The Brief | May 15, 2019

Pitching impact to retail investors, Impossible Foods’ $300 million haul, affordable-housing swaps, Ares’ climate infrastructure fund

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Retail platforms for sustainable investing struggle to differentiate themselves – and to attract customers. Aligning investments and values isn’t just for the wealthy. Automated investment services, aka “robo-advisors,” and providers of low-cost exchange-traded funds are making sustainable investing increasingly accessible to everyday savers and investors. New services like OpenInvest, Swell and Ellevest that have come to market in recent years are competing with existing managers like Wealthfront and Betterment that have launched sustainable investing options. Vestive, Good Money, Aspiration, NewDay and others are crowding in as well. The prize: the more than 43 million households with retirement or brokerage accounts. In the mass market, price-sensitive customers mean providers have to offer affordable products and services—and sell in volume.

Increasingly sophisticated data science, algorithmic design and machine learning have made product development easier. The hard part: acquiring customers and standing out in a crowded field. Ellevest focuses on women, with an investment strategy attuned to women’s career cycles and women-focused companies. Vestive builds portfolios or ETFs screened against carbon footprints, alternative energy, fossil fuels, women on boards, labor violations, and gun and tobacco firms. OpenInvest offers customers portfolios built around climate change, criminal justice, LGBTQ rights and other themes, but has recently pivoted to work with advisors at other firms as well. “There’s so much noise in the market,” OpenInvest’s Joshua Levin complains. “To go out and acquire people head-to-head costs more money than you’ll make.”

Keep reading, “Retail platforms for sustainable investing struggle to differentiate themselves – and to attract customers,” by Jessica Pothering on ImpactAlpha.

Sponsored Content: Cornerstone Capital Group

The Access Impact Framework: Aligning global goals and investment analysis. The 17 Sustainable Development Goals represent the key social and environmental imperatives of our time. But most of the targets and indicators reflect interventions typically employed by governments and NGOs, not private sector actors. Cornerstone Capital Group’s Access Impact Framework bridges the gap between the Sustainable Development Goals and granular metrics on specific environmental, social, and governance issues. The common theme: access to the natural, human and economic resources that will create a more regenerative and inclusive world. We are excited to share this new framework and to continue to work with our clients and partners to understand the social and environmental impacts of investments across industries and asset classes.

Keep reading, “Aligning global goals and investment analysis,” by Cornerstone Capital’s Katherine Pease and Craig Metrick.

  • Join the webinar. Katherine Pease and Craig Metrick will present “The Access Impact Framework: Enabling investors to measure the alignment of the portfolios to the issues that matter most to them,” Monday, May 20, 1 pm ET. Register today.

Dealflow: Follow the Money

Impossible Foods raises $300 million as plant-based meat sales surge. The haul for Oakland-based Impossible Foods was led by Singapore’s sovereign-wealth fund, Temasek, and Hong Kong-based tycoon Li Ka-shing’s Horizons Ventures. The fifth round of funding for the company, which brings its total funding to $750 million, was also backed by celebrity investors including Jay-Z, Trevor Noah, Katy Perry, Questlove, Jaden Smith and Serena Williams. The big raise follows the initial public offering from Impossible’s top competitor, Beyond Meat, now valued at more than $4 billion. Impossible Foods is said to be worth $2 billion. “We have cracked the molecular code for meat and built an industry-leading intellectual property portfolio and brand,” Impossible Foods’ David Lee told Reuters. Going public is a priority for the firm, he said, “but we are not in a rush.”

  • Where’s the beef? The market for alternative, less carbon-intensive meat could reach nearly $6 billion by 2022. The Impossible Burger is sold in 7,000 restaurants in North America and Asia, including Burger King, Red Robin, White Castle and Qdoba. Sales in Hong Kong, Singapore, and Macau have tripled since March.
  • More.

Kenya digital pharmacy MYDAWA raises $3 million. More than 80,000 people have signed up to purchase affordable, high quality medicine and health products from Nairobi-based MYDAWA. The firm raised $3 million from Africa HealthCare Master Fund to roll out across Kenya. MYDAWA sources from producers approved by the World Health Organisation and lets users authenticate products via text message or QR code. Africa HealthCare Master Fund is managed by Singapore-based Asia Africa Investment and Consulting, which has also invested in the affordable dialysis chain Africa Health Network, emergency response startup Flare and Jumuia Hospitals. Dig in.

Impact Community Capital recycles affordable housing financing with Freddie Mac swaps. The San Francisco-based low-income housing lender is piloting a new structure to free capital to finance additional affordable units. Impact Community Capital swapped 77 loans, totaling more than $140 million, for “participation certificates,” or PCs, guaranteed by Freddie Mac, a U.S. government-owned corporation that packages mortgages into securities. Impact plans to sell the “multi PCs” to impact and other investors. “We think this can be the entry point for new institutions that have heard about impact investing, but have had trouble getting in” and want higher credit quality, Impact Community Capital’s Michael Lohmeier told ImpactAlpha. Share this post.

Signals: Ahead of the Curve

Climate and social strategies power a new wave of infrastructure funds. Among the 2019 impact investing trends to watch, according to ImpactAlpha’s “Institutional Shift” podcast in January: “Expect major asset managers from Ares Management to Blackstone to launch billion-dollar ‘sustainable infrastructure’ funds.” Last week, Blackstone (with $512 billion in assets under management) signaled its strategy (see, “What we know about Blackstone’s impact infrastructure, real estate and private-equity initiative). Now comes Los Angeles-based Ares (with $137 billion in AUM) with Climate Infrastructure Partners, Bloomberg reports, citing an email to investors (Ares declined to comment). Investments from the climate infrastructure fund will be aimed at cutting greenhouse-gas emissions and making better use of natural resources. In volatile markets, investors may be attracted to infrastructure funds, which typically expect returns in the high-single digits from long-lived assets with reliable cash flows.

  • Social infrastructure. Franklin Templeton’s Franklin Real Assets Advisors has published several reports on the social infrastructure opportunity in Europe. Social infrastructure, defined as the physical assets that facilitate social services such as healthcare, education and affordable housing, increasingly intersects with efforts to reduce greenhouse gas emissions, Franklin Templeton suggests. “By many measures, buildings use more energy than either industry or transportation, and will contribute more to CO2 emissions between now and 2030.” Chicago-based Harrison Street ($17.2 billion AUM) quietly launched a “social infrastructure fund” last year.
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Agents of Impact: Follow the Talent

Pitch AgriHack is accepting applications from agriculture entrepreneurs in Africa, the Caribbean and the Pacific developing information, communications and technology applications… The Green Alley Award is inviting European startups with circular-economy, recycling and other solutions to reduce waste… The Urban Tech Connect conference returns to Los Angeles May 16.

May 15, 2019.