The Brief | May 22, 2018

Impact in China, KL Felicitas’ portfolio performance, gender approaches to impact investing, Kaiser Permanente’s $200M impact fund

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Letter from Shenzhen: Can impact investors find a role in China’s impact initiatives? China has something some other countries are missing: national policies for driving environmental and social impact. In renewable energy, China’s government has gone bigger than anyone in recent years, accounting in 2017 for more than half of global spending on renewables. Meanwhile, an ongoing “war on pollution” has cut chronic air pollution and China’s president Xi Jinping is pushing a vision of an “ecological civilization.” Two of its top three goals through 2020 are keeping up the war on pollution and fighting acute poverty. Further, China is the world’s biggest market for “payments for ecosystem services” and has emerged as the global leader in green bond issuance.

But private investing in social impact is a concept that has so far been hard for many to grasp. “They have a wait-and-see attitude. They want to see how to exit from those companies, see what the returns are, how to have a positive impact and financial return,” says Tao Zhang, founder and director of one of China’s few social impact investing consortiums, Dao Ventures. “They want to see the results.”

Read, “Letter from Shenzhen: Can impact investors find a role in China’s impact initiatives?” by Michael Standaert, on ImpactAlpha.

Signals: Ahead of the Curve

KL Felicitas Foundation delivers solid impact and modest returns. Toniic, the impact investor network, is set to release on Thursday anonymized performance data from 76 private portfolios (with $2.3 billion in capital deployed) that are part of its “100% Impact Network.” Two mainstays of the network, Lisa and Charly Kleisner, have taken a further step toward transparency, with a new report documenting the financial and social performance of their KL Felicitas Foundation. Since moving 2% of its assets into impact investments in 2006, the allocation toward responsible, sustainable and impact investments reached 99.4% of the foundation’s $9.5 million assets by the end of 2016. That effort made the Kleisners leaders among the growing set of investors pointing 100% of their assets (or at least their philanthropic assets) toward impact investments.

The results? More than 20,000 households cook with BioLite’s HomeStove, up from 4,000 in 2014. Companies supported by Core Innovation Capital I are serving more than 25 million financially underserved customers in the U.S., up from 19 million in 2014. Lyme Forest Fund III protected more than 117,000 acres by the end of 2016, up from 62,000 in 2014. Overall, the foundation’s impact-invested cash equivalents, global fixed income, global public equity and hedge funds have returned 2.75% per year since inception. Note: that figure covers about 71% of the foundation’s assets, and excludes the returns of asset-classes commonly associated with impact: program-related investments, private equity and real-asset investments. (ImpactAlpha flagged the same exclusion from the foundation’s 2013 report.)

  • Performance-related investments: The foundation’s program-related investments have registered a loss of 2.5% per year since inception, missing a target of 0% returns, because of “their intentional risk-taking … prioritizing social impact over financial return,” according to NPC consultants, the authors of the report.
  • Sustainable Development Goals. KL Felicitas Foundation investments aim at 16 of the 17 U.N. 2030 global goals. The highest weightings: SDG No. 7 (affordable and clean energy), SDG No. 6 (clean water and sanitation) and SDG No. 8 (decent work and economic growth).

Surprise! Women and men see impact investing differently. Women are more likely to use impact investing as a complement to charitable giving. Men are more likely to replace philanthropy with impact investing. That finding is part of a new analysis by the Women’s Philanthropy Institute of U.S. Trust’s survey of rich donors. “This finding seems to be a reflection of current gender norms, but norms can and must change,” Acumen’s Yasmina Zaidman told the institute, which rounded up reactions from the impact investment community. Added Marty Cordes, “Impact investing has served as a complement, rather than a replacement, to our family foundation’s charitable giving since inception.” By the way, the foundation has 100% of its corpus invested in impact, Cordes says.

Agents of Impact: Follow the Talent

A new Opportunity Zones Coalition will work with public and private stakeholders to ensure the tax bill’s Opportunity Zones provisions drive positive impact. Among the few dozen investors: Access Ventures, Calvert Impact Capital, Capital Impact Partners, the Community Development Venture Capital Alliance, LISC, Morgan Stanley, Opportunity Finance Network, Reinvestment Fund and Sorenson Impact… “The world needs you to be the leaders and foot soldiers of a moral revolution,” Acumen’s Jacqueline Novogratz told 2018 graduates of New York University’s Wagner Graduate School of Public Service… HCAP Partners says its portfolio companies in 2017 employed 10,429 people, more than half of them women and more than 60% minorities. The $210 million California private equity fund manager uses a “Gainful Jobs Approach” to create high-quality jobs.

Dealflow: Follow the Money

Kaiser Permanente to invest $200 million in housing-as-healthcare initiatives. The impact investing initiative as part of Kaiser’s Thriving Communities Fund will focus on homelessness prevention and supportive and affordable housing. Read more.

Harlem Capital backs Paladin to boost pro bono legal services. The company’s platform helps legal firms manage pro bono work with a dashboard that tracks projects, logs hours and tallies social impact. Get the details.

Capricorn, Schmidt and Social Capital join $60 million financing for Saildrone’s ocean sensors. The company makes solar and wind-powered drones that collect data on fish stocks, shipping routes, and weather and climate. Dig in.

New Markets Venture Partners raises $68 million to bridge skills gaps. The venture capital firm plans to make $1 million to $5 million investments in tech companies bridging equity and skills gaps. Learn more.

— May 22, 2018.