The Brief | June 28, 2019

ImpactAlpha’s Big 8: Refugee investing, sustainability inflection points, impact at art institutions, Climb Hire’s Nitzan Pelman

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TGIF, Agents of Impact!

Featured: ImpactAlpha’s Big 8

1. Solutions for and by refugees are attracting investment capital. What to do about the world’s 70 million refugees may be politically contentious, but Agents of Impact have an idea: invest in them. “There are increasingly more investors doing this by design and intent,” says John Kluge of the Refugee Investment Network, which has catalogued at least 30 investable ventures and funds for and by refugees. ImpactAlpha’s People on the Move is on the beat. Impact crowd-funding platform Kiva launched its first institutional initiative to support refugee resettlement and financial inclusion. Startups like Israel’s Rewire and Mexico’s Hola Code are raising capital to provide digital banking services and tech training to migrants and refugees, respectively. Santa Clara University’s Miller Center is cultivating solutions, with a second accelerator cohort of social enterprises serving migrants, refugees and human trafficking survivors. Returns on inclusion.

2. Tech cost curves meet rising demands for a low-carbon and equitable economy. The Sustainability Trends Report from Generation Investment Management is one of the most highly anticipated slide decks in sustainable investing. Now in its third year, the report charts indicators of the transition to a clean, circular and inclusive economy. The 141-slide deck was culled from more than 1,000 charts. Generation’s Lila Preston says Generation, which closed a $1 billion ‘sustainable solutions fund’ in May, sees opportunity where technology cost curves meet rising demands for a low-carbon and equitable economy. Clean energy has reached that inflection point. Next up: food, healthcare and mobility systems. Wonk out.

3. Souls Grown Deep sets impact investing example for other arts-based institutions. Creative organizations like museums and art schools, which collectively have nearly $60 billion in endowments, have been slow to adopt mission-related investing. Souls Grown Deep is pioneering a model that could inspire a shift. The Atlanta-based foundation, which holds one of the largest collections of southern African American art, intends to invest $1 million back into the artists’ communities. The investments will be made over three years and will largely support racial and social justice initiatives as well as jobs and community development in nine southern states. Upstart Co-Lab, a network of investors in “the creative economy” helped Souls Grown Deep develop the strategy. Upstart’s Laura Callanan hopes institutional investors “come for opportunities in the creative economy, but stay for opportunities in gender, the environment and other issues.” Creative economy.

4. Agent of Impact: Climb Hire’s Nitzan Pelman. Nitzan Pelman isn’t counting on education alone to throttle generational poverty. Nor is she satisfied with helping low-income professionals get skills and land jobs. Pelman is building a tech-training organization and cutting graduates in on a cut of the profits. “It’s very hard for people to create wealth just based on income alone,” she told ImpactAlpha. Pelman has secured $2 million in grants to jumpstart Climb Hire’s upskilling and staffing model. For two decades, Pelman has had a close-up view of the intersection of education and poverty, at Teach for America, non-profit charter school KIPP and New York City’s Department of Education. She’s launching Climb Hire as a fellow of the Aspen Institute’s Ascend program for solving generational poverty. Lower-income workers often lack strong professional networks to lean on for opportunities, says Pelman, so she opted for a cooperative model to incentivize community and network building. Graduates of the 16-week skills program will become part-owners of Climb Hire’s for-profit staffing agency. Says Pelman, “Social capital is an important avenue for wealth creation.” Follow ImpactAlpha on Instagram.

  • Read the full story on Climb Hire’s tech-training model. 
  • Follow the talent with ImpactAlpha’s weekly report on career moves, job openings, events and opportunities.

5. The why and how of impact measurement in Opportunity Zones. Impact tracking requirements fell out of the Opportunity Zone incentives that became U.S. federal law as part of the 2017 tax reform package. A groundswell of local and organized advocacy has put data and measurement back on the agenda… and top of mind for investors seeking ‘impact alpha.’ In a guest post on ImpactAlpha, Columbia University’s Howard W. Buffett, Rob Lalka of Tulane University, and Mark Newberg of Georgetown’s Beeck Center, round up methods for identifying, tracking and reporting the impact of private sector real estate and business projects. Get tracking.

6. Deals of the week. Stay on top of the dealflow all week long on A few that stood out:

  • Clean energy transition. Encourage Capital raises $40 million to help small businesses in India switch to solar… Omnidian closes $15 million for solar performance guarantees… Nigeria motorcycle ride-hailing service raises $7 million expand electric fleet.
  • Inclusive economy. Israeli tech venture Venn secures $40 million to strengthen urban communities… TPG invests in Harlem Capital and its fund for minority entrepreneurs… Prudential backs Aura to help underbanked customers build their financial futures.
  • Farmer finance. Frubana raises $10 million to connect Colombian farmers to markets.

7. Better outcomes in blended finance. “Blended finance” has not yet succeeded in crowding in the kind of capital once expected, with each dollar of public funding generating less than a dollar of private investment. Such leverage is even lower in low-income countries. “This statistic asks us to take a hard look at the state of blended finance – to ask when and how blended finance should be deployed and how we can get the best results,” write Lala Faiz and Vanessa Holcomb Mann of USAID’s Invest initiative, and Serena Guarnaschelli of KOIS. In a guest post on ImpactAlpha, the trio share lessons for getting better outcomes from the blend of development assistance, private capital and philanthropic grants. To blend better, according Faiz, Mann and Guarnaschelli, put the problem first, keep it simple and align interests with other stakeholders. Smarter money.

8. Financing inclusive growth at Palladium’s Positive Impact Summit. Impact at scale requires capital for dynamic, growth-oriented businesses in emerging markets that provide everyday products and services and create jobs. At Palladium’s Positive Impact Summit this week in New York, investors and advisors including Palladium’s Steven Van Weede, Drew von Glahn of the Collaborative for Frontier Finance, Andrew Tillery of the Palladium Impact Fund, UNCDF’s Esther Pan Sloane and John Fairhurst of the Global Fund were on the case (ImpactAlpha was a media sponsor). Such ‘bread-and-butter’ companies are too small and risky for banks and not sufficiently aggressive for venture capital investors. Von Glahn offered a few takeaways:

  • Right capital. Small and growing businesses have specific financing needs, including working capital, small-ticket asset equipment financing, and venture growth funding to support the “soft assets” that are prerequisites to growth. New instruments, such as structured financing, can be more flexible than traditional debt and equity instruments.
  • ‘Right’ rate of return. Dynamic, growth-oriented businesses in emerging markets are risky, but not as risky as perceived. More data and experimentation are needed in order to better understand the relative risk of these businesses, and therefore the commensurate return requirements. Appropriately applied ‘smart subsidies,’ like first-loss capital, can help get capital into the market to better understand risk.
  • More from New York.

June 28, 2019.