The Brief | June 5, 2019

Sit-down with Goldman Sachs’ Hugh Lawson, Temasek’s ‘ABC World Asia’ impact fund, London’s entrepreneurship push, expanding capital access

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Greetings, Agents of Impact! 

Featured: Returns on Investment

Goldman Sachs’ Hugh Lawson on how climate change is changing asset management (podcast). A changing climate is changing the climate inside one of the world’s largest asset managers. Clients of Goldman Sachs Assets Management, which manages assets on behalf of wealthy families, pensions and foundations, endowments and insurance companies, have always expected the firm to recite key financial metrics about the companies they own. All of those metrics continue to be important. But increasingly, says Hugh Lawson, the head of ESG and impact investing at Goldman, clients are demanding the big Wall Street money manager know more about the qualitative aspects of what those businesses do and how they do it.

In the latest episode of ImpactAlpha’s Returns on Investment podcast, David Bank digs in with Lawson about how greater investor urgency around climate, and confidence in low-carbon investment strategies, is changing asset management (or isn’t). The big Wall Street money manager now manages a $21 billion client pool of money invested explicitly with environmental, social and governance, or impact, objectives. An ESG and impact allocation in the tens of billions seems like a lot until you consider Goldman Sachs Asset Management advises about $1.7 trillion in assets. Still, Lawson says awareness of climate, and other ESG-related issues, is taking hold amongst the firm’s money managers. “In the world in which we live today there’s a great recognition of the interdependencies between all of those things and financial performance,” he says.

Read on, and listen in, to, “Goldman Sachs’ Hugh Lawson on how climate change is changing investing (podcast),” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Singapore’s Temasek’s new impact fund targets the global goals in Asia. Temasek isn’t new to impact investing; its roster of direct and indirect impact investments includes tech-for-good company Zipline, vegan food companies Impossible Foods and Perfect Day, and TPG Growth’s Rise Fund. Now Singapore’s $308 billion state-owned investment fund is rolling out its own private-equity impact fund to invest in Asia’s social businesses. The fund, called ABC World Asia, will invest in companies that support Temasek’s “ABC World” vision: Active Economies built around good jobs and sustainable cities; Beautiful Societies that are just, inclusive and resilient; and a Clean Earth. It is meant to “help bridge the financing gap in support of the United Nations Sustainable Development Goals” and serves as an extension of Temasek’s overall investment thesis and approach. “We focus on sustainable long term returns, which is not the same as maximizing returns,” says Temasek’s chairman Lim Boon Heng. ABC World Asia is housed under the firm’s philanthropic arm, Temasek Trust. The size of the fund was not disclosed. Read on.

City of London invests £100 million in local venture and loan funds to cultivate entrepreneurship. London-based tech investor MMC Ventures and social enterprise lender FSE Group are on the receiving end of £100 million from London’s Mayor’s office to advance the city’s startup scene. The commitment from London is part of Mayor Sadiq Khan’s £100 million ($127 million) Greater London Investment Fund to cultivate entrepreneurship in the city. “Small businesses are the lifeblood of our economy – they account for more than 99% of all businesses in the capital and support more than half of all jobs,” Khan said in a statement. Specifically, the Mayor wants to drive more capital to female and diverse founders. Most of the funding for the initiative—£85 million—was provided by the European Union, in spite of current Brexit plan uncertainty.

  • Debt and equity. The capital has been split between equity investment firm MMC, which secured £45 million to seed its MMC Greater London Fund, and FSE Group, which will divvy the other £55 million between small loans of up to £500,000 and larger loans up to £1 million. In all, the capital is expected to leverage an additional £103 million in private investment and support 170 London-based startups.
  • MMC investments. The firm has already backed two companies through the new fund: media tech company Synthesia and life insurance startup YuLife.
  • Cleaner, greener London. £14 million is earmarked for companies promoting a circular economy. Other areas of focus include cultural and creative industries; financial, business, digital and tech services; life sciences; low-carbon and environmental goods and services; and tourism.
  • Dive in.

Signals: Ahead of the Curve

At least five ideas for broadening access to capital for entrepreneurs. A tweet about barriers to access to capital for entrepreneurs sparked an outpouring of ideas for removing them. The Kauffman Foundation’s Victor Huang shared a post about the foundation’s recent report on removing barriers to access to capital for entrepreneurs. Soody Tronson, of wearable nursing system startup Presque, nudged Huang for solutions. “Victor, we know there’s an access problem,” she tweeted. “The issue isn’t more reports on the dismal state of affairs, it’s how do we get access and making it happen.” So Huang put the question to his followers: “What’s your biggest idea to help expand capital access for entrepreneurs?” Entrepreneurs and investors weighed in.

  1. Inclusive fund incubator. “Underwrite the development of new funds created by first time women and POC fund managers, and then capitalize them as anchor investors, loan guarantors and syndicators,”said Sphaera’s Astrid Scholz. “If every capital innovator I know had $100K, access to legal & technical expertise & their first $1M committed, we could mobilize billions. Think of it as an Inclusive Fund Incubator.”
  2. Overcoming bias. “I would love to see capital embrace more of the blinding and rigor recommended for overcoming bias in hiring,” says Milk Run’s Rob Galanakis. He says diverse VC firms like Backstage Capitalhave no trouble finding and funding, but most companies are not at all diverse and need more than good intentions. Galanakis says we need more models like data-driven growth capital investor Clearbanc, where funding is objectively determined. He adds, “How short and to the point could you make diligence? How can we get to 2 weeks from intro to close, even on small amounts? The shorter and simpler, the less bias. Random disbursement on one end, current behavior on the other.”
  3. Social capital. “In order to be able to get money they need broader access to the social capital networks where decision makers and influencers in the capital stack are,” said Pensole Academy’s Stephen Green.
  4. Business networks. “Entrepreneurs also have to create new, 21st-century chambers of commerce like Biz for a Better PDX,” said Zebras Unite’s Mara Zepeda.
  5. Kelsoismsuggested University of Colorado Boulder professor Nathan Schneider. A self-financing mechanism through community ownership.

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Agents of Impact: Follow the Talent

Opportunity Finance Network is recruiting a vice president of programs in Washington D.C… Toniic is hiring a member engagement manager in San Francisco… The Long-Term Stock Exchange is looking for a senior regulatory compliance officer/counsel in New York… Next Street’s advisory practice seeks a senior analyst in its Chicago office… The Global Impact Investing Network is recruiting a manager of IRIS+ and impact measurement and management (see, “IRIS+ tool provides guidance to reset expectations for ‘impact performance’).

June 5, 2019.