The Brief | January 23, 2019

ESG backlash, first for Blue like an Orange, women on boards in Africa, Ujima’s power play, jobs in Nairobi

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Greetings, Agents of Impact!

Featured: Returns on Investments podcast

If ‘ESG investing’ is so great, why is the world going to hell? Raise your hand if you don’t know what “ESG” stands for. “Environmental, social and governance” investing has broken out into subway ads and online pitches for a slew of new ESG mutual funds, ETFs and other financial services. “My mother knows what ESG is – exciting times,” Imogen Rose-Smith, an investment fellow at the University of California, says in the latest episode of ImpactAlpha’s Returns on Investment podcast. The term covers environmental, social and governance factors from companies’ carbon footprint to their supply-chain labor practices to the representation of women on boards and in senior management. How such “non-financial” factors affect financial performance has been a matter of hot debate for several years. As ESG breaks into the mainstream, the roundtable regulars took on a tougher question is: Does it make a bit of difference in the real world?

“There’s a huge disconnect between sustainable investing, investing with purpose, or whatever you want to call it, and these social and economic realities we see around us,” Rose-Smith says. A flurry of recent articles have tried to puncture the ESG balloon. Bloomberg’s contribution was headlined “How Socially Responsible Investing Lost Its Soul,” while Vox asked, “Does it make the world better? Probably not.” Still, ESG measurement and disclosure enables corporate accountability at a level of detail never before possible, making it possible to reward good corporate actors and punish the bad ones. That is driving splits that system-changers can build on. “The discussion moves forward, the predicate gets laid, the data gets collected and that sets the stage for the next set of demands,” ImpactAlpha’s David Bank argues in the podcast. “I don’t want to spend our time trashing ESG. I want to get on with what we’ve now got the platform to do.”

Read on, and listen in, to “If ‘ESG investing’ is so great, why is the world going to hell? (podcast)” Catch up on all of ImpactAlpha’s Returns on Investment podcasts on iTunes, SoundCloud, Stitcher or wherever you listen.

Dealflow: Follow the Money

Blue like an Orange’s first loan goes to small-business lender Produbanco in Ecuador. Blue Like an Orange Sustainable Capital last year raised its first $100 million for its Latin America-focused lending fund targeted at the U.N. Sustainable Development Goals. The firm’s first deal, in partnership with IDB Invest, is a $20 million loan to Ecuadorian small business lender, Produbanco. Access to finance, says Blue like an Orange, contributes to SDGs including zero poverty (No. 1), decent work and economic growth (No. 8), and reduced inequalities (No. 10). Produbanco’s green lending program for small businesses has a knock-on effect on Ecuador’s infrastructure and green economic growth, Blue like an Orange’s Amer Baig told ImpactAlpha. Banking giant HSBC, French insurance firms AXA and CNP and more than a dozen other institutional investors are limited partners in the fund. Here’s more.

Clean energy incubator Powerhouse raises seed fund. The Oakland, Calif.-based clean-energy incubator will make venture investments to help its startups secure early capital. Powerhouse has raised $5.5 million from Total Energy Ventures, Centrica Innovations, NRG’s former CEO David Crane, former California PUC commissioner Mark Ferron, and solar company NEXTracker’s Dan Shugar. Powerhouse has backed four companies, including energy management software company Solstice Energy and low-cost smart meter manufacturer SparkMeter. Dig in.

TheBoardroom gets CDC backing to double women on boards in Africa. The representation of women on company boards in Africa is about on par with the global average, which is to say, disproportionately low. In Africa, 14% of company board seats are occupied by women, compared to 15% globally, according to the non-profit Catalyst. Ghanaian entrepreneur Marcia Ashong founded TheBoardroom Africa in 2016 to match its network of peer-endorsed female candidates with companies and organizations. The U.K. development finance institution CDC is committing £1.6 million ($2.8 million) to TheBoardroom Africa to help double the number of women on boards in Africa by 2028. Read on.

Impact Voices: Pass the Mic

Boston Ujima Project is rebalancing risk, returns and power in local impact investing. The Boston neighborhood investment collective challenges the investor-centric approach that is the norm even in impact investing (see, “Boston is a growing hub of global – and local – impact). Ujima allows community members to invest, prioritize the types of neighborhood businesses needed and vote on what gets funded. The investments aim to boost the flow of capital to entrepreneurs of color and into products and services that promote the well-being of the community. The real transformation, Transform Finance’s Curt Lyon writes in a guest post on ImpactAlpha, is in the way deals and terms are decided. For Ujima, the process, in many ways, is the outcome.

  • Sharing risk and return. The fund aggregates capital in several tranches. Unaccredited investors in Massachusetts have lower minimums and higher return targets, and more loan-loss security. Institutional investors, philanthropic investors, and accredited investors have higher minimums and lower return profiles. That shifts the balance of risk toward those who can most bear it.
  • Balanced power, mitigated risk. Ujima’s deep stakeholder engagement strategy aims to help guide capital towards its best use. The vote of confidence from the community members ensures accountability, and could help derisk Ujima’s investments. The notion is that members will shop at the businesses they are invested in, because they care about their impact in their community.

Read, “Boston Ujima Project is rebalancing risk, returns and power in local impact investing,” by Transform Finance’s Curt Lyon on ImpactAlpha.

Agents of Impact: Follow the Talent

Climate expert Sara Walker joins Lestari Capital as chief conservation officer… Farmfit Africa is hiring a managing director in Nairobi… Open Road Alliance seeks an investment officer (see, “Open Road Alliance expands working-capital loan fund for social-sector organizations”)… Global Partnerships is recruiting an Africa portfolio director in Nairobi… Align Impact is looking for a private markets investment analyst in Los Angeles and a client services associate in New York.

January 23, 2019.