The Brief | September 2, 2021

The Brief: Beta stewardship, sustainable public equity offerings, duckweed protein, cybersecurity apprenticeships, inclusive community finance

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Greetings, Agents of Impact! 

Featured: Universal Owners

Chasing alpha is fine, but long-term returns for universal owners require beta stewardship. We’re all universal owners now. Pension and sovereign wealth funds that ‘own the market’ have long known they can’t diversify away global market risks. Now even 401(k) account holders and other retail investors are realizing that volatility and value-destruction driven by climate, COVID, inequality and injustice threaten the vast majority of value in their diversified portfolios. Any advantage, or alpha, that stock-picking strategies might deliver is likely to be more than overwhelmed by such system-level risks that affect the entire market. That is driving universal owners, large and small, to embrace “beta stewardship” in order to mitigate real-world risks and fully account for negative externalities. The aim: reverse corporate behaviors that impose risks and negatively impact other companies in their portfolio. “It’s a misunderstanding of fiduciary duty when investors focus entirely on the outperformance of a single stock against a benchmark, instead of the health of the benchmark itself,” Sara Murphy of The Shareholder Commons tells ImpactAlpha

Take, for example, antimicrobial resistance to antibiotics and other drugs, a systemic risk that rivals even climate change. Unchecked, AMR could cause up to 50 million deaths by 2050 and cut global GDP by nearly 4%, according to the World Bank. As in other industries, doing the socially optimal thing might put agriculture companies at a competitive disadvantage, or even cause them to fail. That indeed may be what’s required for the overall health of investors’ portfolios, Murphy says. The new practice of beta stewardship goes beyond ESG strategies that promise investors alpha returns by parsing companies’ performance on environmental, social and governance factors. “Responsible investment in its current guise is not fit for purpose as a means to address systemic risks,” writes Ellen Quigley, an advisor to the chief financial officer at the University of Cambridge. “Universal owners aim to mitigate systemic risks in the real world, which has the effect of internalizing externalities and protecting the long-term health of the system as a whole.”

Keep reading, “Chasing alpha is fine, but long-term returns for universal owners require beta stewardship,” by Dennis Price on ImpactAlpha.

  • Join The Call: Capitalism Reimagined. The Shareholder Commons’ Sara Murphy, Illinois State Treasurer Michael Frerichs and Engine No. 1’s Michael O’Leary will talk beta stewardship, investment guardrails and shareholder democracy with ImpactAlpha and Omidyar Network on Agents of Impact Call No. 30, Tuesday, Sept. 14 at 10am PT / 1pm ET / 6pm London. RSVP today.

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Dealflow: Sustainable Lifestyles

Eco-friendly shoe company Allbirds files for an IPO, or rather an ‘SPEO.’ San Francisco-based Allbirds, launched in 2015, uses sustainable materials such as wool, castor bean oil and more, to make shoes, sandals and activewear. Former U.S. President Barack Obama was seen wearing Allbirds at a basketball game in 2019. Now the company is looking for recognition of its ESG commitments through what it’s calling a Sustainable Public Equity Offering. “We are leading by example through our commitment to establishing rigorous, objective, and clearly defined ESG criteria and holding ourselves accountable to meeting those criteria,” Allbirds said in its filing.The company, a public-benefit corporation and certified B Corp, wants to cut its carbon footprint completely by 2030 and has partnered with other shoe companies like Adidas to make sustainable shoes.

  • Going public. Allbirds believes there’s a market opportunity to capitalize on growing demand for sustainable products, especially among Gen-Z and Millennials. Allbirds raised $100 million in a Series A round last year, valuing the company at $1.7 billion. The company’s net loss reached $25.9 million last year, up from $14.5 million in 2019. The Shareholder Commons’ Rick Alexander (see above) argues that Allbirds’ dual-class stock structure, which gives founders voting control, undermines the company’s accountability to stakeholders – and other shareholders.
  • Check it out.

Achieve Partners acquires Metmox to create apprenticeships for cybersecurity. There will be an estimated 1.8 million unfulfilled cybersecurity jobs in the U.S. next year. That makes the industry a candidate for Achieve Partners’ Putting America Back to Work fund, which addresses critical skills gaps in the U.S. by buying companies in high-demand fields and developing apprenticeship programs. Achieve acquired Metmox, a provider of security services for Fortune 500 companies, to bring new workers into the cybersecurity field. “The cybersecurity infrastructure of businesses and governments alike will remain vulnerable until we’re able to train the workers who can act as our first line of defense,” said Achieve’s Aanand Radia.

  • Fast out of the gate. Achieve, which closed the $180 million fund in June, has made three acquisitions in the past month. Freedom Learning Group upskills military spouses and veterans. Cloud for Good trains Salesforce developers for the nonprofit and education sectors. Achieve acquired Optimum Healthcare IT in July to address the digital skills gap in healthcare.
  • More

Plantible scores $21.5 million for duckweed-based protein. The San Diego-based company’s indoor aqua farms grow lemna, more commonly known as duckweed, which it harvests daily to create plant-based protein ingredients. The round will finance Plantible’s commercial facility to launch its product next year.

  • Alt-protein backers. Belgian impact investment firm Astanor Ventures led the round, with participation from Piva Capital, South Korean food company CJ CheilJedang, Kellogg Company’s venture fund Eighteen94 Capital, immigrant-focused investor Unshackled Ventures.
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Healthcare overflow. A sampling of the health and wellbeing deal news crossing our desks:

  • SJF Ventures leads Ellipsis Health’s $26 million round to help individuals and care providers manage mental health conditions.
  • Penn Medicine and Wharton Social Impact Initiative launch a $5 million Fund for Health to invest in businesses addressing social determinants of health for underserved Philadelphians.
  • Women-led Elda Health in Bangalore raises $1.5 million for its digital women’s health platform addressing feminine hygiene, menstruation and menopause.
  • City Light Capital, Kapor Capital and Acumen back addiction treatment app Affect Therapeutics’ $6 million round.
  • Minneapolis-based Joshin clinches $3 million to help people with special needs find caregivers.

Impact Voices: Inclusive Investing

Centering social justice in community finance. Community development financial institutions, or CDFIs, have long provided capital to Black entrepreneurs and families that have been hampered by discriminatory practices. Yet that mission can be compromised when investors dictate rates and returns that perpetuate restrictive lending practices. To “build forward better,” CDFIs must make sure they are community-centered and inclusive and put mission first, write Appalachian Community Capital’s Donna Gambrell and Pacific Community Ventures’ Bulbul Gupta in a guest post on ImpactAlpha. “We need new leaders of color coming in to rethink products and services that center the needs of our communities and those we’re designed to serve,” they write. Read the full post.

Agents of Impact: Follow the Talent

Christina Travers, ex- of Working Solutions, is named CFO of the Local Initiatives Support Corp. Travers, who formerly served as LISC’s treasurer, replaces Michael Hearne, who is retiring… Prime Coalition is looking for a partnerships associate in San Francisco… Rockefeller Foundation seeks a manager of impact investment in New York… Emerson Collective is hiring a portfolio manager for its “culture council” in Palo Alto.

Silicon Valley Community Foundation is looking for a senior associate of investments in Mountain View, Calif… NatureVest is recruiting a portfolio coordinator of disability solutions in Washington, D.C… Tideline’s Ben Thornley will host a conversation with Duke University’s Cathy Clark to preview a course on “Impact Measurement and Management for the SDGs,” Tuesday, Sept. 14.

Thank you for your impact.

– Sept. 2, 2021