2030 Finance | May 18, 2017

$114 billion in impact assets, third Rise Fund deal, forests as a climate solution

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Greetings, ImpactAlpha readers!

#Featured: ImpactAlpha Original

How much money is there in impact investing? Notwithstanding all the qualifiers (we discuss in the full piece), $114 billion is the number we’ll see reported for the coming year as the size of the impact investing market. That represents the total assets of 208 asset managers and owners surveyed by the Global Impact Investing Network for their seventh annual survey. The total marks an increase of 47 percent from $77 billion in total assets in 2015 and 90 percent from $60 billion in assets in 2014.

Pessimists can protest that even $114 billion is a rounding error in the global financial markets. Optimists can point to the growth. Indeed, one challenge of a growing market is the softening of the impact intentions and accountability. The GIIN’s Amit Bouri flagged concern about “impact dilution” as larger investors enter the market, writing, “Judgement should be withheld on any new entrant until the investor demonstrates a rigorous commitment to impact.”

Keep reading ImpactAlpha’s break down of the GIIN’s annual survey, by Dennis Price and David Bank

How much money is there in impact investing?

#Dealflow: Follow the Money

TPG Growth and its Rise Fund back Brava to make it easier to eat at home. Move over Juicero. Household smart-device developer Brava has raised an undisclosed amount of funding from TPG Growth, with additional backing from TPG’s $2 billion Rise Fund. A host of other investors, including Lightspeed Venture Partners and Next Coast Ventures, also participated in the round. Brava’s CEO John Pleasants hasn’t said much about Brava, which raised $12 million last year. TechCrunch reported that the company is “building a system that makes it easier to cook and eat well at home.” Food-based IoT tech got some bad press recently from Bloomberg’s mini-exposé on Juicero’s $400 machine that juices as well as…bare hands. (Early-stage tech investments are full of risk, both in development and in the market.) Other food-related technologies are successfully raising capital on the promise of helping consumers make healthier eating choices, like Belfast-based arc-net and its blockchain-based solution to combat food fraud.

ION Energy raises funding to build electric car batteries. ION Energy has closed an undisclosed amount of funding to develop battery storage for electric vehicles in India. The angel investors include executives from Salesforce and Credit Suisse. The Mumbai company claims its product will help cars charge faster and improve distance range and acceleration time. There is a big push in India for electric vehicles, amid intense smog and pollution in its top cities. The government’s plan to phase out gas-powered cars by 2030 has drawn international investors and development agencies to India’s clean-tech startup scene. Royal Dutch Shell recently launched a clean-tech accelerator in India.

Cameron Foundation backs Virginia Community Capital to spur state job growth. Virginia-based Cameron Foundation is the latest community foundation to step into mission-driven investing. Cameron, based in Petersburg, Va., is investing $1 million in Virginia Community Capital, an impact-focused financial institution that operates across the state. The foundation’s Todd Graham hopes the investment will spur local business and job growth. “The foundation expects to further expand its impact beyond what it can do through traditional grantmaking,” he says. Three-quarters of Cameron’s capital is being committed through a community note, called a Local Impact Opportunity Note. Cameron has deposited $250,000 into Virginia Community Capital’s bank. The bank was certified as a benefit corporation earlier this year — the first bank with that distinction in the U.S. Virginia Community Capital launched in 2006 and has invested in close to 500 community projects with an economic impact of $766 million and nearly 5,000 jobs created.

MicroVest has disbursed $1 billion to microlenders around the world. “By indirectly lending to a yurt maker in Mongolia or a bike repairman in Tanzania, we have demonstrated that they are amongst the best borrowers in the world,” says Bo Cutter, MicroVest’s Chairman. The microfinance investor has passed the $1 billion mark in disbursements. The firm launched in 2003 with $15 million, and has become a lending partner to 90 microfinance and small business-focused financial institutions in 40 countries. Its investments have supported more than 13 million micro and small businesses worldwide. MicroVest currently has $392 million in assets under management.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

Forests grow as a climate solution. Al Gore, the former vice president and current impact investor, is a high-tech guy (and board member of Apple). But Gore was in San Francisco this week to champion a low-tech carbon sequestration solution. “The most efficient technology for taking CO2 out of the atmosphere is a tree,” Gore said. “When you take it to scale, it’s a forest.” Investors at an event hosted by New Forests, the Australia-based manager of about $2.7 billion in assets, saw healthy and growing forests as not only a key to meeting 2030 and 2050 decarbonization goals, but as a portfolio diversifier. Timber values are largely uncorrelated to broader markets and forests have a natural inflation hedge — growing trees. “Our investors are there for the financial returns,” said Celine Claudon of International Woodland Co., a Danish firm with $3.5 billion invested in timber in the U.S. and Australia as well as Europe. Chris Larson, who heads New Island Capital in San Francisco, said market-rate returns are difficult to find in sustainable forestry. “It drives us into niche strategies,” such as conservation easements, carbon credits and loans to small-scale forest-product companies, to enhance core timber returns. The Packard Foundation, with more flexible, mission-driven investments, can come in early or for lower returns to make deals work, said Packard’s Susan Phinney Silver. Even in California, Larson said, sustainable land-use had been left behind in the investment momentum toward low-carbon energy, electric vehicles and smart grids. “It does remain paramount that we get some type of pricing for carbon,” he said.

Rise Fund’s Bill McGlashan: “Let’s collaborate” — and other cliff notes from day two of the Global Private Equity Conference. After much ruffling of feathers from co-founder Bono in past weeks, TPG Rise Fund CEO Bill McGlashan struck a more conciliatory tone at the IFC’s 19th Annual Global Private Equity Conference in association with EMPEA. McGlashan appealed for collaboration and sharing of data and learnings with other investors, “Because our small fund alone won’t be enough to address all of the world’s problems,” he said. ImpactAlpha’s Jérôme Tagger reports from D.C.

#2030: Long-Termism

Earth 2300. Kim Stanley Robinson’s fictional depiction of year-2140 New York City suffering from climate change is dramatic enough. Now comes Katarzyna Tokarska from the University of Victoria in Canada with a non-fictional glimpse of 2300 that is much scarier. In a world 10 degrees Celsius hotter from burning all the fossil fuels we could extract from the ground, Tokarska’s research shows Arctic temperatures would surge by as much as 20 degrees. Rainfall would decrease by two-thirds the current levels in some parts of the world. Flooding and drought would lead to severe food security and health consequences and inhabitability of many parts of the world.

The “warning message” about the ultimate magnitude of climate change is meant to spur action to fulfill and go beyond the Paris climate agreement. “So far there hasn’t been any action,” Tokarska said in an interview. “I think it is really important to know what would happen if we don’t take any action to mitigate climate change.”

Projections 280 years in the future may as well be fiction in terms of spurring action, however. Present-day impacts of fossil fuel use are what is driving movement on the low-carbon transition. Pollution in cities in India and China is driving demand for clean tech, particularly for transport (see above, and here.) To accelerate global money flows into cleaner, renewable options, insurers and investors recently called for an end to fossil-fuel subsidies by 2020.

Onward! Please send any news and comments to [email protected].