The Brief | July 1, 2020

The Brief: Assets off the sidelines, Erie’s opportunity zones, Netflix banks Black, carbon tax on meat, Big Energy’s stranded assets

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Agents of Impact Call No. 20: Investors share experiences in getting their assets off the sidelines (video). It’s an all-hands-on-deck moment. Getting assets off the sidelines and into impact investment portfolios that work for all stakeholders was the agenda on ImpactAlpha’s Agents of Impact Call No. 20, which helped launch Rockefeller Philanthropy Advisors’ new Impact Investing Handbook: An Implementation Guides for Practitioners. “The mission of impact investing right now is very, very clear,” said co-author Steven Godeke. “We need to deploy capital to take on some of these systemic challenges such as racism, the climate emergency and COVID.” More than 600 Agents of Impact signed up for The Call, which was sponsored by RPA. “It’s a great time for new entrants, but for those of us who’ve been doing this for a while, it is equally urgent to raise our game and to not get complacent,” said Ford Foundation’s Margot Brandenburg. Added Chris Earthman of the Aragona Family Office in Austin, Tex., “This is not just something for billion-dollar foundations. You can also take small bites – $5,000, $10,000, $50,000 can do a ton, especially when you’re thinking about place-based investing.”

Alabama Power Foundation’s Myla Calhoun has evangelized impact investing not just to the foundation’s corporate parent, but to the broader Alabama funding community. “Impact investing is not new, but it was not done here,” she said. Similarly, Earthman has been an Agent to nudge impact investments not only within Aragona’s family foundation and donor-advised fund, but also from its main investment portfolio. The Ford Foundation has stepped up to the current crises with a $29 million program-related investment to support the New York City’s frontline nonprofits. It came together in just eight days. Last month, it floated $1 billion in long-term social bonds to double its grantmaking budget. Rebekah Saul Butler of the Grove Foundation, which is spending down its endowment, urged investors to dive in. “Doing it demystifies it,” she said. Calhoun wrapped up The Call with a call for investors to be “courageous and ferocious and relentless” in confronting structural racism. “I’m in Alabama. So it’s real for me in a cellular way,” she said. “This is a moment not to be missed. It’s fun to feel better, but it is critical to do better.”

Keep reading, and watch the video replay, “Agents of Impact Call No. 20: Investors share experiences in getting assets off the sidelines,” on ImpactAlpha.  

Dealflow: Follow the Money

Arctaris commits $40 million to Erie Opportunity Zones. The Boston-based impact investor plans to invest in projects to revitalize the downtown corridor in Erie, Pa., including mixed-use real estate projects. The city of Erie has eight designated Opportunity Zones, “including some of the lowest-income zip codes” in the U.S., according to Arctaris. Erie Insurance invested $25 million in the Arctaris Opportunity Zone Fund in June; the Erie Community Foundation committed $5 million to Arctaris to expand mission-related projects in the community (see, Investments in ‘people and places’ start to demonstrate impact in Opportunity Zones).

  • Exception to the trend. Arctaris’ announcement follows a sobering report detailing the failure of Opportunity Zone capital to flow to equitable development and small businesses (see, Opportunity Zone capital flows to real estate but not to small businesses – or impact).
  • Place-based. In addition to Erie, Arctaris is leveraging Opportunity Zone tax benefits for impact in Baltimore, Ohio, Maine and Michigan. Acrtaris commits 80% of the capital and looks for partners for the other 20%. It plans to launch 10 more such programs by next year.
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Netflix to move $100 million in cash deposits to lenders in Black communities. The streaming giant said on Tuesday it is moving 2% of its cash holdings, or $100 million, to Black-owned lenders, businesses and institutions. The moves include a $25 million investment into the Black Economic Development Initiative, a fund managed by Local Initiatives Support Corp., for bridge loans, participation loans and bank deposits in Black-owned institutions. Netflix also deposited $10 million with Hope Credit Union, led by Bill Bynum, to lend in underserved communities across the Deep South.

  • Corporate capital. How companies deploy their cash reserves is becoming an issue of governance, the ‘G’ in ESG (see, “Stakeholders stake new claims on corporate cash to finance an inclusive recovery). The move from Netflix follows Google’s carve out of $120 million from its balance sheet to make low-interest loans to community development finance institutions, or CDFIs, as well as another $45 million in loans and $5 million in grants specifically for Black-owned businesses.
  • Move your cash. “If every company in the S&P 500 allocated a modest amount of their cash holdings into efforts like the Black Economic Development Initiative, each one percent of their cash would represent $20-$30 billion of new capital,” write Netflix’s Aaron Mitchell and Shannon Alwyn.
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Ingressive Capital fund reaches $10 million to invest in African tech. The Lagos-based investment firm makes early investments of up to $400,000 in high-growth tech ventures. Ingressive’s backers include Nigeria Sovereign Investment Authority, Plexo Capital, Platform Capital, Techstars and Y Combinator CEO Michael SeibelTechpoint reports. Since 2017, the woman-led fund has built a portfolio of a dozen companies, including WiFi operator Tizeti and biomedical research firm 54gene.

Canadian government blends $100 million for Merit Functional Foods’ plant-based protein. Merit will build a production facility in Winnipeg, Canada to produce canola-based proteins. The Canadian government provided the capital through a mix of facilities and structures, including $80 million in debt from Farm Credit Canada and Export Development Canada, a $10 million repayable grant from Canada’s AgriInnovate Program, and $9.2 million in unspecified financing from Protein Industries Canada.

Signals: Ahead of the Curve

Possible side effect of COVID: a carbon tax on meat. In a post-COVID world, governments may tax animal-grown meat rather than subsidize it. Such carbon taxes could cost the top 40 global meat giants up to $11.6 billion by 2050, according to an analysis from investor coalition FAIRR. Like tobacco, carbon and sugar, animal-grown meat exacts social costs (in the form of health and infectious disease) and environmental costs (methane and nitrous oxide emissions) that are not borne by the companies that produce it. Pricing in such externalities with taxes could lower consumption of such products. Zoonotic disease outbreaks, such as COVID-19, are renewing scrutiny of factory farming.

  • Meat taxes. In New Zealand, where agriculture accounts for nearly half of total emissions, farmers have until 2022 to measure and price emissions at the farm level. New Zealand is the first country to bring farm emissions under its Emissions Trading Scheme, starting in 2025. Sweden, the Netherlands, Denmark and Germany are considering similar schemes.
  • Repricing. Factory farming emits more greenhouse gases than the world’s planes, trains and cars combined, “driving gathering momentum in policy circles to apply carbon taxes to the meat industry,” said FAIRR’s Jeremy Coller. “Investors are starting to price this market event into their long-term valuations of meat companies.” FAIRR has built the likelihood of carbon tax on animal proteins into its climate risk tool for investors.
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The oil and gas shake-out continues. Shell will write down oil and gas assets by up to $22 billion – or one-sixth of its market value – in the face of weakened demand. Chesapeake Energy, the heavily indebted fracking pioneer, filed for Chapter 11 bankruptcy on Sunday (see, Is oil’s freefall the tipping point in the transition to a low-carbon economy?).

Agents of Impact: Follow the Talent

Candide Group is hiring a managing director in Oakland, Calif… Sarona Asset Management is searching for an investment committee member for its Emerging Impact Investing Fund… Boston-based New Profit is recruiting for multiple positions… Sunwealth is searching for a capital markets director in Cambridge, Mass… TripleJump has an opening for a project manager in Amsterdam… Euronext seeks a head of ESG in Brussels… Impact Hub Lisbon is hiring a manager.

Thank you for reading.

–July 1, 2020