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Financial �Sprint

COHORT 3 CONVENING | FEB 4-6

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Ready, Set,

Sprint!

01 Why We’re Here � NSQUARE

02 Learning Objectives� N SQUARE

03 Process� NUCLEUS

04 Context Setting� NUCLEUS

2

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The nuclear and finance communities are in the business of mitigating risk

3

INSIGHT

WHY WE’RE HERE

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Stimulate the engagement of the finance community in our mission

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OPPORTUNITY

WHY WE’RE HERE

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Increase funding pipeline into projects & organizations dedicated to reducing nuclear threat

5

CHALLENGE

WHY WE’RE HERE

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Learning Objectives

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�How money works to manifest and support innovation

�IMPORT� INNOVATION� financial instruments (money flow)

�IMPORT INNOVATION�to support nuclear risk reduction �(idea flow)

�EXPORT INNOVATION nuclear IP for new uses to fund risk reduction�(new & dual use)

01

02

03

04

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N Square

7

OUR ROLES

PROCESS

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N Square

David Epstein

8

OUR ROLES

PROCESS

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N Square

David Epstein

Nucleus

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OUR ROLES

PROCESS

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Sprint Process and Timeline

Project Brief

Audience�systems map, understand audience needs & persona maps

Rapid Inquiry: Audience�discussion guide & interviews

Prototyping considered observations and insights, ideation, prototype development

Offering/�Business Plan �final presentation of your refined idea

Rapid Inquiry: Prototype �testing with key stakeholders, feedback analysis and refinement of prototype

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�WEEK 1

�WEEK 2

�WEEK 3

�WEEK 4

�WEEK 5

�WEEK 6

PROCESS

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Monitoring Threat

Cohort 1: 2018 �Open-source platform to identify, track, understand and address emerging threats to humanity.

Import: crowdsourcing, open source structure

Export: sophisticated surveillance and analysis process and reports for new, revenue producing use

RESULT: Catalytic capital funded 2019 launch

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DATAYO (exporting—dual use)

PROCESS

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A Unique Moment in Time

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CONTEXT

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New Millenium, new influences

New Millenium, New Influences

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Davos 2020�Stakeholder Capitalism Manifesto

Business Roundtable: shareholder to stakeholder

UN establishes �SDGs

Triple bottom line investing

A UNIQUE MOMENT

�1998

�2000

�2015

�2019

�2020

2000

2010

2020

ESG factors emerge and formalize

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Davos: Jan (dates) 2020

Davos 2020 Takeaways

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STAKEHOLDER CAPITALISM

GENERATION POSSIBLE

IMPACT ECONOMY

JUSTICE & EQUALITY

economic

environmental

social

Design please! I’m hopeless

A UNIQUE MOMENT

�From shareholders to stakeholders

01

�Impact Economy

02

�Justice & equality take center stage

03

�Generation �Possible

04

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Stakeholder Capitalism

Engage all stakeholders in shared and sustained value creation
Fulfill human and societal aspirations as part of the broader social system
Serve all stakeholders and act as a stakeholder of our global future

MOVE OVER SHAREHOLDERS, STAKEHOLDERS ARE IN TOWN.

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A UNIQUE MOMENT

�employees

�customers

�suppliers

�local communities

�society at large

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Justice and Equality

Justice and Equity

Justice takes center stage in the examination of powerful economic, social and environmental forces that lead to increasing inequity globally.

16

A UNIQUE MOMENT

�social justice

�climate justice

�economic justice

�rampant inequity

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Justice and Equality

The Inclusion Economy

2030 AGENDA:

Promote equal access to opportunities
Institute a macroeconomic policy environment conducive to reducing inequality
Tackle prejudice and discrimination
Promote the participation of disadvantaged groups in economic, social and political life

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A UNIQUE MOMENT

Two thirds of the world’s population lives in countries where inequity has grown. [Source: World Inequality Database]

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Up next!

Dinner tonight (guest speaker)
When to arrive tomorrow (Wednesday time and place) field trip meet at 7:45 AM
What we’ll be doing - vocabulary, warm up exercises for your 6 week ‘run’
Things to think about as you wind down together - XXX

01 Dinner Tonight� PIATTI RESTAURANT, 6:00 PM

02 Field Trip: Nike Missile Silo� HOTEL LOBBY, 7:45 AM

03 Financial Fluency� NEW VOCABULARY

04 Practice� SPRINTS AND DEEP DIVES

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A UNIQUE MOMENT

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Reflect...

Dinner tonight (guest speaker)
When to arrive tomorrow (Wednesday time and place) field trip meet at 7:45 AM
What we’ll be doing - vocabulary, warm up exercises for your 6 week ‘run’
Things to think about as you wind down together - XXX

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A UNIQUE MOMENT

What is one thing you’ve imported from this fellowship so far that is shaping your work and pursuits?

What’s one thing you’ve exported into the fellowship or network that is germinating or yielding progress?

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Generation Possible

Pick up images and hashtags of 10 GPs that spoke at Davos http://www3.weforum.org/docs/WEF_AM20_10_Teenage_Change_Makers_at_AM20_Brochure.pdf

From tackling the climate crisis to fighting systemic discrimination, young people worldwide are taking their futures into their own hands. They are not only advocating for justice but creating change as leaders of transformative initiatives.

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A UNIQUE MOMENT

AUTUMN PELTIER, Indigenous Rights

AYAKHA MELITHAFA,�Just Transition

GRETA THUNBERG,�Climate Crisis

NAOMI WADLER, �March for Our Lives

FIONN FERREIRA, Microplastics

NATASHA MWANSA,� End Child Marriage

MOHAMAD AL JOUNDE,�Refugees

MELATI & ISABEL WIJSEN, Plastic Pollution

CRUZ ERDMANN, �Oceans

SALVADOR GÓMEZ-COLÓN, Climate Adaptation & Disasters

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Impact �Economy

Sustainable, equitable behavior is now seen as a driver of long-term profit and stakeholder returns.

The business, financial, government and NGO communities are forming coalitions and creating new funding platforms and sources.

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A UNIQUE MOMENT

J&J Impact Ventures: $15 million

Supporting frontline health workers in the developing world

Cherie Blair Foundation: £10 million

Pledges to raise £10 million in 3 years for women to strengthen global entrepreneurship

SDG500: $500 million

Funding progress toward SDG goals in developing markets

JPM DFI: $100 billion

Development oriented financing galvanizing funding toward SDG goals

IDH: €100 million

CPG impact fund for smallholder finance will catalyze €1 billion of invetement

Several new funding platforms and sources were launched at or just after Davos 2020 (from individual foundations and corporations to coalitions that incude gov’t, private sector and NGOs) - New money coalescing around these goals - real action and money being dedicated

SDG 500: $500 million - Coalition of private and public sector organisations dedicated to helping achieve the SDGs using debt and equity to bridge the financing gap between seed and growth stage for hundreds of businesses in emerging and frontier markets.

JPM DFI: JP Morgan Development Finance Institution - $100 billion - a fund focused on development-oriented financing activities in emerging markets. Includes rules-based criteria to help identify business activities and opportunities that generate both financial and developmental returns; focused on galvanizing funding toward the SDG goals.

IDH: 100 million euros - the Sustainable Trade Initiative, a coalition with Unilever, Jacobs DE, Mondelez and Rabobank, launched the world’s biggest ever impact fund for smallholder farmers finance. Starting with EUR 100 million, the Fund is expected to catalyze up to a billion EUR of commercial investments into smallholder farmers in developing countries.

100,000 Women: 10k euros - Cherie Blair foundation - aiming to raise £10 million over the next three years. Our goal is to empower over 100,000 more women through our programmes, technology, and a strengthened global entrepreneurship ecosystem.

J&J Impact Ventures, a new $15 million impact investment initiative focused on the health sector and supporting front line health workers in the developing world.

[to support front line health workers (create slide after this one to play video?)]

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Financial �Sprint

COHORT 3 CONVENING | FEB 4-6

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Good �Afternoon

01 Reflection� NUCLEUS

02 Financial Fluency & Lunch� DAVE EPSTEIN

03 3 Sprints� NUCLEUS

04 2 Deep Dives� NUCLEUS

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WEDNESDAY, FEBRUARY 5

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Icebreaker & Reflection

What is one thing you’ve imported from this experience so far that is shaping your work �and pursuits?

What’s one thing you’ve exported into the experience or network that is germinating or yielding progress?

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REFLECTION

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Today’s agenda

Today’s Agenda

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11:30 PM to 1:00 PM	Working Lunch & Financial Fluency DAVE EPSTEIN
1:20 PM to 1:40 PM	Sprint 1: Warm-Ups NUCLEUS
1:40 PM to 2:15pm	Sprint 2: Mash-Ups NUCLEUS
2:15 PM to 2:30 PM	BREAK
2:30 PM to 3:45 PM	Landscape Exercise NUCLEUS & MORGAN
3:45 PM to 5:15 PM	Blue Sky�Building a Brief

REFLECTION

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Financial Fluency

INFLUENCES

SOURCES OF CAPITAL

INVESTORS

INSTRUMENTS

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FINANCIAL FLUENCY

[thank folks]

Please chime in if you have some questions. Or correct me if you think I’m wrong, whether on a nuke comment or something else. Or slow me down if moving too fast.

A lot of folks in the room probably haven’t done much in the private sector, and particularly not a finance function, so I’m going to go over some of the basics.

Among other things, we are going to talk about influences, sources of capital, investors and some financial instruments.

And I’m going to start with a couple definitions that maybe all of you will know but just in case you don’t. When we talk about an investor’s equity or stock or shares in a company, we are basically talking about their portion of ownership of the company. When we talk about debt or bonds that basically refers to borrowed money that a company has to pay interest on and then pay back the principal amount at some future maturity date. And you all know that the government is the public sector and that for profit companies are the private sector. But of course when we talk about private or public for profit companies, they’ll all the private sector. This restaurant is a private for profit company. Probably owned by one person or maybe a few partners. Amazon is a public for profit company that is publicly traded on a stock exchange and is worth a trillion dollars plus.

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Influences

ESG
SDG
Impact Investing & SRI
Rating agencies
Media & Celebrity
Principles for Responsible Banking
Sanctions
Investing and Divesting

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FINANCIAL FLUENCY

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New Millenium, new influences

Forming, storming and ‘norm’ing

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UN establishes �SDGs

FINANCIAL FLUENCY

�2000

�2015

2000

2010

ESG factors established

Business �Roundtable: shareholder to stakeholder

�AUG 2019

�JAN 2020

2020

2005

2015

Davos@50 Stakeholder Capitalism Manifesto

BlackRock@30�A Sense of Purpose

�JAN 2020

2016

2018

27% of�annual reports

mention SDGs

64% of�annual reports

mention SDGs

�2019

�2017

----

Screening or filtering of investments through the lens of ESG, or Environmental, social and governance factors, has been around the last couple of decades but has picked up momentum the last few years with the UN establishment of the sustainable development goals, a growing acceptance that climate change is an emergency, and woke capitalism in general. You can see the increased reporting of SDG’s from 2016 to 2019.

In addition to the Business Roundtable and Davos conference that were mentioned previously, which recognized the important of working on behalf of all stakeholders, not just shareholders, it’s also worth noting that in the last couple of weeks, Larry Fink, the CEO of Blackrock, the world’s biggest fund manager, published letters to CEO’s and investors saying that sustainability and the importance of all stakeholders would be front and center of everything Blackrock does. In addition to other measures, Blackrock will be divesting coal producers and demand greater transparency from the companies it invests in in terms of their reporting on various sustainability goals (e.g. CO2 emissions, water use, etc.)

The first 15 years of the new millenium were a period of forming and storming

The past 5 years have lead to a significant momentum and as of January - we have clearly entered the norming stage

The emergency of new norms are influencing culture, investor strategies and corporate behavior

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New Millenium, new influences

ESG Framework

THE NUMBER OF BLOOMBERG CUSTOMERS USING ESG TRIPLED IN 7 YEARS

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FINANCIAL FLUENCY

18,000

5,000

Source: Bloomberg

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ESG Framework

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SOCIAL�connected to how a company interacts with society – ranging from its employees and customers to the community as a whole.

FINANCIAL FLUENCY

GOVERNANCE�focuses on the alignment of interests between company management, its shareholders and other stakeholders.

ENVIRONMENTAL�focuses broadly on the company’s impact on the �environment at global and local levels.

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ESG Framework

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FINANCIAL FLUENCY

SOCIAL�

Gender & diversity policies
Human rights
Labor standards
Employee engagement
Customer satisfaction
Community relations

GOVERNANCE�

Board composition
Executive compensation
Audit committee structure
Bribery & corruption policies
Lobbying activities
Political contributions

ENVIRONMENTAL

Climate change �& carbon emissions
Air & water pollution
Energy efficiency
Waste management
Water scarcity
Biodiversity & deforestation

Here we show just a sample of some of the many factors investors screen on for environmental, social, and governance. Climate change and carbon emissions are clearly the most focused upon, since climate change is such an existential threat. Investors combine their analysis of how companies screen on these measures with their financial outlook for the company in order to make a decision on how to allocate their investments...whether they want to own the company and how much.

[if there’s time]

These is quite a range, though, in how investors do their scoring on ESG criteria. Some investors might, say, automatically give a low score to all companies that produce oil or natural gas, since hydrocarbons of course emit a lot of CO2 when burned. Other investors, however, may focus more on the relative merits of one oil & gas company to another, giving, say, a higher score to the one with more efficient operations. There can also be a lot of arbitrariness in how investors might come up with an overall score when they combine the importance of the many different metrics. The industry struggles with that.

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Source: Putnam Perspectives

FINANCIAL FLUENCY

Sustainability Frameworks

SRI - EXCLUSIONARY

Screens out firms from the investment portfolio to avoid exposure to businesses with objectionable products or corporate practices.

“Not that”

ESG - INTEGRATED

Considers investing in companies identified �through ESG analysis �and other methods of investment research.

“Best practices”

IMPACT

Considers investing in firms that are actively solving some of the current sustainability challenges through innovative products or services.

“Sustainable solutions”

•There is a confusing bevy of acronyms and inconsistency of terms used in the whole sustainable investing space. Here we show how SRI, ESG, and Impact investing are often used.

• SRI - socially responsible investing - which sometimes covers a broad range of similar goals to ESG - puts a greater focus on excluding investments in ‘harmful’ companies and industries such as tobacco, firearms, etc. And social outcomes may be a bit more important relative to financial return than it is for ESG investors.

*Then we have ESG, which we’ve discussed, and for which it screens on factors mainly as a way of reducing risk and trying to achieve better financial outcomes. There may be a some true conscientious capitalism in ESG investing but for many of those investors little willingness at the end of the day to satisfy financial returns.

*For those first two categories for our purposes, you should again think of large existing companies that trade on stock exchanges - you can look their stock ticker and trading price on google, yahoo, or anywhere else.

*Moving onto the third category - Impact - Impact Investments are investments specifically made to have some positive benefit with regards to the environment, social or other variables, along with the expectation of a financial return. For the most part, Impact investments is less applicable to those large existing companies that trade on stock exchanges. It’s more applicable to small investments - a couple hundred thousand dollars, maybe a couple million dollars - made into a smallish private company.

And we’ll discuss that a bit more on the next slide.

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Returns and Impact

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Source: Credit Suisse

FINANCIAL FLUENCY

Traditional investments

Sustainable / ESG investing

Impact Investing “Return first”

Venture philanthropy

Philanthropic donations

Market returns

Concessionary returns

Impact Investing “Impact first”

Market returns

Conventional equity and fixed-income instruments

Portfolio health checks and reporting
Sustainability-�themed mandates
Sustainability-�themed funds
ESG integration

Thematic impact funds and notes
Green bonds and green loans
Impact private equity
Impact venture capital

Social impact bonds
Outcome-driven loans

Seed capital donations

Charitable donations

Purely profited-oriented

Purely socially oriented

investment

grant

This slide shows the relative importance of financial returns versus societal impact. On the left, we have conventional investments where it’s driven almost exclusively by the financial return - those investors want to attain a financial return commensurate with the risk they’re taking with their investment. Then, the second one, we have ESG investing where the investors putting their money to work may care about the environment and the like but are really most focused on just screening out risks that might hurt their financial return. And it’s tough to do apples to apples, but it’s worth noting that the data thus far show that ESG investing strategies have had financial returns as good or better than conventional strategies.. And part of that may be because they have, say, fewer legacy energy companies in the portfolio - and energy stocks have done poorly with oil prices. But it is likely also because they have companies with more efficient operations, they have happier employees, they’re not polluters and they have better relations with the community, all of which can improve financial results. Then to the right of that we have Impact Investing, where financial return is sometimes more important than impact and sometimes the opposite, but usually at a minimum the impact investor want to at least be able to get their investment back with at least some slight positive return. Just depends on the motivations of the investors. And then at the end we philanthropy, which is of course more socially-minded.

[venture philanthropy is taking concepts from venture capital and applying them to philanthropy]

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A Symbolic Decision

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FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

develop metrics around the environmental, social and governance implications of reducing or increasing nuclear threat?

Source

Goldman Sachs announces it won’t take a company public that does not have gender diversity on the board

[David might chime in that the metric might vary by the type of company you’re thinking about - for instance, if you’re thinking about a nuclear weapon manufacturer versus a shipping company versus a port operator versus a bank]

[if the audience seems lost, Dave could mention one or two things from this list in terms of how to understand the risks of those various companies]

•Manufacturer of nuclear weapons and/or purpose-built components for nuclear weapons, along with manufacturers of dual-use technologies that can be used in nuclear weapons.

•Port Operators.

•Shippers.

•Utilities with Nuclear Power Plants and fuel and waste that needs to be dealt with. We want to keep in mind that despite some of the risks of terrorism and accidents, among other risks associated with nuclear power plants, that they can help battle climate change. As such, we are much more focused on power plants just taking steps to reduce risks rather than shutting down existing plants.

•Miners – risks associated with mining of uranium and other materials for nuclear weapons and nuclear power plants.

•Miners/manufacturers/processors of other radiological materials.

•Users of radiological materials – hospitals, energy service companies, research facilities, etc. Some of these users will be non-profits, so they may not be on investors’ radar but should still be targeted to make sure they have proper procedures in place.

•Insurance products related to life insurance, property and casualty, disability, financial products (e.g. minimum market returns) [need to do more work on what’s excluded with typical NBCR – nuclear, biological, chemical, radiological - exemptions]

•Concentration of assets and/or operations in one or two cities that could be key nuclear targets

•Banks, insurers, asset managers and other financial services companies, in their role as facilitators for much of the global economy.

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Sustainable Development Goals (SDGs)

“A shared blueprint for peace and prosperity for people and the planet, now and into the future.”

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FINANCIAL FLUENCY

The SDGs, set in 2015 by the United Nations General Assembly and intended to be achieved by the year 2030. As you can see they include #1 No Poverty, #2 Zero Hunger, and so on.

They are the most widely discussed taxonomy for sustainable initiatives, something of a north star for ESG and Impact investors.

- Nuclear is not explicit in any of the 17 goals or underlying targets but it is most easily argued to be implicit in #16 - Pease, Justice and Strong Institutions - and nuclear is arguably also implicit, even if less directly, in many of the rest of the 17 goals because they aren’t going to be achieved if nukes are going off and the economy is in shambles. Investors we've talked to - both ESG investors and impact investors - seem to recognize those arguments. The bigger issue is just working with these investors, just to educate them and give them guidance on how to factor it into their practices and make a business out of it - that it can help them do well while also doing good.

[If there’s time]

Bloomberg reported in October 2019 that ~60% of the companies in each the large cap stock indexes in Europe and Japan, along with 30% of the companies in the large cap and well known U.S. S&P 500 index, discussed the SDGs in their financial reports. So the US is still far behind Japan and particularly Europe in most things sustainability but awareness is significant and growing in the U.S.

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Bacardi’s commitments to supporting the SDGs within their operations

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SDGs: Borrowed equity

FINANCIAL FLUENCY

Here is just an example from the liquor company Bacardi, showing how they’ve made improvements in their various operations in support of the sustainable development goals. For instance, limiting underage access to digital ads. Another, reducing the number of accidents. Basically, companies can find a way to characterize almost any decent behavior as being supportive of one of the 17 SDG’s, which are very broad. So that’s a double edge sword - can allow greenwashing as we discussed yesterday - pretending they’re doing good even if they’re really not. But it simultaneously gives us in the nuke space, just like those in the climate change space, a way to try to engage them. Also, some of the improvements are real - they’re not all greenwashing. These types of charts are normally shown annually in reports termed either sustainability or CSR - Corporate Social Responsibility - report.

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Inspired by the SDGs, Raytheon, a defense contractor, created its own version to guide responsible operations.

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SDGs: Borrowed equity

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

highlight the connection between nuclear risks and targets under the SDGs to attract additional funds?

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Brings responsible investors together to work towards sustainable markets that contribute to a more prosperous world for all�

Recognizes climate change as a systemic risk to the economy
UN initiative with a 10 year horizon
Investors and banks commit to strategically align their business with the goals of the Paris Agreement

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Principles for Responsible �Investing & Banking

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

introduce the environmental and climate indications of nuclear threat so that this becomes woven into PRI?

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ESG considerations with material credit implications are influencing corporate and investor behavior�

Agencies assess the financial strength of companies and governments
Ratings are based on confidence of a borrower’s ability to pay debt
New ESG rating agencies assess corporate sustainability performance
Ratings that support transition combine both financial and extra-financial data to assess long term value of sustainability

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Credit Rating Agencies

FINANCIAL FLUENCY

[maybe skip, depending on pace - can check out in the deck if you’re interested, which has been posted online]

[after mentioning the credit agencies can also mention that there are companies like Sustainalytics that just rate companies on ESG criteria but don’t do general rating on a company’s credit]

An agency (e.g. Moody’s) that assesses the financial strength of companies and government entities
Ratings reflect the agencies’ confidence in the borrower’s ability to make payments on their debts
Agencies have begun including ESG-criteria in their credit ratings and providing separate ESG-scoring

How might we:

Encourage rating agencies to consider threat reduction and nuclear risk mitigation in their ESG screening and scoring?

ESG rating agencies assess the corporate sustainability performance of a large number of companies. Some ratings are based exclusively on extra-financial information while others combine financial and extra-financial data to assess long-term value and sustainability

“Our ratings capture ESG considerations with material credit implications,”

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Salience and cultural relevance amplified through media attention affect public sentiment, influence corporate behavior and impact financial markets�

Print, broadcast, digital and social media influence all aspects of the vitality of financial markets by reflecting and affecting public sentiment
Attention to a topic by those who gain fame and routinely capture our imaginations turns a topic from a private concern into a public conversation

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Media & Celebrity

FINANCIAL FLUENCY

[see pacing - may want to skip]

Media & Celebrity. We are not commenting one way or another on the merits of the Kardashian coverage here of an issue on radiation. The point is that celebrity involvement, or getting the media involved, can greatly amplify a message. We should find that some celebrities and dignitaries will want to help us because our mission, and we should take that free publicity when we can get it. Because the value of it could be quite large relative to the operating budgets we’ll have for some of our enterprises.

[if time]

His name escapes me, but at an impact investing conference I was at last fall, there was a pro basketball player, who was also an impact investor, arguing that same thing. He wasn’t focused on nuclear, of course, rather some other social mission, but he was arguing that impact investors and social entrepreneurs should be having celebrities like him to use their platforms to help out with the mission of building awareness of the companies.

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Divesting deprives someone of power, rights or possessions

Withdrawing or withholding funds
PROs: stimulates debates, limits the ability to make money from the production of nuclear weapons
CONs: limits ability to alter a company’s behavior and reduces influence to increase disclosure

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Divesting vs Investing

FINANCIAL FLUENCY

[ICAN, PAX and Profundo]

Before we move onto the next section, I wanted to touch briefly on the Don’t Bank on the Bomb Campaign. This type of divestment or exclusionary investment approach is again part of SRI or socially responsible investing.

The arguments this campaign and some others, who agree with it, make about divesting nuke manufacturers, are that:

-Investors should not make money investing in nukes, which are clearly one of the greatest risks to mankind.

-And that these manufacturers may be following the laws of their home countries but that they are part of the problem in that, in the US anyway, that they lobby hard for government programs on nuclear weapons that benefit their bottom lines and that there’s too cozy a relationship and ombetween the defense department and lobbying firms and defense firms.

-And that defense manufacturing, particularly nuclear weapons manufacturing, should not be in the hands of for-profit companies...that if anything it should be a public-sector only role.

Arguments against divestment include that:

-Divestment is a blunt instrument and it takes away the ability for investors to engage with these companies and alter their behavior or, at the very least, pressure them to increase their disclosures.

-These companies are just following the law and that any change should be through citizens’ elected officials and changes in the law.

-In some cases, the proportion of business that these companies do on nukes is only a small portion of their overall total and some of it may even be necessary - for example, keeping the nukes properly maintained.

Personally, I think this campaign is good for highlighting the issues and creating debate, but I am probably not quite in the divestment camp yet. I do think, though, investors should engage and press on various issues including lobbying activities and maybe even certain specific nuclear weapons programs. But I recognize the challenge of getting more details on such issues.

We can discuss some more offline if you like

[if time]

Major categories that SRI investors choose to divest are such things as tobacco, firearms, fossil fuel companies, alcohol and gambling. Exclusion of nuclear weapons manufacturers is much rarer, at least in the U.S. And when exclusion does happen, it’s generally just part of all controversial weapons, usually defined as things like cluster bombs and land mines and, in terms of nuclear weapons, just those nuke manufacturers that are in countries not party to the NPT treaty - so controversial weapons manufacturers might include Indian and Pakistani nuclear weapons manufacturers but not U.S. ones.

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A balanced approach creates opportunity and supports a transition from where we are �to where we want to go�

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Investing vs Divesting

FINANCIAL FLUENCY

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Sources of Capital

Private Equity
Public Equity
Impact Fund
Philanthropic Capital
Crowdfunding
Revenue-based Financing

46

FINANCIAL FLUENCY

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Source: Stanford Social Innovation Review

Sources of Capital

FINANCIAL FLUENCY

Unexplored solution spaces

Nascent solutions

Commercially viable or near-commercially viable solutions

Government R&D and grants

Philanthropy

Angel Investors

Corporate Venture Capital

Venture Capital

Private Equity

Mergers & Acquisitions

Public Equity Markets

Debt Markets

[Will define debt and equity if I didn’t define them earlier]

This chart from the Stanford Social Innovation Review Illustrates the Different Sources of Capital for Climate Solutions at Progressive Stages of the Project’s Life. Would also be relevant for a lot of other technologies, including nuclear. Early on when you have a brand new technology and don’t know if it works or has any chance of ever being profitable, you may need government funding or philanthropy...as it becomes a little more hopeful that it will work you can start to bring in Angel investors, basically rich individuals that invest in small private companies, as the techology solution is further proven venture capital companies and corporate VC firms and so-called private equity companies will join the mix, and then after some further development and high prospects for the technology solution to work and be commercial, it’s more likely the company can be sold or tap the public equity and debt markets for financing.

[don’t need to define VC and PE here]

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Friends and family, family offices, angel investors, venture capitalists and private equity�

Pools of capital raised from accredited investors who become limited partners (LPs)
Use cash and debt as a means to invest in private companies not traded on a public exchange
Assume higher risks to reap above-average returns

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Private Equity

FINANCIAL FLUENCY

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Shares listed on public market for sale to retail and institutional investors�

Substantial capital to fuel rapid growth is raised through an initial public offering (IPO) of formerly privately held stock
Market capitalization or the value of a company may be measured by the price of its shares
For companies that have reached a level of maturity with a proven ability to generate revenue

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Public Equity

FINANCIAL FLUENCY

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Financially viable businesses that have measurable social and/or environmental outcome targets�

Pools of capital used to invest in businesses that have clear, defined measurable social and/or environmental outcome targets
Designed to unleash the power of capital for good
Considers varying degrees of performance
Often deployed as part of Blended Finance solution, along with concessionary capital (e.g. grants)
Impact investment assets under management exceed $500 billion

50

Source: Bridgespan Group

Impact Fund

FINANCIAL FLUENCY

There’s a lot on this slide and you can revisit it later when the presentation is posted online. But Impact Funds are, as the name suggests, pools of assets that make impact investments with the goal of a positive social and/or environmental outcome in addition to a financial one. The financial returns that impact funds shoot for from a given investment could range anywhere from getting just a slightly positive return to a full financial market return commensurate with the risk incurred. Often times, a project is too risky or not expected to offer a good enough financial return to be able to attract impact capital alone. For example, I’m simplifying, but say you have a project for a new technology that requires a $3 million investment but is only expected to return $2 million of that $3 million over time. No Impact Fund is going to put up $3 million to only get $2 million back. But if you bring in concessionary capital like a grant from a foundation for half of those $3 million costs, then maybe it does work for an Impact fund, because then they only have to invest $1.5 million in order to, if everything goes according to plan, get $2 million back over time.

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Innovations in philanthropy accelerate progress toward achieving a theory of change�

Philanthropic intermediaries incubate and accelerate networks, approaches and organizations
Multi-donor pooled funds increase impact at scale
Policy and advocacy capital catalyze movement-level change
Flexible capital can be deployed in recoverable grants that generate positive social returns alongside financial ones

51

Source: Stanford Social Innovation Review

Philanthropic Capital

FINANCIAL FLUENCY

Philanthropic capital is for the most part charitable giving without the expectation of financial return. But it’s important to note that it can take many forms - doesn’t just have to be a traditional grant but rather can take other forms like a recoverable grant where the funder may get a portion of its capital back and which allows that organization to thereby support more projects. Philanthropy also isn’t just about writing a check - it’s abo alsout writing a check as part of some sort of blended finance approach that catalyzes other investment as well, including capital that requires a full financial return. Which is important because that financially-minded capital is a much bigger pool of potential money.

Charitable giving most often without the expectation of financial return
More recent innovations in deployment of funds include

Funders pool investment into philanthropic Intermediaries incubating and accelerating new networks, approaches, and organizations, and are aligning their strategies and grant-making initiatives
Multi-donor, pooled funds dramatically increase impact at scale
Policy and advocacy capital catalyze movement-level change
Flexible capital can be deployed in refundable grants that generate positive social returns alongside financial ones.

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Crowdfunding

Funding for good ideas and good causes�

For the earliest stages and largely unregulated
Many existing platforms and proven strategies that support fundraising

Rewards-based (Kickstarter, Indiegogo)
Patronage subscriptions (Patreon)
Personal causes (GoFundMe)
Peer-to-peer micro loans (Kiva, Lendahand)
Equity crowdfunding (regulated by SEC)

52

Source: Stanford Social Innovation Review

Crowdfunding

FINANCIAL FLUENCY

[Don’t read through each of the various types of crowdfunding]

There are various types of crowdfunding, as you can see here. I’m not going to read them all. Some of you may have experience with Patreon or others.

You have to be careful in what you try to do on what platform. Consumer electronic products, for instance, might work on some of these platforms, but complicated solutions around nuclear technology are probably a hard sell. I could definitely see something like a clever art installation on nuclear threats - something like the mushroom that we heard yesterday about getting funded or the feminine hygiene project you mentioned yesterday - as something that might work on a Kickstarter or Indiegogo.

Another interesting crowdfunding campaign done recently, which raised many small donations but I don’t think was on any of these crowdfunding platforms but rather an independent website, was Crazy Uncle. It’s an educational app game made by faculty at George Mason to help people combat climate change denial in others. And supporters, depending on their level of contribution, get some swag like executive producer credit, getting a cameo appearance in the app or a free poster. Maybe there's the possibility for some similar approach in the nuclear space in terms of campaign, swag offered, theories about combating misinformation, etc.

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Funding offered in return for a portion of revenues rather than equity or debt

For projects where revenue is likely but profit is highly uncertain or even unlikely
May be part of a blended capital approach that includes catalytic capital in the form of charitable grant

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Source: Stanford Social Innovation Review

Revenue-based �Financing

FINANCIAL FLUENCY

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Incubator & Accelerator
Angel & Venture Investor
Family Office
Strategic Investor
Consortium
Foundation
Retail & Institutional Investor
Government

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Investors

FINANCIAL FLUENCY

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Supports development of very early-stage ideas
Provides space, coaching, tech, & networking connections. Only limited capital.
Nurtures idea developers into leaders and ideas into companies
Applicants screened by predetermined criteria and/or strength of business plan

Accelerates growth of early-stage companies
Cohorts enter together
Learning-by-doing models provide intense, rapid, immersive education.
Compresses company maturation turning years into months
Mentorship and financing in exchange for equity.

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Incubator

FINANCIAL FLUENCY

Accelerator

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Private investor, often entrepreneur.
More willing to back risky, unproven ideas, filling the gap between friends & family and professional investors
Injection of capital for ideas, �growth or to bridge difficult periods
May exert pressure regarding business disclosures, behavior, decisions, goals.
Venture capital funds are larger pools of assets and often come in a bit later.

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Angel �Investor

FINANCIAL FLUENCY

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Private family wealth invested for long-term preservation and growth of assets

Multi-family offices pool investable capital together in an institutional investment arrangement to reap cost economies of scale
10,000+ worldwide with over $5 trillion to invest
Patient, flexible, empathic and risk-tolerant investors who bring personal skills, experience and desires to decision making

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Family Office

FINANCIAL FLUENCY

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A company that invests for strategic purposes for more than the promise of financial returns

Gain future access to new technology
Expand a product portfolio
Enter new markets
Increase customer base
Accelerate innovation
Enhance reputation

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Strategic Investor

FINANCIAL FLUENCY

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Trade groups and industry associations pool resources to develop and protect the interests of members

Founded and funded by organizations with similar interests, ambitions and objectives
Establishes standards, frameworks and operational guidelines for self regulation
Provides legal, lobbying and legislative support
Supports networking, growth and development of members

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Consortium

FINANCIAL FLUENCY

[read my notes, not the slide]

You guys are familiar with consortiums, trade groups, and industry associations.

They are

founded and funded by organizations with similar interests and goals
establish industry standards, frameworks, key performance indicators and efficacy measures. In the impact space, there is a lot of work around how to best measure impact. For any nuclear group we might form, we would also want to suggest how to measure how Impact investments might be reducing nuclear risks.
provide legal, lobbying or legislative support, etc.

We show a bunch of organizations here. Other big ones in the sustainability/ climate space include CERES (C-E-R-E-S) and CFLI or in the business space the US Chamber of Commerce. If you know of any relevant ones in the nuclear space with a financial bent, let me know.

How might we:

Bring the business, financial and non-proliferation sectors together to ensure the durability and sustainability of the financial system?

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How might we...

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FINANCIAL FLUENCY

bring leaders from business, finance and non-proliferation sectors together to ensure the durability and sustainability of the financial systems?

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A charitable, nonprofit organization usually created via a single primary donation from an individual or business

Leaders in influencing, managing and distributing philanthropic capital
Endowment invested to preserve assets
Investment income is disbursed to fund charitable activities aligned with a stated mission

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Foundation

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

encourage the influential foundations supporting nuclear threat reduction to recruit new funders (family offices, finance and tech entrepreneurs) and increase the pool of capital available for grants and concessionary capital?

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Everyday people (non-professional investors)

Buy and sell securities, mutual funds and ETFs through brokerage firms, online trading accounts and robo-advisors
Massive number of investors and small $ trades (compared to institutional investors)
Big impact on market sentiment

Banks, credit unions, pensions, hedge funds and insurance companies, REITS, investment advisors, endowments and mutual funds

Pools money to purchase, on behalf of members, securities, real property and other assets or to originate loans
Hold 70% of stock and can have a significant impact on corporate governance though the largest funds are passive (buying for the long-term) and do not exert influence

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Retail Investor

FINANCIAL FLUENCY

Institutional Investor

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The primary funder of defense, national security, energy, education and health influences innovation and investment through

Regulation
Tax incentives and disincentives
Bond issues
Media campaigns
Educational curriculum
Legislative reform, laws and lobbying
Small business programs
National Labs

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Government

FINANCIAL FLUENCY

You see the graphic on the right the National Science Foundation and the SBIR and STTR programs [Mention SBIR and STTR programs under various agencies]

In terms of the SBIR and STTR, they can be a decent source of funds and an earlier cohort member got some funding for one of his businesses through there. But can take a lot of time, there’s a lot of competition, phase I of funding can be pretty limiting for some businesses at somewhere between $50k and $150K, and there is some restrictions around use of the money, particularly if you get to phase II, which is in the vicinity of $750K to $1 million. So can be useful but no silver bullet.

And just a few thoughts on the National Labs before we move to the next slide:

And just a few thoughts on National Labs to get the discussion started. And this comes from a couple of interviews and some reading but some of you with first hand experience please chime in to correct or complement what I’m saying.

-from my conversations the national labs shouldn't normally be thought of as a source of funds. And sometimes more luck will be had going to the agency that's the mother ship. But It depends to some degree on the particular National Lab and the agency that it's under, and we shouldn’t just look at the nuclear labs because our solutions may be elsewhere.

- The National Labs have talent and resources, however, that can be leveraged through research partnerships; much or all of the funding will often need to come from the outside.

- Their technology can often be licensed.

- Outside for-profit businesses like Fedtech combine National Lab scientists and outside tech entrepreneurs to build businesses around the lab technology.

-And I didn’t list them here but one of my interviewees in the N Square network told me that for our purposes the conclusions would be pretty similar for the UARC’s - the University Affiliated Research Centers under various department of defense sponsors like the ARMY, NAVY, NASA, etc.. I believe there’s pretty much the same number of those as there are national lans.

As

National Science Foundation and Small Business Administration Seed Fund for scientific innovation?

Can the government issue its own form of transition bond to reduce nuclear threat?

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How might we...

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FINANCIAL FLUENCY

leverage the technology and research capabilities of the 17 National Labs to reduce nuclear threats?

And just a few thoughts on National Labs to get the discussion started. And this comes from a couple of interviews and some reading but some of you with first hand experience please chime in to correct or complement what I’m saying.

-It depends to some degree on the particular National Lab and the agency that it's under, but from my conversations the national labs shouldn't normally be thought of as a source of funds. And sometimes more luck will be had going to the agency that's the mother ship.

- The National Labs have talent and resources, however, that can be leveraged through research partnerships; much or all of the funding will often need to come from the outside.

- Their technology can often be licensed.

- Outside for-profit businesses like Fedtech combine National Lab scientists and outside tech entrepreneurs to build businesses around the lab technology.

How might we:

Tap into the funding sources established to incubate and accelerate the growth of small business? https://www.sbir.gov/node/822177

Brookings Institute on how National Labs should increase engagement with local industry to advance mission https://www.brookings.edu/wp-content/uploads/2016/06/BMPP_DOE_Brief.pdf

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Green, Social and Sustainable Bonds
Transition Bond
ETF
Sustainability-linked Loan
Cap & Trade
Catalytic & Concessionary Capital
Blended Finance
Cryptocurrency

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Instruments

FINANCIAL FLUENCY

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Companies borrow money through these types of bonds, with the proceeds earmarked for certain types of projects.

Green bonds support climate-related projects
Social bonds support projects with positive social outcomes
Sustainable bonds support projects with positive social and environmental outcomes

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Green, Social and Sustainable Bonds

FINANCIAL FLUENCY

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Green, Social and Sustainable Bonds

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

create a peace bond for defense contractors targeting specific national security projects?

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Exchange Traded Funds hold stocks, bonds, commodities or futures

Divided into shares that trade on stock exchanges
Often tracks underlying index or industry section

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ETF

FINANCIAL FLUENCY

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Finances projects aimed at changing to cleaner ways of doing business

Provides ‘brown’ companies engaged in environmentally dirty behavior with capital to transition to cleaner, green production.

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Marfrig: Brazilian beef producer’s�bond proceeds to buy cattle from suppliers that signed on to not destroy rainforest�
SNAM: Italian gas company �bond proceeds to reduce methane emissions�
Enel SPA: Italian energy company, �Bonds increase cost if company misses renewable energy target^.

Transition Bond

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

import this thinking to include nuclear production in the definition of a ‘brown company’ and encourage the government and contractors in the nuclear production supply chain to issue a transition bond for cleaning up contamination or inadequate practices?

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Loans with positive incentive interest rates linked to recipient’s performance on sustainability measures

Banks and lenders look to an issuer’s ESG rating to structure loans
Interest rates related to borrower’s ESG rating or uses ESG rating as a performance target within loan terms

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Sustainability-�Linked Loan

FINANCIAL FLUENCY

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A regulatory program designed to limit polluting byproducts and incent innovation

A limited number of polluting permits are issued and companies are taxed if they exceed their limit
Companies that pollute less may sell or trade their unused permits (at a profit)
Government lowers the number of permits annually to incentivize investment in clean technology which is cheaper than buying permits

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Cap & Trade

FINANCIAL FLUENCY

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How might we...

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FINANCIAL FLUENCY

import the Cap and Trade approach and engage National Labs or contractors to limit byproducts from nuclear production and incent investment in other forms of security and energy?

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Catalytic / Concessionary Capital

FINANCIAL FLUENCY

Source: Tideline

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Blended Finance

FINANCIAL FLUENCY

Source: Convergence

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Digital medium of exchange that secures financial transactions and verifies the transfer of assets

Decentralized and theoretically immune to government control, interference or manipulation
Funds transfer directly between two parties without the need for a trusted third party (bank or credit card company)
Lowers transaction costs by streamlining payment processing

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Cryptocurrency / �Blockchain

FINANCIAL FLUENCY

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Exercises

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SECTION 3:

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Proximity
One-For-One
New Use/Dual Use
Act of God Update
Rhino Bonds
Transition Bonds
ESG Add-on

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Thought Starters

EXERCISES

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Deep Dive: Opportunity Exploration

�ESG framework with nuclear added

�New use, dual use products and technologies

01

02

�New/enhanced financial instruments and economic programs

03

EXERCISES

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Next �Steps

01 Goals

02 Avenues of Exploration

03 The Next 6 Weeks

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THURSDAY, FEBRUARY 6

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Unleash various forms of capital dedicated to reducing nuclear threat by creating system change

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NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

GOAL

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Museum of the Future

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NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

EXAMPLE

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So, what if …

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NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

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Philanthropic Toolkit for expanding the existing funder base

Program Related Investments (PRI) ie., Build for BIllions

Wonts �(LEGACY GIVING)

“Decontaminating your image” / Nuke-washing �(CAP & TRADE)

Municipal Bonds

One-for-One / Build a Bomb, Fund X �(TRANSITION BONDS)

Attracting Unlikely Funders (PornHub example)

Atomsphere

Death & Life Bundle�(ETF)

No DOD on board

SDG 18

Nuclear in Investment Screens

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Avenues for Exploration

NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

�Process

�Instruments

�Screening

�Products/Service

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Project Brief

Audience�systems map, understand audience needs & persona maps

Rapid Inquiry: Audience�discussion guide & interviews

Prototyping considered observations and insights, ideation, prototype development

Offering/�Business Plan �final presentation of your refined idea

Stress Test �testing with key stakeholders, feedback analysis and refinement of prototype

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Process Review

NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

�CHECK-IN 1

�CHECK-IN 2

�CHECK-IN 3

�CHECK-IN 4

�CHECK-IN 5

�CHECK-IN 6

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What needs to be overcome?

What’s the problem you’re trying to solve?

What systemic change needs to be created?

How will you create system change?

What might be the release (from fear, danger, or tension)?

Who are the core audiences or stakeholders?

Consider whose input you need as build personas and find people to speak to.

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Project Brief

NEXT STEPS

Financial Literacy Immersion

Develop Your Brief

Map Your Process

Outcomes

Support & Check-Ins

Financial Fluency

Concept/Term Facility

Working Session

Tool Review Q&A

Persona Interviews

Prototyping

Rapid Inquiry

Case Studies

Examples

Morgan & Tom: X

Nucleus: X

Dave: X

�CHALLENGE

�OPPORTUNITY

�AUDIENCE

01

02

03

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Thank �You!

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