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Ocean Crest Alliance new wave of Action BLUE CAPITAL Blue Capital is the groundswell building on the horizon and OCA is positioned nicely, to catch and ride the wave! Since 1969, when program-related investments (PRIs) were first written into the U.S. Tax Code, U.S.-based private foundations could make investments that count as grant distributions whenever there was a case to be made that those investments would not have been made by mainstream investors. The tax language that defined PRI-making in American philanthropy also forms the basis of the broader trend of Blue Capital Investing in global philanthropy, an approach that often deploys charitable capital — in the form of grants, recoverable grants and PRIs — as well as noncharitable, impact-seeking capital, into investments that prioritize impact and address important capital needs neglected by mainstream investors. Blue capital programs are built to alter the risk/return profiles of high-impact companies, projects or funds to bring mainstream, economically motivated investors to the table (whether at the same time or in subsequent investment rounds) to support solutions that would otherwise remain overlooked. This global trend gives us hope of addressing the world’s most pressing problems at a scale unattainable by nonprofit programming alone. These days, philanthropists are expanding the toolkit they use to give, including blue capital, at an accelerating pace. Building OCA infrastructure to steward Blue Capital OCA was founded in 2012, to accelerate the change needed in ocean Conservation, Research, Education, Science and Technology, an effort branded as CREST activities. As with most small non-profits we experienced that through the traditional fund raising mechanisms, achieving our goals was an arduous task, due to the lack of funding needed for our operations. We have shifted gears and are leveraging and investing our assets to aggregate blue capital towards deploying scalable solutions to climate change. As we celebrate over a decade of dedication and work (and many more to go), it’s clearer than ever that nonprofit public charities have critical new roles to play in this emerging era of market-minded philanthropic giving. Here are five responsibilities we believe OCA is uniquely positioned to fulfill.
When a philanthropist wants to deploy blue capital, they can do so directly through Ocean Crest Group, our for profit business sector, or they can partner with OCA partners who specialize in pooling and deploying blue capital from many sources toward a shared mission. Founders of investment programs set up formation documents and procedures that everyone must follow over the course of the program’s lifecycle. At our core, our organization thrives on alliances. Our success in collaboration with communities, governments, academia, technical and tourism partners, are essential in our ability to fulfill our purpose. With this commitment, we are excited to introduce our new business division, OCEAN CREST GROUP. The new division embodies our dedication to alliances while developing strategic funding partners. OCA will play a pivotal role in building a strong, unbiased case for the program as a whole, selecting the right-fit investment managers, architecting the governance, categorizing impact-first investment criteria and more. It is strongly in OCA’s interests to do these things to advance our nonprofit missions — the reason we exist. Based on over a decade of experience as a nonprofit and through many years of working in the large yacht industry, the process of planning a new project begins obviously with general premise and validation. Once these are complete, a baseline for funding negotiations is set followed by the design, specifications, fundraising, and implementation. We consider this our internal how-to guide for launching any new blue capital program. Throughout the process, there are many ways for OCA will strengthen the case for the program’s existence, prioritize mission and set the future direction of all fund activities. For example, Prime sets a high bar for impact potential and for how we expect this potential to be assessed. We also require that investment programs we establish must not make investments where mainstream investors could provide ample support without our involvement, even when the impact projections are high. While it is counterintuitive to most investors to step away from a “hot deal,” this is the essence of why a market-driven effort does or does not deserve charitable support.
In order to imagine market-driven solutions achieving commercial scale that might also make large-scale impact as intended, we want our impact-first investment managers to choose companies and projects guided by their business acumen. But we need them to choose with their sustainable and charitable-purpose mindsets as the guideline. To steward blue capital requires that investment managers choose solutions that, by definition, have unacceptable risk/return profiles for mainstream investors — and also presents important opportunities for impact linked compensation. Both the authorship and implementation of impact-linked compensation programs must occur apart from those who stand to benefit from those decisions, leaving the expert at the mission — OCA — well positioned for this role, and singularly able to set appropriate impact milestones, unbiased by personal gain.
Over the past century, to accommodate philanthropic giving behaviors that expanded alongside American economic progress, the U.S. has built a massive infrastructure of nonprofit public charities. These organizations are positioned to receive and steward tax-deductible grants from philanthropic asset owners to advance a wide variety of charitable purposes. It is time we had a blue capital marketplace that functions at a similarly meaningful scale to address our global social and environmental challenges. To meet that need, OCA has developed our capacity to raise, receive, manage and report about complex incoming financial transactions, including traditional and recoverable grants, PRIs and non-tax-exempt, mission-aligned investment capital. OCA is a destination for philanthropic asset owners to efficiently deploy blue capital. Building OCA’s infrastructure not only holds market forces accountable, but also allows the market to behave in ways that are uncommon among for-profit investment firms, such as reducing investment minimums in the spirit of inclusion and viewing investor relations beyond mere financial transactions. In today’s growing blue capital market, an educational posture with new-to-catalytic-capital investors is vital for our program to serve as an easy on-ramp to blue investing.
As a nonconflicted and expert third party, OCA can assess deals against underwriting criteria pre-investment, staff governing and advisory groups that have gating authority over investment decisions, drive post-investment tracking, and report impact metrics. OCA can assess investment managers’ performance toward positive impact outcomes and away from unintended social and environmental harm. Conducting these activities as a third party removes the opportunity for even the most mission-aligned investment managers to tip the scales knowingly or unknowingly toward private benefit.
If blue capital is a gathering single wave, and crowding-in market capital is the rest of the ocean, then OCA can change the strength and direction of the swell or the shape of the shoreline. OCA can shape the wave by, for example, planning grant-supported programming around investments to work on the regulatory environment, policy, community partnership, and other general conditions that will produce favorable social and environmental outcomes. Imagine a blue equity investment into a novel off the grid capacity energy company that also comes with nonprofit capacity support and expertise to work hand-in-hand with regulatory commissions to unlock permitting for energy providers. Alternatively, envision a catalytic loan guarantee for a carbon credit program that also includes nonprofit support for community partnerships, setting a best-in-class, and, ultimately, money-saving precedent for carbon credit programs elsewhere. This is hard work for the “community good” beyond one company or project —assistance that is not typically provided through platform services from for-profit investment firms. Supporting OCA infrastructure while deploying blue capital It is easy for market forces to cause a program to default to the self-interest of its stakeholders, and to lose sight of its own virtuous intent. This is because it is demanding to keep a collective mission front and center. And it is more demanding still to advance good intent to its greatest impact possible. The best path can therefore seem tough, but it is also the best path — an exciting opportunity for OCA to advance our charitable purposes at scale. As family offices, foundations, donor-advised funds, corporate giving programs and trusts increasingly deploy charitable capital into market-driven solutions, it is imperative to support nonprofit public charities, such as OCA, in their hard work to ensure that complex blue capital pursue excellence. In order to achieve our goals, we are hopeful philanthropists of all stripes will support our efforts. That’s the future OCA wishes for all! To learn more about our Blue Capital opportunities please contact: Nicola Ierna ni-oca@oceancrestalliance.org or Joseph Ierna Jr. jijr-oca@oceancrestalliance.org
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