The Brief | July 10, 2019

Appalachia’s post-coal economy, CalSTRS divvies up $750 million for sustainable investments, continuum for impact, impact-focused fintech

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Beyond Coal: Seeding Appalachia’s sustainable future with public and private capital. In April, the US generated more energy from renewable sources than coal for the first time. Two months later, billionaire Michael Bloomberg launched a $500 million effort to close down coal plants. And last week Chubb, the largest commercial insurer in the US, said it will stop insuring coal plants and phase out existing policies by 2022. The signals that the world is moving beyond coal are clear. What comes next in communities long-dependent on coal jobs and economic activity is less so. In Appalachia, the multi-state stretch along the Eastern United States, communities, local advocacy groups and place-based investors are building the market for a more economically diverse and sustainable post-coal future. In the first piece of a two-part series, ImpactAlpha explores the imperative for Appalachia’s coal-impacted communities to diversify and the public, private and blended funding initiatives and projects that have the potential to reinvent the regional economy.

“To be self-sustaining, Appalachia needs diverse strategies as well as increased investment and sequencing of capital across the funding and financing spectrum,” said Stephanie Randolph of Invest Appalachia, a central Appalachia-focused impact collective that will deploy both philanthropic and private capital to strengthen local businesses and advance critical sectors when it launches later this year. In economically distressed areas, entrepreneurs and early projects face barriers to accessing capital and risks need to be absorbed, says Donna Gambrell of Appalachian Community Capital. Over the past few years, local projects have received public funding through the Abandoned Mine Land Pilot Program, designed to get Appalachia’s coal-impacted communities to think collectively about a future without coal. The hope is that these projects can serve as models and project playbooks if the RECLAIM Act – for Revitalizing the Economy of Coal Communities by Leveraging Local Activities and Investing More Act – passes the U.S. Congress. The Act could release $1 billion (collected as a tax on coal companies since the 1970s) to coal-impacted states and tribes for investment in projects that promote sustainability, rely on community stakeholders’ input and clean up abandoned mine lands.

Keep reading, “Beyond Coal: Seeding Appalachia’s sustainable future with public and private capital,” by Jean Haggerty on ImpactAlpha. 

Dealflow: Follow the Money

CalSTRS commits $750 million to three sustainable investment fund managers. The California State Teachers’ Retirement System (CalSTRS), a $226 billion pension fund, is divvying up $750 million of its $6 billion sustainable investment commitments among three sustainability-focused equity investment managers. The managers include Hermes Asset Management, Impax Asset Management and Schroders. CalSTRS is already working with Generation Investment Management, AGF Investments and activist investors like Jana Partners and Impactive Capital. Impax Asset Management separately announced that it will manage $200 million of the allocation through its Impax Leaders strategy, which eliminates fossil fuels and seeks equities supporting resource efficiency. Here’s what we know.

NiYO raises $35 million to bank India’s blue collar workers. Bangalore-based NiYO launched in 2015 to enable corporations to pay benefits and salaries to employees through digital accounts. Now, a key part of the company’s growth strategy is financial services for salaried blue collar workers, like managing payments and savings and accessing insurance products. NiYO’s mobile app is available in eight languages and is also speech enabled, making it more accessible for India’s diverse workforce. The company recently passed one million users and aims to reach five million people in the next three years. To help, it raised $35 million in Series A funding from India’s Horizons Ventures, China’s internet giant Tencent and JS Capital, the investment firm of Jonathan Soros, George Soros’ son. Read on.

Rent To Own secures €1 million for equipment financing in Zambia. It’s difficult for rural farmers and agribusiness owners in Zambia to access, much less afford, equipment to do their jobs better and more efficiently. Rent To Own helps small businesses acquire tools like irrigation pumps or hammer mills on a lease and then pay off the tools on a financing plan via mobile payments. The company has supported 7,000 business owners in financing $4 million in equipment since 2010. Rent To Own also solves the logistical challenges of accessing tools by providing delivery, installation and training. It has secured €1 million ($1.1 million) in working capital from the Dutch Good Growth Fund, a Dutch government fund managed by impact investment firm Triple Jump and PwC. The investment follows Rent To Own’s $1 million equity round in December. Check it out.

Signals: Ahead of the Curve

Beyond Trade-offs: A common language helps investors define their contribution to social impact. Earlier this year, ImpactAlpha ran the “Beyond Tradeoffs” podcast series with Omidyar Network to explore how investors are making investments for impact across the continuum of financial returns. The series caught the attention of the Impact Management Project, whose consensus building around impact classes – which group investments based on their impact characteristics – put a similar structure around impact. By bringing these two pieces together, says Mike McCreless of the Impact Management Project, “we can build a more complete understanding of investments’ performance.” In a guest post on ImpactAlpha, McCreless lays out areas of alignment between the Impact Management Project norms and the Beyond Trade-offs continuum. Among them:

  • Impact, risk and return. Both frameworks encourage investors to articulate their goals across impact risk and return as well as financial risk and return, and to measure and manage performance accordingly.
  • Across the continuum. Much like financial asset classes, impact classes provide a shorthand for conveying the impact characteristics of an investment in a descriptive manner. Another similarity: No one impact class is in every way better than any other.
  • Across impact classes. Just as investors play across Omidyar Network’s returns continuum, investors and asset owners often play across many impact classes rather than confining themselves to a single strategy.

Wonk out with, “A common language helps investors define their contribution to social impact,” by the Impact Management Project’s Mike McCreless, on ImpactAlpha.

The rise of impact-focused fintech. The mashup of finance and tech known as ‘fintech’ shows no signs of cooling: VC-backed fintech companies raised $39.57 billion across 1,707 deals globally last year, a 15% increase over 2017, according to CB Insights. Among the top trends for 2019: The rise of “impact fintech.” The market research firm highlights growing demand for ESG and impact investing in its “2019 FinTech Trends To Watch.” Among the insights:

  • Impact inflows. ESG and impact investing are gaining recognition for their ability to generate alpha. Market volatility could drive more inflows into impact.
  • Wealth transfer. Platforms are emerging to cash in on the $30 trillion generational wealth transfer to sustainability-minded Millennials. Early movers include online banks such as Aspiration and Newday, investing platforms such as Motif, OpenInvest and Swell, and lending products like CNote.
  • Retail revolution. Investment platforms are emerging to democratize access to alternative assets for retail investors, including brokerages like Robinhood and Coinbase, platforms like PeerStreet and Fundrise, and marketplaces like Crowdcube and Equitise. One roadblock: Sustainable investing competitors are struggling to differentiate themselves – and to attract customers.
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Agents of Impact: Follow the Talent

“There are entrepreneurs like me all over the country… I believe in these entrepreneurs,” said AOL founder Steve Case of Rise of the Rest on 60 Minutes… Peer to peer lender Initiative Ireland appoints Aisling Healey as director of finance and treasury… New Island Capital is hiring a vice president of liquidity portfolio in San Francisco… Agora Partnerships seeks a head of investor relations in Mexico City, Bogota or Santiago… Prudential’s diversity, inclusion and impact team is looking for a finance and operations senior analyst in Newark… Social Finance is hiring a part-time content producer for its impact incubator in London…  Impact venture capital firm Uprising is recruiting an executive assistant in the Bay Area.

July 10, 2019.