Greetings, ImpactAlpha readers!
#Featured: ImpactAlpha Original
This European VC is turning to impact for business advantage, not social benefit. The approach taken by Octopus Ventures may signal a shift among mainstream investors in private companies. The London venture capital firm, which just opened a New York office, is assessing its portfolio of European tech startups for their environmental, social and governance, or ESG, performance.
Not knowing is a risk; knowing is an opportunity. Investors in public equities are increasingly using ESG reports as a signal for broader performance. Octopus, part of the U.K. fund management firm Octopus Group, with north of $800 million in assets, is taking the practice to private equity, to help its portfolio companies lower costs, identify risks and opportunities, and present more compelling stories to customers.
Keep reading “Impact Signals for Venture Capitalists” by Dennis Price at ImpactAlpha:
#Dealflow: Follow the Money
Telkom backs WeThinkCode_ to boost youth employment in South Africa. The South African telecommunications company is investing $4.4 million in WeThinkCode_ to expand its free coding and software programming instruction. The startup trains students between the ages of 17 and 35 to fill the country’s gap in software engineering skills by improving the employability of South African youth. WeThinkCode_, which wants to double the number of software engineers in the country by 2018, will expand its Johannesburg campus and open a campus in Cape Town. Telkom’s subsidiary, BCX, will disburse the funding over the next three years and enroll 40 of WeThinkCode_’s students as interns each year. South Africa’s official unemployment rate is above 25 percent (unofficial estimates peg unemployment at nearly 40 percent).
Canada’s NatureBank to invest $14 million in sustainable cocoa in the Dominican Republic. Canadian impact investor NatureBank Asset Management and U.S.-based Southern Harvest Partners are ramping up sustainable cocoa production in the Dominican Republic with a $14 million joint venture. The Dominican Republic is the eighth-largest cocoa producer and largest organic cocoa producer in the $8 billion global cocoa industry. Growing demand among chocolate producers for sustainably and organically grown cocoa has spurred moves to improve cocoa’s inefficient and opaque supply chains. NatureBank and Southern Harvest Partners have been looking for land to acquire in the Dominican Republic and expect to plant their first crops later this year. Forest Finest Consulting, a unit of NatureBank, will develop and manage each project and find buyers for the cocoa.
Michael and Susan Dell commit another $1 billion for social entrepreneurship. Dell founder and billionaire Michael Dell, and his wife, Susan, are topping up their foundation’s assets with a cool billion. The Michael & Susan Dell Foundation has deployed nearly $1.3 billion since 1999 in grants and impact investments in the U.S., India, and South Africa to improve the lives of young people living in urban poverty. Bucking standard philanthropic practice, the foundation has paid out more than the required annual minimum of five percent (more like 15 percent), according to FastCompany. Spending at that rate drew down the endowment to around $646 million. The foundation released A Philanthropist’s Guide to the Future to highlight social entrepreneurs and the need for philanthropists to invest in innovative and ‘riskier’ projects. “Old structures and roles are breaking down, and there are more ways than ever for individuals, organizations, businesses and foundations to join together to make progress on some of the world’s greatest challenges,” said Janet Mountain, who heads the Dells’ foundation.
North Sky Capital’s clean infrastructure fund tops its fundraising target. The Minneapolis-based investment firm closed its Clean Growth Fund IV at $63 million, $13 million above its target. The team has already made four investments and deployed nearly a quarter of the fund’s capital toward infrastructure in the U.S., Canada and Europe. North Sky Capital started in 2000 as a traditional private equity buy-out and venture capital firm inside investment bank Piper Jaffray and began focusing on clean tech in 2006. Since spinning out of the bank in 2010, the fund has focused on companies delivering water and clean energy to urban areas in developed countries. North Sky closed a $240 million clean energy infrastructure fund earlier this year and has $1.2 billion in committed capital. A new benchmark from the Global Impact Investing Network and Cambridge Associates showed mixed performance for impact funds investing in infrastructure. About a quarter of the funds generated internal rates of returns of of greater than 10 percent. But three funds lost at least 15 percent, bringing the overall pooled-net IRR to near zero.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
The Obama Foundation wants you…to strengthen digital citizenship. Glenn Brown was in the crowd at last year’s South by Southwest festival when then-President Obama called out techies. “What we have to do is figure out how do we use and harness the cool next thing to make sure that everybody in this country has opportunity,” Obama said. Brown, a former Twitter and YouTube guy and a fellow at tech accelerator, Betaworks, took on the challenge. Last week, Brown was hired by the foundation to “engage people around the world online and inspire them to make change in their own communities,” said David Simas, CEO of the Obama Foundation. Now Brown is recruiting others, for what he calls “a cross between a start-up and a creative agency for citizenship.” He’s looking for “an all-star team of makers: creative, editorial, and technical” to “make media, prototype technology, and build relationships with people wherever they spend time online.” Key goals: break down silos, help people escape echo chambers, “boost the signal and reduce the noise.”
Corporations play catch-up on Sustainable Development Goals. Let’s just say there’s room for improvement in global corporations’ commitments to the global goals for 2030. The U.N. Global Sustainability Index Institute reviewed annual reports from 100 top global companies for sustainability themes. Less than a quarter of the corporate reports called out the Sustainable Development Goals.
The low-hanging fruit are the SDG-related goals that appear in the reports of more than 80 companies, even without mentioning the global goals specifically. The trick is to match those rhetorical commitments to action, and to results. The report, for instance, ranks Volkswagen among the top five firms for its talk about sustainability efforts; the company is trying to recover from the scandal over its cheating on diesel emission tests. Conversely, Apple, among the lowest-ranked, is 96 percent of the way toward its goal of 100 percent renewably-powered facilities (and its new goal to source all of its product materials from renewable or recycled sources).
The report doesn’t deal with actual corporate behavior, admits Roland Schatz, founder of the U.N. Global Sustainability Index Institute. Still, he says, he prefers companies who declare they want to follow the highest standards and sign onto them every year “as opposed to those who have legally declared nothing.”
It may be global investors who prod corporations to make their commitments to the global goals more explicit. Last year, a group of Dutch financial institutions helped galvanize a movement to align global capital to the Sustainable Development Goals and their 2030 targets. The World Bank raised $173 million on the first “SDG Bond,” with returns pegged to an index of 50 SDG-committed companies, including Nestlé and Danone. The U.N. is planning to ramp up its effort to increase scrutiny of corporate commitments to the global goals. The index will grow to track 1,000 companies to help investors identify companies “aligned with the long-term needs of shareholders and the planet.”
Onward! Please send any news and comments to [email protected].