'd love to see and we as social finance are trying to work on it but as of yet we don't have a full solution there is one nascent solution that I know Joe and also Paul Chang on the front row have been involved into a certain degree is it worth mentioning here or not I just wonder whether this is a kind of thing where a local financial product works are there people in the local area who want to invest in housing in their own community the two issues in philanthropy they're always very interesting one which you can always raise funds for one is children and the other is housing there are lots of these types of models I'm not going to go into them now but happy to chat to you later certainly in the United States because housing obviously is an asset that you've got there at the end of the day so I think there is some innovation and it's probably worth a conversation okay next question hello Rodolfo from Main Street Partners I think that distribution is as in any industry is very important also in the impact investing social finance field what do you guys think about the banking sector or the banks in general which role should they play into this because if we look at money if we look at traditional securities we look at investments that are mainly intermediated by banks in some cases created by banks so what do you think is the role that banks should play here Arthur mentioned that actually when you talk to a banker you try to convince him to sell a product like that like a social bond or anything like that they get crazy because they don't understand it or maybe they don't like it and it's not enough money for the pocket so I've been a banker for 12 years social broker entrepreneur whatever you want to call it what do you think about it and which will be the right distribution channel if the banks are not the right one great question distribution is key for the growth of this market we spent the last several years trying to get those intermediaries, those bankers to engage in this product they are broadly useless I think we know that but it's depressingly they are depressingly useless so I think I'm just exploring ideas around online distribution I think if the yields for the products are sub-financial rate of return then we have to be smart around the way the distribution of product gets worked up so just right now we're just going through a model around how that might work we were set up I used to work for a Merrill Lynch and places like that and they are inaudently slow and difficult to deal with because there's a convenient spreadsheet and there's not 10 years worth of historic track record so I'm completely on side with your question and it's a key thing to get this distribution right because otherwise we won't get product out there obviously I'm going to strike her slightly more optimistic no, I agree with Jeff at the moment they're fairly useless but there's another redeemed banker I hope I'm passionate to try and get to a point where we can use the distribution channels that they do have because when I look at it from purely selfish point of view what's the point of me hiring lots of people and creating massive headcount within my own organisation to be distributing when there are people sat around the city of London and all the financial centres around Europe and around the world whose day job is already to pick up the phone and talk to investors if I had a £50 million six year bond, double A rated paying gilts plus 250 basis points for a social housing type event or even a social impact bond is probably a bad example to say social housing if I took that to Merrill Lynch or Morgan Stanley or whoever they'd place it for me but the point is we don't have the products at the moment sufficiently that we can take to them in a format they understand forget trying to persuade them to change and come in at this stage to Arthur's point earlier that just ain't happening we have to use them through the mechanisms that they understand or don't use them same for accessing retail I'd love to see products getting out there so that we could go and do more than just cash ices in Treados they're brilliant and that's the first one but we need to see loads of this stuff out there anybody here could walk into their high street branch and buy a product the problem is the regulator in Europe is USIT's three regulations lost half the audience but we don't have the underlying products and tools yet to be able to white label these things and sell them out through the high street banks of BNP, HSBC or whoever there's an interesting analogy here isn't there that there's BOP distribution of products has effectively failed because the same organisations that turn to R&D cook stoves or lighting are also trying to distribute and everything's fallen flat on its face frontier markets outside is one of the first outfits we're not interested in the product development we're just doing distribution and they seem to be smashing straight through so is there something there about doing what we're good at and letting the banks get on with it but Jeff you're saying they're rubbish two quick points it is disappointing these banks haven't met us halfway on the structuring side because they are experts at structuring and it is around the price I don't trust frankly a secondary market banker to distribute impact product on the right basis so if we're going to see this market grow and stay true to what we're trying to deliver here then I think it's very important that we come up with our own distribution because otherwise it will be lost Joe and then we're going to go to another question two quick points firstly we keep doing research there is demand for a product so it's definitely a distribution problem but you can see people creating their own distribution solutions and that's not just in the social investment space abundance is an example in the social and environmental space but Zopor has a peer-to-peer lending platform as the other one when I joined Ashoka eight years ago my brief was to engage the major financial institutions in this space so I've been dealing with them for about eight years on this issue you've got to first ask the question which bit of the bank for the private bank the reason they're interested is this is the largest transfer of wealth ever in human history $41 trillion in the United States alone that will be transferred by 3% of the population that owns 60% of the assets so for the private bankers when people reach 55 and glimpse their own mortality they rationalize their providers from 11 down to about 3 and philanthropy has a very clear mindset element in terms of that intergenerational wealth transfer that's the reason UBS is in this marketplace you then got the asset managers which are taking a look at SRI portfolios and see this as the fastest growing element of portfolios but bear in mind the asset managers are already taking 1% on the $1 trillion so 20% of everything we give away already goes as fees to the bankers the investment bankers that see this as a transition in terms of new investment banking models and I've seen this time and time again where you get the senior management to buy into it and then there's a little fracar inside the bank between the private bank and the investment bank is about who will actually produce the product I could mention two major banks whose names you would know that actually got to that stage and then because of the current crisis it all fell apart so I think the banks are interested and they understand the strategic issue the point to Jess point is that you've got to produce product that is easy replicable that is simple and banks are sales organisations at the end of the day and unless you can give it to a salesman he can touch it, feel it, smell it and punt it out the door and the risk guys can just look at it and put their standardized risk assessment then you're talking small which is exactly what we do small individual contractually law structures with no economies of scale and I come back to my previous point it is the last thing a banker ever wants to see we have two questions lined up and only a few minutes left we now have three, any other questions? or okay, so team nice and short and sweet, Tony hi Tony from Eco Capital I agree with you Arthur but I would argue that the private banks are really really far ahead of the structure for private banks and they are doing a lot of really innovative stuff but that, those products go straight into pockets that you don't see, I mean there is no secondary mark because they don't need one my question is really maybe looking 10, 15 years in the future especially when it comes to debt instruments what would you guys like to see, a repo market an options market and just on the social element of a bond I'd like just to get your thoughts 10, 15, 20 years in advance what you'd like to see as the debt market actually develops I'd like to see a market where the concept of impact investment impact investment is meaningless and that actually we've moved to a position of 3D investing where every investment and every product we make we price in the externalities, we price in the impact on whatever that investment actually is big deal I'm going to answer that on the basis of pain that I regularly go through I regularly go into speak to large multilateral organisations about a social finance issue and I'll give you an example on sanitation and they summon in the doctors and the engineers and they talk about an idea like a contingent return model after about 35 minutes they go now now we can't do this a contingent return model is in essence an option on a future if I want to know how I do an option on a future I go and ask a banker the flip side of this is that it would be me walking down to a city of London trading floor going hi guys what do you think about Bangladeshi sewage systems I get exactly the same nonsensical reply as I do when I put a social finance issue into the sectoral specialist there's nothing wrong with sectoral specialist but as a community answer ourselves how we can address we need to think about the innovation one or two cuts away and bring that expertise and leverage that expertise to the benefit of our community as opposed to asking the right questions to the wrong people so to your question I would like to start having conversations within the large organisations that recognise that this innovation that social entrepreneurs bring is one or two innovations away and that they need to think how they integrate that in terms of what they're doing Ross Hi my name is Ross Baird I run an organisation called Village Capital and we've been able to do some things in the UK which is great I have a question Arthur your idea about the PRI 20% is the most interesting idea I've heard all day I have no idea if it would work but it's very interesting my question is let's say that do you think that there would be enough demand in places to actually put that capital you can guess them doing that thing where questioners ask questions where they're really making statements I don't think they would so either you can answer that in the affirmative or if not what are the most interesting things out there that are going to increase places to put investment capital beside social impact bonds A programme related investment was passed by congress in 1969 it represents currently about 2% for those of you who don't know what programme related investment it is where a foundation is allowed to use a for profit capital tool for social purpose as long as the primary purpose is social and not for profit and that was confirmed to your point in February 2010 when the American Bar Association tax section I'll send you the letter wrote to the IRS commissioner confirming that the application of debt equity equity kickers was applicable for social investment and in fact this week the IRS produced a new series of guidelines from private foundations confirming that lead structure so there is law on the books that defines the application of for profit capital market tools for social purpose the stuff that I've worked in the United States which is around something called the L3C and we're doing it in the UK with the former charity commissioner and the leading UK lawyer and we're looking at the application of applying a limited liability policy to that structure and what that then allows you to do is to institutionalise the cross subsidisation between the charitable sector and the for profit sector with the social mission hardwired now does it work, does it happen yes, if you look at the affordable housing market you will see those are exactly the types of structures that have moved billions of dollars and furthermore you can take a look what the congressional budget office research says that says that is revenue neutral to revenue positive so all the L3C is and the SELP in the UK is taking that concept and applying that across philanthropy more broadly so to your question yes, there is a code Congress saw this back in 1969 in the United States it isn't used at the moment because of the way it is structured there is a legislation that's passed in 10 jurisdictions the congressional bill was tabled about 3-4 weeks 3-4 months ago, I apologise so there are legal moves afoot to simplify that process and it is part of a process to get to producing vehicles that don't cost it, it is part of the mechanism to produce scuritisation we have 3 minutes and 2 questions so the panel is going to have to be very very tight hi, Evan Gill from the Aga Khan foundation I'm not saying we have to wait this long but I'm also going to go about 10-15 years out into the future and I'm just wondering to affect the kind of social change that you're all looking to do what would be the one course that you would mandate every MBA student take psychedelic drugs oh yeah, I hate to already do it apparently the other question that was just down here could you pass that along please thank you thank you and I read from next billion I was wondering, we were talking about the necessity to have innovative products we were talking about asking the right questions to the wrong people what do you think who are the key people in bringing forward those innovations who must collaborate in which markets, in which sectors to bring these products into the market and into the awareness of the right people great, two brilliant questions to wrap up so I'm going to try and constitute this by saying as your closing statement the one MBA course that you think everybody should take and the single person, apologies for concentrating on your question the single person you think would make the substantive change that our questioner asked I'm going to answer what I think is easier which is the second question you've got to do both Joe okay so again with my sort of public service innovation hat on I think the single most important person in the future of innovation in public services is a commissioner who goes beyond being a procurer of services to somebody who thinks about the overall system so if you're thinking about looked after children somebody who not only understands what services they're buying now and they can buy now but what the evidence for what works is and where there's a need for innovation for investment and thinks about that as a system rather than a functional procurement job commissioner with binocular vision as per our earlier presenter and obviously you need to do a social finance course as part of your MBA I would do two things to the second question because that is the easier one I think this whole move towards outcome models when you move away from bilateral negotiation in terms of solutions to actually thinking in terms of tangible outcomes and you are paying by those tangible outcomes then you begin to create a mechanism for collaboration and scale so the first point in terms of changing the incentive structure this is change management at the end it's not about money it's about change management to the second question I'm a history buff and I like history I'd make everybody read Machiavelli 1528 and there's a quote by Machiavelli that said there is nothing more difficult than trying to change a system because all those that benefit out of the current system will basically protect their position and those that would change or wish to create the change do not see the benefits from which drop from that innovation I badly profess but you get the point so I would insist everybody reads the first management consultant which is Nicola Machiavelli in my view excellent second question first it would be strong engagement by the financial regulators that constrain our activity and the first answer the first question would be don't go to MBA school very good I should have gone first because you nicked the answer to that I would echo that the regulator to enable this market to open up more quickly the first question I would actually reflect the answer I made to Tony that I would instigate a course whereby people began to understand the true cost of everything they do and everything they do as a business and everything that they buy and everything that they invest in so that we actually start to correctly price the way we live and then people can start to think about how they actually therefore live and invest and do business I'll be writing that next week then thank you very much guys let's give our panel a round of applause


The federal executive council has approved the resumption of the federal capital development authority land swap initiative introduced by the previous administration. The minister of the federal capital territory, Mohammed Bello, announced this at the end of the weekly cabinet meeting presided over by President Mohammed Buhari. The minister said some amendments were made to the original initiative by establishing a legal framework to protect all parties. The federal executive council approved the land, FCT, a land infrastructure swap initiative, which is popularly known as land swap, which was commenced some time ago by previous FCT administration. And after a review of what has transpired over the years and also changes made, the federal executive council approved that we now should continue with the land swap initiative on the basis of amendments to the procedure as well as new safeguards introduced so that investors, the FCT, that is the government, as well as off-takers will be protected. Hello, hope you enjoyed the news. Please do subscribe to our YouTube channel and don't forget to hit the notification button so you get notified about fresh news updates.


The main question in the paper is how are institutional potential output estimates revisely responds to a shock and what seems to be disturbing in that evidence is that in presence of a shock with just temporary effect on GDP, even in the long run we see basically an important revision in potential output, even in the longer on when, even in presence of information on asymmetries people estimate in potential output should have understood that the shock is only a temporary one ne če ne izvajte potencijalne izvajte. Ism je tudi posil všim? Slepa, da je pomečena, še prist, in je tudi pravdiv.  And when you look at the policy implications of their estimations, you find out that if you take their analysis, then the U.S. of Pogap in the last decade is probably much larger than we thought. And I'm very sympathetic to this message with my colleague, Mario Kiarosinski, who was working on euro area data in a very different paper, but we come up with two relatively similar implications on the euro area potential up put and the up put gap. In particular, we find that its best potential output in the euro area after the crisis is best characterized by a relatively temporary slow down, but then return quite quick to pre-crisis growth rates. And then also to a much larger up put gap than institutional estimate. So you see a relatively similar result even based on very different methodologies. Now, I think that this paper has a very nice byproduct, so in particular this relatively simple and powerful, time-serious method to cross-check the estimate to potential up put. I think it's something that we should consider for the toolbox for the briefing monetary policy in central banks, in particular to help the assessment of the risks to more judgmental and sophisticated estimate to potential up put. Of course, these estimates and those that we have in the paper with Mario Kiaroski is also a lot of question about the policy implications, particularly about whether we should have done or we should do more policy stabilization policy than we thought. And the other one is what is the level of the natural rate in the recent decade if we take that potential output didn't strongly slow down. In particular, this would be relevant for discussion on the new normal. Is the natural rate so low as we thought or it's at the levels that we had before the crisis? Apart from this very general consideration, I have actually two further, a little bit more specific comments. The first one related on the issues, further issues for the business of estimating potential up put that can come from the advent of an economy more based on intangible goods. And in the second one what I want to do is to test a little bit the proposal of using Bevert VARs and in general the Blanchard Equal Methodology or EuroArea data with the aim of highlighting some of the possible challenges that there would be if we want to use these types of methods in the actual briefing at central banks. So, let me start very quickly with this comment on tangible intangible. We know investment can be into type of goods, so tangible goods is those you can touch, the usual investment we have in mind. And in tangible investment, which is said things you cannot really touch, so computerized information, innovative properties, economic competencies. Now, people working in this literature know that a recent finding is that over time in the share of intangible goods into GDP is growing while the one tangible investment is decaying and actually you see that in the recent decade intangible investment as a share of GDP seems to be larger than tangible investment. Why is that relevant? Well, because this actually poses another measurement challenge beyond those that Olivier already mentioned for estimates of potential output and for many other things. We know in fact that a large part of intangible goods and intangible investment escapes the national accounts. So, we might be much more uncertain about the potential output that we actually think on the basis of the data that we have. Of course, when you look actually at the estimates of intangible investment, it looks like at least so far that there is much more of a level shift rather than a change in the dynamics of investment due to this intangible investment. So, it's possible that there will not be such a big issue for our models but it is something that we have to take into account when we think about how uncertain we are about potential output, the apple gap and so on. Another thing which I think is relevant to take into account for the issues discussed by Olivier is that an economy that is strongly based on intangible goods could actually become more prone to decaying slope into, so decaying slope into the development of potential output. Particular because we know that for some of the characteristics of intangible investment, for example, scalability, implies that we might go and we already seen that to an economy with a few mega firms and an army of laggards. And these army of laggards might possibly imply important under investment. So, endemic under investment and given the relationship of investment in TFP growth, we would basically be heading towards endemic low TFP growth. So, I guess that we shouldn't be complacent about the results we have found both for the URI and for the US over relatively resilient slope of potential output because we might see in the future something different due to this advent of more intangible, more relevance of intangible goods in the economy. Let me then dive to my last point. I was really strongly inspired by the time series logic in the paper of Olivier and Quotors. Particular the main example which is based on this Blanchard and Qua methodology I think it's a simple and powerful idea and it's very tempting to use it in real time policy making although, of course, to fulfill so, in order to be used and to be accepted in our toolbox, it starts to fulfill several criteria that I want to mention and I want to discuss. I will focus mainly on one aspect in particular because this is not characterizing only the Blanchard and Qua application but also some of the other applications proposals that Olivier and Quotors presented. Particular what I want to ask here is does this method, this Blanchard and Qua method and the application in the paper is able to properly disentangle shocks and propagation. So let me tell you what I mean with that. So when you run this exercise based on VARs and implicit assumption before you start identifying shock is that your VAR is actually able to disentangle the propagation so if you want the red part up there in the equation from the shocks. So the red, the green part there. So you would expect that the forecast error of the VAR are only a linear combination of the structural shock and then you can run your identification exercise using the identification assumption that you believe in. This boils down to have that YT so the observable you put in the model the vector of observable is large enough to capture all the relationship of GDP and unemployment with the rest of the economy. In other words you do not have to omit any variable that would grandeur cause these two variables. And you know there are ways of texting that Mark and Bartoschier in first row they have a very nice paper on how to do that in a Bayesian context. Generally I would say that this bi-variate VAR from what we know about forecasting in the US and in the Euro area is too small to identify all the shocks. So most likely there will be omitted information. However let's remember what this exercise really is. They don't want to identify all the shocks in the VAR. They only want to identify really those that have a permanent effect on the economy. So it could still be that to this relatively smaller task this VAR is able to accomplish even in presence of omitted information. Of course this is an empirical question. So what I want to do is just to give you an example of what I'm talking about using Euro area data. What I will do I will compare a small VAR to a larger one where I put some information that would possibly be taught to grandeur cause the two variable here and I want to see if there are big differences in the outcomes of these two VARs to find out whether the omitted information is indeed relevant. So what I do here is just to estimate beside the two variable VAR Olivier Tal have estimated a five variable VAR where I add the real investment consumer confidence and capacity utilization. I run the VAR levels because I suspect that there are long run relationship I do not want to wash out by differencing here. I use quarterly data from 1995 to 2017 and not 2007 sorry use Bayesian estimation and I estimate so I identify the shocks similarly to what they do in the paper although with some small twist that is probably not appropriate to discuss here. Let me try to give you some results. So in the top panel here I'm showing you the shocks and the red line is the shocks in the bivarate VAR while the dash the black line is the shocks in the larger VAR you see that they are not that different but there are some important differences in particular around the period of the crisis where the bivarate VAR goes much more down and much more up and stay more positive for a longer period of time so we could you know we would think that that model adds some deficiencies into capturing some of the dynamics that were probably captured by some of the endogenous variable I have added in the five variable VAR and I'm looking at the impulse responses there to this shock and again the dash the black line are the impulse responses to the long run shock in the five variable VAR 16 to 84 quantile in the median and the red line is the median of the bivarate VAR so the density of the impulse responses are actually partly overlapping but the median of the bivarate VAR is sensibly higher than the median of the five variable VAR on impact twice as much the response and generally staying on the upper edge of the response so it seems that this five variable VAR does add information which could be relevant for the problem attend that is I remind you estimate the supply shock and throw them into this transmission mechanism to come up with an estimate to potential output so let's put it all together and let's look at which kind of estimate you would have for the upper gap in the two models now the level of this estimate doesn't mean anything because what I have done is buy the properties of the exercise and normalize them to zero in 1996 so they only have a sense of where would the upper gap be in a certain period compared to 1996 but the two are actually comparable because they did the same normalization what you can see is that the two models again do not differ that much in terms of peaks and troughs but in very important parts of where we would like to know where is the level of the upper gap they do differ for example in the boom period the upper gap in the euro area was sensibly higher in the red line and very recently we see that instead the red line would probably give us a more dire perspective than the dashed red line but the difference in the last part is consistently around 2 percent now it is also fair to say that if you put uncertainty around these estimates these differences are not enormous okay maybe there is a significant difference there in the peak of the boom and very briefly in the last part of the sample but by a large, statistically these differences are not too big however, we know that if you are a policymaker you have to talk about the level of the upper gap zero is very different from minus two also in terms of communication so let me then say what are some very quickly what are some other dimension in which we would want to test the proposal of Olivier encotors if we want to use it in our tool but of course there are other possibilities in terms of which variable to add there is a way, a reason to think that we should be much more careful about the domestic component in the VAR they mention that in the paper as well so in their model, in my model here is just exogenous but you might want to model it for example as a function of slow moving important elements like demographics and so on and so forth there is a question of how much uncertainty there are in these estimates there is a question of robustness to data revision and so on and so forth so just to say that this is a great proposal I think we should think a little bit more carefully to how to do to include it in our toolbox so let me conclude now so I think this is a very nice paper it gave me a very fresh perspective on an old but still relevant problem I think that I agree with them that maybe potential output is not growing so slowly after all and in my comments I just tried to twilight some of the issues around this work or if you want elaborate on some of the further question that are stimulated by this nice paper thank you okay now is time for round of questions before we also turn back to Olivier to react to the discussion we have two mics running around and Mark has the first question if someone could give them a mic yeah it's coming from the other side Mark I was just gonna say that I think it seems quite reasonable up until this past year argue that outputs been below potential just on the behavior of inflation because in the US inflation have been running at one percent to one and a half percent so that's consistent I think with your argument but in this past year my impression is there's been a pickup in inflation to around target two percent or slightly above and you're seeing wage growth real wage growth start to pick up as well so it seems like to me what you kind of want is you have these sizable output gaps up until this past year but then you'd kind of like them to narrow at least based on the inflation data next question over there yeah Frank to the right of you two questions one question is I was wondering to what extent these results are driven by the great recession and the double dip recession in the case of the euro area because there of course don't mean the financial crisis was a very important element and you could argue that when financial intermediation isn't working that that has an impact on sort of misallocation of resources and TFP if we do a decomposition of this fall in potential growth for the euro area for example in the recession then it's mostly coming from the TFP growth again that's not any evidence but it's just a sort of an observation the second question I have is so I mean basically have kind of three theories out there not to explain the cyclicality of potential growth or the level of growth one is kind of mismazement which I think can be statistical mismazement or can be the fact that we forgot or we didn't allow the slope of the Phillips curve to flatten because for example in a low inflation environment there is more evidence of downward nominal weight rigidity and so on so forth so that's one sort of set of theories the other one is the other extreme where this is indeed the sort of the legacy of let's say the recession on potential on the working of the supply side of the economy and in between and you mentioned that there is sort of the hysteresis kind of hypothesis I wasn't sure where your analysis speaks to that hypothesis and so again another question Bernard in the back yes somewhat going in the same direction it seems to be a healthy reminder of the kind of work that Ofanidis did on the pitfalls of the real time measurement estimates so I would draw the opposite policy conclusion that Nikkele has done that there's more scope for stabilization policy maybe there's less scope and the two points I want to make is one are your results robust to the starting point so isn't there as much overestimation of potential output before the crisis during the new economy boom during the credit boom bus cycle then there's now a case for seeing an underestimation so on average maybe we actually in level terms we are not underestimating now if the overestimation pre-crisis was high enough so that's one question on robustness and the second point what is your take on the recent GDP revision for the US in the benchmark revision so we actually have uncertainty about actual GDP not only about potential GDP we've seen actual GDP revised up now by one percent so the gap you're pointing to is being closed not just by revising the potential output but also by the real output the actual output thank you okay I will come back Arresta but before at least I forget the questions maybe we go back to Olivier sure thank you so thank you Michela for your comments I think the idea of using a larger var is a fine one we don't have any particular attachment to the specifics of the Blanchard and Qua approach for us this was just a particularly tractable way of trying to separate supply and demand shocks in real time as Michela emphasized the Blanchard and Qua approach does not allow you to separate out the different kinds of supply and demand shocks and so in principle it will work only to the extent that different supply and demand shocks give you pretty similar dynamics you know in practice it seemed to work fine in terms of what we were doing but certainly there's I think there's scope for considering larger scale vars one issue with integrating consumer confidence into these vars is that previous work has found that consumer confidence seems to capture a lot of news about future productivity and so this is going to be a little tricky to integrate when you're thinking about estimates of potential GDP because if you're getting news about a future increase in productivity which would show that should tell you that you know in the future potential GDP will be higher potential GDP today has not increased and so if you're integrating this consumer confidence into your var then you're likely to overestimate by how much potential GDP is changing today because you're going to be incorporating this news about future productivity into that but certainly I think there's scope for considering larger scale vars in principle you know that you should be able to combine the information about consumption and inflation et cetera into a single framework which I think would be much more useful in response to Mark's point about inflation over the last year so in the context of the Phillips curve we're using what matters in terms of identifying the gap is the difference between inflation and the measure of inflation expectations that you're using in that Phillips curve the inflation expectations we're using are still higher than actual inflation so we would still have a gap of the same sign it would be the case that that gap is smaller now than it was as inflation kind of converges higher to those expectations so in the paper we stop in 2017 so that's why you don't see that closing happening but certainly would have narrowed somewhat over the last year if we extended it it wouldn't have closed again because those expectations are still significantly higher than actual inflation so in response to the point about hysteresis so we view our interpretation of the data as complementary in terms of the policy implications as the hysteresis view so the hysteresis view is you've had these demand side shocks which have brought down the potential level of GDP through whatever hysteresis mechanisms we think would be important but if that's the case then demand side policies can reverse those changes and so you should be doing more of these demand side policies to reverse the declines of potential GDP our view is that potential GDP hasn't fallen so much and there remains a large output gap which you should be closing through demand side policies how do you separate between those our view is there's not there's not really any empirical evidence for the hysteresis view there's a long literature on for example the effects of monetary policy on the economy you don't find in any of those papers hardly results that suggest that monetary policy shocks have long lived effects on GDP which is what you would need for the hysteresis view to be important of course in the long run the fact that you can't reject that the effect is zero doesn't mean that the effect is literally zero so maybe it's just a question of precision about the long run effects so when we do the Blanchard and Qua we're implicitly assuming that the hysteresis view is not true but when you do the the Cochran approach the Cochran approach is not taking a stand on hysteresis all it's saying is you can identify changes and potential from what's happening to consumption based on whether people are interpreting those changes in income as being permanent or transitory so imagine a world where you have hysteresis then demand and supply shocks can have permanent effects on GDP that's going to be getting picked up by consumption in this world and so when you do the Cochran var those declines in permanent GDP in the potential GDP that we're identifying could be coming from either supply or demand side shocks the demand part can happen if you have hysteresis in that case we're not ruling out hysteresis but qualitatively it still gives us the same picture which is there's been some decline in potential but not nearly as big as what the CBO would have us would have us think the point about linking this to Orphanides we agree I mean the interpretation we have is kind of the flip side of what Orphanides said about the 1970s and so essentially right now I think we're at risk of understimulating the economy because of mismeasurement of the gap and then in terms of where we overestimating the gap pre crisis that's certainly an issue when you're doing the var methodologies because they're essentially we're imposing a normalization as as Michele said about what was some initial level it's not so much an issue when you do the Phillips curve approach because there you can actually make a statement about the size of the gap and in that case it's giving us something something similar but certainly when you do the var methodologies you do have to worry about what is the starting point that you're assuming Oreste he left okay so was not so urgent any other questions very good so when policymakers get presented these estimates from the various models present us are not always as lucky as as you seem to be where all your estimates are above the official estimate but often time they kind of cross all these lines or they spend pretty much the entire chart and then it's everyone's guess which one is the most relevant one but what I take away is that we should think very hard about whether we are facing series of demand shocks or supply shocks and this is also in the forecasting side of the ECB where put a lot of emphasis not just relying on the models but really thinking about the narrative that goes into these models all right thanks very much for this presentation so we move on to the second paper Emmanuel will present this