The Brief | December 6, 2018

Blending finance for climate adaptation, Harlem Capital’s raise, New Zealand’s social enterprise fund, Paul Polman’s legacy

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Changing climate means growing demand for ‘adaptation finance.’ It’s not that a massive mobilization of capital for climate-change ‘mitigation’ isn’t still a damn good idea. But we now also need a crash investment strategy for climate-change ‘adaptation.’ Think resilient agriculture, coral-reef restoration or weather insurance. The Climate Policy Initiative estimates that total adaptation finance from all government sources was only $22 billion from 2015 to 2016. But as the costs of fires, floods and storms become clear, investment funds and vehicles targeting adaptation solutions are starting to line up to move significant amounts of capital. Public and philanthropic investors are blending capital to juice returns or lower risk for commercial investors with currency- and first-loss guarantees and early-stage support.

“Blended finance can and does attract commercial capital to adaptation sectors in emerging markets,” writes Justice Johnson of Convergence, the blended-finance matchmaker, in a guest post on ImpactAlpha. Althelia’s Sustainable Ocean Fund has a partial guarantee from USAID’s Development Credit Authority to mobilize capital for sustainable fisheries in Latin America and the Caribbean. The InsuResilience Investment Fund from KfW, the German development bank, aims to improve access to insurance in developing countries. Convergence helped develop the Climate Finance Facility and, with NatureVest, a Blue Bond to support conservation and climate adaptation activities. The mandate of the Green Climate Fund includes mitigation and adaptation strategies in emerging markets. Still, climate adaptation “has remained largely overlooked and underinvested,” says Johnson. There’s plenty of room for growth. The annual cost of adapting to climate change in developing countries could top $500 billion by 2050.

Read, “Changing climate means growing demand for ‘adaptation finance’” by Convergence’s Justice Johnson on ImpactAlpha.

Dealflow: Follow the Money

Harlem Capital launches fund for under-represented entrepreneurs. The firm has $2 million in hand, $23 million to go. Harlem Capital, one of the small but growing number of venture capital firms driving funding to minority-led entrepreneurs, has raised the first slug for its debut fund, according to an SEC filing. The Harlem-based manager is targeting $25 million. Its early investments include legal tech firm Paladin, media company Blavity and cosmetics firm Beauty Bakerie. What we know.

New Zealand’s Impact Enterprise Fund misses target with $6.2 million in commitments. New Zealand’s Akina Foundation, New Ground Capital, and Impact Ventures launched an impact fund last year to invest in domestic social enterprises. The partners, who targeted NZ$10 to $15 million (roughly $7 to $10 million) for the Impact Enterprise Fund, have closed the fund at NZ$9 million. The fund’s Chris Simcock blamed lack of awareness about impact investing for the shortfall. “We [ran] into the old school way of thinking where people split philanthropy and investing,” he said. The fund’s single investment to date is in Melon Health, a digital platform  that helps patients manage health needs and goals. Read on.

Repassa raises capital to help Brazilians recycle used clothes. Repassa’s online platform helps Brazilians buy and sell lightly used clothes to reduce the environmental impact of textiles by diverting used clothing from landfills. Repassa has raised an undisclosed amount of funding from São Paulo-based venture capital firm Redpoint eventures. Other environmentally-focused online clothing companies that have recently raised venture capital inclucde U.S.-based For Days and Lithuania-based Vinted. Dig in.

Signals: Ahead of the Curve

What does Paul Polman’s legacy mean for socially and environmentally responsible companies? A year before the 62-year-old chief executive of consumer packaged goods giant Unilever announced his retirement last week, he fought an epic battle for the future of the company – and perhaps of capitalism. Polman called his successful defense against the unsolicited $143 billion takeover offer for Unilever from Kraft Heinz Co. “a near-death experience.” Without naming names, Polman last week said the battle was “a clash between people who think about billions of people in the world and some people that think about a few billionaires.”

  • Sustainable living. Unilever’s “Sustainable Living Plan,” launched in 2010, sought to decouple the company’s growth from natural-resource consumption and drive social impact. It includes initiatives such as drip irrigation projects to help soybean farmers save water and reduce pesticides, and ambitious carbon-reduction goals.
  • Shareholder pressure. In the aftermath of the Kraft Heinz bid, shareholders forced compromises “which I frankly would not have done,” Polman said this week, including a €5 billion ($5.7 billion) share buyback in April.
  • Stakeholder alpha. The core of Polman’s vision of sustainable, stakeholder capitalism remains intact. Running Unilever for the benefit of consumers, customers and employees also benefits shareholders, he said in a farewell message. Polman has long argued that “sustainable living” represents not a tradeoff, but a source of business advantage that compounds over time – impact alpha, if you will.

Since 2009, Unilever’s shares (up 150%) have outperformed the FTSE 100 index (up 70%). Perhaps more telling: since the takeover drama, cost-cutting Kraft’s shares are down by 40%. Unilever’s are up by almost 30%.

Read, “What does Paul Polman’s legacy mean for socially and environmentally responsible companies?” by David Bank on ImpactAlpha.

Agents of Impact: Follow the Talent

Liz Lloyd, previously of Standard Chartered, joins the U.K.’s CDC Group as its first chief impact officer… George Ashton will oversee Opportunity Zone strategies at Local Initiatives Support Corp.… Steve Nocka, ex- of Bank of America Merrill Lynch, is the new chief lending officer at Root Capital. Amy Mullen joins the social lender from Oxfam America as chief development officerUpaya Social Ventures is looking for a manager for its accelerator program in Bangalore… WeFunder launches XX, a three-month accelerator program for immigrant entrepreneurs… HBCUvc is seeking nominations for 30 Under 30 Black, Latinx and Afro-Latinx leaders in venture capital.

December 6, 2018.