Greetings, ImpactAlpha readers!
#Featured: ImpactAlpha original
Casting an eye on how banks are — and are not — financing the low-carbon transition. The biggest banks in Europe, North America and Asia are in a global race to finance the historic transition to a low-carbon economy. You don’t believe it? True, a new report by Boston Common Asset Management criticized most banks’ commitments as “skin deep” and “found urgent shortcomings that threaten to undermine efforts to support the transition to a low carbon-economy.” It found only 49% of the 59 banks surveyed are using the Paris agreement’s 2-degrees scenario planning and “less than half” of the banks have explicit targets to finance low-carbon products and services.
But that means half of global banks finally are doing serious climate-risk assessment and half are making explicit commitments to finance the low-carbon transition. BNP Paribas is committed to provide $15 billion annually in financing for renewable energy projects by 2020. Goldman Sachs has a 2025 target of $150 billion in clean energy financing and investing. HSBC pledged to provide $100 billion in sustainable financing and investment by 2025. JPMorgan Chase hopes to facilitate more than $200 billion in clean financing by 2025. TD Bank announced a $78 billion target for low-carbon lending, financing, asset management and other programs by 2030.
Of course, none of that is nearly enough to meet the $12 trillion needed by 2030 to avert the worst climate-related disruptions. Given the risks and opportunities, banks should be racing each other to finance the low-carbon future. Banking leaders, the strategic thinking goes, can grab an advantage as banks increasingly are held accountable for the climate impact of their lending. Assessing risks and tracking commitments are essential to make any optimistic spin credible.
Read “Global Banks: We’re watching how you finance the low-carbon transition,” by David Bank on ImpactAlpha.
#Dealflow: Follow the Money
JPMorgan’s Entrepreneurs of Color Fund expands to New York and San Francisco. JPMorgan Chase launched funds in San Francisco and New York’s South Bronx to support small business owners of color, following the bank’s similar efforts in Detroit. The $3.1 million fund in San Francisco will be managed by Working Solutions, ICA Fund Good Jobs and Pacific Community Ventures, and will focus on helping small businesses remain in the area as rents and other costs increase, Pacific Community Ventures’ Patrick Duggan told ImpactAlpha. Excelsior Growth Fund and Accion are the bank’s partners in the $2 million fund in the South Bronx. In 2015, JPMorgan committed $6.5 million to minority small business owners in Detroit. Read “JPMorgan’s Entrepreneurs of Color Fund expands to New York and San Francisco,” by Jessica Pothering on ImpactAlpha.
Impact investors rally £1.9 million for London cinema. Big Issue Invest, The Arts Impact Fund and Triodos Bank are allocating two-thirds of the funds needed to convert an old cinema in East London into a community theater and music venue. The Hackney Arts Centre will become a hub for Community Music, an arts charity offering professional courses and a youth music program. “We see a real positive role that financially self-sustaining socially-minded arts organisations can play,” says Big Issue Invest’s James Salmon. Nesta’s Arts Impact Fund committed £600,000 ($844,000) to Village Underground, the organization leading the project, last July. The creative sector has attracted little impact capital. An exception is Artscape’s $21.4 million fundraise to build an art entrepreneurship hub in Toronto.
Quad Learning raises $4.8 million to help students get four-year degrees. The Washington, D.C.-based education venture helps two-year degree students transfer into four-year programs through its American Honors network of community colleges. Quad Learning’s Phil Bronner started the company in 2012 so students could pursue four-year degrees more affordablyby starting in lower-cost community colleges. It has four community college partners in Pennsylvania, Texas, New York and Washington state. In 2015, Quad launched an app to help students and academic advisors manage students’ progress. The company is also helping universities recruit international students, according to its website. Quad has raised over $43 million in debt and equity, including it’s latest funding, according to SEC data.
#Series: The New Revivalists
Mark Warner: ‘Virginia is for Entrepreneurs’ shows policy leadership. Virginia Sen. Mark Warner launched two startups that “failed miserably,” he says, before starting a successful cellphone venture. In December, Warner and former Gov. Terry McAuliffe launched “Virginia is for Entrepreneurs,” a statewide effort to make sure the state’s entrepreneurs have access to the capital and support they need to grow their businesses. More than 300 businesses and nearly 100 investors have registered and 88 connections have been made. “Our goal is to give that agriculture entrepreneur in Abingdon the same opportunity that a high-tech entrepreneur in Northern Virginia with lots of venture capitalist friends already has,” Warner told ImpactAlpha. A growing number of such statewide efforts show how critical political and civic leadership is to successful entrepreneurial job-creation. In addition to capital, startups need access to capital, portable benefits, mentorship and skills training. “Yes we have money, but we also help build ecosystems,” Warner says. Read, “Mark Warner: Mark Warner: ‘Virginia is for Entrepreneurs’ shows policy leadership,”by Amy Cortese on ImpactAlpha.
New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.
#Signal: Ahead of the Curve
Overheard at The Economist’s New York impact investing event. Headliners at the magazine’s second annual gathering seemed to find their voice in rebutting stubborn assumptions.
- Pigeonly founder Frederick Hutson was asked why his startup helping families communicate with inmates was an “impact” company and not just good capitalism. “I don’t look like a typical tech founder,” said Hutson, who is African American and was formerly incarcerated. “Before impact investors backed me, mainstream investors wouldn’t give me the time of day.”
- Debra Schwartz, charged with deploying $500 million in program-related investments for the John D. and Catherine T. MacArthur Foundation, didn’t bite when asked if there is a tradeoff between impact and return. “We’re not here to prove there’re no tradeoffs,” Schwartz said. “We want to know where they are, why they’re needed and what levers to pull.”
- Liesel Pritzker Simmons, who leads the $500 million Blue Haven Initiative family office, said there’s no contradiction between investing in women and maximizing shareholder value. “If you want to maximize shareholder value, you better be having this discussion.”
- Village Capital’s Ross Baird challenged the premise of a question about whether impact investing is going mainstream. Even Henry Ford tried to create good-paying jobs in Michigan so workers could buy cars, he said. “We’re getting back to how business used to be.”
- But impact products can’t scale to attract the trillions of dollars needed to finance the sustainable development goals, can they? Yes they can, said Rockefeller Foundation’s Saadia Madsbjerg. There will be products, she said, that “the NGOs can stand behind, that pension funds can put money in and that fund managers can execute.”
Thank you for reading. Onward! Please send news and comments to TheBrief@impactalpha.com