Greetings, Agents of Impact!
The Call No. 8. Join ImpactAlpha’s Agents of Impact call, “Sustainable investing advice – for financial advisors,” Thursday, April 18 at 1 pm ET / 10 am PT / 6 pm London. Register today.
Featured: ImpactAlpha Original
As assets flow to ESG investing, investors on the sidelines face hidden risks. Client demand for investments that take into consideration environmental, social and governance factors has big asset managers touting their ESG offerings as a way to reduce downside investment risks. But if ESG investing lowers risks, the inverse must also be true: portfolios not screened for ESG contain undisclosed and uncompensated risks. That confronts leading asset managers that have embraced ESG investing with an uncomfortable question: Are they exposing the majority of their clients to hidden risks? “We believe ESG is a risk mitigator and an alpha generator,” State Street’s Rakhi Kumar told ImpactAlpha. Yet of State Street’s $2.5 trillion in total assets under management, only about $179 billion, or 7%, are explicitly managed with ESG considerations.
Sustainable and ESG assets represent a growing share of portfolios for both asset owners and managers. But most investors remain unaware. A survey from BNY Mellon’s Newton Investment Management found that 55% of American investors are unfamiliar with “social investment,” including ESG and the broader category of responsible investing. Rising risks may serve to increase investor awareness. Evolving consumer attitudes, technology disruption and shortfalls in productive reinvestment represent rising “relationship risks” that can undermine a company’s societal license to operate, according to a report from the $192 billion Lazard Asset Management. “We believe the breakdown of these relationships represent a threat to long-term fundamentals and ultimately returns.” Last week, the global consultancy Mercer called out the possibility of sudden climate-risk “repricing events” that could upend portfolio values. BlackRock suggested investors are discounting climate risks lurking in municipal bonds, commercial real estate and U.S. utility stocks. Are your assets at risk?
Keep reading, “As assets flow to ESG investing, investors on the sidelines face hidden risks,” by Dennis Price and David Bank on ImpactAlpha.
- Join the conversation. State Street’s Lori Heinel, Boston Common’s Geeta Aiyer and Nuveen’s Peter Reali are on the agenda at Total Impact Philadelphia. Hosted by the Good Capital Project in collaboration with ImpactPHL, Toniic, Wharton Social Impact Initiative and Intentional Endowments Network, the conference returns May 1-2. ImpactAlpha is a media sponsor. Register with code “ImpactAlpha250” to save $250 (and take advantage of today’s flash sale to save a total of $450).
Dealflow: Follow the Money
Publisher Pearson launches $50 million education and workforce skills tech venture fund. A growing roster of education companies is raising money for the reskilling and upskilling of tomorrow’s workforce. British education publisher Pearson is upping its game with a three-year, $50 million early-stage venture investing initiative called Pearson Ventures. The strategy is an extension of the publisher’s $20 million affordable learning fund, which launched in 2012. Pearson Ventures will invest in startups focusing on lifelong learning, education tech, and democratizing access to skills and education. “Education will look different in the future, so finding new business models, incorporating emerging technologies into our products and seeking new partners for collaboration is becoming more important than ever,” Pearson’s Jonathan Chocqueel-Mangan wrote on LinkedIn. Learn more.
EverlyWell raises $50 million for at-home health diagnostics. Austin-based EverlyWell makes at-home diagnostic exams that individuals can use to test for everything from food allergies to fertility to sexually transmitted diseases. “EverlyWell customers tell us daily that we’ve changed their lives by providing healthcare services they otherwise wouldn’t be able to afford, access or understand,” says EverlyWell’s Julia Cheek. The company is adding physician consults and some prescriptions. EverlyWell’s $50 million funding round was backed by Goodwater Capital, Highland Capital Partners, Next Coast Ventures, NextGen Venture Partners, and SoGal Ventures. Check it out.
LISC commits to SustainVC’s second impact-driven startup fund. Local Initiatives Support Corp. is drawing on the treasury side of its business to back impact venture capital firm SustainVC. The 40-year-old community development financial institution is investing $1 million in SustainVC’s second impact fund for social- and environmentally-driven startups. LISC has made $20 billion in grants, loans and equity investments in underserved communities across the U.S. LISC’s commitment to SustainVC is part of an $15 million strategy to align the organization’s assets with its organizational mission. “We are utilizing capital traditionally associated with conventional financial instruments to invest in impact-focused funds that actively promote quality jobs, healthy communities and a strong financial return,” said LISC’s Maurice Jones. SustainVC Impact Fund II has a target fundraising goal of $25 million, half of which will be invested in women- and minority-owned businesses. More.
- Lessons from Fund I: “SustainVC: Ten lessons from ten years of early-stage impact investing”
Signals: Ahead of the Curve
Strong local news lowers cost of capital for local governments and taxpayers. Local newspapers hold governments in check, reduce incentives for corruption and boost government efficiency. Three finance professors found that over the long-run, after a local newspaper closes, the borrowing costs for governments increase by about 10 basis points, or 0.1 percent. “If local governments are not being kept in check,” NPR’s Shankar Vedantamreports. “That makes it riskier to lend money to that city or town.” More.
- … and local news is a democracy catalyst. “Local newspapers are basically little machines that spit out healthier democracies,” writes Joshua Benton for NiemanLab. More.
Agents of Impact: Follow the Talent
Beijing-based Kuaishou Technology launches a social impact institute on sustainable businesses for low-income entrepreneurs… Rally Assets is recruiting an impact advisory consultant and an investment research associatein Toronto… Also in Toronto, SolarShare is hiring a community engagement coordinator… Opportunity Alabama is looking for a director of operations to connect investors with investable assets in Alabama’s Opportunity Zones… The Global Impact Investing Network seeks a summer associate for its capital mobilization program in New York… Refugee Investment Network is looking for an intern in Washington D.C… Agora Partnerships is hiring an impact investing intern in Mexico City.
— April 17, 2019.