How Does Clean Energy Help Us Grow?

The foundation for a low carbon energy future, involving not only power sources like wind and solar, but also such wide-ranging industries as lighting and transportation, continues to strengthen. Renewables and clean technology are scaling up faster than expected, with advancing technology and significant cost declines drawing investors and accelerating growth. What’s more, substantial economic benefits have become more obvious, perhaps most significantly in the expansion of infrastructure and local jobs.
Goldman Sachs has been instrumental as both an investor and financier in clean energy development. Since setting our initial target in 2012 to deploy $40 billion over 10 years in the clean energy space, we have invested and financed $54 billion and expanded our goal to $150 billion in capital by 2025. This will ensure that we continue to play a key role, leveraging capital markets to aid in the global transition to greater energy security and sustainable economic growth.
The impact of our investment and expertise has been visible and substantial. From 2012 through May 2016, when we reached the initial $40 billion target, we helped 89 companies and projects scale up clean energy and renewables in 29 countries, helping facilitate 31 gigawatts of renewable electricity generation — enough to power 5.5 million U.S. homes. Our investments and financings have also fueled the broader clean tech ecosystem: the development of electric cars, smart grids and manufacturing capacity for solar components and advanced biofuels.
Together, these companies and projects have helped to employ tens of thousands of people and have had a significant positive economic impact on local communities. What’s more, they are helping to avoid millions of metric tons of greenhouse gas emissions per year.
[ph]

Clean Energy Impact Report

Clean tech and renewables are growing and are resulting in significant benefits, from reduced environmental impact to economic development in markets worldwide. What are the benefits of our own commitment to the clean energy space? We recently issued a report that gauged the impacts of our investments and financings across the globe. After conducting our analysis, here’s what we found.

The Three Drivers of a Low Carbon Future

Technology, capital and policy — all have a leading role to play in increasing energy security, reducing negative impacts and moving the global economy to a more sustainable energy system. Kyung-Ah Park, head of Goldman Sachs’ Environmental Markets Group, sees rapid technology innovation and convergence, catalyzed by capital and policy, driving a broader shift to a low carbon economy.
[ph]
This article is paid for by Goldman Sachs.

What Is Powering the ESG Investing Surge?

Environmental, social and governance (ESG) investing, once a sideline practice, has gone decisively mainstream, and this is creating real opportunities for investors. These opportunities meet the interests of a wide spectrum of clients, from fiduciaries aligning their portfolios with the realities of a rapidly changing world to clients who are increasingly looking to have their investments express their values.
Better data, refined tools and improved methods have expanded the possibilities across all of those interests. As a result, ESG investing is no longer a carve-out within a portfolio — it is the portfolio for some investors. What was once the province of a small number of family offices and foundations has drawn sharply increased participation among pension funds, insurance companies, nonprofits and faith-based investors.
At Goldman Sachs, the growth of ESG investing has been significant in recent years. We have seen a virtuous cycle in which demand has driven product and service innovation, creating new models for success and driving further demand. As a result, our assets under supervision in dedicated ESG strategies have grown significantly, to $6.5 billion by the end of 2016.
Fundamental to this growth is an increased understanding that a disciplined approach to ESG investing can drive competitive risk-adjusted returns — just as with any other investment. Risk/return profiles of ESG portfolios now mirror the markets and span asset classes, fueling the evolution of impact investment strategies that meet conventional risk/return hurdles, but also include social and environmental impacts that are both intentional and measurable.

World Resources Institute

How does a research-driven, global institute focused on sustainability manage its portfolio for the long term? One way is by leveraging its own research on trends to more effectively steward their endowment while also using this work to create a model for other institutional investors. Here, the World Resources Institute’s President and CEO Andrew Steer and Head of Sustainable Investing Elizabeth Lewis discuss WRI’s objectives and investing approach with Goldman Sachs’ John Goldstein.
[ph]

Municipal Bonds: An Overlooked Impact Investment?

As interest grows in achieving positive impacts while generating market-rate returns, investors may forget about the opportunity in their own backyards: municipal bonds. Often focused on financing redevelopment, infrastructure and key community needs for education, health, housing and sustainability, municipal bonds can drive ESG impact in addition to providing clear tax advantages. Senior portfolio manager Ben Barber and research analyst Michael Kashani of Goldman Sachs Asset Management explain. Read the discussion.
This article is paid for by Goldman Sachs.
Social thumbnail by Tzido Sun/Shutterstock.

Will Bringing Big Data Into the Classroom Help Students Learn Better?

Brad McIlquham was tutoring at-risk youth in Durham, N.C., when a former co-worker gave him the educator’s equivalent of the Social Network pitch. What if, instead of teaching at most 50 kids a year, you could help bring personalized tutoring to 100,000, or a million kids?
McIlquham’s co-worker, Jose Ferreira — who had taught SAT and GMAT prep with McIlquham at Kaplan — was proposing an upending of the traditional “teach to the middle” classroom model. When teachers instruct students of varying ability in the same class, some students get bored, while others struggle. And often, teachers don’t discover which students have failed to understand key concepts until their tests get graded. But by then, they’ve already fallen behind. In the meantime, all the potentially useful data from students’ individual homework assignments, quizzes and textbook exercises — everything but the final grade — disappear into the ether.
Ferreira came up with an idea to capture that data and use it to create digital education tools that help tailor the curriculum to each student as he or she learns — by detecting gaps in knowledge early on, recommending the appropriate exercises to help students acquire skill and alerting teachers when students are struggling. “Our goal is to personalize education,” says McIlquham, now director of academics of the education startup called Knewton that Ferreira founded, “to take educational content and understand not only the ins and outs of that content, but how students interact with it — when students run into difficulties, when they start to forget things — and use it to customize the educational experience.”
Knewton, which launched in 2008, bills itself as an adaptive learning “platform,” a behind-the-scenes service that schools can use to personalize their existing digital coursework. Assisted by Knewton, schools can monitor students’ progress as they work through lessons and make sure students are grasping the material before moving on. In its early years, Knewton was designing its own digital coursework. But since 2011, it has partnered with the textbook publishing company Pearson, combining its analytics tools with that company’s educational material; and last summer Knewton announced a similar partnership with Houghton Mifflin Harcourt publishing company. So far, Knewton’s also received $105 million in funding from Pearson and a collection of venture capital firms.
MORE: This Controversial Teaching Method Is Changing Classrooms
Knewton didn’t invent adaptive learning: There are a lot of digital education tools that tailor coursework to individual students, giving them more difficult problems as they get better at solving them, for example. The technology has become increasingly popular with the growth of the “flipped classroom,” a way of organizing courses so that students watch video lectures and do reading at home, then do coursework and exercises in class, where teachers are there to help them.
Knewton brings advanced data analysis to this model, looking at factors like how much time students spend on specific questions and whether they consistently fall for certain false answers. “This shows a misconception, that they’re thinking about a concept in the wrong way,” McIlquham says. It’s something that might be easy to fix, but would be difficult to detect from looking at the results of a single test.
McIlquham emphasizes that this kind of adaptive process is a boon to teachers as well as to students, giving them new insight into what lessons are working, what concepts need to be revisited and which students are falling behind. “Teachers will be so much better equipped when they walk into the classroom,” he says.
As Knewton gathers more and more data, McIlquham says, it will also be able to figure out patterns in learning, drawing connections between certain types of students and what learning methods work best for them — a sort of Netflix-style “people who did well with this exercise also did well with this” recommendation engine. “If you’re a similar student and you struggled with something I struggled with, we can see that if I learned it the same way, data suggests you’ll learn well that way too,” explains McIlquham.
ALSO: The Next Frontier in Online Education Isn’t What You’d Expect
Knewton will have a lot of data to work with. Through its partnerships with Pearson and Houghton Mifflin Harcourt, it is now “powering” interactive education programs for 3 million students, and will reach up to 10 million by the end of 2014, from kindergarten all the way through college.
Mcllquham envisions an educational system where grade levels and semesters fall away, and students progress at their own pace, learning key concepts in small groups with help from a teacher. One of Knewton’s earliest test programs involved remedial math students at Arizona State University, which contracted with Knewton in 2011 to design an adaptive math program. ASU had a dropout problem. Some of its remedial students had been away from school for 10 years and needed a quick refresher, while others had never received basic math education in the first place. When these students were dumped into the same classroom, few received the right kind of instruction and many dropped out.
Knewton’s program let more advanced students skip concepts they already understood and focus on ones they didn’t, while an instructor went from student to student giving individual help. Initial figures from Knewton’s adaptive program at ASU showed that withdrawal rates dropped by half after two semesters and the proportion of students getting passing grades rose from 64 percent to 75 percent. Almost half the students finished their classes four weeks early. McIlquham says this sort of variable pacing and small-group instruction could become the norm.
Some observers have pointed out that while go-at-your-own-pace learning works well for some students, it can allow less motivated students to fall far behind. There are also questions about whether adaptive learning can extend beyond basic introductory classes, and whether it would work with less quantifiable, more intuitive subject matter, like literature and philosophy.
McIlquham thinks that adaptive education will free up teachers in any setting for more one-on-one instruction with students, and help them figure out which students need special attention. “Teachers are going to have so much more relevant information about their classes available to them,” says McIlquham. “As a teacher myself I’m excited about that. I’m much happier working with students on problem solving, critical thinking and issues they’re having, than standing up in front of a class and lecturing as if they’re all the same student.”
DON’T MISS: The Minerva Project: On Online College to Rival the Ivy League

This State May Have Discovered the Secret to Saving Tax Dollars While Doing Good

In Massachusetts, Governor Deval Patrick has launched a $27 million initiative that he hopes will keep at-risk youth out of jail, reduce crime, and promote safer communities. That may sound like a tall order — after all, it’s more difficult than ever to get funding for social services these days — but the government isn’t fronting the cost, and neither are the taxpayers. Instead, the Massachusetts Juvenile Justice Pay for Success Initiative will be funded by organizations like Third Sector Capital Partners, New Profit Inc., Living Cities, the Laura and John Arnold Foundation, and Goldman Sachs, among other private and nonprofit investors, through the largest social impact bond ever created in the U.S.

Social impact bonds are a new type of philanthropy that involves a partnership among the government, nonprofit organizations and private-sector investors. Here’s how  they work: a government identifies a social problem in the community and contracts with private investors who raise money to fund a solution and (hopefully) achieve a pre-determined goal. Participating nonprofits manage the project — in the case of the Massachusetts’s initiative, Third Sector Capital Partners, a nonprofit advisory firm, will serve as the project intermediary, while Roca, a local charity that aids high-risk young men, will provide the services — while a third party conducts a rigorous independent evaluation at the conclusion to determine if it achieved the desired outcome. Only then will the government (and taxpayers) pay the investors back. Therefore, Social impact bonds (otherwise known as Pay for Success initiatives) is a minimal risk to taxpayers, while allowing nonprofits to use their already-established resources to make a significant societal change.

MORE: In the Do-Nothing Congress, These Lawmakers Got Things Done

In Massachusetts, the new Pay for Success initiative will allow Roca to provide job training, counseling and other services to 929 at-risk young men between the ages of 17 and 23, all of whom are currently in the juvenile justice or probation system. Roca has a specific model that it uses to keep its participants out of jail and employed. Its four-year program consists of two years of intensive support from a youth worker, followed by two years of follow-up, and has a proven track record. Out of 115 young men participating in the final two years of the program, 89 percent had no new arrests, 69 percent retained employment for three months and 95 percent had no new legal violations, according to Fast Company. The social impact bond’s success will be determined by Roca’s ability to reduce the number of days participants spend in jail by 40 percent, and improve these young mens’ employment options. If Roca’s services are proven to produce these positive outcomes — in turn saving Massachusetts millions — the government will begin making “success payments” to the investors. “By working with our partners at Roca, the Pay for Success initiative will allow us to marry smart financial solutions with programs proven successful in helping high-risk youth become employed, stay employed, and break the cycle of violence,” Patrick said in a press release.

ALSO: How to Get People to Save When All They Want to Do Is Play the Lottery

Massachusetts recently received an $11.7 million grant — the first of its kind — from the Department of Labor to help fund this Pay for Success initiative.  The additional funding will help with success payments and enable the state to extend the project, should it be successful, to an additional 391 young men, thereby serving a total of up to 1,320 young men over nine years. On a larger scale, these social impact bonds are an innovative way for governments to try to fix some of the largest social issues facing the nation, without risking taxpayer backlash. Colorado, New York, Ohio, South Carolina and other states are pursuing Pay for Success initiatives. The only question is: which state will be next?

MORE: Seattle Readies ‘Financial Empowerment Centers’ for Low-Income Residents