The Brief | April 16, 2020

The Brief: Calling universal owners, OpenInvest goes global, green outcomes in South Africa, catastrophe bond catastrophe, climate lessons for COVID

The team at


Greetings, Agents of Impacts!

Agents of Impact Call No. 15: Making the mark in impact management. Join Tideline and ImpactAlpha and featured guests to discuss investor alignment with the Operating Principles for Impact Management, Thursday, April 23 at 9am PT / 12pm ET / 5pm London (please note corrected time). RSVP today.

Featured: The Impact Alpha

Four ways for universal owners to live up to their name in the COVID recovery. Stewards of capital must become the stewards of a new form of capitalism. A system failure of the magnitude of the looming depression reflects, well, a system failure. It’s not just a government problem. The captains of the world’s supertankers of capital who steer the sovereign wealth of nations and the retirement security of hundreds of millions of people have accepted responsibility for safeguarding the sustainability of the world’s financial system. These “Universal owners” hold such large portfolios they can’t escape a systemic downturn. The largest of the universal owners, Japan’s $1.5 trillion Government Pension Investment Fund, or GPIF, owns about 10% of Japan’s stock market. Owners of everything don’t want everything to tank.

“If we were to focus purely on short-term returns, we would be ignoring potentially catastrophic system risks to our portfolios,” wrote the GPIF’s recently departed chief investment officer, Hiro Mizuno, along with CalSTRS’ Christopher Ailman, and Simon Pilcher of USS Investment Management in the U.K. In a remarkable letter last month, they warned that companies that maximize revenues at the expense of the environment, workers, communities and other stakeholders “are not attractive investment targets for us.” Asset managers who ignore long-term sustainability risks and opportunities “are not attractive partners for us.” The COVID recovery provides such universal owners a chance to fulfill their systemic responsibilities. In his occasional column, ImpactAlpha’s David Bank suggests how:

  • Forge a new social contract. Investors can insist labor be treated as an asset, not a liability, on corporate balance sheets, and that companies optimize for the value of that asset.
  • Reprice risk. Like pandemic risk, mispriced climate risk is subject to sudden “repricing events.” Realistically pricing such risks is the new fiduciary duty.
  • Bet on the future. Universal owners that make an active bet on concerted action on climate change, income equality or sustainable development more broadly can signal their expectations of such progress. Optimism about the future can become self-fulfilling.
  • Hold corporations accountable. One of the clearest signals of the growing pressure on corporations was last year’s declaration by more than 180 CEOs committing to generate value for employees, customers, communities and suppliers as well as shareholders. Corporations can start to fulfill their pledges in the season of annual shareholder meetings now upon us. Universal owners have made clear they’re watching.

Keep reading, “Four ways for universal owners to live up to their name in the COVID recovery,” by David Bank on ImpactAlpha.

Dealflow: Follow the Money

Impact investing platform OpenInvest raises $10.5 million to go global. OpenInvest launched in 2015 with the ambitious goal of democratizing impact investing. That proved harder than expected (see, “Retail platforms for sustainable investing struggle to differentiate themselves – and to attract customers). Last year, the robo-advisor pivoted away from its direct-to-consumer approach and toward technology partnerships with wealth advisors and asset management platforms, including Resolute Investment Managers, which handles $75 billion in assets. “Advisors are realizing this is a personal conversation, but optimizing portfolios and managing risk across the many factors that people value is almost an impossible human task,” OpenInvests’s Josh Levin told ImpactAlpha. The Series A funding will help the company launch globally. QED Investors led the round with participation from SystemIQ, Resolute and the venture arm of ABN AMRO.

  • Market opening. The current market volatility is driving more capital to responsible strategies (see, Sustainable investments are growing, and outperforming, in a volatile market). “This is a time that comes once or twice in a career for an emerging asset manager,” Levin says. “No one changes when the market is going up. It’s when you have volatility that people start looking for new solutions.”
  • Dive in.

Green Outcomes Fund direct capital to South Africa’s green economy. The fund is looking to catalyze 488 million rand ($27 million) for green micro- and small businesses by offering fund managers below-market-rate capital tied to metrics like green job creation (see, Monetizing impact to finance green small businesses in South Africa).

Chloe Capital backs three companies addressing a shifting workforce. The seed-stage fund, which invests in female founders, added healthcare staffing venture Provider Pool, remote workforce coaching platform Riff Analytics, and developer of prefabricated eco-homes to its portfolio.

Signals: Ahead of the Curve

Amid wave of COVID relief bonds, the World Bank’s pandemic bond has yet to pay out. The bank’s catastrophe bonds, launched in 2017 in response to the Ebola outbreak, were designed to provide “surge funding” to poor countries in the event of another pandemic. That pandemic is here, but bond payoffs have not been triggered. Investors, meanwhile, have enjoyed yields as high as 14%. With more than two million COVID cases reported globally and 130,000 deaths, the only missing criteria is an “exponential growth rate” of the virus in eligible countries. When triggered, the five-year bonds will release $132.5 million to emerging markets to combat the virus (see, Needed: New models for ‘pandemic-lens investing). “You can see the thing coming like a train, and these countries are going to need a response,” the University of Oxford’s Andrew Farlow told Bloomberg. “It’s bizarre and counterproductive that you have to wait.”

  • COVID relief. The pandemic has disrupted the market for green, social and sustainability bonds, with new issuance down sharply. One corner of action: COVID-related social bonds. Many of these relief bonds have been from multilateral actors, such as the African Development Bank, the European Investment Bank and the Inter-American Development Bank. In late March, the Nordic Investment Bank issued a €1 billion Response Bond to mitigate social and economic consequences of the virus.
  • Green bond slump. Green bond issuance fell to just over $5 billion in March, from $29 billion in the first two months of the quarter and $15 billion in March 2019, according to Environmental Finance. Among the recent issuers: German utility E.ON floated a €750 bond for sustainable infrastructure and energy efficiency. Pfizer’s $1.3 billion sustainability bond will support environmental projects and make COVID-19 treatments accessible to vulnerable populations.
  • Long-term demand. Any slump in green, social and sustainability bonds is expected to be temporary. Green bonds have outperformed in the downturn. For issuers, “It is all about being prepared and making your business future-proof,” NN Investment Partners’ Bram Bos told WealthBuildingAsia. “The next crisis could be a climate crisis. The current situation is triggering companies to look ahead.”
  • More.

Impact Voices: Pass the Mic

Make new mistakes: Learning from climate change to tackle the COVID challenge. The conversation about how to stop the spread of disease, protect ourselves, and respond to the pandemic’s crippling socio-economic effects has an eerie precedent in the history of climate action. The lesson: A coordinated, global, and equal response for our mutual well-being is necessary. The warning: We have only slowly and haphazardly achieved any such cohesion in our climate response. “Now is the time for us to act differently than we have in the past,” writes Rehana Nathoo of Spectrum Impact in a guest post on ImpactAlpha.

  • Empowering local leaders. Expanding the Paris Agreement’s cast of players to include governors, mayors, corporations and civil society proved its salvation when the Trump administration withdrew, Nathoo argues. In the context of COVID19, governors and local leaders are stepping up to offer guidance, protection and assurance. “In the fight to preserve our planet, public will has had an enormous role to play,” says Nathoo. “Our individual, local, and community responsibilities in the context of COVID19 are just as critical.”
  • Keep reading, “Learning from climate change to tackle the COVID challenge,” by Rehana Nathoo on ImpactAlpha.

Agents of Impact: Follow the Talent

Lenny Mendonca steps down as chief economic and business advisor to California Gov. Gavin Newsom… Korn Ferry is recruiting candidates for: head of sustainability at Kohlberg & Co.president of the McKnight Foundationpresident of LOCUS Impact Investing; and executive director of the Aspen Network of Development Entrepreneurs (see, Korn Ferry’s Kate Shattuck’s “Market Observations and Lessons Learned)… Sunwealth is hiring for roles in investor development, asset management, accounting and project development in Cambridge, Mass… Opportunity Alabama is looking for a director of portfolio development in Birmingham… Arabesque seeks an ESG research associate / data specialist in Boston.

Thank you for reading.

–Apr. 16, 2020