#Featured: ImpactAlpha Original
Fighting human trafficking with investments in early-stage technology. Humanity United, part of the Omidyar Group, has raised a $23 million fund to address the use of slave labor, poor working conditions and other worker abuse that plague the networks that companies use to assemble products before they are shipped to consumers. As many as 16 million people may be victims of forced labor exploitation around the world. The practices persist despite the codes of conduct and social audits undertaken by many corporations.
Humanity United’s Working Capital fund has adopted four investment themes: product traceability, worker engagement, risk assessment and ethical recruiting tools. Also promising: biometrics, digital identity technology, sensors and connected devices. The fund, with backing from Walt Disney Co. Walmart Foundation, C&A Foundation, the Soros Economic Development Foundation and several impact investors, is looking to invest in a dozen or more companies.
“Codes of conduct are voluntary and difficult to enforce down the supply chain. Coalitions are slow moving. Companies’ social audits — their go-to tool — can be gamed and ultimately don’t tell much about labor conditions,” Humanity United’s Ed Marcum told ImpactAlpha. He said many early-stage technologies need early champions. “We can’t just keep throwing good money at social audits.”
Read “New Omidyar fund to invest in supply chain technology to fight worker abuse,” by Jessica Pothering on ImpactAlpha.
#Series: The New Revivalists
Margaret Bradley: Turning local Philadelphia institutions into impact investors. Ben Franklin Technology Partners tapped seven local universities, health insurers and pension funds for capital and formed ImpactPHL Ventures in 2017 as a one-stop seed-fund shop for the region’s early-stage ‘impact’ startups tackling education, health, other social and environmental challenges. Now, Margaret Bradley is charged with deploying $15 million into Philly-area startups. “We have an extraordinarily strong “eds and meds” world,” Bradley told ImpactAlpha’s Dennis Price. “When connected well to community or to entrepreneurship, there is a lot of opportunity for growth and development.” In the latest in ImpactAlpha’s series on “the New Revivalists,” Bradley shares how ImpactPHL Ventures is shining a light on Philly’s sometimes-overlooked startups. Read the full Q&A.
New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.
Catch up with Bradley and other impact investors in Philadelphia at Total Impact, Apr. 26–27. Good Capital Project and ImpactPHL are bringing together advisors, family offices, and investors interested in aligning their portfolios and social values. Get an early-bird discount when you register before Feb. 23.
#Dealflow: Follow the Money
Grameen America closes first microfinance impact fund. The U.S. affiliate of Muhammad Yunus’ Grameen Bank has raised $11 million for its Social Business Fund. The fund will expand lending to financially underserved women entrepreneurs across the bank’s 20 U.S. branches. Grameen America launched in 2008 and has disbursed more than $820 million in small, short-term loans, starting as small as $1,500. Repayment rates of 99% have helped individual branches become self-sustaining in about five years. “That was proof to me that the model could scale,” Grameen America’s president and CEO Andrea Jung tells ImpactAlpha. “We began to talk about vehicles for funding on a national scale.” The five-year Social Business Fund is backed by billionaire Ray Dalio’s foundation and other family and community foundations and includes a 20% first-loss guarantee.
Rensource raises $3.5 million for renewable power subscriptions. The Lagos, Nigeria-based company has developed home and business solar systems that integrate with Nigeria’s power grid. Half of Nigerians lack reliable access to electricity and spend $14 billion on individual power sources, like diesel generators. Rensource subscribers register for one of four plans, from power for basic lighting up to powering washing machines and other appliances. Its system switches between solar and battery power and the national grid. A mobile app allows subscribers to track usage between the two. Launched in 2015, Rensource previously raised $1.1 million from CRE Venture Capital and Sissili Limited. Its latest round was led by Amaya Capital Partners with backing from Omidyar Network and CRE. The company will use the funding to expand into the cities of Kano and Abuja and launch a business-to-business service.
SANAD makes $10 million loan for Egypt’s small businesses. SANAD, a microfinance investor, issued the loan to Egypt’s sixth largest bank, Banque du Cirque, to increase lending to small businesses. In Egypt, more than 2.5 million small businesses are responsible for more than 90% of private sector jobs and 80% of Egypt’s GDP. SANAD’s loan will increase Banque du Cirque’s lending throughout its network of 230 branches. SANAD, which means “support” in Arabic, was launched by KfW Development Bank in 2011 to invest in financial institutions and organizations lending to small businesses and low-income households in the Middle East and North Africa. It has issued about $350 million in loans since 2011.
#Signals: Ahead of the Curve
Is the social impact bond market half-billion full or empty? The more than 100 social impact bonds launched in the past eight years have mobilized more than $400 million in total and touched more than 700,000 lives in two dozen countries. Is that a lot, or a little? In roughly the same time period, “green bonds” issues have reached more than $120 billion per year. Social impact bonds have been bedeviled by complex structures and measurement difficulties, not to mention the thorny social problems themselves. Sometimes called “pay-for-success” contracts, SIBs raise money from private investors to finance proven interventions to social problems; if milestones are met, governments (or in some cases, third-party funders) pay off the investors. Essentially, SIBs are a way to capture the value of prevention, and shift government funding toward outcomes rather than outputs.
“What has surpassed my expectations, and why the work is so hard and the impact so enduring, is we are changing mindsets,” Tracy Palandjian, CEO of Social Finance US, a leading social impact bond developer, told ImpactAlpha. “We are changing how government officials think about problems.” In Massachusetts, for example, Social Finance helped raise $12.4 million from private investors to help immigrants and refugees make successful transitions to employment, higher wage jobs and higher education. Ten projects report that they have returned investors’ capital, with a return, and another eight have begun making payments (investors lost their money on at least one bond, an anti-recidivism program on Rikers Island in New York). Palandjian said growth will come when governments fund social impact bonds not as pilot projects, but from savings in their regular budgets. “Politicians are still dipping their toes,” she said. “We can’t wait to get to scale.”
#2030 Finance: Long-termism
Four ways to get the private sector to start paying attention to the Global Goals. If investments in the UN’s 17 Sustainable Development Goals can start to look like any other investment, more private capital will flow toward the global goals. The right structures and incentives must be put in place to direct private investment into the Global Goals, argues Justice Durland of Convergence, a Toronto-based platform that matches investors with development projects. In a guest post on ImpactAlpha, Durland suggests four ways to engage private investors: Speak their language. Team up. Learn from elders. And data, data, data. “There is currently a paucity of return data on blended finance transactions, particularly return data for the commercial layers of capital in blended finance transactions,” she writes.
Read, “Four ways to get the private sector to start paying attention to the Global Goals,” by Justice Durland of Convergence, on ImpactAlpha.
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