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#Featured: Returns on Investment
Real Impact: Morgan Simon on bringing communities into impact investing. The longtime leader in the field bridges two worlds with her new book, “Real Impact: The New Economics of Social Change” (grab a copy at Amazon or Politics and Prose). In an interview with ImpactAlpha’s David Bank, Simon reaches out to social-justice activists who may have a reflexive antipathy to Wall Street. “The opportunity is so massive if we’re able to change the way the global economy functions,” she says. For impact investors, engagement with on-the-ground communities and grassroots activists is essential for driving real impact and avoiding unintended consequences.
In our latest Returns on Investment podcast, Simon, a leader of the Candide Group and previously CEO of the Toniic investor network, lays out three principles developed by Transform Finance, of which she is a founder. First, engage communities in the design, governance and ownership or projects and companies. Second, add more value to communities than you extract. And finally, balance risks and returns between investors, entrepreneurs and communities. With private investment overtaking traditional foreign aid, it’s essential civil society has a seat at the table, she says. “If we’re able to harness that collective power, we could go so much further.”
#Dealflow: Follow the Money
TPG Rise Fund hits $2 billion target. TPG met its fundraising objective a little more than a year after interest from the “billionaires impact circuit” and rock star Bono caused it to double its initial target. The earlier named investorsinclude Jeff Skoll, Pierre Omidyar, Richard Branson, Lynne Benioff, Reid Hoffman, Laurene Powell Jobs, Mellody Hobson, Lynne Benioff and Mo Ibrahim. Recent investors include Bank of America Corp., UBS, and the University of California’s Board of Regents, which put in $100 million, Bloomberg reports. “You can’t be a leader today of anything and not believe that you have to do the right thing for future generations, the planet we’re on, and the people you serve,” says UC’s Jagdeep Singh Bachher. The Rise fund has announced five investments so far. Read ImpactAlpha’s coverage of the deals: data platform Dharma, ed-tech firm Everfi, dairy company Dodla, smart-device maker Brava and, most recently, Indian school-in-a-box LEAD.
J.P. Morgan adds D.C. to its urban-renewal roster. The bank is committing$10 million over the next three years to the U.S. capital’s economically challenged Southeast quadrant. The investment will focus on two of the District’s poorest eight wards, where incomes are falling and poverty rates are rising in spite of the city’s overall economic improvement. Half of J.P. Morgan’s investment will go to a group of community-development institutions that are financing local projects and lending to local businesses. The investment in D.C. follows a $40 million commitment to the city of Chicago, announced last month, and $150 million for Detroit.
Enable Impact closes shop. After four years and two business models, founder Philip Berber is shutting down Enable Impact. Berber, who earlier sold his online brokerage startup CyBerCorp to Charles Schwab, initially sought to build a matchmaking site to connect impact entrepreneurs needing early- and growth-stage funding with investors looking for deals. “We had some success, and we did help fund a number of deals,” Berber wrote in an email to supporters this week. Eighteen months ago, Enable Impact pivoted to become a fee-based investment service bringing screened deals to a network of impact investors. “Yet we were unable to fund enough deals to generate enough fees to build a sustainable business,” he says. In the end, he said, checks from investor groups and networks “are few and small,” while larger fund managers rely on their own peer and co-investor networks. With the interests of impact investors spread across geographies, sectors, issues and stages, “any deal, however strong, appeals to a limited few,” Berber says. “We didn’t add enough value to enough investors to keep going.”
#Signals: Ahead of the Curve
Environmental impact investors unite. Environmental investors have sometimes felt left out in the rush toward social-impact investing. Now, they’re banding together. More than 80 environmental funds and family offices are gathering in Seattle Oct. 19 for the first gathering of EnVest. “Just trying to get more syndicates built and more competitive capital dollars put to work in the environmental economy,” organizer Brock Mansfield of the Salmon Innovation Fund told ImpactAlpha. “Didn’t find an event like it, so we created our own.” Envest’s website promises “pitch after pitch from companies seeking seed, venture or growth capital, and whose products and services address key environmental challenges.” The dealflow ranges across food and agriculture, fisheries and oceans, air and water, climate and energy and waste and pollution. ImpactAlpha is the media sponsor of the invite-only event.
Cars of the future will be electric, self-driving, and…made of wood?Investment in electric cars is booming as governments from India to China to the U.K. ponder a fossil-fuel-free, not to mention driver-free, automobile future. Researchers in Japan are adding a twist of their own to that vision: wood. A team from Kyoto University is working on a material made from wood pulp and strong plastics that “could be as strong as steel, but 80% lighter,” BBC reports. The material, which could be used for any non-performance auto-part, could be a game changer for auto manufacturers. Lighter electric vehicles can travel farther on each charge and fuel-based cars can travel farther between refills and emit less pollution, too. “There is a rush to try and cut as much weight as possible,” says Paolo Martino, automotive components analyst at IHS Markit. The researchers’ goal is to have it ready within a decade.
Wood is surprisingly eco-friendly. In addition to cars, companies are designing a new generation of wooden “plyscrapers” with cross-laminated timber that consumes less energy than concrete and steel. The wood also captures carbon dioxide: a modest four-story building made from the new material could reduce carbon emissions by the same amount as taking 500 cars off the road for a year. More demand for wood means more investment in rural landscapes means more forest cover and more carbon dioxide sequestered from the atmosphere.
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