Greetings, ImpactAlpha readers!
#Featured: Impact Voices
Bridging a $200 billion credit gap with financing tailored for small farmers. Small farmers need credit to smooth out the many lumps in their cash flow. They can’t control the weather, their crops are vulnerable to disease and most don’t have the power to decide what to charge for their harvests. Their cash may be low when they need to buy seed and fertilizer. School fees may be due at the wrong time. To most lenders, these small farmers look too risky for a loan. The world’s 450 million small farmers need an estimated $200 billion more credit than is available.
One Acre Fund and a unit of the Agora Microfinance network are among a small number of lenders working to plug the gap with financial products suggested by farmers themselves. One innovation: loans that farmers can draw down in parts and make repayments when they have cash on hand. Another: climate insurance for lost crops. In a guest post on ImpactAlpha, the two firms make the case that such smallholder-specific financial products represent a big opportunity for lenders willing to listen to farmers.
Read, “Flexible loan terms, climate insurance open door to small farmer financing,” by One Acre’s Mike Warmington and Agora Microfinance’s Tanmay Chetan on ImpactAlpha.
#Dealflow: Follow the Money
AgDevCo invests in Tanzanian hydro project. No, the project doesn’t represent a shift for the agriculture-focused impact investor. The 1.5-megawattSuma Hydro project in southwest Tanzania will power a local tea factory and bring electricity to 700 nearby households and businesses. AgDevCo, a UK-based social impact agribusiness investor, is committing $2.5 million to the power plant, which is already under construction. The project is part of an initiative by the Global Environment Facility called “Greening the Tea Industry in East Africa.” The plant’s output could eventually be increased to 5 megawatts.
CDFIs create $15 million disaster recovery fund. Enterprise Community Loan Fund, Mercy Loan Fund and NeighborWorks Capital have partnered to create a “rapid recovery” loan fund to restore affordable housing and community facilities in areas hit by Hurricanes Maria, Irma and Harvey as well as the recent California fires. Loans of up to $1 million, which can be approved and disbursed in a few as 20 days, will be available to community organizations to repair and redevelop affordable housing projects and businesses. The capital is meant as a bridge for organizations waiting for insurance payments and other funding. Enterprise Community Loan Fund’s Noni Ramos told ImpactAlpha the hope is that rebuilding will include long-term “resilient principles, so if disasters appear in the future, facilities and lives are better protected.” In September, Enterprise Community Partners launched a $10 million loan fund specifically for Hurricane Harvey recovery. Community Capital Management, LiftFund and others have also launched disaster recovery funds.
Addenda Capital launches Canadian fixed-income impact fund. The Montreal-based investment firm is building an impact fund made up of public debt, commercial mortgages and other types of loans in the areas of community development, climate change, health and education. Addenda says it’s the first domestically-focused fixed-income impact fund. The fund is being built to capitalize on the rapid growth of Canadian impact investing — it’s more than doubled in recent years — and a need to diversify impact asset types. Addenda is targeting pension funds and endowments for its new fund. Addenda Capital has $27 billion in assets under management; $1.4 billion have an environmental or social component.
#Featured Event: Latin American Impact Investing Forum
New Ventures, the Mexico City-based impact accelerator, is offering 20 ImpactAlpha readers 40% off the price of admission to its annual Latin American Impact Investing Forum from February 27 to March 1 in Mérida, Mexico. Use code ALPHAFLII to register.
#Signals: Ahead of the Curve
Some bankers’ pay is more equal than others. Early last year, Arjuna Capital filed a shareholder proposal requesting the release of pay data from Citi, JPMorgan Chase, Bank of America, Wells Fargo, American Express and MasterCard. The resolution sent to Citi cited a 10% pay gap between men and women, and a 14.8% pay gap in the top earning bracket. Citi says the gap isonly about 1%. Nonetheless, the financial giant’s pay process in 2018 willinclude a wage adjustment for women and minorities in the US, UK, and Germany, after a survey of pay data revealed a discrepancy between their wages and those of male and non-minority colleagues. It also said it would publish its pay data. Arjuna’s Natasha Lamb called Citi’s move a “tipping point for Wall Street,” adding, “Citigroup is stepping into a leadership role on the gender pay gap that we have not seen from any of its US financial peers.” Last May, Arjuna withdrew a proxy resolution at Starbucks, after the coffee company produced a report that found it it pays comparably-skilled male and female employees within 99.7 percent of each other.
#2030 Finance: Long-termism
Putting artificial intelligence to work for the earth. The singularity may be sustainable after all. A report released at the Davos meeting of the World Economic Forum outlines ways to make AI not only human-friendly, but “earth-friendly.” This could be important, what with Google CEO Sundar Pichai saying at Davos, “AI is probably the most important thing humanity has ever worked on. I think of it as something more profound than electricity or fire.” The big shift will come in the next decade or so as AI develops truly autonomous decision-making, toward presumably agreed-upon goals.
The report, from PwC, cites eight AI “game changers” across autonomous vehicles, distributed energy grids, smart agriculture, livable cities and climate and disaster response. For example, “Substantial greenhouse gas reductions for urban transport can be unlocked through route and traffic optimisation, eco-driving algorithms, programmed ‘platooning’ of cars to traffic, and autonomous ride-sharing services.” Likewise, “Deep reinforcement learning may one day be integrated into disaster simulations to determine optimal response strategies, similar to the way AI is currently being used to identify the best move in games like AlphaGo.”
AlphaGo was developed by DeepMind, now a unit of Google’s parent, and is arguably the best Go player ever. It uses “reinforcement learning,” in which the AI agent learns by trial and error with little or not initial data. The approach, which requires less time and computer processing power, has primarily been used for gaming agents, but is being applied to corporate strategic analysis, process optimization and other areas where the rules are well known. Real-world and natural systems are messier and less bounded, but the report suggests that “deep reinforcement” may be able to solve such challenges by 2030, if not earlier.
A key goal, the report says, is to ensure that AI becomes value-aligned, “that its idea of a good future is aligned with humanity’s values.” The approach of the fabled singularity, the moment when artificial superintelligence takes off, requires checks and balances to ensure that AI systems remain not only human-friendly, but earth-friendly as well.
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