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#Featured: ImpactAlpha Original
On the heels of the G20 meeting in Hamburg comes the “Impact 16” in Chicago. That’s the number of countries, with the recent addition of Finland and Argentina, that have formed national advisory boards to accelerate the practice of impact investing. The awkwardly named Global Social Impact Investment Steering Group, or GSG, grew out of the (then) G8 task force on impact investing established in 2013. In addition to the original seven countries (excluding Russia but including Australia and the European Union), the GSG now includes Brazil, India, Mexico, Israel and Portugal.
Representatives of more than 30 countries are expected in Chicago for the group’s “summit” next week. Sir Ronald Cohen, the legendary British venture capitalist who chairs the steering group, is expected to predict a 2020 “tipping point” for the movement, when global impact assets under management are expected to reach $300 billion, double this year’s assets of approximately $150 billion.
Read “Steering impact investing toward a 2020 tipping point,” by David Bank on ImpactAlpha:
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#Dealflow: Follow the Money (institutional capital edition)
Swiss Re to move $130 billion portfolio to track ESG indexes. The world’s second-largest reinsurer is done with legacy indexes that fail to account for companies’ performance on environmental, social and governance, or ESG, issues. The Swiss firm is already 90 percent of way towards shifting its portfolio to track ESG indexes and expects to complete the switch by the end of the third quarter. “This is not only about doing good, we have done it because it makes economic sense,” Swiss Re’s chief investment officer, Guido Fuerer, told Reuters. He said equities and fixed-income products with high ESG ratings “have better risk-return ratios.” Indeed, the argument over ESG outperformance is largely over. So far this year, the MSCI ESG Leaders Index has outperformed the MSCI International World Price Index, gaining 11.2 percent to the world index’s 9.6 percent.
World’s largest pension fund hits responsible investing milestone. Japan’s Government Pension Investment Fund has allocated ¥1 trillion ($8.9 billion) to companies that focus on positive environmental, social, and governance (ESG) practices. The pension fund has ¥144 trillion ($1.3 trillion) in assets under management. Its ESG allocation represents only 3% of its Japanese stock portfolio, but the focus on positively screening stocks could guide other Japanese and Asian institutional investors to follow suit.
New Mexico commits $50 million each to TPG Rise and BlackRock Renewables funds. The investments are part of the New Mexico State Investment Council’s $275 million in commitments to “alternative” investments, which also include private equity, renewable energy (see below), and real estate. TPG is raising $2 billion from a combination of Silicon Valley tech titans and institutional investors such as Swedish pension fund AP2. Most of New Mexico’s alternatives investments have a “responsible” component. Its $75 million investment in New Mountain Capital’s fifth private equity fundconsiders positive environmental, social and governance factors in its investment thesis. A $50 million investment in Berkshire Group’s new multifamily real estate fund will focus on affordable housing.
Institutional investors oversubscribe BlackRock renewables fund. BlackRock raised $1.6 billion — $600 million more than its target — for its second Global Renewable Power Fund. Nearly 70 institutional investors backed the fund, including New Mexico’s State Investment Council. BlackRock’s David Giordano says the raise proves that “geopolitical movements” have not derailed the global commitment to renewable energy. “The U.S. is going to continue to be one of the largest demanders of capital for new renewable energy projects, despite the sound bites from the federal government,” he said. BlackRock will invest in renewable projects and infrastructure in the U.S., Europe, Japan, and Australia. One-fifth of the capital already has been committed to five wind projects.
Bridges Fund Management closes £220 million fund. The U.K.-based impact investor’s fourth property fund is its largest to date, following its £212 million third fund that it closed in 2015. (The third fund raised close to $320 million at the time; $274 million at today’s exchange rate.) The fourth fund has four investments lined up, including a 500-unit affordable housing development and an old industrial site that will be rehabilitated.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Tapping artist-innovators as a source of business and social value. Leonardo da Vinci imagined and sketched helicopters, tanks, and parachutes centuries before they were produced. With modern artists bringing problem-solving skills and unique talents, venture capital firms Kleiner, Perkins, Caufield & Byers and Khosla Ventures host designers-in-residence and MasterCard, United Healthcare and USAID work with OpenIDEO to connect with activists, experts, and social innovators to uncover new solutions. Artist innovators are an untapped source of potential value for investors, business, government, and impact sector, says a new report from Upstart Co-Lab and Emergence Creative. “Both artists and entrepreneurs function as our society’s scouts,” cellist Yo-Yo Ma told the report’s authors. They act as “forerunners who are sensitive to changing conditions, on the lookout for broader perspectives and new opportunities.” An IBM survey of 1500 CEOs found that creativity is the most important skill for leaders; a separate survey found 85% of employers have a hard time finding applicants to fill creative positions. In a Returns on Investment podcast last year, Upstart Co-Lab founder Laura Callanan explained how the initiative promotes creative people and communities.
Turn toward “My Country First” is blocking path to 2030 global goals. It’s not just that rich countries are nowhere near achieving the policy objectives laid out in the 17 U.N. Sustainable Development Goals for economic and social inclusion, peace and environmental sustainability. It’s that their environmental, financial and governance failures are hampering the ability of poor countries to make progress, according to a new index ranking 157 countries according to their progress against the 2030 global goals.
Chief disappointment: The United States of America, which ranks 42nd out of 157. That puts the U.S. ahead of only four other OECD countries (Chile, Israel, Mexico and Turkey). The ranking corroborates findings from last month’s Social Progress Index, which showed a significant drop in the U.S. score for tolerance and inclusion. The new report from the Sustainable Development Solutions Network and Bertelsmann Stiftung was scathing in its critique of industrialized nations turn towards “My Country First” policies and rhetoric. A traffic-light chart shows a number of red warning lights for the U.S. The world’s richest nation faces major challenges in gender and income inequality (SDGs №5 and 10), unsustainable consumption and production (№12), climate and environmental action (№13 through 15), peace at home and broad (№16) and global partnerships (№17).
Rich countries, including Sweden, Denmark, Finland, Norway, Czech Republic, Germany, Austria, Switzerland, Slovenia and France, make up the 10 highest-ranked countries, though nearly all scored poorly on sustainable consumption and production. But rich countries are also among the bottom 20 performers on spillover effects — the externalized environmental and social costs passed from one country to another. “This suggests that good SDG outcomes are often associated with negative spillover effects,” write the report’s authors. And only six countries (Sweden, Norway, Luxembourg, Denmark, Netherlands and UK) are delivering on their commitments to spend 0.7% of GDP on Official Development Assistance, or foreign aid.
As leaders of the G20 nations meet in Hamburg, the index and dashboard highlight the need for rich countries to make sustainable development work within and beyond their borders, said economist Jeffrey D. Sachs, lead author of the report, “If the world is to achieve the SDGs, all countries must take up the goals as part of their national development strategies and ensure that they take responsibility for their impact on the rest of the world.”
Onward! Please send any news and comments to [email protected].