The Brief | February 19, 2020

The Brief: Stakeholder obstacles, climate footprints, sustainable deliveries in Amsterdam, solar installations in West Africa, diversifying foundation asset managers

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Wells Fargo’s move to block shareholder vote undermines ‘stakeholder’ commitments. One of the first acts of new Wells Fargo CEO Charlie Scharf when he joined the bank last October was to sign the statement on the “Purpose of a Corporation” promoted by the Business Roundtable. A few months earlier, more than 180 CEOs had declared a new era in which they would give attention to stakeholders, like customers, employees, suppliers and communities, as well as shareholders. In a guest post on ImpactAlpha, Shareholder Commons’ Rick Alexander writes that Wells Fargo is continuing to prioritize shareholders over other stakeholders, “giving the lie to much of the talk around the new purpose of corporations” (see Corporate accountability is key to the success of stakeholder capitalism).

At issue is a shareholder proposal that Wells Fargo study the feasibility of becoming a “benefit corporation,” a corporate structure available in Delaware and other states that lets companies enshrine their stakeholder commitments. Arguing against putting the benefit corporation proposal to a shareholder vote, Wells’ lawyers warned, “There would likely be some uncertainty regarding decision-making in a public benefit corporation… where the interests of stockholders and other stakeholders or the public benefit diverge.” Wells Fargo is not the only financial firm blocking shareholders seeking to hold them to their stakeholder pledges. BlackRock, JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup have sought to dismiss resolutions requesting details of plans to align with the Business Roundtable statement. “Shareholders are beginning to notice that shareholder primacy isn’t so great for them,” Alexander notes. So why can’t they be trusted to vote on behalf of stakeholders? Alexander suspects the perverse incentives of executive compensation. CEOs, directors, money managers and other financial players, he writes, “are judged on and rewarded for high stock prices at individual companies, even when those increased prices come at the expense of our planet and economy.”

Keep reading, “Wells Fargo’s move to block shareholder vote undermines ‘stakeholder’ commitments,” by Shareholder Commons’ Rick Alexander on ImpactAlpha.

Dealflow: Follow the Money

Solactive takes stake in German climate analytics startup. Frankfurt-based startup right. based on science (yep, that’s their name) has developed a model for analyzing companies’ climate contribution and risk exposure, down to the °C. German index provider Solactive took a minority stake in Right, which is working on an open-source version. Right’s model churns out data for setting and managing climate targets, risk management, reporting and communication. Solactive’s Steffen Scheuble said it is “astounding to see the share of a company’s contribution to global warming in such a tangible and accurate manner.”

Brazil’s IOUU raises $1.3 million for peer-to-peer business lending. The company facilitates loans for small businesses through a marketplace that lets borrowers list their needs for micro-loans of as little as $115. IOUU vets participating companies, analyzes risks and takes a fee on top of lenders’ monthly interest earnings, which are said to be below 4%. DOMO Invest, Indicator Capital and Devas Invest backed IOUU.

Bringly raises early funds to boost sustainable delivery services. The Dutch company has developed a platform to help retailers coordinate deliveries using environmentally-friendly modes, like bikes and electric vehicles. The startup raised an undisclosed amount of pre-seed funding from ASIF Ventures.

SunFunder invests $4 million in Nigeria’s Daystar Power. The loan will help Daystar scale up on-site solar for West African businesses. The company has about 100 systems installed in three countries.

Signals: Ahead of the Curve

Foundations are diversifying who manages their billion-dollar endowments. Asset allocators inside pension funds, endowments, foundations and sovereign funds overwhelmingly select white and male-owned firms to manage their money. Women and minority-owned firms manage just 1.3% of the industry’s $69.1 trillion in assets. That homogeneity may be crimping returns, with data suggesting outperformance by gender and racially diverse teams, and growing evidence that the better fund managers of color perform, the more bias they face. Some foundations, at least, are reading the signals. A new study from the Knight Foundation found that firms led by women and people of color now manage an estimated $8.6 billion, or 13.5%, of the $64 billion in assets held by 26 of the nation’s 50 top foundations. “Change comes from knowledge,” says Knight’s Juan Martinez. “There’s a sizable interest among investors for investment manager diversity.”

  • Inclusion alpha. The survey covered only assets that could be analyzed with publicly available data or information volunteered by the foundations. Of $1.8 billion in Knight’s assets analyzed, nearly half is managed by women- or minority-owned firms. Among other above-average foundations: Casey Family Programs (35.3% managed by diversely-led firms), Robert Wood Johnson Foundation (26.6%), John Templeton Foundation (21.7%) and Carnegie Corp. of New York (20.9%). Kellogg, Hewlett, Packard, Ford and other foundations cited a variety of reasons for declining to participate, including nondisclosure agreements with fund managers.
  • Intentionality. Ford and Knight foundations dedicate a portion of their endowments for diverse fund managers. Kellogg Foundation’s mission-investing strategy intentionally backs fund managers of color and seeks investments that reduce systemic bias in the financial system. Kellogg and Prudential have carve-outs for first-time and emerging minority and women-owned investment firms. By not properly valuing people of color, big asset allocators are “limiting your ability to generate high risk-adjusted returns,” says Stanford’s Ashby Monk.
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Agents of Impact: Follow the Talent

Alok Sharma, the U.K.’s Secretary of State for Business, Energy and Industrial Strategy, was named president of the COP26 climate conference in Glasgow in November… Laboratoria brings its programming bootcamp for women to Colombia… Illumen Capital seeks a product manager in the San Francisco Bay Area… Aunt Bertha is hiring a community engagement manager in Austin.

Thank you for reading

–Feb. 19, 2020