Greetings, Agents of Impact!
Podcast Series: Beyond Tradeoffs
Big investors press asset managers to integrate ‘ESG’ and impact across portfolios. For an increasing number of sovereign wealth and pension funds, major insurance companies and billionaire families, ‘ESG’ and impact investing represent not trade-offs but practical approaches for managing portfolio risks, finding material value and riding social and environmental trends still underappreciated by other investors. Such institutional asset owners are pressing asset managers to add ESG and impact capacities. Not surprisingly, major asset managers are responding. In the second episode of ImpactAlpha’s “Beyond Trade-offs” podcast series, produced in collaboration with Omidyar Network, Goldman Sachs’ John Goldstein charts the development of “risk-return-impact” frameworks that meet the needs of institutional investors.
In the podcast, Goldstein admits he has reversed himself on one of impact investing’s long-running debates: the depth of impact possible through investments in the public markets. “At the scale of Goldman Sachs,” he says, “the transmission mechanism to the public markets is a little bit more interesting” than at Imprint Capital, the boutique San Francisco impact advisory he co-founded in 2007 and Goldman acquired in 2015. The $207 billion New York State Common Retirement Fund, for example, asked Goldman to develop a low-carbon index that reduced investments in companies with high emissions. That aligned with the pension fund’s advocacy and shareholder engagement, including promoting emissions disclosure and supporting the 2015 Paris climate accord. When major asset owners communicate their priorities, ask for data and disclosure and challenge assumptions, he says, “that works its way into the capital markets.”
Read, “Big investors press asset managers to integrate ‘ESG’ and impact across portfolios,” by David Bank in ImpactAlpha’s Beyond Trade-offs series, produced in collaboration with Omidyar Network.
- Interactive infographic. Explore investors’ portfolios along the continuum of returns.
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Dealflow: Follow the Money
DispatchHealth raises $33 million for home health calls. DispatchHealth is the second Denver startup this week to raise funding for an alternative urgent care model. Dispatch is updating doctors’ old-fashioned house calls as a way to cut back on unnecessary emergency room visits and costs. Patients needing non-life threatening medical attention can book an appointment with urgent care specialists, who will arrive within two hours. Dispatch, which works with insurance companies and health care systems, serves several hundred mostly elderly and low-income patients each day in 10 cities. The Series B funding includes Echo Health Ventures, Alta Partners and Questa Capital. Read on.
AgDevCo backs Tradin Organic to source cocoa from smallholders in Sierra Leone. Amsterdam-based Tradin Organic has sourced organic cocoa from smallholder farmers in 2015 under an initiative to reinvigorate agribusiness after the Ebola crisis. U.K. agribusiness impact investor AgDevCo approved a $3 million revolving credit facility. The financing will allow for Tradin Sierra Leone to pay premium prices for cocoa beans from 20,000 local farmers, for processing in Tradin’s facility in the Netherlands. The investment, AgDevCo’s first in Sierra Leone, also will support Tradin’s farmer training initiative. Here’s more.
Dealflow overflow. The Brunel Pension Partnership of U.K. local government pension schemes, anchored Neuberger Berman’s new impact fund with $60 million… Robo-impact advisor OpenInvest launched Optimus, a software platform for financial advisors… MIT Solve launched a planned $30 million philanthropic venture fund to invest in finalists from its annual Global Challenges competition… Solar-energy company Daystar Power listed €500,000 ($560,000) in debt on social impact crowdfunding platform Trine to finance commercial solar projects in Togo and Senegal… Cleveland Foundation, with $2.5 billion in assets, pledged to commit $150 million to local impact investing by 2022; Bainbridge Community Foundation in Washington state pledged to move 60% of its assets—which totaled $12.3 million in 2017—to sustainable investments.
Signals: Ahead of the Curve
Financing the sustainable takeover of farmed fish production. The world’s seafood farmers will need to invest up to $300 billion over the next decade to meet the booming demand for fish protein. Such capital expenditures represent an opportunity for impact-minded investors to promote sustainable farmed fish production, according to “Towards a Blue Revolution,” a guide to sustainable aquaculture from The Nature Conservancy and Encourage Capital. “Driving additional investment toward these low-impact production methods can help ensure that they achieve commercial scale and become more competitive relative to conventional production systems,” write TNC’s Robert Jones and Encourage Capital’s Jason Scott.
- Growing demand. The people want it. Sustainable seafood production is growing 10 times faster than conventional seafood. Sustainably sourced fish accounted for 14% of total seafood production in 2016, up from 0.5% in 2014.
- Three opportunities. Among the high-impact, high-growth aquaculture production systems ripe for investment: Seaweed and bivalve systems (think oysters, clams and scallops) that require few inputs and act to restore degraded habitats. On-land finfish systems that can treat wastewater and take production out of the marine environment. Off-land finfish systems that move activities into deeper waters and away from critical habitats.
- Catalytic capital. Heavy capital expenditures and unknown risks have scared off investors. Concessionary and risk-taking capital can pave the way by subsidizing tech R&D, prototyping production of new species and underwriting “first plant” risk. For seaweed and bivalve models, inexpensive debt can help scale up production.
- Investor mobilization. The Meloy Fund raised $22 million for sustainable fisheries last year. Dutch sustainable aquaculture investor Aqua-Spark, with $81 million in assets under management, has backed 16 companies. The first investment from Althelia’s $37 million Sustainable Ocean Fund was in Kampachi’s sustainable tuna farm in Baja California. Pescador Holdings, developed by Encourage, has made investments in Geomar, a Chilean producer of canned seafood that works with small-scale fisherman, and Portland, Ore.-based Fishpeople, which sells packaged meals featuring sustainably caught fish.
- On the beat. Follow ImpactAlpha’s “Financing Fish” vertical where we track investor activity and enterprises targeting healthy, sustainable and tasty fish. ICYMI: “With oceans in peril, investors find new ways to invest in the ‘blue economy.’”
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What we learned from the U.S.’ first 25 ‘pay for success’ projects. Learn by doing. More than two dozen pay for success projects have launched in the U.S. targeting criminal justice and recidivism, homelessness, and early childhood education and well-being. Four of the five projects that have released public results have been considered a success. Nonprofit Finance Fund, an early PFS pioneer, rounded up the lessons. Among them: PFS 2.0 will require new funding models, such as bonus payments, rate cards, and other innovative financial structures. More from Nonprofit Finance Fund.
Agents of Impact: Follow the Talent
Impact Capital is recruiting a vice president of lending in Seattle… Social Venture Circle and the New England Impact Investing Initiative host a social entrepreneurs pitch event in Boston May 21… The Central Bank of Kenya and the Monetary Authority of Singapore present the Afro-Asia FinTech Festival Jul. 15-16 at the Kenya School of Monetary Studies.
— May 9, 2019.