Greetings, ImpactAlpha readers!
#Featured: ImpactAlpha Original
Good Capital Project takes on impact investing’s grand challenges. With so many frameworks and schemas, the fragmentation of impact investing continues to frustrate. The latest to try their hand at coordination was today’s convening in New York of the Good Capital Project, the first initiative under the new ownership group at SOCAP, the annual social capital markets conference. The day was organized around a half-dozen “Grand Challenges,” such as “enabling the entrepreneur,” “investable solutions” and “product design and distribution” with the intention to create protocols, or at least translations, between diverse approaches. According to Kevin Jones, himself a bridge between ‘old SOCAP’ and ‘new SOCAP,’ “The goal is to get to where we are coordinating capital flows and systems become automated and you accelerate the flow of capital to good.”
Keep reading, “Impact investing’s grand challenges” by David Bank on ImpactAlpha:
#Sponsored: Wetherby Asset Management
Wetherby Asset Management is proud to sponsor ImpactAlpha as it redefines business media around social and environmental value. Learn more about Wetherby’s approach to impact investing and check out our latest industry brief on shareholder engagement on our website.
#Dealflow: Follow the Money
Lendingkart gets $7.8 million in loan capital for small businesses in India. The Bangalore-based financial tech company will use debt financing from Yes Bank to expand its small-business lending across India. Lendingkart’s software underwrites small-business credit risk to enable small loans of around $6,000. It has a lent to businesses in 650 Indian cities. The Yes Bank financing could help lower Lendingkart’s cost of capital in comparison to non-banking financial institutions. “It is a natural progression to move more and more towards banks,” Lendingkart’s Harshvardhan Lunia says. Lendingkart has raised close to $40 million in debt since 2014, along with $30 million in equity.
Global Seed Vault slated for $4.4 million upgrade. The Arctic vault, which houses almost a million seeds for food crops, is a “food security” investment for the world. The nine-year-old vault is buried 130 meters inside a mountain and was built to withstand man-made and natural disasters. But unusually warm temperatures this winter sent meltwater flooding into the vault. The seeds weren’t damaged but the Norwegian government has earmarked the funds to bolster the vault against extreme weather and additional water leakage from permafrost melt. The seed vault cost $9 million to build.
FinLab winners share $3 million for inclusive fintech solutions. Eight startups have been awarded $3 million in startup capital from the third fintech competition from JPMorgan Chase and Financial Solutions Lab. The “FinLab” competition focuses on solutions for personal financial health, particularly among underserved U.S. populations. Winners include EverSafe, a banking and investment monitoring service for aging Americans; Nova, a cross-border credit reporting agency; Blueprint Income, a pension planning service; and Dave, an overdraft alert and protection service. Each startup receives $250,000 alongside mentorship and support in testing and refining their products and services. Fifty-seven percent of Americans have difficulty managing personal finances.
A dozen media startups get seed funding from Matter Ventures. Media accelerator and investor Matter has selected a dozen businesses in New York and San Francisco for its five-month program. Ideas selected include Purple, a platform for media consumers to ask questions and have conversations with journalists; The Establishment, a publishing outlet for underrepresented writers and reporters; and Graffiti, a data visualization resource. Each startup gets $50,000 in seed funding plus $75,000 to cover the program costs. Matter’s manifesto exhorts “the seeds of the next great media institutions will be planted this year by courageous entrepreneurs who make the leap to build ventures that speak truth to power, close the empathy gap, and take a radically inclusive approach to amplifying the voices of all people.”
See all of ImpactAlpha’s recent #dealflow.
Thank you for your leadership. The impressive response to our call for nominations for the first #GSGHonors testifies to the breadth and depth of leadership talent in impact investing. Sir Ronald Cohen, chair of the Global Steering Group for Impact Investment, and Zuleyma Bebell, co-founder of ImpactAlpha, will present the awards in Chicago at the GSG Summit July 10–11.
#Signals: Ahead of the Curve
No excuse for lack of energy access. The cost of solar power has fallen so much that failing to deliver it to those still without electricity risks civil unrest, says Jigar Shah, co-founder of Generate Capital. Case in point: More than half a billion people now have a mobile phone but no place at home to charge it. “What many see today is a government that doesn’t care enough to prioritize the effort to solve [their energy problem],” says Shah. Even basic solar lanterns, most of which include mobile charging outlets, could boost household incomes, improve health and improve child education and development. The global kerosene budget alone is enough to provide basic solar energy to every family by 2020, he says. Off-grid solar companies like d.light, Greenlight Planet, M-KOPA, and Mobisol are now serving more than 85 million people with simple solar electricity, more than grid operators in many areas. To reach more people requires more political willpower. Says Shah, “The technology is ready but attention and pressure on large utility and telecom companies are necessary to make it happen.”
Will impact investing be passive investing in 2030? “Both large and small investors should stick with low-cost index funds,” wrote Warren Buffett in his annual letter to Berkshire Hathaway shareholders. It seems people are heeding his advice. Passive investment funds — ones that track stock market indices — could own the whole U.S. stock market by 2030 if the current rate of growth continues. Today, about 30% of U.S. assets and 40% of U.S. stocks are held in such funds.
Passive funds like Vanguard, which are managed by rules-based algorithms, are on the rise because they have lower fees than active money managers and may be outperforming them as well. The algorithms also make possible rules around sustainable or responsible investing. Platforms like OpenInvest and Motif are expanding socially- and environmentally-minded stock screening and thematic investing for people investing as little as a few thousand dollars. Journalist Marc Gunther has made a case for why foundations should switch to passive investing as well: it would free up capital for core program that is currently used to pay money managers.
How will the algorithms hold corporate management to account? Large asset managers like BlackRock and State Street have become outspoken champions of shareholder engagement as a catalyst for corporate governance improvement and long-term thinking. Passive fund managers could become more active. Vanguard reportedly voted against ExxonMobil’s management in urging the oil giant to report its long-term risks from climate change and climate action.
Onward! Please send any news and comments to [email protected].