2030 Finance | October 27, 2017

Impact drives growth, artisan marketplaces, free-trade carbon, tapping the $12 trillion…

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Greetings, ImpactAlpha readers!

#Featured: Impact Voices

Investors discover that impact drives growth (just don’t call it impact investing). As an investment firm focused on college affordability and completion, University Ventures pays close attention to the impact of its investments on students. “Our portfolio companies are achieving growth because they achieve impact,” writes co-founder and managing partner Daniel Pianko on ImpactAlpha. “But we don’t call our investments ‘impact investments.’ They’re just investments.”

That’s because impact investing often gets conflated with philanthropy or donative capital. In an ironic twist, Pianko says, “impact” allocations designed to seed funds have the opposite effect: traditional (or “legacy”) investors frequently view the presence of impact investors as a signal that financial returns will suffer. “The transformation of impact investment into a $15 trillion capital market hinges on eliminating the false-choice between returns and impact,” Pianko writes. “That starts with a willingness of impact investors to leave the safe confines of donative capital — and show the world that social impact is a great business to invest in.”

Read “Market-leading returns from solutions to the world’s greatest problems,” by Daniel Pianko of University Ventures, on ImpactAlpha.

Market-leading returns from solutions to the world’s greatest problems

#Dealflow: Follow the Money

Global Partnerships backs online artisan marketplace Novica. Novica connects more than 19,000 artisans worldwide with international markets and provides no-interest microfinancing through Kiva. It has arranged nearly $81 million in payments to artisans (National Geographic is a partner). Now, impact investor Global Partnerships is providing $750,000 in financing through its Artisan Market Access initiative, which seeks to improve livelihoods for craftspeople who typically earn less than $10 a day (see “Global Partnerships blends finance to deliver for the poor and for investors). In July, Global Partnerships committed $2 million to development organization BRAC to support low-income women entrepreneurs in Tanzania and Uganda and $100,000 to mobile education startup Arifu.

U.K. Life Chances Fund approves 10 pay-for-success projects. The fund was launched in July to back small-ticket pay-for-success projects in which the public agencies supporting the programs might see only small savings (the U.S. has a similar fund). Ten contracts for a total of £54 million have been approved, each of them for less than £10 million ($13.7 million). The projects include the U.K. Family Drug and Alcohol Court, which supports families and children involved in foster care proceedings; East Midlands Children’s Services Social Investment Platform, which will test new services for children at risk of entering foster care; and Integrated Family Support, to address safety concerns for children in homes where drugs and alcohol are abused. Life Chances Fund is committing £16.4 million and 36 local authorities are contributing the rest. A recent report from the Center for Public Impact found that investors think social impact bonds below $15 million don’t justify their costs. Social impact bonds targeting child and family services have also been launched in the U.S. and Australia.

RSF Social Finance lends $1.6 million to organic sauerkraut producer. Pickled cabbage is the newest– make that oldest– superfood. RSF made the loan to Whitethorne, a subsidiary of the nonprofit Hawthorne Valley Association, which sells ethically produced organic foods. The capital will allow Whitethorne to move into a new production facility and expand sales of its sauerkraut and other foods in the northeastern U.S. Funding came from RSF’s Food Systems Transformation Fund and its Biodynamics Capital Collaborative initiative. The food-systems fund enables foundations to provide low-interest, program-related loans to RSF, which are then lent to ventures like Whitehorne. The Biodynamics Capital initiative aims to encourage “a holistic, ecological and ethical approach to farming, gardening, food and nutrition,” says RSF.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to [email protected].

#Signals: Ahead of the Curve

A North American carbon-trading market? The North American Free Trade Agreement may be in trouble, but California, Quebec, Ontario and now Mexico are working together on a different type of trading: carbon. California launched a carbon cap-and-trade market in 2013. A year later, the state partnered with the Canadian province of Quebec to link their carbon markets. Ontario has agreed to join next year. Here comes Mexico, which is in the midst of a 12-month pilot program to study mechanisms for a carbon market it intends to launch next year, with plans to join California and the Canadian provinces within five years. Companies in each of the market would be able to buy and sell carbon emission allowances with each other. “We are looking at the beginnings of a North American framework for a carbon market,” David Heurtel, a member of Quebec’s National Assembly, told The Globe and Maillast year. Mexico is the 10th largest greenhouse gas emitter in the world, and on pace to become the world’s seventh largest by 2050. Under the 2015 Paris Agreement, it has pledged to cut carbon emissions by 22% below 2000 levels by 2030.

#2030: Long-Termism

Think different to tap the $12 trillion sustainability market. “Responsible” business is no longer a cost center, say authors John Elkington and Richard Roberts, but an opportunity to unlock $12 trillion a year in value by 2030. The two have introduced a set of Steve Jobsian “imperatives,” to help investors and business leaders tap growth sectors including low-income food markets, public transport in urban areas, energy storage and telehealth.

  • Think Exponential. The rules of the game are about to dramatically change. Companies need to radically reinvent how they view sustainability if it is to emerge from its corporate silo, overcome internal competition, and get past confusing terminologies. And new players aren’t happy with less than 10-fold improvements over time.
  • Think Open. Sharing ideas and innovations benefits everyone in the long run, including those with the original ideas. Tesla’s Elon Musk, for example, made all of the firm’s patents available to anyone who wants to use its technology. “We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform,” said Musk.
  • Think Circular. Externalities that typically are considered costs to be avoided should be seen as value wasted. The authors invoke IKEA’s zero waste to landfill policy. The retailer now makes a small profit from its waste, rather than spending well over $1 million getting rid of it. Data, as a by-product of a core business, is valuable in the way that oil was in the 20th century — and contributes to the valuation of companies like Tesla and Airbnb.

Onward! Please send news and comments to [email protected].