The Brief | July 15, 2020

The Brief: BlackRock’s stewardship shortfall, Blackstone’s alt-dairy bet, KKR’s green collar, forestry in Africa, health tech in India, gender alpha funds

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With all eyes on BlackRock, asset manager’s ‘stewardship’ falls short on climate action. Our house is on fire. Let’s keep an eye on it. That was the takeaway from BlackRock’s disclosure of its 2020 proxy voting record. Among BlackRock’s pulled punches: It declined to join the campaign to remove from the board of JPMorgan Chase the former Exxon chief executive Lee Raymond, voting to re-elect the longtime bank director. BlackRock also withheld support for a vote asking JPMorgan, the world’s largest financier of fossil fuels, to align lending activities with the Paris Agreement’s goal of keeping warming well below 2 degrees Celsius. “BlackRock is complicit in slowing down climate action in the corporate sector,” said ShareAction’s Catherine Howarth. BlackRock “sent a signal through its voting choices that high-carbon companies can relax and count on BlackRock not to push for the urgent action needed to address the climate emergency.”

The $7 trillion asset manager voted against management at 53 companies, mostly opposing directors up for re-election. But that was just over one-fifth of the 244 companies BlackRock has identified as making insufficient progress on climate risks and disclosures. The remainder were put “on watch.” A few years ago, such transparency and activism might have been applauded as an example of social responsibility. By now, BlackRock’s record looks painfully passive in light of both the urgency of climate action and BlackRock CEO Larry Fink’s annual letter in January. “We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them,” Fink wrote. Now, companies on BlackRock’s watch list have another 12 to 18 months to show progress. Said As You Sow’s Danielle Fugere, “Continued engagement where companies are not taking action is, in the end, a failure.”

Keep reading, “With all eyes on BlackRock, asset manager’s ‘stewardship’ falls short on climate action,” by Amy Cortese on ImpactAlpha.

Dealflow: Follow the Money

Blackstone leads alt-dairy maker Oatly’s $200 million funding round. Sweden’s Oatly was an outlier in the 1990s, when soy milk dominated non-dairy milk options. The company’s oat-based milk alternative has become a household name in Europe and the U.S. with growing consumer demand for plant-based food products and environmental concerns over meat production and livestock farming. Oatly’s sustainability report (from 2018) emphasizes its positive carbon impact from the replacement of animal dairy, as well as company practices around food waste, suppliers and packaging. Blackstone led Oatly’s $200 million raise to help it expand across Europe, the U.S. and Asia.

  • Impact capital. Blackstone isn’t a traditional impact investor. But the $538 billion investment firm can “play an essential role in order to create real sustainable change,” Oatly’s Toni Petersson said. “It is my belief that capital has to turn green and do so for the right reasons.”
  • Celebrity investors. Blackstone was joined by Oprah Winfrey, Natalie Portman, former Starbucks CEO Howard Schultz and Jay Z’s Roc Nation, along with Orkila Capital, Rabo Corporate Investments and Verlinvest-CR Joint Ventures.
  • Plant-based boom. Oatly’s nine-figure raise follows a $300 million round of financing for alt-protein company Perfect Day. The Good Food Institute reports grocery sales of plant-based foods that replace animal products have hit $5 billion, up 29% in two years.
  • Dig in.

Komaza secures $28 million for sustainable forestry in Africa. Kenya-based Komaza is fighting deforestation by partnering with smallholder farmers to plant trees and harvest wood more sustainably. The company, which connects farmers to everything from seedlings to sawmills, aims to work with two million farmers to plant one billion trees by 2030. Komaza’s Series B round was backed by existing investor Novastar and AXA Investment Managers, FMO and Mirova’s Land Degradation Neutrality Fund. Check it out.

India’s HealthQuad raises $68 million for its second healthcare fund. The Delhi-based venture capital firm invests in healthcare and health tech startups increasing accessibility and affordability in India. Portfolio companies include online medical supplies platform Medikabazaar and telehealth tech company Neurosynaptic Communications. HealthQuad’s second fund is backed by Merck & Co., Ackermans & van Haaren, TIAA, impact investor KOIS, Quadria Capital and development finance institutions SIDBI and Swedfund.

KKR’s Global Impact Fund backs GreenCollar’s environmental marketplace. GreenCollar, a platform for natural resource project development, has helped develop Australia’s carbon market and provides commercial climate services to governments and corporations. Terms of the deal were not disclosed.

NEI launches an impact bond fund for Canadian investors. Ontario-based Northwest & Ethical Investments’ NEI Global Impact Bond Fund aims to be fossil fuel-free and will invest in corporate and government bonds addressing education, job training, security, affordable housing, health, water and sanitation in advanced economies.

Signals: Ahead of the Curve

Surge in funds investing in and for the benefit of women. Rising awareness of the value of gender and diversity in business has led to a spike in venture funds led by women, investing in female founders, or backing solutions for women. In its latest reportProject Sage, a project of Wharton Social Impact Initiative and Suzanne Biegel, tallies 138 “gender-lens” funds managing some $4.8 billion, up from 87 funds with $2.2 billion in assets last year. Almost half of the private equity, venture capital and private debt vehicles were launched last year, many by fund managers who left other firms to focus on gender-lens investing. “This marks a shift in who has power to make investments,” write the authors. Roughly a quarter of the funds use racial or ethnic diversity lenses, along with gender, in their investment decisions. More than 60% focus outside the U.S. “We’re very much financial investors,” Ada Ventures’ Francesca (Check) Warner told Project Sage. “We identify when value is unrecognized. It’s mispriced value. Overlooked founders. Overlooked markets.”

  • Gender alpha. Biegel has identified at least six sources of “gender alpha” and cites research that shows gender-diverse companies deliver better returns and lower risk. That the venture industry still dramatically underfunds women-led companies has presented an opportunity gender-lens investors are seizing. This week, Rethink Impact raised a $182 million second fund to invest in female-led tech ventures. Last week, Victress Capital closed a second fund at $21.7 million to back women-led consumer brands, services and marketplaces.
  • Corporate gender lens. Project Sage identified (but did not include because outside investors are unable to invest) a dozen corporate venture capital funds with an explicit gender or diversity lens, including Bumble Fund, Intel, Salesforce Impact and Microsoft M12.
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Agents of Impact: Follow the Talent

Nithio CEO Hela Cheikhrouhou joins the board of the Global Impact Investing Network… The ImPact is hiring a manager of education and insight in the U.K… The Predistribution Initiative and The Shareholder Commons are hosting a discussion on Friday, July 17 to respond to the U.S. Department of Labor’s proposed ESG rules (see, Trump administration seeks to turn back the ESG tide). Guests include Bhakti Mirchandani of Trinity Church Wall Street and Bob Eccles of Oxford’s Saïd Business School.

Thank you for reading. 

–July 15, 2020