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The Brief: Impact in a downturn (podcast), impact-linked loan, peer-to-peer in Indonesian, edtech in Nigeria, blue bonds

Greetings, Agents of Impact!

“You gotta be reading ImpactAlpha.” If your optimism makes you an outlier around the dinner table during this holiday season, feel free to blame us. As an ImpactAlpha reader, you’re not surprised by the recent embrace of “stakeholder capitalism.” You’re watching for “universal owners” of institutional capital to drive accountability for climate risk. You understood why “revenues over rounds” made sense even before WeWork imploded. You know some cities are using Opportunity Zones to lift up underestimated neighborhoods, even as billionaires angle for tax breaks. We could go on, but it’s time to head out for the U.S. holiday break. As you give thanks, give your friends and family a nudge as well. Let them know, “You gotta be reading ImpactAlpha.” Safe travels. We’ll be back in your inbox on Monday, Dec. 2.

– David Bank, editor

ImpactAlpha Podcast: Returns on Investment

Will impact investing be swimming naked when the tide goes out? (podcast). Even as Wall Street traders get ready to pop the Champagne corks on another year of record results, there are indicators that the bull-market party won’t last forever. How impact investing will fare in the inevitable (eventually) economic downturn is the topic of the most recent episode of ImpactAlpha’s Returns on Investment podcast. Roundtable regulars Brian Walsh, David Bank and “loveable curmudgeon” Imogen Rose-Smith, an ImpactAlpha contributing editor, all see a slowdown, and possibly even a crash, in the not-so-distant future. “How will impact investing fare, and what impact will a recession have on the challenges impact investors care most about?” asks Walsh. Channeling the Sage of Omaha, he wonders if impact investors will be found to be swimming without their shorts when the tide goes out.

Rose-Smith predicts a “flight to safety,” as even impact investors shift from alternative private market investments that are perceived to be higher risk. The pull back from ESG (environmental, social and governance) and impact investments was apparent after the 2008 economic collapse. Bank offered up “uncorrelated” assets, which may perform better than the markets as a whole, as microfinance demonstrated in the crisis of 2008. Affordable housing, likewise, may prove more resilient than real estate more broadly. If an ESG analysis does indeed reduce risks, such portfolios may perform at least less poorly. Walsh suggests a selloff could even be good for impact. “There could be creative destruction,” he says. “You would be able to see which managers are not just slapping on an ESG or an impact label” – and who has been skinny dipping.

Read on and listen in to, “Will impact investing be swimming naked when the tide goes out? (podcast),” by Imogen Rose-Smith on ImpactAlpha.

Dealflow: Follow the Money

Australia’s IIG backs “neurodiverse” jobs with BOLD impact-linked loan. The twist in the A$600,000 loan (US$407,000) from Impact Investment Group: the more social impact employment startup Xceptional delivers, the less it has to repay. The Sydney-based investment firm selected Xceptional as the first borrower under a structure it calls Beneficial Outcomes Linked Debt, or BOLD. Xceptional, a “neurodiverse” jobs placement firm, works with candidates with autism to identify companies and roles suited to their skills, which include pattern recognition, sustained concentration and precision. (Watch this space: U.S.-based Ultranauts raised $3.5 million to prove neurodiversity can be a competitive advantage in business.) “Other types of finance, like traditional venture funding, or a loan from a standard finance company, can drag a purpose-driven founder away from their mission,” notes IIG in its product brief.

  • How it works. BOLD starts with choosing a target impact metric. Xceptional is measuring the number of people placed in jobs, and who report being happy with their roles. That metric is assigned a baseline and a dollar value. As Xceptional grows, the tally of impact above the baseline gets deducted from the loan’s principal. Bonus features: Xceptional gets a grace period before it has to start payments and revenue-based repayments reduce financial pressure (see, “As unicorns stumble, investors warm to revenue-based financing for ‘zebras’ and ‘Clydesdales’”).
  • Impact incentives. U.S.-based Beneficial Returns will waive the final payment on loans to social enterprises that achieve their impact targets. UBS Optimus Foundation lowers interest rates on its “Social Success Notes” if impact targets are met. Germany’s Roots of Impact is testing impact “bonus” payments with its social impact incentives, or SIINC model (see, “Impact-linked financial rewards help high-impact companies attract growth capital”).
  • Learn more.

Indonesian peer-to-peer lender Amartha raises $18 million. The company, which facilitates lending to micro-entrepreneurs, raised Series B financing from impact investor Bamboo Capital Partners, Line Ventures, UOB Venture Management and SBI Holdings.

Credit Suisse and World Bank plan $29 million ‘blue bond’ for marine restoration. Both backers are increasing their activity in ocean preservation and restoration financing (see, “With oceans in peril, investors find new ways to invest in the ‘blue economy’).

Nigeria’s uLesson raises $3.1 million to address students’ learning gaps. The edtech platform offers smartphone-based lessons as a substitute for tutors for lower-income learners.

Agents of Impact: Follow the Talent

U.K.-funded Renewable Energy Performance Platform is calling for women-owned or managed renewable energy projects in Africa… Applications are open for ANDE’s Advancing Women’s Empowerment Fund… The Equality Fund is hiring a head of investment strategy in Toronto or Ottawa… Unilever’s Sundial Brands seeks a sustainability manager in New York… London Community Land Trust seeks a senior development manager in London… Kiva is looking for an impact intern in San Francisco… FBRK Impact House is opening an innovation-focused philanthropy center in Chicago.

Thank you for reading. 

– Nov. 27, 2019

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