The Brief | June 14, 2019

ImpactAlpha’s Big 9: Trend watch, female fund managers, impact advocacy, Halloran’s field-building, Temasek’s Ho Ching

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TGIF, Agents of Impact!

Featured: ImpactAlpha’s Big 9

1. Investment trends to watch in the second half of 2019 (podcast). Talent rush. Climate-change investing. Beyond plastics. Financial product innovation. In the latest episode of our occasional podcast series, “Institutional Shift,” ImpactAlpha’s editor David Bank and co-host Dave Chen of Equilibrium Capital look back, at our forecasts from January, and ahead, for trends to watch. Impact investing talent, Chen says, is in hot demand, as firms move from belief to execution. “Almost every firm is reconstituting those groups and bringing in seasoned mainstream investment professionals.” As climate risks rise, says Chen, expect Times Square banners to tout ways to “Invest in Climate Change.” Also watch for: incentives to mitigate plastics use and a new wave of financial product innovation. Read on and listen in.

2. Female fund managers seize ‘gender alpha’ in emerging markets. Trillions could be added to global growth if women’s economic participation equalled men’s. Unlocking that requires investing in more women. Female founders get only 7% of emerging market private equity and venture capital. One reason: only 11% of investment firms have female fund managers, who are twice as likely as male managers to back women founders. “Women have a unique capacity to get close to the unknown and transform a hunch into a better investment decision,” says Jana Boltvinik of Mexico-based Capital Invent. A quick market scan by ImpactAlpha found firms with at least one female partner have raised or are raising $1.3 billion to deploy in local markets. Hear from the managers.

3. Investors call on government to collect Opportunity Zone data… The U.S. government is offering the largest incentive for community reinvestment in a generation without a way to know whether or not it will be effective. Nearly 70 organizations and investors in low-income Opportunity Zones are calling on the Treasury Department to adopt a framework for reporting and disclosing investment and social impact data. “Measuring the full impact of this policy requires the adoption of a thoughtful data collection framework,” said John Lettieri of Economic Innovation Group, which led an effort. Learn more.

4. …and for smart subsidies to scale mini-grids. Rural electrification has always required subsidies, usually from governments. A dozen impact investors, representing $2 billion in assets, are calling for smart subsidies to accelerate renewable energy mini-grids. “We are ready to be the private capital needed to invest alongside those subsidies,” wrote Acumen, Blue Haven Initiative, and Ceniarth, Engie Powercorner, Responsability, KawiSafi Ventures and others. The subsidies needed to help extend electricity access to 450 million people living off the grid will decline over time, the group argues in a public position paper. Read on.

5. Agent of Impact: Ho Ching of Temasek Holdings. This week’s Ecosperity conference in Singapore could seem like another gathering of environmental activists, with dire warnings of global warming and ecological destruction. Instead, it’s the annual event of Temasek, one of the world’s largest sovereign wealth funds with $226 billion in assets. Singapore’s fund is showing up in an increasing number of impact deals, including Zipline, Impossible Foods and Calysta. Now, Temasek is standing up its own impact private-equity fund to invest in an “ABC World” – Active Economies built around good jobs and sustainable cities; Beautiful Societies that are just, inclusive and resilient; and a Clean Earth. The impetus comes from the top. Temasek CEO Ho Ching, who has led the fund for a decade, urges business leaders to consider the three P’s. Businesses can only thrive if they meet the needs of their customers as their Primary mission, says Ho, who is married to Prime Minister Lee Hsien Loong. Businesses must also invest in their People, she says, and give them knowledge to transition into a fast-changing future. And Ho urges leaders to protect the Planet, and combat climate change and its impacts. Ho’s independence from Singapore’s political establishment has been questioned and a succession plan is underway. Still, the urgency of her agenda remains. “The purpose of our capital – whether economic, human or knowledge capital,” she says, “must be to ensure life can survive on Earth.” Follow ImpactAlpha on Instagram.

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

7. Takeaways from Year One of Cameroon’s cataract bond. Development impact bonds are an innovative way to get private capital to overlooked regions and issues. But with less than 10 underway worldwide, data on whether they pay off with the impact they claim is largely absent. In Cameroon, early data reveals that a $2 million impact bond is exceeding expectations in providing high-quality treatment to thousands of cataract patients. But it is not reaching enough of Cameroon’s poorest patients. “The project is working to better understand the barriers people face and develop strategies to increase access for the poorest,” said OPIC, which financed the bond with the Netri Foundation. Take a look.

8. A data-driven tool for predicting startups’ future climate impact. Few tools exist to enable investors to allocate capital to the early-stage technologies with the highest long-term climate impact. PRIME Coalition, which mobilizes philanthropic and commercial capital for gigaton-scale climate solutions, developed a methodology to fill that gap. The Cambridge nonprofit is open-sourcing its “Emissions Reduction Potential” tool for use by other investors and entrepreneurs. The software will save investors time and effort, and help create a standard for forward-looking impact benchmarking, says PRIME’s Sarah Kearney. Check it out.

9. Investing to build the field of impact investing. A lot of foundations talk about impact investing “field building.” For a dozen years, Halloran Philanthropies has been walking the talk. The small Philadelphia philanthropy of Harry Halloran, CEO of American Refining Group as well as Energy Unlimited Inc., has invested $51 million in grants and investments to promote social and economic empowerment around the globe. A peek into the portfolio: first-time fund managers like Adobe Capital and young social enterprises such as Wash Cycle Laundry; as many as 30 impact entrepreneur accelerators including Village Capital and Unreasonable; and impact investing infrastructure like B Lab, SOCAP and multiple Impact Hubs. Building the field.

— June 14, 2019.