Greetings, ImpactAlpha readers!
#Featured: ImpactAlpha original
The Patriots (and Vikings and Falcons) underestimated the Eagles, just as investors have misjudged Philadelphia and other cities like it. An underdog Super Bowl victory provides an all-too-easy opportunity for metaphors and deep thoughts, but indulge us — it’s only been 24 hours. ImpactAlpha’s Dennis Price joined other happy Philadelphians in the streets to celebrate the Eagles first-ever Super Bowl victory. The outpouring represented the city shedding its inferiority complex. The Eagles outperformed opponents’ expectations throughout the season and playoffs. “We’re not a city on the cusp of doing big things anymore. Philadelphia Inquirer’s Mike Newall wrote overnight, “We’re doing them.”
Like many US cities still trying for a 21st-century reboot, Philadelphia is often under-appreciated and misunderstood. Since 2015, Philadelphia-area venture capitalists have raised 11 funds totaling a bit more than $500 million. Boston VCs in the same period hauled in more than $11 billion through 47 funds. Philadelphia “may not be the biggest, but we can be a leader; the Eagles represent this beautifully,” said Margaret Bradley, who runs ImpactPHL Ventures, which is investing in early-stage impact startups in Philadelphia. “The joyous outpouring of neighbors all over the city is a sign of what can happen when we come together.”
Read “Philadelphia Eagles: Angry birds? Nah, hungry birds,” by Dennis Price on ImpactAlpha. And check out last month’s “Philadelphia rings the bell on a 21st-century revival.”
#Featured Event: The Economist, Investing for Impact
Meet with impact investors, policymakers, academics and philanthropistsat The Economist’s Investing for Impact: Risk, return and the future of the world conference on February 15 in New York City. Explore how to put capital to work in a world where the outlook for risk and return is changing every day. Use discount code IA15 when you register for a 15 percent discount.
#Dealflow: Follow the Money
Pacific Life commits $30 million to Swell. The life insurance company last year helped launch Swell, an impact platform for everyday investors and retirement savings plans. The $30 million capital infusion is meant to help Swell grow its product line and attract more customers, currently numbering 3,000. The company manages $16 million in assets. Swell will use $15 million of the new funding to expand its equity and fixed-income products, launch a mobile app, and build out its impact assessment tool. “People want to make an impact, but they’re not really sure what that means when they invest,” Swell’s CEO Dave Fanger told ImpactAlpha. As an example, Fanger said Swell wants to better explain how carbon emission reductions translate to money saved, and planetary and local impact. Swell recently changed its legal structure to allow it to bring on outside investors.
Temasek backs low-cost healthcare chain Clinica SIM. Singapore’s $275 billion state-owned investment fund made an undisclosed equity investment in Clinica SIM, a chain of low-cost health clinics in northeastern Brazil, Brazil Journal reports (translated). The company started in 2007 and has built 15 clinics catering to the Northeast region’s low- and middle-income uninsured. (Across the country, 60% to 70% of Brazilians don’t have health insurance.) Clinica SIM expects to expand to 20 to 25 clinics this year. Temasek doesn’t focus on Latin America — only 4% of its portfolio is invested there — however, growing middle income populations is one of fund’s investment themes.
Beta Hatch raises $1.6 million for sustainable animal feed. The Seattle-based startup’s seed round is backed by agribusiness giant Wilbur-Ellis’s venture arm Cavallo Ventures, cleantech venture fund E8, and Seattle area angel investors. Beta Hatch grows mealworms for animal feed. Wilbur-Ellis’ Mike Wilbur says his company’s fund backed Beta Hatch because animal feed trends are evolving. “Our customers are asking for alternative sources and they’re looking for more sustainable options,” he told AgFunderNews. Insect-based feed, another kind of animal feed, is not currently sold by Willbur-Ellis because it is still too expensive. It is a growing sector, however, with other startups like Protix and Enterra raising capital for similar products.
#Series: The New Revivalists
Carmen Rojas: Building a 21st-century economy that works for working people. In Texas, Carmen Rojas worked to reform building permit rules to drive training and fair wages for construction workers. In New York City, Rojas helped set procurement standards linked to job quality. In Boston, Rojas is helping retiring small-business owners sell their companies to their employees. Workers in the U.S. have power beyond collective bargaining, says Rojas, the founder of the Worker’s Lab in Oakland. The daughter of Latin American immigrants, Rojas is bringing an entrepreneur’s mindset to building business models to redistribute wealth, increase wages and expand benefits. “How do we leverage public dollars to incentivize private action?” asked Rojas in an interview with ImpactAlpha. The Worker’s Lab’s approach: an Innovation Fund, which provides grants and low- and no-interest loans. Design sprints and business-plans help hone new approaches. And three-year investments of up to $1 million in independent business models with an ability to transform lives across an industry or place. Read, “Carmen Rojas: Building an economy that works for working people,” by Megan McFadden, on ImpactAlpha.
New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.
#2030 Finance: Long-termism
The 2040 race between climate-risk disclosure and the “tragedy of the horizon.” The classic problem in environmental economics is the “tragedy of the commons.” Bank of England Governor Mark Carney called out a related tragedy in a speech to insurers in London in September 2015. “Climate change is the tragedy of the horizon,” said Carney, who also chairs the G20s Financial Stability Board. “We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors — imposing a cost on future generations that the current generation has no direct incentive to fix.” Carney was kicking off the Task Force on Climate-Related Disclosure, which was chaired by former New York Mayor Michael Bloomberg. “Once climate change becomes a defining issue for financial stability,” Carney warned, “it may already be too late.”
Now, more companies are being forced to gaze at that horizon. Last week, an “Investor Agenda” backed by major public pension funds committed them to seek corporate disclosure in in line with the recommendations of the Task Force. In Europe, the High-Level Expert Group on Sustainable Finance also recommended adopting the Task Force recommendations as standard reporting guidelines. More than 230 companies with combined market-value of more than $6.3 trillion have lent their support to the Task Force recommendations.
As if on cue, ExxonMobil treated investors to an object lesson in the value of such disclosure. Last week, in its regular report, Exxon forecast that population growth will drive up oil demand by about 20% by 2040. However, when Exxon modeled demand under the Paris climate agreement’s goal of holding global temperature increase to less than 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels, world oil consumption drops by 25% by 2040. Even under that scenario, Exxon said it faced “little risk” to its oil assets, but critics are pressing for more detailed financial disclosure. Exxon undertook even the limited scenario-planning exercise only after shareholders voted overwhelming last year to insist the oil giant assess its climate-related risk. Crucial to the vote was the reversal of major asset managers like the $6.3 trillion BlackRock and the $4.5 trillion Vanguard Group, which bucked Exxon’s management on the issue.
Carney was counting on just such dynamics. “We can build that virtuous circle, of better understanding of tomorrow’s risks, better pricing for investors, better decision making by policy makers and a smoother transition to a low-carbon economy,” he said in his speech. “By managing what gets measured, we can break this tragedy of the horizon.”
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