The Brief | May 20, 2019

Ford Foundation’s mission-related investments, debt capital for Mexico’s Ejido Verde and Indonesia’s Nazava, new recipes for global goals

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Greetings, Agents of Impact!

Podcast Series: Beyond Tradeoffs

Ford Foundation: Spotting mispriced risks in affordable housing, quality jobs and diverse managers. Foundations command a combined $900 billion in the U.S., and more than $1.5 trillion globally. No other class of asset owners should be more predisposed to move “beyond trade-offs” than philanthropies, which have a legal mandate and tax obligation to benefit society, as well as a presumably charitable original intent. The trade-off between financial returns and social impact is enshrined in the organizational structure of most foundations, however, which keep the investment office separate from the philanthropic mission. Fewer than two dozen foundations commit even part of their endowments to “mission-related investments.” Now, the emergence of institutional-grade impact investment strategies has brought into the open the social impact and environmental sustainability of that other 95% of foundation assets.

The biggest mandate so far is the Ford Foundation’s $1 billion, 10-year, carveout from its $13 billion endowment. “We’re trying to prove that it is possible to generate both financial returns that would be appropriate for endowments…and social returns,” says Roy Swan, who lead’s Ford’s mission-related investing effort, in the latest episode of ImpactAlpha’s Beyond Trade-offs series of podcast, produced with Omidyar Network. The common thread through much of the $130 million that Ford has allocated so far: a gap between actual and perceived risks. “Risk-adjusted,” after all, is a key part of risk-adjusted market rates of return. The portfolio is focused on four verticals: affordable housing, financial inclusion, quality jobs and diverse fund managers. Says Swan, “Our goal is to demonstrate that there are investment opportunities available that have returns on capital profiles that would fit risk-adjusted return-on-capital expectations for many investors.”

Read on, and listen in, to, “Spotting mispriced risks in affordable housing, quality jobs and diverse managers,” by David Bank on ImpactAlpha.

  • Travel to the land beyond trade-offs. Join The Call No. 9, featuring guests in our Beyond Trade-offs podcast series, including Prudential Financial’s Ommeed Sathe, Elevar Equity’s Sandeep Farias, Blue Haven Initiative’s Liesel Pritzker Simmons and Omidyar Network’s Robynn Steffen, Thursday, May 30th, at 10:00 am PT / 1:00 pm ET / 6:00 pm London. RSVP now.

Dealflow: Follow the Money

Mexican agroforestry venture Ejido Verde secures $2 million from IDB Invest. Ejido Verde is using forest conservation as a tool to empower indigenous families in the Mexican state of Michoacán. The decade-old company supports sustainable production of pine resin by lending indigenous communities capital to plant new trees on communally-owned lands, known as ejidos. Communities repay the loan with 10% of the resin they procure after the trees mature, about 10 years from planting. Ejido Verde buys the remaining supply at a fair market price. The company has supported 480 family farms on 11 ejidos plant 3,000 hectares of trees. “The trees we plant today will create revenue and jobs for the next three generations,” Ejido Verde’s Shaun Paul told ImpactAlpha. A $2 million loan from IDB Invest, the private-sector arm of the Inter-American Development Bank, will enable the company to build and maintain 1,250 hectares of native pine trees towards its goal of 12,000 hectares by 2022. Read on.

Beneficial Returns backs Indonesian clean water venture Nazava. Bandung, Indonesia-based Nazava is helping low-income Indonesians access clean water by selling affordable household water filters. Nazava’s ceramic water filters can each filter 7,000 liters of water. The company says its filters have provided clean water to more than 680,000 people and have helped families save $16 million since 2007. Growth-stage lender Beneficial Returns provided a loan to help the company produce and sell 300,000 filters by 2023. If Nazava reaches that goal, its final loan payment will be waived. Nazava is Beneficial Returns’ first investment in Southeast Asia and its second in water filtration, after an investment in Guatemala-based Ecofiltro last year. Check it out.

Dealflow overflow.

  • Vermont-based Norwich Solar Technologies’ new community impact fund allows local investors to back community solar projects that lower electric bills for underserved communities.
  • The European Bank for Reconstruction and Development approved a €2 million ($2.2 million) loan to Moroccan digital payments firm Société Maghrebine de Monétique S.A., in part to support the company’s youth job training initiative.
  • India’s National Bank for Agriculture and Rural Development reached the first close for its 7 billion-rupee ($100 million) agriculture and rural livelihoods fund. The fund is being managed by the bank’s venture arm, Nabventures.

Signals: Ahead of the Curve

New recipes for meeting the Sustainable Development Goals. The obstacles to averting climate disaster and meeting the global goals are more formidable than ever. Our collective progress is lamentably slow, write Sphaera’s Astrid Scholz and Cameron Burgess, in “Behaviors we might survive by.” Based on their work with the systems-design firm, Scholz and Burgess are pinning hopes for global survival on two sets of changemakers:

  • Natively networked organizations. Enterprises using (not building) technology to organize and coordinate innovators, investors, and implementers in the pursuit of massive outcomes.
  • Anti-establishment establishment. The ultra high-net-worth individuals, trustees of foundations and family offices, who are breaking the modus operandi of philanthropic and investment organizations to pursue new, more direct approaches to scaling solutions. Read the opus.

Agents of Impact: Follow the Talent

RSF Social Finance is hiring an investment manager in San Francisco… Beeck Center for Social Impact and Innovation seeks a director of influence and communications and a special assistant to the executive director at Georgetown University… Phenix Capital released its Global Impact Platform impact fund database for institutional investors… Unreasonable Impact reports the accelerator supported 94 companies that have created 20,067 new jobs while raising $2 billion in capital (and earning $1.9 billion in revenue) over three years.

May 20, 2019.