Investing for opportunities, alternative protein, 2018 optimism, immigration and population growth



Greetings, ImpactAlpha readers!

We hope you had relaxing and refreshing New Year’s break. ImpactAlpha is ready for an impactful 2018. Stay tuned to The Brief for in-depth coverage of impact investing. (And please add editor@impactalpha.com to your email contacts to ensure smooth delivery. Your family, friends and colleagues can sign-up here).

#Featured: ImpactAlpha Original

The new loophole in the U.S. tax bill that could draw private capital to distressed communities. The desire to generate social or environmental benefit is key to impact investing. But a tax break can be an added incentive. Among the many provisions of the Republican tax bill signed by President Trump last month is the new “Investing for Opportunities Act,” which lets investors temporarily defer taxes by investing their capital gains in distressed areas designated as “opportunity zones.” The bill also creates “opportunity funds,” or “O Funds,” that help investors locate, execute and share risk on investments in low-income neighborhoods. With as much as $2.3 trillion in unrealized capital gains in U.S. stocks and mutual funds, the new provision could draw significant investment to low-income communities.

In the end, advocates for community development and renewable energy financing say the final tax bill did less damage than originally feared. The Low-Income Housing Tax Credit and the New Markets Tax Credit survived, as did critical tax credits for wind energy, solar power and electric vehicles.

Read more about “The new loophole in the U.S. tax bill that could draw private capital to distressed communities,” on ImpactAlpha.

The new loophole in the U.S. tax bill that could draw private capital to distressed communities

#Roundups: 2017 in Review

Catch up with ImpactAlpha’s 2017 roundups:

#Dealflow: Follow the Money

SuperMeat raises $3 million for petri-dish poultry. The Israeli startup has a process for growing meat in a lab. The cellular agriculture technology is part of a growing “alternative protein” market aimed at producing healthier and more sustainable products to meet the world’s demand for food. SuperMeat’s seed round was backed by European poultry producer PHW and New Crop Capital and Stray Dog Capital, which focus on animal welfare. PHW’s CEO said the investment would strengthen its “vegan product portfolio.” Investments by industry giants in alternative-meat startups is a growing trend: Cargill hasbacked Memphis Meats, which produces lab-grown protein, and Tyson Foods has funded plant-protein company Beyond Meat. SuperMeat plans to market its lab-grown chicken within three years. Bonus question: Is lab-grown meat vegan?

State Bank of India backs small-business lender Lendingkart. The Ahmedabad-based company helps unbanked business owners in India get access to loans and lines of credit. Since 2014, it has provided short-term loans to 12,000 small businesses, but demand is exponentially greater, Inc24reports. The latest backing from the government-run State Bank of India will be used to extend Lendingkart’s reach to 950 cities, up from 650 last year. In June, Lendingkart raised $7.8 million from Yes Bank to expand its loan book.

Vionx Energy raises $5 million for battery-storage technology. Improving storage capacity and reducing battery costs are key to expanding renewable-energy sources like solar and wind. Woburn, Mass.-based Vionx produces utility-scale “flow batteries,” an alternative to the lithium-ion batteries that are now standard. Flow-battery technology is considered well suited to the utility industry because of its longer lifespan and capacity, but it still needs to become cost-competitive with lithium ion, UtilityDIVE reports. In October, Vionx installed a three-megawatt/hour system at Holy Name high school in Worcester, Mass., which is pairing the system with wind turbines to become grid-independent. Vionx’s latest round of debt and equity (paywall) funding brings its fundraising total to $85 million.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to thebrief@impactalpha.com.

#Signals: Ahead of the Curve

Reasons for optimism about the new year. “Most important story of 2017 is that the global poverty rate reached its lowest level ever,” tweeted economist Bill Easterly. “This will probably be the most important story of 2018 also. Happy New Year.” One reason: China. In the past three years, the world’s most populous country has cut by half the number of people living below the poverty line (from 99 million to 43.4 million). That was one of the 99 “best stories” of 2017 rounded up by Quartz. The U.S. poverty rate, at 12.3%, is the lowest since the financial crisis. Over the last 16 years, more than a billion people have gained access to electricity (and in 2017 the price of wind and solar power fell another 25%). Remember Zika? It all but disappeared as a five-year international assault on tropical diseases saved millions of lives. All that violence? Deaths from terrorism fell 22% in 2017 from the 2014 high. Rates of violent crime and property theft in the U.S. are half that of 1990; incarceration rates are falling in the majority of states. Predicts Gideon Rachman of the Financial Times [paywall]: There will not be a war on the Korean peninsula, nor will there be one in the South China Sea or in eastern Europe…By contrast, there will be big and positive change in the Middle East. And England will win the World Cup.”

#2030: Long-termism

The U.S. population is growing while other advanced economies are shrinking. As global population increases from 7.6 billion in 2017 to a projected 9.8 billion in 2050, half that growth is expected to be concentrated in just nine countries(in order of expected contribution):

  • India
  • Nigeria
  • Democratic Republic of the Congo
  • Pakistan
  • Ethiopia
  • Tanzania
  • United States of America
  • Uganda
  • Indonesia

One reason the U.S. is defying global trends: more open immigration policies. Over the past two decades, immigrants are responsible for most of the U.S.’s net population growth, a trend projected to continue through 2065. Not so in Europe. “International migration at or around current levels will be insufficient to compensate fully for the expected loss of population tied to low levels of fertility, especially in the European region,” observes the United Nations. Still, the report adds, “the movement of people between countries can help attenuate some of the adverse consequences of population aging.”

Onward! Please send news and comments to TheBrief@impactalpha.com

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