2030 Finance | June 3, 2017

Climate market signals, Rise Fund’s new institutional investor, neighborhood finance in Detroit

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Greetings, ImpactAlpha readers!

#Featured: ImpactAlpha Original

Signals for climate action are in the capital markets, not the Rose Garden. Don’t look to President Trump to understand the future for climate action. Follow the money. In the short-run, watch whether others step up to fill the void of U.S. funding. Former New York Mayor Michael Bloomberg anted up $15 million to make up for the shortfall in U.S. funding for U.N.’s climate secretariat itself, and there’s a $2 billion hole in the Green Climate Fund. Those figures are a drop in the bucket of the “clean trillion” needed annually to fulfill the goals of the Paris agreement, tripling 2016 investment of less than $300 billion. Falling costs for renewables may drive even more ambitious investments as project developers scale up, cutting carbon emissions and driving economic growth. If investments accelerate, it will signal the markets believe the low-carbon transition is inevitable, and they want to stay on board.

Read “Climate market signals” by David Bank on ImpactAlpha:

Climate market signals

Too much brain damage? Test your impact IQ with The Brief Quiz №17, by Jérôme Tagger:

Nespresso, Mitt Romney, and hospital beds, they’re all in the Brief Quiz №17


Nominate yourself or others by June 16. We’re looking for leaders driving impact investing around the world. The Global Steering Group for Impact Investment will honor investors, managers, entrepreneurs and market-builders. Submit an entry.

#Dealflow: Follow the Money

Knight and Ford foundations commit $2.5 million to Detroit neighborhoods. The philanthropic capital is being invested in the $30 million “Strategic Neighborhood Fund,” launched last year by the City of Detroit and Invest Detroit, a community development finance institution, or CDFI. The fund also has raised $10 million from JPMorgan and the Hudson-Webber Foundation to finance recreation spaces, community gardens and other projects in three city neighborhoods that have “suffered disinvestment for too long,” according to Detroit mayor Mike Duggan. The city wants to expand investments to 50 neighborhoods over three years. “For the city’s recovery to be sustained and inclusive, it must focus on the needs of longtime residents who never gave up on the city,” Duggan says. Detroit’s determination after declaring bankruptcy in 2013 is catching investors’ eye. Last month, JPMorgan committed a separate $50 million to the city’s revitalization plans.

TPG RISE Fund raises another $50 million. Swedish pension fund Second AP Fund — or AP2 — is committing to the planned $2 billion fund to boost its Sustainable Development Goal-aligned investing. “We try to be actively involved in these goals,” says AP2’s Eva Halvarsson. TPG’s impact assessment methodology was developed independently by The Bridgespan Group — a key draw for AP2. The RISE Fund has so far announced two investments: in edtech venture EverFi and India’s dairy company Dodla.

Dutch bank launches €2 billion bond to tackle affordable housing shortage. An “Affordable Housing Bond” from Dutch public bank Nederlandse Waterschapbank is the second €1 billion-plus (+$1.1 billion) social housing bond to launch in the past year (paywall). Dutch cities, like many urban hubs worldwide, are grappling with a shortage of affordable housing; there is reportedly a 10-year wait for rent-controlled homes in Amsterdam. Nederlandse Waterschapbank’s bond will be split between a €1.5 billion ($1.7 billion) seven-year tranche and a €500 million ($560 million) 15-year tranche. Coupons are small: 0.25 percent and 1.25 percent respectively. So far, the bond has attracted Credit Agricole, AP2, and Robeco Investment Management. Last July, Dutch municipal bank BNG Bank issued a €1 billion bond for social housing.

Green indices reject Repsol’s “green bond.” Spanish oil company stoked controversy last month when it launched a €500 million ($560 million) “green bond” to retrofit its refineries. Major indices aren’t buying it. Neither the Bloomberg Barclays MSCI, S&P DJI, nor Solactive indices have listed the bond, Environmental Finance reports. Nonprofit green bond tracking group Climate Bonds Initiative argues if Repsol really wants to make an impact climate-wise, it should transition to other fuel options, like bio-feedstock. That would require swift acceptance on Repsol’s part that for fossil fuels companies, “incremental change is out of time,” as Climate Bonds Initiative says. The group nevertheless praised Repsol’s transparency.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

Impact investors respond to Trump’s climate decision. As policy moves backward, says Zevin Asset Management’s Pat Tomaino, “Pressing companies to cut their own emissions, deploy renewable energy, and lobby responsibly become even more important.” Calling Trump’s decision a return to “Dark Age thinking,” Michael Whelchel and Shawn Lesser of Big Path Capital write, “We will stay to this path, for it is the smartest business decision to make. Let us all redouble our efforts, add more sails, stock more provisions and deploy capital in the New World that we’ve seen with our own eyes but others may not yet have.” Tribe Impact Capital, an impact wealth manager, issued a statement saying the tools are in hand to drive the Paris agreement. “When we harness our collective power as consumers through spending, as citizens through voting, as investors through mission, and as employees through influence, then we can and will deliver the Paris Accord.” Social Impact Capital managing partner, Sarah Cone, tweeted, “Trump’s decision was monumentally idiotic, but as a clean energy investor, I tell you that it will mean very little.” Responded Caprock’s Matthew Weatherley-White, “Markets trump policy, and geopolitics trump politics.”

The role of small business in Detroit’s resurgence. City-level entrepreneurship development efforts are helping revitalize Detroit and rebuild national investor confidence in the city (see the latest findings from the Motor City-based Kresge Foundation’s Detroit Reinvestment Index). An event last month at the Brookings Institution explored the role of entrepreneurship in Detroit and its application to building inclusive economies in other Rustbelt cities. Five takeaways: 1) Small businesses provide benefits to neighborhood economies like jobs for residents without a car; 2) Small businesses are pathways to opportunity and wealth for a broad cross-section of residents; 3) Cities need to support small business with ecosystems that include cutting red tape, connections to experts and office or production space; 4) Alongside small businesses, cities must also invest in innovative, tradable growth industries with multiplier effects; 5) Philanthropy can play a role in pooling capital (see above) and financing startup ecosystems.

#2030: Long-Termism

Africa’s Agenda 2063 for capturing demographic and diversity dividends. World leaders at last week’s G7 meetings in Taormina recommitted themselves to investment in sustainable development in Africa, and tipped their hat to Africa’s Agenda 2063 (see, “Transcending Trump in Taormina”). That sent us scrambling to dig deeper into the African Union’s blueprint for the next half-century, adopted in 2015.

The year 2063 will mark the 100th anniversary of the African Union, which was founded as the Organisation of African Unity, on May 25th, 1963 to unite the continent against colonial rule and rid Africa of racial discrimination. Agenda 2063 calls for “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in international arena.”

Among the agenda’s seven “aspirations”: An Africa whose development is people-driven, relying on the potential of African; people, especially its women and youth, and caring for children. That is particularly critical for African nations seeking to capture the social and economic “demographic dividends” of growing productivity from a large working-age population and increased representation of women in business and politics. Reporting from the Africa Regional Forum on Sustainable Development In Addis Ababa last month, AllAfrica reports that more needs to be done to meet the challenges of “youth unemployment, girls’ education and bridging gender gaps, reviving local economies, putting in place solid financial instruments, and investing in statistics.”

Among the African leaders reporting on their progress and challenges, Mutuuzo Peace Regis, Uganda’s minister of state for gender, labour and social development, said 42% of Uganda’s parliamentarians are women, and that the government is empowering youth, who make up 78% of the population. Uganda’s education policy, she said, has spurred a “drop in the illiteracy rate from 32% to 24% in just 10 years.” Nysasha Chikwinya, Zimbabwe’s minister of women’s affairs, gender and community development, said, “In Zimbabwe our constitution provides for 50–50 representation of women in politics and decision-making as a tool to realize gender equality,” adding, “I trust there are many other countries that have done better.”

Onward! Please send any news and comments to [email protected].