The Brief | November 5, 2018

Donor-advised impact investing, NYC opportunity zone opportunities, working capital in Colombia, CNote mobilizes $18 million

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Featured: ImpactAlpha Voices

Five ways to boost the impact of donor-advised funds. The tax-advantaged accounts managed by community foundations, public charities and financial-services giants like Fidelity, Schwab and Vanguard have primarily been used to make charitable donations. But in the same way that some big foundations have begun to go beyond grant-making to advance their missions, some sponsors of such “DAFs” are allowing donors to direct their principal toward impact investments (with any returns remaining in the accounts for reinvestment or donations). In a guest post on ImpactAlpha, Nicholas Salter of Progressive Philanthropy Group suggests five ways to improve the effectiveness of donor-advised funds as vehicles for impact investing, and boost the flow of capital.

Our favorite: “Outcome portfolios” constructed by donor-advised fund sponsors to help donors mix grants and investments in specific issue areas. “This would be a practical chance to engage and educate donors about how their resources – both philanthropic and investments – can be leveraged to support measurable outcomes on the issues they already care about,” writes Salter. Record commitments have pushed total DAF assets to $85 billion. Improving the services available to donor-advised fund holders would give philanthropists more tools, and unlock a large pool of patient, tax-advantaged capital for place-based, early-stage and other potentially high-impact impact investments.

Read, “Five ways to boost the flow of donor-advised fund capital to impact investments,” by Nicholas Salter on ImpactAlpha.

Dealflow: Follow the Money

Sempli raises $5.7 million to support Colombia’s small businesses. Medellín-based Sempli is an online lender that offers working capital loans to small and mid-sized companies in Colombia. Using its in-house data-based credit scoring system, the fintech company can disburse loans of between $10,000 and $100,000 in as little as three days. Sempli raised the capital from Dutch impact investor Oikocredit and the Inter-American Development Bank. More.

CNote mobilizes $18 million in savings for community investment. The women-led, Oakland-based fintech company raised the capital through its 2.5%-interest note. The deposits are on-lent to community development financial institutions to make loans and investments in community organizations and businesses. Since last September, CNote’s account holders have supported more than 280 entrepreneurs. Half of the businesses are minority-led; 37% are led by women. Read on.

Reinvestment Fund backs solar investor Sunwealth. The Philadelphia-based community development financial institution invested $3 million in solar investor Sunwealth. Sunwealth, based in Somerville, Mass., invests in small-scale commercial solar projects for businesses and underserved communities that have had difficulty finding funding. Coupled with $3 million in tax-equity investments from private investors, the loan from Reinvestment Fund will finance 2.5 megawatts of solar capacity, enough power for more than 400 homes. Dive in.

Impact Voices: Pass the Mic

Sweetening the Opportunity Zone opportunity with low-interest loans, job training and help with the tax bill. New York City is keen to attract private capital to 306 designated opportunity zones across the five boroughs, says Eric Clement of city’s Economic Development Corp. Clement’s ideas: Loans at 3% (vs. commercial rates of about 8%) for opportunity fund managers; pipeline support to guide investors toward attractive projects; and additional advisory and consulting services. The proposals emerged from a gathering last month of New York real estate investors, fund managers, impact investors, attorneys and consultants. Among the other takeaways, according to Impact Capital Forum’s Carolyn Kim Allwin and Orrick’s Perry Teicher:

  • Regulatory interpretation. Recently released rules around the new investment tax incentive “should give you courage to go out and act,” said Ernst & Young’s Lauren Lovelace. “Just be sure to be consistent with your interpretation.”
  • City support. Brookings Institution’s Bruce Katz and Evan Weiss offered 10 ways cities can maximize the economic and social potential of the tax break. High on the list: Help for local residents in gaining the skills necessary to meet labor demand and support for female- and minority-owned businesses to gain access to capital, technical assistance, mentoring and legal services.
  • Cash for taxes. Some investors are concerned about how they’ll pay the tax bills that will come due in 2026. Quinn Moss, a partner at Orrick, suggests that some investors could get a cash distribution to meet their tax obligations, while other limited partners could forego the distribution in return for a break on fees.

The gathering demonstrated the strong interest in opportunity zones among major financial institutions, with representatives from Goldman Sachs, Morgan Stanley, CT Greenbank, Ernst & Young, AllianceBernstein, BNP Paribas, Deutsche Bank and others.

Share, “City support and other takeaways from a gathering of New York City opportunity zone investors,” by Carolyn Kim Allwin and Perry Teicher.

Agents of Impact: Follow the Talent

Mary Pang is the new global head of private client practice at Cambridge Associates… Nesta is looking for an interim investment director in London… The United Nations Development Programme is hiring an SDG impact management specialist.

November 5, 2018.