Beats | April 25, 2018

Racial-lens investing, blended-finance action plan, global health-tech, fintech in Africa and India

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Greetings, ImpactAlpha readers!

Featured: New Series

Apply a racial lens, and other lessons from Living Cities’ impact investments. Over the past decade Living Cities arguably has been one of the most innovative impact investors deploying capital to revive low-income U.S. communities. Through its two structured debt funds, Living Cities has deployed $57 million into 33 transactions across America. The organization has provided an on-ramp for foundations and financial institutions to test drive impact investing, seeded small-business loan funds and backed early pay-for-success models. Its work has shown that American cities, despite the hesitations of many financial institutions, are indeed investible.

In a new multi-part series on ImpactAlpha that starts today, Living Cities will explore the power of foundations and financial institutions to deploy capital to create good jobs, grow incomes and build wealth in America’s cities.

First up, two Living Cities investment directors share six lessons the organization has learned in ten years of impact investing. Lesson number one: Race-neutral efforts to boost economic opportunity have failed, say Brinda Ganguly, who oversees the family of Living Cities funds, and Brian Nagendra, who helps manage the portfolio. Living Cities recently focused its investment approach on closing racial wealth gaps, write the directors. “Businesses run by people of color are more likely to employ people of color, and to support the creation of wealth for entrepreneurs of color.”

Read, “Apply a racial lens, and other lessons from Living Cities’ impact investments,” by Living Cities’ Brinda Ganguly and Brian Nagendra, on ImpactAlpha.

Continue the conversation… Brinda Ganguly will join SOCAP 365’s “Investing for Racial Equity in Cities,” panel in New York on May 9th.

Agents of Impact: Follow the Talent

Sev Vettivetpillai, the former head of impact investing at Dubai-based private equity firm Abraaj, is the new chief executive officer of LGT Impact, the impact investing arm of the $206.4 billion LGT Group, the asset manager controlled by the royal family of Liechtenstein. Vettivetpillai left Abraaj amid ongoing controversy at the firm. At LGT Impact, based in Zurich, he plans to build a team of about “50 investment professionals and raise regional funds to invest in Latin America, Sub-Saharan Africa and South Asia,” as well as Europe, he told Pension Equity News in an interview. LGT Impact, launched in 2016, will “essentially be focusing on the mid-market—growth capital investing with impact,” said Vettivetpillai, in sectors including education, health care, energy and agriculture.

Signals: Ahead of the Curve

How blended finance aims to catalyze private capital for the U.N. Global Goals. Not all investors are hip to impact as an investment thesis. They need a nudge to make the leap. Blended finance practitioners structure investments that use philanthropic and development funding to reduce risks and boost returns for private investors. With a bit of financial engineering, blended finance proponents hope to mobilize enough private capital to close the $2 trillion to $3 trillion annual gap in financing necessary to deliver on the U.N. Sustainable Development Goals. Now, the Blended Finance Taskforce, a subset of the Business and Sustainable Development Commission, hasreleased a plan to turn all that nudging into a coordinated thrust toward that goal.

  • Sustainable infrastructure commitments… The plan calls for the formation of a ‘Clean Investment Club’ of asset owners, in time for California Governor Jerry Brown’s Global Action Climate Summit in September, that commits members to allocating 2% of their portfolios to sustainable infrastructure by 2020 and 5% by 2025 in line with their fiduciary duties.
  • Closing gaps… By 2025, that commitment would mobilize half a trillion dollars a year to sustainable infrastructure and cover about a third of the estimated private sector funding gap.
  • Priority sectors… The plan prioritizes the development of blended-finance strategies for resilient cities and sustainable land-use—two high-impact sectors that don’t fit into typical asset allocations and have non-traditional business models—by boosting the percentage of green bond targeting each, for example.
  • Broad support… HSBC, Credit Suisse, Aviva, Investec, Allianz, EBRD, the International Finance Corp. and the Rockefeller Foundation are all on board for the 12-18 month plan.

Dealflow: Follow the Money

Investors back health-tech startups to manage diabetes around the world. Real-time data and personalized feedback are the buzzwords of new diabetes-management ventures worldwide. Learn more.

Chinese investor and Goodwell Investments back MFS Africa to speed business transactions. China’s LUN Partners Group is backing the Johannesburg-based digital payments firm to boost trade and ease business transactions on the continent. Go deeper.

Arman Financial Services raises $7.6 million to serve India’s unbanked. Arman offers microfinance, small business, and loans to India’s unbanked. Get the details.

Social Investment Scotland moves forward with social startup fund plans. The Scottish community development financial institution has formed a subsidiary to seed social startups. Read more.