2030 Finance | July 21, 2017

Impact in Korea, dealflow for PRIME and Closed Loop, ARPA-E’s climate-tech pipeline, progress is…

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Greetings, ImpactAlpha readers!

#Featured: Returns on Investment (podcast)

Fertilizing the roots of impact in Korea. To the list of examples of place- and people-based impact investing, add Seoul, South Korea. A neighborhood of co-housing, co-working and co-investors in “changemakers” is attracting university talent and mission-driven entrepreneurs. Kyungsun Chung, the founder of Root Impact, is behind many of the projects. Chung is part of the third generation of the family that built the giant Hyundai Group. “I’m like the black sheep, or the green sheep,” of the family, he told ImpactAlpha in a new podcast. Chung also is investing in Las Vegas’ Downtown Project, a large-scale test of the urban regeneration model led by Zappos’ Tony Hsieh (with so far mixed results). In Seoul, Chung just launched the 60,000-square foot HeyGround co-working space, and is a leader of The ImPact, a network of wealthy families moving capital toward impact. “I’m trying to convince my own family to be more socially conscious and open to the public,” Chung said. “I’m still working on it.”

Listen to Kyungsun Chung’s interview with ImpactAlpha’s David Bank:


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We built it, so please do come. As a reader of ImpactAlpha, you know the robust activity of impact investors and entrepreneurs. Now we’re putting it on the map — the Impact Investing Network Map. The map, a project of the Case Foundation, ImpactAlpha’s ImpactSpace database and CrunchBase, is mapping transactions and relationships to demonstrate the size, breadth, depth of impact investing. The open-data project is putting tools in the hands of investors, intermediaries and entrepreneurs seeking impact. Increase your own impact by sharing your data. Check out the map demo. #ShareYourData here.

#Dealflow: Follow the Money

Prime Coalition and Closed Loop back Rebound Technologies to cut energy in food storage. Impact investors are getting together to start to fill the gap in early-stage climate solutions. The PRIME Coalition, Closed Loop Ventures, and members of Investors’ Circle funded a $1.2 million seed roundfor Rebound Technologies in Denver. The company claims its food speed-freezing technology uses 40% less energy than traditional refrigeration equipment. That could help cut some of the 60 million tons of food wasted in the U.S. each year. For PRIME, the investment represents the fifth proof point for the nonprofit’s model to mobilize philanthropic investments for early-stage climate solutions (see #Signals, below).

Closed Loop backs Natural Machines’ ‘3D printer for food.’ The $50 million venture fund, backed by Walmart, Coca-Cola, Nestlé and a half-dozen giant consumer companies, has been busy. Their second #dealflow of the day is a bet on Natural Machines’ “3D printer” that effectively makes processed foods at home (ok, we don’t quite get it either). The device, called Foodini, retails for $2,000 and is primarily being used in restaurants and commercial kitchens. Closed Loop’s interest is in reducing food waste by building a market for “ugly fruits and vegetables” that are deemed not fit sale. Over 1.5 tons of food gets wasted worldwide every year. Other ventures trying to tackle ugly produce waste include Imperfect Produce and Full Harvest both in San Francisco.Inspirafarms is focused on preventing spoilage on small-scale farms without cooling facilities.

French and Spanish funds for investing in the 2030 global goals. Bankia, the fourth largest bank in Spain, is building a fund (paywall) open to retail and institutional investors around companies focused on poverty alleviation (SDG №1), eliminating hunger (SDG №2), health and well-being (SDG №3), clean water and sanitation (SDG №6) and life on land (SDG №15). The fund will be three-quarters in stocks and one-quarter in fixed-income investments. In France, La Financière de l’Echiquier is realigning an existing socially-responsible investment with the SDGs. “They are a new way of looking at companies [and] offer us new opportunities to engage with the companies in which we invest,” says CEO Didier Le Menestrel. The bank will require that at least 10% of company revenues come from SDG initiatives. Dutch pension funds APG and PGGM have pressed for more SDG-aligned investing.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

ARPA-E primes the pipeline of climate solutions with early-stage investments. Among the many capital gaps impact investors and innovative-finance gurus are trying to bridge is for breakthrough technologies that can address climate change at scale — if they can scale. One of the best demonstrations of the potential for such solutions is the Advanced Research Projects Agency-Energy, or ARPA-E, the “moonshot investment arm of the Department of Energy,” according to MIT Technology Review. At last count, the 74 projects backed by ARPA-E had attracted $1.8 billion in private financeand created 56 new companies. With a boost from ARPA-E energy is now the top research focus of PARC, the legendary Silicon Valley-based technology research institute that back in the day brought you things like the graphical-user interface.

ARPA-E hosted ImpactAlpha’s David Bank and PRIME’s Sarah Kearney on a webinar to discuss bridging the climate innovation gap with strategic philanthropic investments. PRIME is a non-profit mobilizing risk-tolerant program-related investments from private foundations to back early-stage cleantech innovations. Since 2015, PRIME has mobilized $15 million from foundations and commercial co-investors, including in from 27 first-time philanthropic investors and 15 foundations new to climate investing.

The potential of such market-based models to address climate change at scalemakes all the more mystifying the determination of the Trump administration and House Republicans to gut funding for ARPA-E, or eliminate it entirely. (The latest word is that the Senate may spare ARPA-E the worse of the cuts.) Beyond climate solutions, public R&D like ARPA-E, modeled on the Pentagon’s DARPA, which brought us the Internet, are key to the U.S. edge in science and tech, and lay the foundation for future jobs. “This is not a conservative or liberal point of view,” said MIT’s president, L. Rafael Reif, at ARPA-E’s Energy Innovation Summit in March. “This is about the future of our nation.

Impact investing in Cape Town. MOOCs and other online courses work for for many impact investors and social entrepreneurs. For those who want the old face-to-face, in South Africa, no less, the University of Cape Town’s Graduate School of Business is running Impact Investing in Africa from November 13th through 17th. The executive-education program puts an African lens on raising or managing an impact fund, evaluating deals and crafting innovative financing mechanisms, with pitch sessions and site visits. Applications are open.

#2030: Long-Termism

Progress is possible and the solutions are known (part II). Many, if not most, countries are making dramatic progress in almost every one of of challenges covered by the 17 Sustainable Development Goals (with 169 targets and 232 indicators). We pretty well know what works. Yesterday, we shared a half-dozen highlights from the many reports at this week’s U.N. session reviewing progress toward the 2030 global goals. Today we bring you six more for an even dozen. Progress is possible.

1. Economic growth is decoupling from energy and resource consumption. Between 2012 to 2014, 15 of the world’s 20 largest energy-consuming countries reduced the ratio of energy used per unit of GDP (though not quite doubling the rate of improvement, as targeted). Emissions of carbon dioxide per unit of manufacturing value-added also are declining. We haven’t yet fully turned the corner: Domestic material consumption (the natural resources used in all economic processes) increased from 1.2 kg to 1.3 kg per unit of GDP from 2000 to 2010.

2. Paint a big fat target on the back of those remittance fees. In 2016, international remittances totalled $575 billion. Post offices and money transfer operators charged fees of more than 6%, on average; commercial banks charge about 11%. The SDG fee target is 3%. A new crop of startups, many of them deploying blockchain technology, are driving fees to below 4%, with more reductions to come. Overall, the fintech revolution is taking hold: From 2011 to 2014, 700 million adults opened accounts; the share of adults with some kind of financial account hit 61%, up from 51%.

3. Fisheries and forests on the rebound. Overfishing depletes ecosystems, reduces biodiversity and impairs food security. However, “the trend has slowed and appears to have stabilized from 2008 to 2013,” the UN reports. Likewise, the net loss of forest continues to slow and forest biomass stock per hectare is stable. The annual net loss of forest area globally from 2010 to 2015 was less than half that of the 1990s. We’re still going in the wrong direction: the proportion of land covered by forest fell to 30.6% in 2015, from 31.6% in 1990.

4. Reports of human trafficking are going up, but that may be good news. The UN reports that countries “have made solid progress in terms of detecting victims of trafficking in persons.” The share of victims trafficked for sexual exploitation fell in comparison to those trafficked for forced labor. More than a quarter of all trafficking victims detected in 2014 were children.

5. Fertility rates keep falling. Adolescent birth rates among females 15 to 19 years old declined by 21% from 2000 to 2015. In northern America and southern Asia, the decline was more than 50%. The teen birth rate remains high in two-thirds of all countries, with more than 20 births per 1,000 adolescent girls in 2015. Globally, the fertility of half of the world’s population has fallen below the replacement ratio, says a study from the University of Oxford, making out of date the dominant narrative of a soaring world population.

6. Time to scale up sustainable ag. We need to produce more food for more people with less water on less land at lower prices. Sounds like a challenge for tech. Two billion people, or a quarter of the world’s population, are living in countries under high water stress (freshwater is being used faster than it’s being replaced). Undernourishment has declined from 15% in 2002 to 11% in 2016. But last year, 21 countries (13 of them in sub-Saharan Africa) experienced high staple-food prices. Investments in enhanced agricultural productivity is crucial. The good news: lending to agribusinesses buying from the world’s half-billion smallholder farmers is growing. Smarter subsidies, more risk capital and increased business and technical assistance can increase the flow of capital.

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