Greetings, Agents of Impact!
Signals: Ahead of the Curve
Cultural institutions start to put their assets to work for mission. Universities, private foundations and even large nonprofits have deployed hundreds of billions of dollars into ESG, impact and community-based investment strategies. In contrast, America’s art institutions have been slow to shift their $58 billion in endowment assets. That is changing, sparked by the COVID crisis and this year’s Black Lives Matter protests, as well as a stronger track record for both ESG and impact strategies. The Walters Art Museum in Baltimore, for example, is deploying more of its $170 million endowment to socially responsible and impact investments, five years after moving to intentionally hire diverse-owned investment firms to manage a portion of its assets. “We’re at the forefront of social justice issues and on the economic precipice here in Baltimore,” the museum’s Julia Marciari-Alexander told ImpactAlpha. “To be a transformative force for good in the city, this is exactly the kind of work that we need to be doing.”
- Institutional shift. Cultural institutions that seek to drive social change through exhibitions, concerts, productions and classes are getting more comfortable deploying endowment assets as well. The new commitments and strategies are chronicled in “What cultural institutions need to know about investing for values and mission,” from Upstart Co-Lab. “The cultural sector is open to this in a way that it never has been before,” Upstart’s Laura Callanan told ImpactAlpha.
- From Warhol to the Louvre. The Andy Warhol Foundation for the Visual Arts has moved 25% of its $300 million endowment to socially-responsible strategies. Souls Grown Deep, with one of the largest collections of art by Black artists in the southern U.S., has adopted a 100% impact investing policy (see, “Souls Grown Deep Foundation to invest $1 million in artists’ hometowns in the U.S. South”). In France, the Louvre has carved out 5% of its €250 million ($302 million) endowment fund for investments in creative businesses.
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Financing for climate action is not catching up to the climate emergency. The pace of climate change is accelerating: new records were set in 2020 for land and sea temperatures, Arctic ice shrinkage, and acres lost to wildfires in the western U.S., according to the U.N.’s World Meteorological Organization. Financing for the low-carbon energy transition, however, is flat or falling. The Climate Policy Initiative, which is finalizing its annual global climate finance report, estimates spending by public and private players in 2019 at just over $600 billion and expects 2020 spending to be even lower, the result of policy uncertainty in major economies and the global recession. Climate spending peaked at $612 billion in 2017 before falling to $546 billion in 2018. Between $1.6 trillion to $3.8 trillion is needed each year for low-carbon energy generation and other climate-smart infrastructure to stay within the global warming goals set by the Paris climate agreement. “Clearly we are falling well short of what’s needed,” CPI’s Cooper Wetherbee told ImpactAlpha.
- Production gap. Governments of G20 countries have committed $233 billion to fossil fuel-related activities in their stimulus plans, versus $146 billion for green and low-carbon alternatives, according to the U.N.’s “Production Gap“ report, which measures the gap between countries’ energy investments and production levels needed to keep warming below 2°C. Fossil fuel production needs to drop by 6% per year; instead, countries are planning an increase of 2% per year. Together, the reports represent a call to action to world leaders as they mark the fifth anniversary of the Paris Agreement this month.
- Increased ambitions. Several countries are likely to step-up emission-reduction plans ahead of a Dec. 12 U.N. meeting commemorating the anniversary. The U.K’s Boris Johnson is considering cutting greenhouse gas emissions up to 69% by 2030. On Wednesday, 42 companies including Amazon, DuPont, JPMorgan Chase, General Motors and Walmart urged U.S. president-elect Joe Biden and Congress to work together to “enact ambitious, durable, bipartisan climate solutions.”
- The heat is on.
Dealflow: Follow the Money
GoSite raises $40 million to digitize U.S. small businesses. The pandemic has forced traditional brick-and-mortar small businesses to lean into e-commerce to survive. San Diego-based GoSite helps small business owners set up websites and manage online transactions. The company’s Series B round was led by Left Lane Capital, with participation from Longley Capital, Cove Fund, Stage 2, Ankona Capital and Serra Ventures.
- Digital inclusion. Tech startups in Africa addressing the small business sector’s digital inclusion needs are thriving (see, “African tech startups are peddling pandemic resilience“). Indonesia’s SIRCLO, Colombia’s TUL, Brazil’s Celcoin and Pakistan’s Tajir all raised capital during COVID to provide digital upgrades for micro- and small businesses.
- Dig in.
Curio launches a $30 million fund for inclusive cannabis. Baltimore, Md.-based Curio Wellness is trying to get more women, veterans and people of color into the growing U.S. cannabis industry. The planned $30 million fund will help 50 diverse entrepreneurs launch medical marijuana businesses in multiple states, as banks remain reluctant to lend to cannabis founders. “The fund will expand diversity and enable economic empowerment for entrepreneurs who otherwise would be locked out of the rapidly growing field,” said Curio’s Jerel Registre.
- Racial-equity lens. Cannabis revenues in the U.S. could reach $50 billion by 2026. Black Americans and other people of color risk being shut out of the “green boom,” in part because of disproportionate rates of conviction on earlier marijuana-related charges (see, “‘Inclusive cannabis’ investors apply a racial equity lens to a high-flying industry”).
- Startup costs. The Curio fund will provide up to 93% of the capital to open a Curio dispensary, plus resources to manage the business for the first three years, after which founders would be able to claim full ownership. Applications will open early next year.
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Habitat for Humanity aims to accelerate affordable housing startups in emerging markets. The nonprofit’s ShelterTech program will help 20 companies in Southeast Asia and Latin America advance housing solutions for low-income families affected by COVID’s impact on “housing livability and affordability.”
- Shelter tech. Cambodia’s My Dream Home makes eco-friendly building bricks. In the Philippines, Social Light is improving low-income families’ access to wi-fi. Chile’s HOBE is developing a portable, modular emergency shelter. And Columbia’s Fika is helping home buyers save for a down payment. The regional programs, in partnership with Village Capital and Villgro, have support from the Autodesk and IKEA foundations.
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Impact Voices: Pass the Mic
What Accountability Counsel learned about the state of impact accountability from 74 investors. Last month, International Finance Corp.’s Neil Gregory rounded up the publicly-available disclosures from signatories of the IFC’s Operating Principles for Impact Management (see, “What the IFC learned about the state of impact management from 62 investors”). Accountability Counsel’s Margaux Day has taken another look at the disclosure statements from impact fund managers (now up to 74) and found a gap: only three signatories report having accountability mechanisms that let individuals or communities negatively impacted by investments raise issues with investment decision-makers. Accountability mechanisms are critical impact tools, Day writes in a guest post on ImpactAlpha. “First, they offer the people who bear the most risk from investments – namely communities living near or working at investment sites – an opportunity to protect their rights and environment,” she says. “Second, they help ensure successful investments in that they provide investors with a way to learn of and address potential negative impacts before they drive an investment materially off course.”
- Unintended consequences. Accountability Counsel has worked with communities that have flagged environmental and social risks of projects billed as impact investments, including a hydropower project in Mexico and a conservation project in Myanmar (see, “Will impact investors welcome the arrival of mechanisms to redress community grievances?”).
- Best practices. The IFC itself has one of the world’s first and best accountability mechanisms, Day says. But the IFC doesn’t mention its Compliance Advisor Ombudsman in its own Impact Principles disclosure. “The IFC should either state explicitly that accountability mechanisms are a hallmark of ‘good international industry practice’ that should be reflected in disclosures, or the IFC should offer a shared mechanism for each signatory to use,” Day writes.
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Agents of Impact: Follow the Talent
ImpactAlpha contributing editor Monique Aiken, ex- of Mission Investors Exchange, joins The Investment Integration Project as managing director… Thierry Adant, formerly with Willis Towers Watson, is named chief investment officer at Newmarket Capital… Casey Family Programs’ Antoinette Malveaux and University of Washington’s Reggie Brown have been elected to the Beneficial State Bank board of directors… San Francisco-based Community Vision is recruiting a president.
Croatan Institute’s Joshua Humphreys joins US SIF’s Lisa Woll for “A dialogue on trends in sustainable and impact investing in the United States,” Tuesday, Dec. 8… Pacific Community Ventures is soliciting feedback on its policy paper, “Meeting The Moment: U.S. Impact Investing Policy, Inequality, and COVID-19 Recovery.” Join the sessions on market infrastructure policy, Monday, Dec. 14, and sector-specific policy ideas, Thursday, Dec. 17.
Thank you for reading.
– Dec. 3, 2020