The Brief | April 5, 2019

The Brief’s Big 8: Doing the numbers, food revolution, carbon capture, purpose-driven disruption, Agent of Impact Nipsey Hussle

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TGIF, Agents of Impact!

How do you grow the impact investing marketplace? Tweak your methodology. Researchers this week delivered findings on the scope of impact and sustainable investment assets worldwide (see No. 1, below). The Global Impact Investing Network’s estimate of $502 billion in impact assets under management seemed oddly specific for a study that extrapolated, multiplied and discounted. Nonetheless, the report generated the requisite headlines about the market’s growth when compared, erroneously, with the $228 billion identified by the GIIN last year with a different methodology. The growth narrative was reinforced when the Global Sustainable Investment Alliance estimated the much broader category of sustainable, responsible or socially responsible assets at $30.7 trillion worldwide.

So how do you really grow the impact investing marketplace? By building and investing in scalable solutions to urgent challenges, including in food production (Nos. 2 and 6) and carbon reduction (No. 3), and across women’s health, inclusive fintech and the future of work (No. 5). European pension funds appear to be increasingly walking the talk (No. 7). Financial advisors are getting on board to satisfy – and stoke – client demand (No. 8). Whatever the actual totals of assets under management, it’s clear we’re only at the end of the beginning of what needs to be a profound transformation of finance. It may be too late to become an early adopter of impact investing, but there’s plenty of real work left to do.

– David Bank, editor and CEO

Featured: The Brief’s Big 8

  1. Impact investment assets hit a half-trillion dollars, give or take $50 billion. In Sizing the Impact Investing Market, the GIIN extrapolated from data from 750 organizations to estimate assets for an additional 600 firms and peg total impact assets under management at $502 billion. The results using the new methodology have a 10% margin of error and can’t be compared with last year’s survey that counted $228 billion in impact assets under management. But the new total is roughly in line with the $444 billion in impact and community investment assets identified in a separate survey by the Global Sustainable Investment Alliance. Both numbers represent only a small slice of the more than $30 trillion in “sustainable investing” assets, including negatively and positively screened, ESG and impact investments. Investors who have already aligned their capital with their values have potential “to more intentionally use their investments to fuel progress through impact investments,” the GIIN report concluded. Do the numbers.
  • Wider net. Retail and Japanese investors pushed assets in global ‘sustainable’ investments to an estimated $30.7 trillion. Impact-ish.
  • Setting standards. Investors don’t need anybody’s permission to seek positive impact from their investments. That hasn’t slowed efforts to define the terms of the growing impact investing market. The GIIN issued a set of “core characteristics” of impact investing that include intentionality and management. Next week, global investment firms and development finance institutions are expected to adopt “operating principles for impact management” developed by the International Finance Corp. Term sheets.
  1. Healthy and sustainable choices are revolutionizing the food industry. Five years ago, consumers weren’t ready for Burger King’s Impossible Whopper or Questlove’s Philly cheesesteak, both made with Impossible Foods’ plant-based meat. The shift in consumer tastes is driving “nothing short of a revolution in the food industry,” Walter Robb, former co-CEO of Whole Foods, said in an interview with ImpactAlpha’s Dennis Price at the McCombs School of Business at the University of Texas at Austin. Health-conscious consumers have made local, organically-grown and natural the fastest growing food categories in the U.S. Venture capital investment in food and agricultural technologies is up 40% to $17 billion. Major food and ag companies, which were slow to grasp the market shift, are rushing to catch up. “Capital markets have woken up to the food and agriculture opportunity,” says Robb, now a sustainable food investor and senior advisor to TPG Growth’s Rise Fund. Chow down.
  1. Carbontech entrepreneurs go negative to find climate solutions and a huge new market. Carbon-negative startups are aiming to scale techniques to suck billions, or hundreds of billions of tons of carbon out of the atmosphere and turn it into useful products. Investors are beginning to glimpse what could be a $1 trillion market in the U.S. (and $6 trillion worldwide) according to nonprofit Carbon180, which is recruiting waste-to-value startups for its carbontech accelerator. Carbon-negative startup pitches that lead with climate change raise red flags, however. “It has to be better, faster or cheaper, or help a company deal with regulatory challenges,” said Data Collective’s James Hardiman. With rapidly falling cost curves for capturing and converting carbon, “We are cheaper than fossil-fuel approaches with today’s costs and we are going lower,” says Opus12’s Nicholas Flanders. Carbon-negative.
  2. Agent of Impact: Nipsey Hussle, hip-hop artist and entrepreneur. Born Ermias Asghedom, the rapper earned a Grammy nomination for songs about his rise as an independent MC. He earned community hero status for investments in youth, entrepreneurship and the arts in the Crenshaw neighborhood of Los Angeles where he grew up. “Hussle didn’t just envision a vibrant South L.A.,” wrote Gerrick Kennedy in the Los Angeles Times. “He saw it as a hub for our nation’s brightest intellectual thinkers.” Hussle was shot and killed outside his Marathon Clothing store in the strip mall where he used to sell mixtapes. Hussle and real estate developer David Gross recently purchased the mall with plans to add low-income apartments and expand the mixed-use model across the country with a multi-city Opportunity Fund. Gross and Hussle last year created Vector90, a co-working space and business incubator, along with Too Big to Fail, a youth science, technology, engineering and math center intended as a bridge between Silicon Valley and the inner city. Hussle remembered feeling, “Maybe I’m not even supposed to be thinking this big and thinking outside the box,” he told the L.A. Times last year. “I would like to prevent as many kids from feeling like that as possible.” Follow ImpactAlpha on Instagram.
  • Follow the talent with ImpactAlpha’s weekly report on career moves, job openings, events and opportunities.
  1. Deals of the week. Stay on top of the dealflow all week long on ImpactAlpha.com. Deals that stood out:
  1. The Craftory looks to purpose to drive consumer-goods disruption. Elio Leoni Sceti and his partners in the London-based holding company are betting the next tectonic shifts in consumer behavior will be driven by the quest for positive impact. Leoni Sceti founded The Craftory after observing a swell of new brands seizing on “purpose” to attract and keep customers. “People care about the planet and health and respect,” Leoni Sceti told ImpactAlpha. “The big brands are going to be disrupted in a massive way.” The Craftory has commitments of $300 million in ’cause capital.’ ImpactAlpha’s Jessica Pothering caught up with Leoni Sceti to talk about disruption, AI-based vegan foods, and co-investing with Jeff Bezos in NotCo, a Chilean foodtech startup. Get the scoop.7. European pension funds move to operationalize impact. Institutional investors in Europe are expanding their impact investing mandates and relaxing restrictions that had blocked the deployment of capital. “People are moving from the talk to the walk,” Phenix Capital’s Sophie Robé told ImpactAlpha. The firm’s fifth Impact Summit Europe in The Hague convened asset owners representing more than €12 trillion. Several large investors announced new mandates and others are relaxing internal rules to allow investments in smaller funds. Read on.
  • New mandates. Some takeaways from Impact Summit Europe.
  1. Sustainable investing tips for financial advisors. Approximately 300,000 financial advisors in the U.S. alone serve as gatekeepers to the trillions of dollars in assets owned by retail investors, high-net-worth families and institutions. A new guide, “Fundamentals of Sustainable Investment,” walks financial advisors through the process of building a sustainable investing practice, from starting a conversation with clients to monitoring clients’ impact investments, to staying current on trends (one of the guide’s suggestions: read ImpactAlpha). The guide’s key message is that sustainable and impact investing is key to client recruitment and retention. “We started as reluctant disbelievers,” one financial advisor told co-authors William Burckart and Jessica Ziegler. “80% of our new business is in this space.” Prep yourselves.
  • Advice for advisors. ImpactAlpha’s Agents of Impact Call No. 8 will dig into the business of financial advice, with The Investment Integration Project’s William Burckart, Regenerative Investment Strategies’ Mark Sloss and other special guests. Join us on Thursday April 18 at 1 pm ET / 10 am PT / 6 pm GMT. RSVP today.

— April 5, 2019.