The Brief | February 13, 2019

Financing the Green New Deal, safe ride-hailing in Latin America, South African impact ventures, overheard at #EconImpact

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Greetings, Agents of Impact!

Featured: Returns on Investment podcast

No need to wait for Washington to mobilize around a ‘Green New Deal’ (podcast). It seems U.S. senators will get to vote on an ambitious manifesto to get the U.S. to “net-zero” in greenhouse gas emissions by 2030 and to use that mobilization to drive good jobs and quality health care for all. Sen. Mitch McConnell, the majority leader, has called for a vote to force what he thinks will be an awkward choice for many senators. Newly elected Rep. Alexandria Ocasio-Cortez has galvanized the political debate with a proposed Green New Deal that would rely primarily on government financing to pay for the required investments in climate-friendly agriculture, transportation, buildings, manufacturing and, of course, energy. In the latest Returns on Investment podcast, roundtable regulars Brian Walsh and Imogen Rose-Smith tried to force ImpactAlpha’s David Bank into his own awkward choice: private capital or government funding?

“It’s true that Alexandria Ocasio-Cortez has gone to the mat, and more power to her, that the public can pay for these things,” Bank says in the podcast. “But that undersells that there is going to be massive private investment as well.” The kinds of financing mechanisms in the Green New Deal proposal – to mobilize capital, apportion risks, protect stakeholders and ensure accountability – have been built by elements of the impact investing industry in recent decades, he said. Rose-Smith agreed, “We don’t need to wait for Washington. You are starting to see private sector investing, including impact investing, coming into those growing opportunities.” The legislation’s emphasis on public accountability is key. Ocasio-Cortez has helped change the dynamic from “This is socialism,” to “Sharing the wealth is vital part of a successful, sustainable capitalist economy,” Rose-Smith said. “That will be a huge game-changer.”

Read on – and listen in – to “No need to wait for Washington to mobilize around a ‘Green New Deal,’” by David Bank on ImpactAlpha.

Dealflow: Follow the Money

Blue Like an Orange finances Cabify to boost safety in ride hailing in Latin America. The debt fund founded by former World Bank officials to finance the Sustainable Development Goals closed its second deal (see, “Blue like an Orange’s first loan goes to small-business lender Produbanco in Ecuador). Cabify, founded in Madrid, operates in 10 Latin American countries as well as Spain and Portugal. Blue Like an Orange’s Suprotik Basu told ImpactAlpha that Cabify committed to measure improvement in road safety and carbon reduction, and to improve safety for women riders and to hire women as drivers. The fund committed $30 million in mezzanine debt to go with $40 million from IDB Invest, an arm of the Inter-American Development Bank. For growing businesses, such “structured financing” can bridge the gap between equity investment and commercial debt. Read on.

  • Agent of Impact. The former chief financial officer of the World Bank, Blue Like an Orange’s Bertrand Badré published a book last year, “Can Finance Save the World?” Follow ImpactAlpha on Instagram.

Adianta raises $2.2 million to expand access to working capital in Brazil. Brazil’s small businesses have limited access to credit to meet their short-term working capital needs. São Paulo-based Adianta allows small and medium-sized businesses in Brazil to access same-day credit and working capital through its online platform. Brazilian tech investor DGF Investimentos led a R$8 million ($2.2 million) round for the firm. Adianta has extended $30 million in credit since 2016. Learn more.

Lion Pride Agility Fund launches to invest in South African impact ventures. The ZAR500 million ($37.4 million) fund will invest in small and medium-sized South African enterprises. The Lion Pride Agility Fund’s two share classes target separate themes and returns. Its “impact investing” shares will target fintech, education, healthcare, food and “4th industrial revolution” ventures serving South Africans at the “base of the pyramid.” The fund offers investors tax advantages in order to drive investments into small and growing firms that can stimulate economic growth and create jobs. More here.

Signals: Ahead of the Curve

Overheard at the Economist’s 2019 New York Impact Investing forum. The Oxford-style debate at Tuesday’s Economist impact investing forum was less a debate on the motion – This house believes that impact investing will turn out to be the most profitable way to invest – than a dialogue about how to make it so. Goldman Sachs John Goldstein led with a definition on the nuance of “profits,” arguing that profit can be anything that is deemed beneficial. Beeck Center’s Lisa Hall spoke of the strength and diversity of talent attracted to impact investing. “Don’t we want better talent managing our portfolios?” IGNIA’s Michael Chu pushed for more clarity around what constitutes an impact investment. With so many ways of deploying capital under a single name, he said, “you have to conclude that this is more confusing than clarifying.” Stanford/Columbia University’s Ronald Gilson cautioned against faith in impact funds that only tie performance to financial returns. “If they don’t believe they can do [impact], there’s not reason you should think they can.” More from New York:

  • Follow the talent. Ellevest’s Sallie Krawcheck touted the diversity of her startup, which now manages more than $250 million on behalf of everyday women investors. More than 50% of the company is female, including its engineering team; more than 66% of leadership is female; and more than 40% is non-white.
  • Beyond the margins. Acumen’s Leslie Labruto, speaking on a panel on climate finance, called into question the intent of oil and gas companies’ experimentation with impact funds and renewables investments. “Is a $5 million initiative significant” for an oil and gas company? “No. We need to see eight- and nine-figure investments” at a time, she said.
  • Reining in the winners. Winners Take All author Anand Giridharadas laid out ideas on how to insight the change for which he advocates. First up: A “moratorium on impact investing, until finance unwinds its complicity,” he said. Giridharadas also called for a crack-down on billionaire tax evasion and tax havens, better collective bargaining for the working class, and ending class segregation in the U.S.
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Agents of Impact: Follow the Talent

Pamela Jacobs, ex- of Envestnet, joins Spouting Rock Asset Management as chief sustainability officer… Illumen Capital is looking for a vice president of business development and investor relations… Alterna is looking for an impact fund officer in Guatemala City… The Global Fund to End Modern Slavery seeks an investment manager… AgFunder is recruiting a venture capital investment analyst in Silicon Valley… Accion’s “Inclusive Fintech 50,” an initiative to recognize early-stage fintechs, is accepting applications through Mar. 8.

February 13, 2019.

*An earlier version of this Brief misquoted Giridharadas as saying “…until finance unwinds its complexity” and Labruto as saying “…a $500 million initiative”. We regret the errors.