Greetings, Agents of Impact!
Co-creating in Amsterdam. It’s not easy to take the temperature of a diverse community, but we have the feeling that Agents of Impact urgently want to get it done. We’re in Amsterdam this week at the Global Impact Investing Network’s investor forum, where Agents of Impact will be moving forward on many fronts:
- Catalytic capital. The CDC Group’s Yasemin Saltuk Lamy will talk about the need for development-finance institutions to reassess risk in order to catalyze nascent markets, which she teed up this week in an ImpactAlpha post, “How CDC Group is innovating with catalytic capital.”
- Faith-based investing. We’ll continue our series, “Faith and Investing” with dispatches from the GIIN’s thematic coverage. Catch up with, “Faith-based institutions fit local investments into global portfolios” and “Faith-based investors are building a direct-investment pipeline to finance climate action.”
- Public equities. I’ll be moderating a panel provocatively titled, “Public Equities & Impact: Prove it,” with Anthos’s Dimple Sahni, Morgan Stanley’s Jamie Martin, DWS’s Paul Buchwitz and Baillie Gifford’s Catherine Flockhart, 11:30am Thursday.
- Liquidity event. To prepare for the work ahead, Agents of Impact in town for the forum, as well as locals, are invited to meet up at ImpactAlpha’s happy hour, Tuesday from 7-9. Details and RSVP.
Here’s to a productive week.
– David Bank, editor
Featured: ImpactAlpha Original
Index Impact: Passive investors are actively tilting stock indexes toward sustainability. Most investments in public equities are held in “passive” accounts that keep fees low by tracking standardized indexes such as the S&P 500. Most companies included in such indexes aren’t cutting their carbon emissions fast enough to forestall the worst impacts of climate change. So major institutional investors are moving to change the indexes. That could trigger a massive shift in assets and, over time, reward companies that make faster transitions to the low-carbon economy and punish those that move slower. In late August, passive funds that track broad U.S. equity indexes hit $4.27 trillion in assets, surpassing the amount of money invested in actively managed funds for the first time.
The world’s largest pension fund, the $1.6 trillion Government Pension Investment Fund of Japan, has moved $40 billion in its equities portfolio from a traditional passive index to one weighted for environmental, social and governance themes and, in particular, de-carbonization. The fund’s chief investment officer, Hiro Mizuno, believes transforming index investing can be more effective than divestment in encouraging companies to transform their business models and disclose climate-related information. “All the things we’re doing, we’re not really trying to make our portfolio look better, but trying to affect the whole market,” Mizuno told a rapt audience at last week’s Bloomberg Global Business Forum. “The index has been a very convenient tool for us.” Index creators and fund managers, including MSCI, BlackRock and Bloomberg, are responding. But until more investors shift their portfolios to carbon weighting, “we still need to offer those [traditional] products,” said iShare’s Sarah Kjellberg. “It will be up to these large asset owners who are willing to take that action and provide inspiration to others to follow.”
Keep reading, “Passive investors are actively tilting stock indexes toward sustainability,” by Amy Cortese on ImpactAlpha.
Dealflow: Follow the Money
Mexico’s Klar raises $57.5 million to expand digital credit. Latin America’s fintech startups are hot with the venture capital crowd because they’re reaching a new and large base of customers: the region’s un- and underbanked adults. The latest example is Mexico’s Klar, a digital credit company that offers a fee-free credit card in a country where only 15% of adults have access to credit products. Klar’s app offers cashback on purchases and lets users make flexible payments. The one-year old venture wants to reach 100,000 Mexicans by next year. Klar raised $7.5 million in equity and $50 million in debt from Santander Bank’s InnoVentures fund and Quona Capital, a financial inclusion-focused venture capital firm. Klar can potentially have “dramatic impact on financial inclusion in Mexico,” Quona’s Jonathan Whittle said in a statement, while Santander’s Manuel Silva Martínez noted the startup’s “ability to imprint a truly customer-centric approach to an ambitious product vision.” Check it out.
Danish private pension funds pledge $50 billion to fight climate change. The funds are committing to invest just over 10% of their assets in green infrastructure, bonds and equities to support Denmark’s commitment to cut national greenhouse gas emissions by 70% by 2030.
Aquaconnect raises $1.1 million to help manage shrimp farms. The Chennai-based software startup raised the capital from impact investor Omnivore and aquaculture accelerator Hatch to help shrimp producers in India and Indonesia manage their farms.
Kresge Foundation invests $5 million to support credit unions serving the underbanked. The commitment goes into financial intermediary Inclusiv’s planned $45 million Southern Equity Fund, which will lend to credit unions in low income areas across the southern U.S.
Atlanta’s Civic Loan Fund backs four female impact founders. The fund is financing engagement network Civic Dinners; The Showcase Group, a youth training organization; education startup Brown Toy Box; and culturally-conscious swimming organization SwemKids.
Signals: Ahead of the Curve
Can blockchain play matchmaker in financing the U.N. Global Goals? Trillions of dollars are needed each year to achieve the U.N. Sustainable Development Goals. Billions are currently being invested. “Rather than a lack of capital, what is missing is a robust and efficient mechanism for identifying and enabling projects,” argues blockchain software firm ConsenSys and the World Wildlife Federation. The duo created Impactio, an SDG deal matchmaking platform that curates funding opportunities aligned to the goals. People with ideas—project coordinators and venture teams—are paired with experts who volunteer their time to vet the projects. The entire listing, diligence, and approval process is logged on the blockchain to ensure “transparent, democratic consensus,” ConsenSys’ Robby Greenfield told ImpactAlpha.
- SDG roots. Last year, ConsenSys scaled back the social impact-focus of its $50 million in-house venture fund. ConsenSys’ Kavita Gupta, who was recruited to manage the fund, told ImpactAlpha at the time that the firm hadn’t found enough traction among impact-tech solutions built on the distributed ledger.
- Future of cities. The organizations piloted Impactio around the theme “future cities.” They identified 17 initiatives, including startups like Kua, which seeks venture funding for its kelp-based plastic packaging alternative and iBUILD, which is connecting communities to affordable and sustainable housing construction.
- Matchmaking graveyard. Impactio is not the first effort to lean on tech to fill the impact funding gap. There’s a trail of shuttered platforms warning that tech alone is not the solution. Impactio’s partners say that the technology is there to facilitate and validate project coordination, not supplant it.
- Building trust. Other organizations like MIT’s Solve “open innovation” competition are similarly trying to vet, curate and finance ideas with high impact potential. Solve relies on relationships, connecting teams with its high-powered partner network. Impactio aims to take “politics” out of relationship-based fundraising. “More transparency on the project funding process helps build trust with potential applicants,” argues Greenfield.
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Agents of Impact: Follow the Talent
Monica Varman, previously with Tesla and Zola Electric, joins venture capital firm G2VP’s investment team to focus on sustainability… Eighteen new organizations signed onto the International Finance Corp.’s Operating Principles for Impact Management, bringing the total number of signatories to 76 (see, “Global investment firms adopt IFC principles seeking a market standard for impact investing”)… The European Venture Philanthropy Association is focusing on impact at its annual conference, in partnership with ImpactCity, in The Hague, November 5-7.
Thank you for reading.
– Oct. 1, 2019