My thanks to Temasek and Temasek Foundation for inviting me to join you this morning. I think you are onto something important in this Philanthropy Asia Summit.
Its basic aim is to shift from traditional philanthropy – individualised and often transactional, ‘chequebook philanthropy’ – towards collective action for greater impact. Collective action amongst philanthropies themselves, as well as a new compact between philanthropies, governments and the private sector. This is key to addressing the biggest challenges we face, globally and within our own societies.
Temasek CEO Dilhan Pillay’s remarks earlier this morning summarised it well. The whole purpose is to catalyse partnerships – partnerships for impact and partnerships for the common good. And each of those three points is instructive – catalyse partnerships, impact, common good. That should be the way we orient ourselves, and there is a lot to be done.
I know you are working on important initiatives. We have to scale this up - more initiatives, more philanthropies, more partners, and more global scale. Importantly, the initiatives also recognise that finance can and must be a force for good. We have to organise ourselves to make that possible.
We start from a very unkind pandemic, unkind particularly to those who were already disadvantaged. They have been set back further – children from lower-income families who could not manage studying at home, communities and countries that were already behind.
But the pandemic also saw an outpouring of kindness. In fact, philanthropic giving has soared in the last year – something like $20 billion globally – far more than happened after the global financial crisis or other major crises in the past. We’ve got to make sure that this is not just episodic. It is not just a cataclysm that should lead to this giving. We’ve got to find ways to keep this going, keep the momentum going.
The way to do it is like this initiative – coalescing partnerships, finding a way in which we motivate each other, collaborate with each other, bring skills and expertise together. And it really can be done. The three initiatives that you are taking forward this morning illustrate the approach – the Mangrove Cities Alliance (M40), the Accelerating Circular and Resilient Cities (programme) with Malacca being a good example, and Inclusive Education.
I believe the broader orientation you are taking is the right one: addressing the big challenges of our times, within our own societies and globally. The big challenges we now face are existential – the threats to the existential commons of climate security and global health security – and the challenge we face of widening gaps in opportunities within our societies and globally.
I would have to say that amongst the gaps that are opening up as a result of COVID, or rather have been accentuated by COVID, the largest gap we have globally is the gap in learning. It was already large, and has widened greatly. And the consequences of this gap, much more so than gaps in income or wealth, are for the long term. They shape trajectories that are further apart than before. That divergence will have much more than economic consequences globally, and we have to take it very seriously.
So those are the major challenges – the degradation of biodiversity and climate security, the loss of global health security that goes together with that, and the widening inequalities and especially gaps in opportunity within many societies and certainly globally. But they cannot be addressed in the traditional ways, where the public sector does its thing, through taxes and redistribution.
Some corporate leaders are taking the lead, but we cannot expect that markets will do the job on their own. And it cannot be done by philanthropies on their own, no matter how well-intentioned. It does require a more concerted partnership between the public and private sectors and philanthropies. A much more involved partnership, with each bringing something a little different – different skills, different orientations and time horizons, different missions. I would not say completely different missions, but overlapping missions which are still distinct, as they have to be.
We need the public sector, first and foremost to provide incentives through taxes, and through regulation. We need political leadership to promote trust, which is a critical ingredient in everything we are trying to do. Trust within our own societies, and trust globally.
The private sector discipline is important in all of this – focussing on outcomes, the impact we are trying to achieve, and having some discipline in working to achieve it. It is a discipline that is often missing when we talk about public mission and trying to serve the broader good.
We need philanthropies. Not just in the traditional sense of needing a flow of charitable monies, although that’s important, just like government redistribution is important. But that is not going to solve the big problems of the day. We need philanthropies because they have a different risk absorption capacity. They have the ability to take certain risks that the private sector cannot. They have the ability to accept failure, which we must expect as we now invest in the technologies and the innovations needed to address the biggest challenges. So we need philanthropies, and we have to think about this from the perspective of an investment ecosystem and not just a charity ecosystem.
Another way I could illustrate this is by describing the scale of the challenge. If we take climate transition alone. Estimates vary, but roughly speaking, we are going to need between $100-$150 trillion US dollars over the next 30 years in investments –investments in new technologies and paying to mothball plants based on old technologies. So let’s say at least $3 trillion per year, which is not likely to be an overestimate.
$3 trillion sounds like a lot, and is certainly a lot more than has been going so far towards new technologies and innovations to achieve climate transition. But the size of global assets under management today is about $110 trillion, and each year it grows by more than $3 trillion. The increment alone is equal to the amount of money that has to be invested in transition – not counting the reorientation of existing funds and investments within the $110 trillion.
So the numbers sound daunting, and they sounded daunting at COP26 – but they are achievable. There is money and wealth out there that needs to be incentivised, to some extent needs to be corralled, but we need to organise this. It requires close partnership between the public, private and philanthropic sectors.
The reason why it requires such partnership and cannot be left to markets is because a significant portion of the technologies required for transition are in fact not yet bankable or investable. Some are marginally bankable, some are still some ways off. The International Energy Association estimates that roughly half the technologies required, and which the world hopes will eventually become viable, are not there yet. (They are) still being developed - some still at the basic R&D stage, some now in translational R&D, some being tried out in an experimental way, but they are not there yet. And you cannot expect the private sector to invest in a major way in something that is not there yet.
Yet we cannot just wait for the new technologies to become bankable. The next 10 to 15 years is critical. We have to step up the pace of innovation, step up the pace of developing and applying new technologies, and it cannot be done by the private sector alone. The private returns adjusted for risk are not high enough. But the social returns of these new technologies are expected to be very large. If you take the portfolio of new technologies – the social returns of investing in them, even if many fail – the social returns that come out of the winning technologies are immense. And that is why we need the public sector and philanthropies to fill the gap. By the way, I use the word 'social returns' here the way economists do. It reflects the economic benefits that the whole of society derives, beyond the private returns.
It’s like the mRNA vaccine. An astounding success, no one knew if it would work. It would not have progressed if it was left to the private sector. Eventually a few mRNA vaccines succeeded, and succeeded phenomenally, with the social returns of getting vaccines into arms around the world vastly exceeding the private returns.
There is an economic and financial case for the public sector to get involved where the expected social returns are high. We have to look at it as an investment. We’ve got to explain the spending to our publics. We’ve got to budget for it, and to collaborate internationally, rather than each country or region only investing on its own.
The way in which we are going about it will have to involve COP26-type initiatives. Working out harmonisation of standards, trying to get every country to move towards more ambitious targets, and especially getting everyone to have more concrete transition strategies.
In the partnerships we are developing, as you are doing now, between philanthropies, private sector, public sector, we have to focus on concrete initiatives that we can get going on. If we look at the world of emissions, seven to eight key activities or methods account for the majority of emissions. And within each of those key areas, there are often specific breakthroughs that aim to reduce emissions, and which if they succeed will have very high payoff.
You can think of the same for biodiversity, and for global health security. Focus on the concrete, needle moving investments and changes. We cannot just wait for the realisation of a grand agenda, because it takes time and will have its own uncertainties, given the state of multilateralism. We have to get going on specific initiatives where we can achieve change and collaborate more intensely than before.
We are moving in Singapore to develop thicker partnerships, this stronger philanthropy ecosystem, and your initiative is an extremely important one. Not just for Singapore, but for the region and to some extent further afield. We take this seriously - how do we support the philanthropy ecosystem? The MAS and EDB have been working jointly on this.
It also means developing capabilities. As we all know, in every area of life, every business, capabilities matter. We have to develop the skills and capabilities for this philanthropy ecosystem, and we look forward to doing it together with you. We are working with the Wealth Management Institute to develop a Global-Asia Family Office Circle. Just like you are doing this morning, bringing people together, including the family principals, to build up and share knowledge. We are developing a ladder of skills and competencies through the Institute of Banking and Finance for finance professionals to be able to advise families and foundations.
We are also developing the knowledge and skills required for trusted carbon markets, which does not yet exist. It requires data, technologies, skills. That’s a very important initiative that we have embarked on through public-private partnership.
I will stop there, with those broad remarks. But essentially, we have to think of this not in short term or transactional terms. We have to think of this not simply in terms of distributing resources from one group to another. We have to think of how we develop a culture of partnerships, work towards impact, and develop solidarity. Life is just much more meaningful when it is about lives together, and lives that are moving up together. We all know that, and we have got to now collaborate to make that possible. To make all lives better.