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The Brief: Digging deeper to invest for racial justice, sustainability-linked credit, Trillium’s Matthew Patsky walks the talk, PhD to VC



Greetings, Agents of Impact! 

The Call: Changing the racial justice algorithm. Racism is an archaic relic of an outdated economic operating system – and yet it remains entrenched in almost every investment asset class, from alternatives to municipal bonds to public equities. Building on new research from Transform Finance (see below), ImpactAlpha’s Agents of Impact Call No. 23 will explore how anti-racist investment strategies can help flip the economic algorithm from exclusion and exploitation to inclusion and justice. Join the conversation, Tuesday, Sept. 22 at 10am PT / 1pm ET / 6pm London. RSVP today.  

Featured: Impact Voices

Digging deeper to root out racism in investment portfolios. The racial justice protests sparked by the killing of George Floyd spurred many investors to consider ways their capital might help mitigate racial injustice. Two strategies that have received attention: allocations of capital to asset managers of color, who are heavily under-represented in finance; and investments in founders and entrepreneurs from communities of color. Recently, strategies have more explicitly targeted positive impact in Black and Brown communities. “These initiatives are valuable contributions to the fight for racial justice. And yet, they are still leaving potential for impact on the table,” says Shante Little of Transform Finance in a guest post on ImpactAlpha. “We know that finance can do more.”

Capital is entangled with racial injustice in ways that current investor responses do not address, says Little. Divesting from operators of private prisons, for example, does not address all of the other areas in which criminal justice, race and capital intersect. Likewise, race influences employment patterns in myriad ways. The incidence of hiring discrimination against Black applicants hasn’t declined since 1990. Partly as a result, workers of color comprise two-thirds of the on-demand employment pool. Yet gig economy jobs don’t provide most on-demand workers with enough income: half of gig workers have annual incomes of less than $30,000. Little urges investors to Get Smarter, Act With Urgency and Pay it Forward. “Investors need to build a broader toolbox for advancing racial justice,” she writes. “We need to experiment with strategies that demonstrate what a total racial justice approach looks like.” 

Keep reading, “Why racial justice investors must align with the racial justice movement,” by Shante Little on ImpactAlpha. 

Dealflow: Follow the Money

Aligned closes $1 billion in sustainability-linked credit to green its data centers. Data centers are consuming huge amounts of electricity. Dallas-based Aligned uses energy-efficient cooling systems and has committed to 100% renewable energy for its facilities. The $1 billion credit facility to support Aligned’s sustainability goals was structured by ING Capital and will reward the company with a reduced interest rate if it hits impact targets, including 100% clean energy by 2024; industry-leading workplace safety; and “continuous improvement across sustainability best practices” (see, “An incentive for companies that deliver on sustainability: lower-cost capital). Read on

Endeavor Catalyst raises $134 million for global entrepreneurs. Global startup network and investor Endeavor launched its Catalyst initiative in 2012 to back high-impact startups and entrepreneurs designing products and services to fill large market gaps. It has invested in 150 startups in 30 markets, including Kenyan “Amazon” Copia, Mexican waste-to-fuel company Sistema.Bio, and fast-growing financial services firms like Brazil’s Nubank. Investors in Endeavor Catalyst’s third fund include LinkedIn founder Reid Hoffman, Michael Dell, Pierre Omidyar and Bill Ackman. Check it out.

DFC originates $5 million loan to support Akola’s Ugandan workforce. Dallas-based Akola employs low-income women in Uganda to make jewelry. The company changed its production process during the COVID lockdown to be able to keep its employees on payroll and enable them to work from home. The financing from the U.S. International Development Finance Corp. will provide Akola with working capital, enable it to build up its e-commerce plan, and build a new production facility to grow into post-COVID. 

U.S. Department of Commerce allocates $35 million to support entrepreneurship. The 52 grantees included nonprofits, higher education institutions, and entrepreneurship-focused organizations in 36 states. Among them: Louisville, Ky.-based Access Ventures, Coastal Enterprises in Maine, Opportunity Alabama and Economy League of Greater Philadelphia. 

Series: Walking the Talk

Matthew Patsky: Finding my tribe in an unexpected place. Patsky made his first investment in a socially responsible fund at age 11. Later, as an analyst at Lehman Brothers, he wrote a business plan to incorporate environmental, social, and governance, or ESG, metrics into Lehman’s consumer research. The response: “Matt, it’s really nice that you care about these issues. But if you don’t stop, it will destroy your career,” writes Patsky in the latest edition of Walking the Talk. The ImpactAlpha series, in partnership with Confluence Philanthropy, gives impact investors an opportunity to open up about their own portfolios. Patsky is now CEO of Trillium Asset Management, an ESG investment management firm with $2.8 billion in assets under management that was acquired this year by Perpetual Limited, an Australian financial services firm. With their own assets, Patsky and his husband Jun prioritize environmental and social justice issues, especially gender, racial, and LGBTQI equality.

  • Public equities. Patsky holds the majority of his liquid assets in public equities through the Trillium Sustainable Opportunities Strategy, which he helps manage. He calls the fund a “high-conviction, sustainability-themed strategy” that invests in companies positioned to thrive in the transition to a sustainable economy.
  • Private ventures. Patsky has invested approximately 20% of his assets in a handful of private funds. The largest holding is a fund of funds that invests across private asset classes in climate solutions, economic empowerment and healthy living. He keeps about 5% of his liquid assets in community development financial institutions like Low Income Investment Fund. He and Jun are also pressuring Schwab to increase socially-responsible options for their donor-advised fund. “They only offer one fund with an ESG overlay,” he says.
  • Keep reading, Finding my tribe in an unexpected place,” by Matthew Patsky on ImpactAlpha
  • Also walking the talk: Beth Bafford, Matthew Weatherley-White, Brent Kessel, Erika Karp and Kristin Hull.

Agents of Impact: Follow the Talent

Fifty Years creates “PhD to VC” to help scientists transition into venture capital… The new Anthropocene Fixed Income Institute will “monitor, advocate for and influence the impact of fixed-income markets in the age of human-induced climate change”… The American Sustainable Business Council and Social Venture Circle are combining membership under a new partnership… Transform Finance is accepting applications for its Institute for Social Justice Leaders.

Heron Foundation is recruiting a director, integrated capitals and communities, in New Haven… Beyond Capital Fund is looking for an investment fellow… Neuberger Berman is hiring an ESG and impact investing associate for private markets in New York… Kiva seeks a fund operations manager for the California Rebuilding Fund (see, “California Rebuilding Fund strengthens regional community development financing infrastructure”).

Thank you for reading.

–Sept. 17, 2020

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