Hello ImpactAlpha readers! Some evening reading for your impact pleasure.
#Featured: ImpactAlpha Original
Building a social capital market in Asia. As one of the first female Bangladeshi investment bankers on Wall Street, Durreen Shahnaz came to appreciate the immense power of financial markets. She went on to roles at the World Bank and Grameen Bank. She launched, and sold OneNest, an e-commerce company that gave micro-entrepreneurs global market access.
In 2009, Shahnaz launched the Impact Investment Exchange with a vision of building a more inclusive financial system through impact investing. Since then, IIX has established a social stock exchanges, an equity crowdfunding platform for impact investing and, most recently, the the $8 million Women’s Livelihood Bond. For its contributions to the social capital markets in Asia, IIX was honored by the GSG as a Market Builder of the Year.
Read “Building a social capital market in Asia” by Beth Debeer on ImpactAlpha:
#Dealflow: Follow the Money
Women-led Babel Ventures raises $30 million to back Latino entrepreneurs. The Bay Area fund is the second Latino-focused venture fundto launch this week. Both Babel Ventures and LEAP Partners are trying to bring more venture financing to an underfunded startup demographic. (LEAP announced the first two investments from its early-stage venture fund for Latino-owned businesses in the U.S. and Mexico). Babel Ventures stands out as a women-run fund; founders Bárbara Kunde Minuzzi and Daniela Arruda both previously raised funds for real estate and tech funds. Almost 90% of venture capital partners are men, and the share of women decision-makers in venture funds in the U.S. has actually gone down. “We don’t know the rules, so we are breaking all of them,” Kunde Minuzzi says. “And it’s working for us.”
Calvert Foundation backs SA Taxi’s lending to taxi entrepreneurs in South Africa. SA Taxi provides finance and insurance to entrepreneurs who operate minibus taxis in South Africa, which are used by nearly 70% of all households. The taxi-finance company offers vehicle services to its clients, nearly all black South Africans who don’t commonly qualify for commercial financing. The Calvert investment will give SA Taxis the ability to grow its team of minibus drivers and entrepreneurs and help SA Taxis reduce emissions with the purchase and management of fuel-efficient minibuses, It is the first international transportation investment for Calvert, which was joined by the Overseas Private Investment Corp. and MicroVest.
People on the move. Orrick, a global law firm focused on tech, energy and infrastructure and finance, has appointed Perry Teicher as its first Impact Finance Attorney. The firm is expanding its impact finance practice (which tweets under the handle @OrrickImpact) as “limited partners such as public investment funds and university endowments place a stronger emphasis on private-equity allocations to this asset class,” said Ed Batts, the head of Orrick’s private equity practice. (Orrick partner Peter O’Driscoll recently called for a new private equity model for investing in frontier growth markets.)
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Fintech startups are disrupting Mexican financial services by banking the unbanked. Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times [paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financiero provides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America. Long lines, high fees and poor branch and cash machine coverage aren’t helping financial-services incumbents.
Yes, peace, justice and strong civic institutions are investable opportunities. Dutch pension funds and other institutional investors are leaders in “SDG investing,” and are playing a key role in encouraging private investors to see the U.N.’s Sustainable Development Goals as a ($12 trillion, by one account) investment opportunity. To that end, APG and PGGM, which collectively represent €567 billion ($657 billion) in assets under management, have developed “taxonomies” for classifying such investments. The two pension funds consider 13 of the 17 global goals to be investable.
Conspicuously left off that list is SDG №16 (“Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.”) Peace and justice may be unfamiliar themes for mainstream private investors, but impact investors are finding a growing number of startups seizing on potentially profitable opportunities. One signal: the growing number of SDG №16 investments in ImpactAlpha’s #Dealflow roundups.
- Omidyar Network pledged $100 million to bolster free media and combat hate speech, part of $220 million in grants and investments Omidyar has made over the last decade to drive accountability and transparency in government.
- A $3.5 million fund managed by the Latin American Alliance for Civic Technologies and backed by Omidyar and Fundación Avina is planning to invest in 20 Latin American startups driving citizen engagement in policymaking and government.
- The Knight Foundation, the Democracy Fund, and the Rita Allen Foundation are seeking startups with fact-checking mechanisms to counter propaganda and fake news.
- New Media Ventures and Matter have recently identified cohorts of new media startups targeting civic engagement, community empathy building, and data visualization.
- Impact robo-advisor OpenInvest has developed an investing themearound refugee inclusion that selects company stocks based on their commitments to support refugees.
- The Media Development Investment Fund, which backs independent media companies in regions hostile to a free press, recently made four investments from its new loan fund.
In the report, APG and PGGM said it was “not possible to contribute to this goal through investment activity.” (The research has not yet been published, but you can read about here.) Among the most investable goals? SDG №11: Sustainable cities and communities, including public transit and other types of infrastructure that will already be familiar to institutional investors. “The taxonomy is by no means perfect yet,” says APG’s Claudia Kruse, who said the intention was to “kickstart the conversation about a market standard for sustainable development investments.”
Onward! Please send any news and comments to TheBrief@impactalpha.com.