Greetings, ImpactAlpha readers!
#Featured: Returns on Investment podcast
Which financial innovations will grow from billions to trillions? (podcast). A raft of innovative social-impact and environmental financing vehicles are emerging from labs, incubators and startup funds. By finding inventive ways to make social inclusion and environmental regeneration pay, innovative financing models are “internalizing positive externalities.” Too wonky? Just call it “impact alpha.”
In Indonesia, the Tropical Landscapes Finance Facility recently issued a $95 million bond to pay for wildlife-friendly, socially inclusive and climate-sensitive rubber production in two provinces. The Climate Finance Lab, a private-public partnership has launched more than two dozen financial vehicles that together have mobilized more than $1 billion. The Rockefeller Foundation, through its “Zero Gap” portfolio, is on the hunt for “SDG unicorns” that can mobilize at least $1 billion each to meet the Sustainable Development Goals. In the latest episode of Returns on Investment, ImpactAlpha’s David Bank argues that the best of the new models will scale up to attract real dollars (see “Bonds go green,” below). The roundtable’s resident curmudgeon, Imogen Rose-Smith, is skeptical that many of the impact investment pilots can graduate from the kiddie table and join the adults in the “real world” of finance. As always, host Brian Walsh keeps it lively.
Read on and have a listen to the podcast, “Which financial innovations will grow from billions to trillions?” (This episode of Returns on Investment is sponsored by Wunder Capital, an easy way to invest in solar energy projects across the US. Visit WunderCapital.)
#Dealflow: Follow the Money
Omidyar Network spins out $100 million Spero fund… Spero, which means “hope” in Latin, will make Series A and Series B tech investments, focused on health, wellness and food; the future of work; and human relationships and connection. The fund is being spun out of the Omidyar Network; eBay founder Pierre Omidyar is the new Spero’s sole investor. “We are optimistic about the role of technology in building a better world, and mission-driven entrepreneurs give us hope for the future,” Spero’s founding partner Shripriya Mahesh wrote in a blog post. “We [also] believe some fundamental things are likely to stay the same: we will care about our health and the environment we live in; we will seek fulfillment in our work and our sense of purpose; we will value relationships with friends, family and community.” Fifteen companies, includingJopwell, which helps candidates from underrepresented backgrounds land jobs, and food tech startup SafeTraces, are rolling over to the Spero portfolio.
…And invests in ZineOne to accelerate financial inclusion in India. India would seem poised for a boom in digital financial services, but adoption has been spotty, even among younger consumers. “A big factor is lack of self-confidence,” Omidyar Network’s Smita Aggarwal told ImpactAlpha. “[People] feel finance is more complex than just chatting or messaging and they’re afraid of doing something wrong.” Omidyar Network led a $2.5 million Series A financing for ZineOne, a data analytics and software firm, as part of its mission to foster digital services as a path to greater financial inclusion and better consumer services. The company aggregates customer usage data from online and mobile platforms and helps companies offer personalized recommendations in real time. ZineOne’s mission is to “make life better for end customers,” Aggarwal says. “We look at their tools as a way to give more power to consumers, so consumers can make better decisions. Currently, the power equation is highly skewed towards providers.” Read Omidyar Networks’ account of why they invested.
SeamlessDocs raises $7.5 million led by SJF Ventures. The company’s SeamlessGov tool is used by more than 300 US state and local governments to manage digital forms, online payments and workflow automation. The company says 27 million citizens have submitted digital forms through SeamlessGov. SJF Ventures invested $4.5 million in SeamlessDoc’s Series C round and Motorola Solutions, Entrepreneur Roundtable Accelerator, NY State Innovation Ventures and CapRock also invested. SJF’s Dan Geballe told ImpactAlpha that government tech is a growing area of interest for SJF. The cost savings from improved efficiency is one positive, he said, as is the reduction in paper. “Government efficiency is something we can all agree is important,” he said. “Also just the perception of government efficiency has positive consequences.”
Agents of Impact. Sir Harvey McGrath has been named chair of the UK National Advisory Board on Impact Investing. McGrath, chairman of social investment firm Big Society Capital, replaces Michele Giddens, co-founder of Bridges Fund Management. At the top of McGrath’s agenda in his new role: Working with an industry task force, appointed by Prime Minister Theresa May, to leverage impact investments for a more sustainable and just economy in the UK. The task force, led by Elizabeth Corley of Allianz Global Investors, will focus on “left-behind parts of the country, homelessness and housing for vulnerable people.” The National Advisory Board’s recommendations are included in its report, “The Rise of Impact.”
#Signals: Ahead of the Curve
As shareholders get active on climate, the SEC lets companies duck votes. The case for “shareholder engagement” was strengthened last year when investors in ExxonMobil approved a resolution last May — over the objections of management — demanding a report on the oil giant’s climate-risk exposure. Now, a decision involving another fossil fuels giant highlights the limits of such a strategy. In a letter to EOG Resources, a major oil and gas company, the Securities and Exchange Commission backed the company’s refusal to even submit to shareholders a resolution, proposed by Trillium Asset Management, to establish targets for greenhouse gas reductions. The letter said the proposal tried to “micromanage the Company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.” Another example of the Trump administration’s hostility toward climate-related activism? Perhaps. But, in a guest post on ImpactAlpha, attorney Bruce Campbell, of Blue Dot Advocates, argues the implications are even broader, exposing the limitations on shareholders’ ability to influence corporate behavior.
Read “As shareholders get active on climate, the SEC lets companies duck votes” by Bruce Campbell on ImpactAlpha.
#2030 Finance: Long Termism
Bonds go green. “Green bonds” are at the head of the class of financial innovations for environmental sustainability, with Moody’s forecasting issuance could hit $250 billion in 2018, up from $155 billion last year. At this week’s Climate Bonds Initiative conference in London, Christiana Figueres, who led negotiations for the Paris climate accord, said annual green bond issues need to reach $1 trillion by 2020 if the pact’s goals are to be met. Climate-action leaders want to do more than simply boost the number of bonds that adhere to green bond principles of accountability; they want all infrastructure bonds issued by countries, states and cities to be green. In addition to climate and environmental groups like the Climate Bonds Initiative, Ceres, Carbon Disclosure Project and Figueres’ Mission2020, a new Green Bond Pledge was developed by the offices of California Gov. Jerry Brown and the state’s treasurer, John Chiang. California led the US last year with more than $5 billionin state and city green bond issues. Brown will host a “Global Climate Action Summit” in September in San Francisco.
Most green bonds to date have financed relatively prosaic projects around energy efficiency and infrastructure. At the London conference, The Nature Conservancy and Climate Bonds Initiative floated a variation that could finance one of the biggest opportunities for greenhouse gas emissions-reduction: land use. Sustainable Land Bonds, issued by countries or government agencies, would be mainstream, fixed-rate, 7- to 30-year bonds backed by the full faith and credit of the issuing country or agency. The novelty would be “results-based payments agreements” that would reduce or eliminate interest payments in return for reduced emissions. The backers say technology improvements have made monitoring emissions from forestry projects straightforward and low-cost; monitoring soil carbon remains expensive.
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