The Brief | May 25, 2018

Beyond neoliberalism, 100% impact network, Abraaj health fund in play, longevity economy

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Greetings, ImpactAlpha readers!

Featured: The Impact Alpha

Pushing impact investing beyond neoliberalism. Just what is impact investing’s “theory of change”? “If you think the market economy needs to be changed, and I do, this is not the way to do that,” the Hewlett Foundation’s Larry Kramer told other foundation leaders last week. In this week’s column, ImpactAlpha’s David Bank writes, “I’m no economist, but it seems as if the propositions impact investors are testing at least point toward a new paradigm.” Valuing and accounting for social and environmental impact is opening possibilities for change and, importantly, creating a constituency for it. As investors move money, data and market mechanisms are following. As impact worms its way into the machinery, the markets are shifting.

The impact investing theory of change, then, is to use the markets’ own mechanisms to redirect them for good. The $114 billion in impact investment capital identified last year by the Global Impact Investing Initiative is not enough to change capital markets. But if we succeed in mobilizing the $15 trillion or so needed to stem climate change, or the $30 trillion to $40 trillion required to meet all of the U.N.’s 2030 Sustainable Development Goals, we might just drive global system-change as well.

Read, “The Impact Alpha: Pushing impact investing ‘beyond neoliberalism’,” by David Bank, on ImpactAlpha. And catch up on all The Impact Alpha columns.

Signals: Ahead of the Curve

Inside the portfolios of impact investing’s 100% network. The second annual report is out on a group of investors who have committed to moving 100% of the assets of at least one seven-, eight-, or nine-digit portfolio to impact investments. The report from Toniic’s 100% impact network includes portfolio data from 76 asset owners who have collectively deployed $2.3 billion. The portfolios range in size from $2 million to more than $500 million; all but six have less than $29.5 million in assets. On average, the portfolios are 75% invested for impact; more than 30 have more than 90% in impact investments. Takeaways from “T100 Powered Ascent”:

  • Global goals. More than 8 in 10 of the investors in the study say they’ve met or exceeded their impact performance expectations. The three most-cited Sustainable Development Goals are No. 11 (sustainable cities and communities), No. 7 (affordable and clean energy) and No. 17 (partnerships for the goals).
  • Commercial returns. Nearly three-quarters of the portfolios target commercial returns overall, though most make some sub-commercial investments as well. Eight in 10 report they’ve met or exceeded their financial performance expectations.
  • More measurement. Six in 10 portfolios now measure impact, up from four in 10 two years ago.
  • Asset allocations. Impact investors in the study are overweighted in private equity investments and underweighted in hedge funds, compared to the asset allocations of non-impact portfolios. Foundations have nearly double the allocation to public equities and fixed income than other investors; private equity is most common for family offices.
  • Local focus. African investors predominately invested in Africa, Asian investors in Asia, Europeans in Europe and so on.

Impact investing “lenses” are proliferating. Suzanne Biegel uses a gender lens. RS Group, a climate lens. Ditte Lysgaard Vind, circular economy principles. Nidal Eses, Eric Rassman and Talia Arnow are guided by the caring economy. Lorrie Meyercord has adopted Laura Callanan’s creative economy lens.

Private equity watch: TPG’s Rise Fund is in talks with investors in Abraaj’s Growth Markets Health Fund about taking over management of the $1 billion fund, the Wall Street Journal reports. Both private equity firms say they provide investment capital to help deliver the U.N.’s Sustainable Development Goals. The Rise Fund declined to comment, as did the Bill & Melinda Gates Foundation, a major investor. Abraaj itself is not involved in the talks, the Journal reported. The backstory.

Dealflow: Follow the Money

Three deals span the lucrative “Longevity Economy.” The deals target some of the most costly over-65 expenses: housing, health and health services. Dig in.

Calvert and Urban Advisors raise $12 million loan fund for entrepreneurs of color. The UP Community Fund will make loans ranging from $250,000 to $1.2 million to small businesses and organizations in the U.S. Southeast. Read more.

Argentinian fintech firm secures $3 million for short-term lending. OPIC provided financing for MONI Online, which offers short-term credit to Argentines underserved by traditional financial institutions. Go deeper.

BP Ventures backs StoreDot and its fast-charging battery technology. The Tel Aviv-based venture is building batteries for electric vehicle that can fully charge in five minutes. Read on.

May 24, 2018.