Impact Investing | May 21, 2024

Impact products aim to shift portfolio allocations in bonds, private credit and cash

David Bank
ImpactAlpha Editor

David Bank

Short duration green bonds. Private credit for regenerative agriculture. Cash management that helps accelerate lending for climate-smart community infrastructure.

Financial service providers are rolling out investment products for impact investors in asset classes far afield from venture capital and private equity, which have typically been limited to high-net worth individuals and institutional investors.

What new impact products are you seeing? Drop us a note.

Short-duration green bonds

“Publicly listed green bonds have specific sustainability goals and have measurable carbon impact. But there was no vehicle that if you wanted to park cash would not be taking a lot of duration risk,” said Zach Stein of Carbon Collective, which specializes in climate-friendly 401(k) plans.

Carbon Collective, along with Artesian, an alternative asset manager based in Sydney, Australia, last week launched the Carbon Collective Short Duration Green Bond ETF, which trades on Nasdaq under the ticker CCSB, to provide liquidity along with capital-preservation and positive environmental outcomes. The fund has attracted just over $10 million in assets.

The fund buys corporate green bonds, issued by companies like JPMorgan, Honda and Sunoco, that have only a year or two to maturity, limiting interest rate risks.

Carbon Collective maintains a dashboard that tracks avoided carbon per million dollars invested, as well as the green projects financed by the bonds and links to sustainability reports.

Regenerative agricultural lending

The private credit market grew to more than $1.6 trillion last year, according to Pitchbook. Agricultural production loans have among the lowest chargeoff rates. Mad Capital’s Perennial Fund II is one of the few private-credit lenders dedicated to organic farmers.

Unlike managers like S2G Ventures, which launched Clear Frontiers to build out a farmland portfolio, or Iroquois Valley Farmland REIT, which lets investors buy into portfolios of organic farmland, Mad Capital owns no real assets. Instead, it makes flexible loans to finance farmers through the dip in revenues as they transition their farmland and get certified as organic, after which they can fetch premium prices.

Mad Capital’s Brandon Welch told ImpactAlpha that interest-only repayment terms help farmers manage their cash and are more straightforward than the revenue-based loans Mad Capital initially offered. The Boulder, Colo.-based manager has secured $14 million in commitments from the Rockefeller and Schmidt Family foundations, Builders Vision and others toward a planned $50 million fund.

Climate cash management

The community development financial institutions and other local lenders that will disburse $20 billion in Greenhouse Gas Reduction funds are beefing up their own balance sheets. CNote’s Climate Cash product helps investors, from individuals to corporations to foundations, to park some of their cash in mission-driven and minority depository institutions participating in the GGRF’s green lending (see, “Investors ready products to amplify US green bank funding”).

As with CNote’s Impact Cash product, which splits funds across CDFIs, Climate Cash will reduce burden of setting up direct accounts with multiple mission-driven institutions.

“Climate Cash becomes a force multiplier for GGRF,” CNote’s Cat Berman told ImpactAlpha.

Climate Cash funds are federally insured and can be parked overnight or for longer durations.