The Brief | May 15, 2018

Place-based impact, talking system-change at MIE, Rise Fund’s first Africa investment, Michigan fund-of-funds

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Greetings, ImpactAlpha readers!

Featured: ImpactAlpha Original

Impact investors rediscover the power of ‘place.’ Invest in where you know. From downtown Detroit and Chicago to communities across Central Appalachia and the Navajo Nation, “place-based investing” is taking off. Private investors are tapping civic leaders, community foundations and local nonprofits to find opportunities to finance small businesses, schools, health clinics and urban infrastructure. A new report from the Urban Institute, produced in collaboration with the MacArthur Foundation and Mission Investors Exchange, highlights nearly two-dozen place-based impact investing initiatives in communities across the nation. The intended impact: quality jobs, affordable housing and inclusive growth.

Each model looks a little different. In Minnesota, local foundations have committed nearly $20 million from their endowments into a bond fund to invest in local affordable housing and small businesses. The Rainmakers Investment Collaborative is deploying community development loans to Native communities in New Mexico and Arizona. Benefit Chicago has mobilized $95.5 million for local non-profits and social enterprises. Such initiatives, write the authors of the Urban Institute report, “can compensate for market failures, absorb risk for investors or mitigate risk for investees, and bring much-needed capital to underinvested communities where the costs of capital are often high.”

Read, “Invest in where you know: Impact investors rediscover the power of ‘place,’” by Dennis Price on ImpactAlpha.

Signals: Ahead of the Curve

Talking system-change and impact investing at Mission Investors Exchange. “You guys are absolutely agreeing with each other,” moderator Tracy Palandjian pointed out midway through yesterday’s opening session of the Chicago gathering of impact-investing philanthropic foundations. “We just yell at each other while we do it,” said Hewlett Foundation’s Larry Kramer, who mixed it up with the Ford Foundation’s Darren Walker and the Heron Foundation’s Dana Bezerra over the efficacy of moving endowment assets toward “mission-driven” investments (see “Foundation leaders meet to talk place, race and impact,” for some background). The three agreed on the need for changes to prod the market system to deliver racial equity, shared prosperity and environmental sustainability. The disagreements came on how to get there.

Kramer was a lightning rod for his skepticism about redeploying Hewlett’s $9 billion endowment, in addition to its grant budget. “You would have thought that I had told people that their gods are false.” Any financial hit, he argued, could crimp Hewlett’s grantmaking without making a meaningful impact on financial markets as a whole. Hewlett’s grants support efforts (including ImpactAlpha) to educate private impact investors, as well as to explore ideas to move economic thinking “beyond neoliberalism.”

Walker cast the carveout of $1 billion from Ford’s $12 billion endowment as a first step and a moral imperative. “I don’t believe there are no places to look beyond our portfolio and not see hope and opportunity,” he said. Heron (also a supporter of ImpactAlpha) last year met its goal of deploying 100% of its $250 million endowment towards its mission of job creation and poverty reduction. Foundations can’t ignore that all investments have impact, positive or negative, she said. No community should accept polluted air or other health hazards “on the promise we’ll be back later to fix it with a grant.”

Agents of Impact: Follow the Talent

Tiedemann Wealth Management, which last year acquired Threshold Group, has rebranded itself Tiedemann Advisors. Tiedemann has created an impact advisory council, signed the U.N. Principles for Responsible Investment and launched an equity and Inclusion investment strategy… New Ventures Mexico is hiring a director of institutional development… Consulting firm Next Street is hiring a finance and operations manager and other team members.

Dealflow: Follow the Money

Lloyds launches £2 billion loan plan to support sustainable businesses, large and small. Lloyd’s Banking Group will offer loans at discounted interest rates to companies cutting their environmental impact. Learn more.

TPG’s Rise Fund takes stake in digital payments company Cellulant. The investment to expand low-cost mobile banking is the Rise Fund’s first investment in Africa. Get the details.

Michigan fund-of-funds raises $81 million for early-stage startups. More than two dozen backers have invested in Renaissance Venture Capital’s third fund. Dig in.

Indonesian peer-to-peer lender Julo raises $5 million for expansion. Julo connects borrowers to unsecured loans using an algorithm to assess their credit worthiness. Learn more.

— May 15, 2018