Flint’s ROI miscalculation, IIX does debt, a lab for SDG finance, global elections



#Featured: ImpactAlpha Original

The return-on-investment miscalculation that caused the Flint water crisis. Cost savings were the stated driver of the 2014 decision by officials in Flint, Mich., to switch water systems — to one tainted with lead and other toxins.

As events have shown, projected savings of $200 million over 25 years have been vastly outweighed — by sickness and death among Flint’s 100,000 resident and lifetime birth defects, as well as felony trials of government officials, the replacement of 6,000 water pipes and incalculable reputation damage to Flint and to Michigan.

How could the bean counters have gotten it so wrong? They failed to calculate their true ROI, or return on investment. Externalizing such costs pushes the burden to others, a lesson for the Trump Administration as they undo rules around the “social cost of carbon,” now set at $40 per ton. Without such frameworks, public and private investors routinely miscalculate their ROI.

Read more from Dennis Price at ImpactAlpha:

The investment miscalculation that caused the Flint water crisis

#Dealflow: Follow the Money

Hong Kong health startup raises debt through IIX’s Impact Partner Platform. Pacific Baby, which makes non-plastic baby feeding products, has closed the first debt deal on Impact Partner Platform, the matchmaking platform of IIX. Based in Singapore, the platform connects social enterprises with mission-driven investors. The Hong Kong startup raised the undisclosed amount to expand its distribution of bamboo- and steel-based products in 30 countries, including the U.S. and China. Baby feeding is a $5 billion industry, yet most products are still made with petroleum-based plastics linked with health problems in humans. The Impact Partners Platform has closed more than 30 equity deals, but this was the first debt financing. Many entrepreneurs are turning to debt rather than equity to finance their growth plans. IIX founder Durreen Shahnaz was recently awarded the Oslo Business for Peace Award.

Fintech startup First Circle raises $1.3 million for small business lending in the Philippines. Rather than traditional collateral, First Circle relies on basic data such as customer numbers and transactions to underwrite loans averaging $10,000. The startup has lent $5 million to date to small- and mid-sized businesses in the Philippines, a country with a population of nearly 100 million. Eyeing potential expansion into Indonesia or Thailand, Patrick Lynch, First Circle co-founder and CEO says the company looks “at markets where there are low levels of small- and medium- enterprise financing, increasing e-commerce penetration, and sub-optimal availability of capital.” Accion Venture Lab and Silicon Valley-based Deep Blue Ventures provided the capital. Last year, the firm raised $1.2 million from 500 startups, IMG, Key Capital and others.

NSF seeds edtech startup Couragion to boost STEM career education. The National Science Foundation is seeking to increase the pipeline of science, technology and engineering and math talent with investments in edtech startups that make such careers accessible — and cool — to underserved kids. Couragion, a Denver, Colo.-based startup is building an application to make learning about STEM careers fun and accessible through videos, games, and self-reflection quizzes. The $750,000 NSF grant, through NSF’s Small Business Innovation Research program, will help the company amass STEM content and develop its platform “based on big data, machine learning and predictive modeling techniques.”

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

SDG Finance Lab: “Vast pools” of institutional capital for sustainable development… How to close the $6 trillion annual gap in finance needed to reach the global goals for 2030? Tap the $80 trillion held by insurance companies, pension funds, sovereign wealth funds, and philanthropic organizations in OECD countries alone. The U.N. launched an SDG Finance Lab at a high-level event at UN headquarters to mobilize institutional capital for the 17 Sustainable Development Goals. Showing up: representatives from Aviva, JPMorgan Chase, Rabobank, Meridiam Infrastructure, Citi and others. “We must create incentives to embed sustainability into financial decision-making,” said Peter Thomson, President of the UN General Assembly, reports Responsible Investor [paywall]. That reorientation is beginning to take hold in Europe, with commitments from major pension funds in the Netherlands, Sweden and Norway. Earlier this month, Bertrand Badré, the former World Bank financial chief who recently launched BlueOrange Capital to mobilize private capital for SDG investments in Latin America. Responsible Investor is hosting a series of webinars in May on SDG investing.

…And emerging market private equity players are ready to play. The SDGs are the new black on the investment conference circuit. The Global Private Equity Conference, May 16–17 in Washington D.C., will feature Bill McGlashan, head of TPG’s Rise Fund, which is raising $2 billion for emerging market impact investing (see, “Deconstructing TPG’s $2 billion RISE Fund”). Another speaker: the new CEO of the World Bank, Kristalina Georgieva (see “World Bank tiptoes toward impact bonds and a focus on results”). Warburg Pincus CEO Charles R. Kaye will join more than 850 emerging markets private equity fund managers, institutional investors and stakeholders from more than 60 countries. ImpactAlpha is a media sponsor for the event (see our report from last year’s event, “Impact Investing a Bright Spot in Emerging Markets Private Equity”). You can register here.

#2030: Long-Termism

Global elections are coming. What will they mean? The Norwegian Nobel Committee, responsible for selecting the winner of the Nobel Peace Prize, holds a global election to choose the most deserving candidate. More than 700 million voters from 50 different countries vote in a secure, transparent, mobile, cross-border system. The winner’s image becomes the most recognizable face on the planet, with a mandate to rival any president, prime minister or king.

The Nobel committee has no such plans — yet. Futurist speaker Thomas Frey believes that by 2030, we will have conducted “global elections.” A new global election industry is inevitable, says Frey. “Inside what may start out as a playful way to get more people involved in selecting the winner of the Nobel Peace Prize is something far more serious — methodologies for establishing new global mandates.” TV competitions like American Idol and the Eurovision Song Competition pioneered the concept of global voting as a media event. Can global voting raise the profile ocean pollution, carbon emissions and human rights?

Overreach is a real risk. Do we want a global leader? Referenda on religion? Would small countries simply be outvoted? What if too few vote? Would Facebook and Google have too much influence? Still, global mandates will serve as “a temperature gauge for global opinion” and “a checks and balance system for over-reaching countries,” Frey says. “They may also be used by people in first-world countries to impose their will on the less fortunate.”

Onward! Please send any news and comments to TheBrief@impactalpha.com.

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