The Brief | June 3, 2024

The Brief: An open letter to ‘alleged co-colluders’ on climate action

ImpactAlpha
The team at

ImpactAlpha

Greetings Agents of Impact!

In today’s Brief:

  • Is it collusion to make common cause on climate? 
  • Iowa bond takes on agricultural runoff and water quality  
  • Designing Kataly Foundation’s investment strategy

Dear Alleged Co-Colluders: Let’s really make common cause for climate action. The 18-month campaign by US Representative Jim Jordan against a range of climate-change initiatives by investors, asset managers and shareholder advocacy groups heats up this month with a public hearing before the Republican-led House Judiciary Committee. More than a dozen investors and alliances have received threatening letters, subpoenas and demands for information, including the $486 billion CalPERS pension fund; the $9.1 trillion asset manager BlackRock; the US arms of the $297 billion Aviva Investors; and Net Zero Asset Managers, which has more than 300 signatories representing $57 trillion in assets. Also in the committee’s crosshairs: the nonprofit shareholder advocacy group As You Sow, which Jordan says “appears to facilitate collusion that may violate US antitrust law.” As You Sow’s Andrew Behar relishes the fight. “It appears that the chair and the Judiciary Committee are specifically trying to discourage our coordination because they see it as the key to reducing climate risk for the entire global economy,” writes Behar in an open letter to his “alleged co-colluders.” “Therefore, I propose that the 14 of us actually do work together, with total transparency, to accomplish the task that the committee has laid before us.”

  • Fiduciary future. The Judiciary Committee’s investigation is itself part of a coordinated campaign that includes governors, state legislatures and attorneys general that have targeted firms that consider environmental, social and governance, or ESG, factors in investment decision-making. At stake is the future of fiduciary duty and the understanding of material risks. ImpactAlpha has invited Behar to chronicle the action in “Fiduciary Future,” a series of dispatches from the front lines. “Every US citizen is already bearing the costs of climate inflation each time they check out at the grocery store. Millions along the coast from the tip of Texas to North Carolina cannot get homeowners insurance due to sea-level rise,” Behar writes in the first post in the series. “Continuing business as usual and not coordinating our efforts to address this situation is the real violation of our fiduciary duty.”
  • Collusion confusion. According to the committee, each of the 14 organizations “appears to have colluded with other institutional investors to work with the companies in which [they] invest” to reach net-zero greenhouse gas emissions by 2050. In other words, Behar says, “We spoke to employees at companies that we own and possibly to each other about how to avoid risk.” Shareholder coordination is well within the law, says Behar. Under the Trump administration, the Securities and Exchange Commission issued rules noting that “shareholders engage directly with each other through various channels” to identify issues “important to the broader shareholder base” and generate efficiencies for both companies and shareholders.
  • Antitrust analysis. Columbia University’s Cynthia Hanawalt and Denise Hearn have argued that antitrust law “is a poor weapon of choice” for the legal attack, as “consumers have an interest in a livable climate.” (See, “The antitrust theories are weak, but the effects can be chilling.”) A new analysis by the law firm Jenner & Block concluded that investors and companies that make independent investment choices “are not violating fiduciary duty and are at negligible risk for antitrust claims” by making climate commitments or joining efforts such as Climate Action 100+, an investor alliance convened by the nonprofit Ceres, another target of the committee.
  • Collective action. The Judiciary Committee did get one thing right, Behar writes. “If we work together, we indeed do have the power to correct this historic threat to the global economy and to future generations. We still have time to bring about the clean energy future that we all know is both necessary and possible.” He continues, “The committee has brought us all together and defined our common cause. Now we must stand shoulder-to-shoulder in transparent and collective action that will benefit all stakeholders, fulfill our fiduciary duty, and enhance the freedom of all Americans.”
  • Keep reading, “Dear Alleged Co-Colluders: Let’s really make common cause for climate action,” by As You Sow’s Andrew Behar, in ImpactAlpha’s new series, Fiduciary Future. Have a reaction, or a dispatch of your own? Drop us a note. 

Dealflow: Muni Impact

Iowa readies a $200 million bond to address agricultural runoff and improve water quality. Iowa is nearly synonymous with corn, which generates the biggest chunk of the state’s $47 billion in agricultural revenue. But mono-cropping corn and other crops takes a heavy environmental toll, including water contamination from agricultural runoff. The Iowa Finance Authority is readying a $203 million bond in its 2024 State Revolving Fund Revenue Bond Series to invest in water quality, environmental resilience and public health. The authority has self-certified the bond as green. HIP Investor gives the Iowa Finance Authority a rating of 78 of 100 for its social and environmental impact. The bond is being featured as part of ImpactAlpha’s collaboration with HIP Investor to highlight municipal bonds with environmental or social significance.

  • Rural infrastructure. Iowa’s State Revolving Fund supports infrastructure and agriculture practices that reduce nutrient runoff from farms, treat wastewater and sewage, and protect water sources from contamination. In the town of Johnson, population 25,000, new sewer lines are being installed to connect unsewered residents. Davenport is making water treatment facility improvements. Columbus Junction is setting up wastewater lagoons, which can be a more cost-effective way to treat wastewater in rural communities.
  • Check it out. 

Dealflow overflow. Investment news crossing our desks:

  • South Africa’s state run development bank, DBSA, has put up $50 million for a new biodiversity fund and is aiming to raise additional capital from private investors. (Bloomberg)
  • San Francisco-based Plural Energy raised $2.3 million in pre-seed equity to “tokenize” and sell equity stakes in clean energy projects to both retail and institutional investors. (Axios)
  • Dutch development bank FMO provided a $50 million loan facility to Banco Mundo Mujer to support access to finance for women and micro-entrepreneurs in Colombia. (FMO)

Impact Voices: Inclusive Economy

How Kataly Foundation designed an investment strategy for non-extraction and racial justice. When the Kataly Foundation set out to invest its $450 million in assets in line with the foundation’s goals of racial justice, the process seemed straightforward. After all, there were options such as Black- and Native-led community banks and community development financial institutions, or CDFIs (see, “How Kataly Foundation is divesting from Wall Street to reinvest in communities“). But as Kataly’s chief investment officer Lynne Hoey has laid out on ImpactAlpha, allocating this sum of capital in a mission-aligned way has proven challenging at nearly every turn. Under-resourced community banks and lenders, for example, could not absorb large sums. A plan to work with an asset manager to invest in a corporate bond portfolio screened for justice metrics fizzled due to values misalignment. “We are pausing on that portion of the strategy and re-assessing,” Hoey writes. “This is painful to share.” The foundation, co-founded by Hyatt Hotels heir Regan Pritzker, is on a path to spend down its assets over the next decade.  

  • Non-extractive deposits. Kataly will deposit cash into credit unions and cooperativas through a very low-interest social impact deposit product from Inclusiv. The investment will make Kataly one of the first foundations to directly invest in cooperativas in Puerto Rico. Kataly is working with Oweesta Corp. to invest directly in Native CDFIs at a non-extractive rate (for background, see “To finance Indigenous communities, capitalize Native-led investment funds and nonprofits“).
  • Muni impact. Kataly is funding municipal bonds through Next World Assets, a registered investment advisor spun out of Activest, the nonprofit fiscal justice research firm. Hoey hopes that working to disrupt the “Black tax” will send a message to other investors that “Black communities are equally as credit worthy and deserve to have bonds issued at the same rate as white communities, with the same level of interest.” Kataly plans to invest in some of the municipal bonds below their coupon rate.
  • Balance sheet cash for infrastructure. Community-led infrastructure projects to improve energy, water, and internet connectivity need significant resources up front. As a result, many communities of color give up ownership and control in order to move such projects forward. “We have seen this particularly with larger scale, community-led renewable energy projects,” writes Hoey. “Therefore, we are maintaining a large cash reserve to support these opportunities as they arise.”

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

The Church Commissioners for England appoints Poppy Allonby, previously with T. Rowe Price, as chief investment officer… Matt Ripley will step down as head of impact of The Good Economy to join Impact Frontiers… Jobs for the Future is looking for a research director for its center for justice and economic advancement… Jubilee Fund seeks a Canada-based fund development manager… The Refugee Venture Fund seeks a fund manager.

The Redford Center is recruiting a program officer in San Francisco… Also in San Francisco, the Schmidt Family Foundation is recruiting an investment associate… The Impact Investing Institute is hiring a fundraising manager in London… The Epilepsy Foundation is on the hunt for a fund development officer for its NeuroImpact Fund… The Steinbridge Group is looking for a marketing intern in New York… Also in New York, Goldman Sachs has an opening for a head sustainability and impact. 

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– June 3, 2024