Israeli tech for impact, Saudis back women’s fund, Islamic finance for inclusive development



Greetings, ImpactAlpha readers!

#Featured: Open Mic

Turning Israeli tech toward sustainable development. With President Trump in Israel, we asked Cecile Blilious of Impact First Investments to brief The Brief on Israel’s emerging impact investing ecosystem. “Israel wears its crown proudly as a ‘startup nation,’” Blilious writes. Israel’s technological prowess and entrepreneurial zeal makes the positive vision of impact investing an increasingly good fit, she reports. “Interest in such investments is growing, either by angel investors that focus on social tech, or by accelerators and small investors.”

Read Cecile Blilious’ report from Israel on ImpactAlpha:

Turning Israeli technology toward sustainable development

#Dealflow: Follow the Money

Saudis pledge first $100 million for World Bank facility for women entrepreneurs. Expect to hear more about the Women’s Entrepreneurship Facility before the G-20 meeting in July, where World Bank President Jim Yong Kim wants to announce a $1 billion raise. Ivanka Trump initiated discussions with Kim about the fund, which also has the support of Germany’s Angela Merkel. That Saudi Arabia is contributing to the fund’s first $100 million, along with the U.A.E., raised eyebrows, given the Gulf kingdom’s overt gender inequality. The pledge coincided with the visit of President Trump (and Ivanka). The initiative may be modeled on an earlier women’s enterprise fund, started in partnership with Goldman Sachs and the International Finance Corporation. That fund was championed by top White House advisor, Dina Powell, then head of Goldman’s impact investing group. There’s little disagreement women business owners need financing. At least 70 percent of women-owned businesses worldwide lack access to finance, a credit gap of $300 billion.

Benefit Chicago backs six small businesses and community lenders. The innovative funding collaborative has made its first six investments in the Chicago area, totaling $12 million. The planned $100 million fund has raised $77 million so far, including $50 million from the MacArthur Foundation, $15 million from the Chicago Community Trust and an additional $12 million via the Calvert Foundation, which offers its Community Investment notes to individuals for as little as $20. “When you invite people to put small amounts of money into this you can’t be disappointed,” Julia Stasch, MacArthur’s president, told the Chicago Tribune. The loan fund was launched last year to invest in high-need neighborhoods and social programs in Chicago (see, “The Chicago Model”). Early borrowers include: AutonomyWorks, a social enterprise that employs adults with autism; hydroponic farming venture Garfield Produce Co.; and Sweet Beginnings, a honey producer that employs people with criminal records. The fund is also backing three community development institutions that invest in local social projects: community development finance institution CNI; community lender and real estate developer IFF; and LISC Chicago.

U.S. Bancorps halts fossil-fuel project lending, but not to DAPL. The bank, one of the largest financial institution in the US, is ending project finance for new fossil fuels pipelines and coal facilities. It appears to be the first US bank to do so. The move was announced at the bank’s annual shareholders meeting and goes beyond last year’s environmental policy to “reduce” fossil fuels lending. U.S. Bancorp will honor existing commitments, including to Energy Transfer Partners, the construction company behind the Dakota Access Pipeline. U.S. Bancorp said clients with environmentally sensitive assets in oil and gas or forestry would get “enhanced due diligence.” Other banks, like the Industrial and Commercial Bank of China, are also implementing environmental and climate risk underwriting.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

Move over Silicon Valley. Startup activity growing across the US. A new index from the Kauffman Foundation identified Miami, Austin, Los Angeles, San Diego and Las Vegas as the top US cities for entrepreneurship in 2016. Among the 25 smallest US states, the top startup spots were Oklahoma, Wyoming, Alaska, Montana and Nevada. “We are seeing growing broad-based startup activity nationwide,” says Kauffman’s Philip Gask. The annual startup index tracks new entrepreneurs and businesses, and founder motivations. For the third straight year, people in the US opened more businesses than the previous year. More entrepreneurs (86 percent) are starting businesses out of opportunity rather than necessity. First-generation immigrants make up nearly 30 percent of new US founders, a two-decade high. Kauffman’s Victor Hwang says, “Growing startups not only support individual entrepreneurs but lift surrounding communities.” Minority and female founders continue to face barriers.

Islamic financing for the Sustainable Development Goals. The 57 member countries of the the Islamic Development Bank account for 40 percent of the world’s poor. Islamic finance emphasizes risk-sharing, connection to real economic activities, and inclusiveness. Thus, it would seem to be a short step to turn Islamic-managed assets, set to grow from $2 trillion to $3.2 trillion by 2020, toward financing for the UN global goals. Earlier this year, the World Bank flagged the potential of Islamic finance for the SDGs. Now comes the Islamic Development Bank, along with the United Nations Development Program, to lay out recommendations and launch a new investing platform. Among the recommendations: Back Islamic impact investing funds and intermediaries. Align standards for impact measurement with the broader impact investing community. Build networks of public and private actors to share ideas and challenges. Islamic finance is on the agenda of the second Global Ethical Finance Forum in Edinburgh in September.

#2030: Long-Termism

Saudi Arabia 2030 will look like a broadly diversified portfolio. The Gulf kingdom was spreading its wealth around this week (see above), balancing $110 billion in arms purchases with a $20 billion commitment to infrastructure projects — in the US. The Saudi’s pledge to a new infrastructure fund by private equity firm Blackstone is in line with “Vision 2030,” the country’s blueprint for moving away from oil dependence, partly in anticipation of waning global demand for fossil fuels.

Part of that plan includes a move to publicly list its state oil company, Aramco, on the New York Stock Exchange. When the IPO was announced, the company was valued at $2 trillion; now, it could be worth half that amount, at best, according to Bloomberg. In January, Saudi’s Energy, Industry and Mineral Resources Minister announced plans to invest $30 to $50 billion in renewable energy projects by 2023.

The Blackstone pledge reflects a bit on a sector that is a favorite of the current US administration. “There is broad agreement that the United States urgently needs to invest in its rapidly aging infrastructure. This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth,” said Blackstone President Tony James. Last month, Arif Naqvi of the Abraaj Group said US infrastructure was the “biggest opportunity on the planet.”

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

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