Greetings, Agents of Impact!
Featured: ImpactAlpha Original
Emerging impact fund managers represent an emerging source of impact alpha. Smaller and newer may mean bigger and better returns. Small impact funds and first-time fund managers face obstacles raising capital from investors who need to see proven track records and want to write big checks (while not taking more than 20% of the total fund). Such rule-bound investors may be missing an opportunity: “Emerging managers” have fresh ideas, innovative theses and real-life experiences that can help them spot winning solutions for big challenges at attractive valuations. ImpactAssets, the San Francisco-based financial services firm, surfaced more than a dozen promising newcomers in the latest release of its ImpactAssets 50 list of private capital impact investment firms. Such emerging managers, says Jed Emerson, “have the hunger, creativity and a willingness to explore alternatives that more seasoned fund managers may not.”
There’s data to back such qualitative observations. In an overlooked finding of the 2015 impact investing benchmark study from Cambridge Associates and the Global Impact Investing Network, smaller and first-time funds outperformed both peers among conventional funds and larger impact investment funds. Among the emerging managers highlighted by ImpactAssets: Cat Berman of CNote Group, which offers a suite of fixed-income products for steering cash into community investments; Illumen Capital, the impact fund of funds led by Daryn Dodson, which is helping fund managers outperform by combating bias; and Indigenous-led Raven Indigenous Capital Partners, which provides early-stage equity capital to Indigenous enterprises in Canada. Other “emerging impact managers” on the list: Kiva.org’s Kiva Capital Management, which is raising a series of thematic funds, starting with solutions for refugees and migration; Fledge, a family of seed funds and impact business accelerators; and Tiger Grass Capital, which manages the Drawdown Fund to back businesses addressing major drivers of climate change.
Keep reading, “Emerging impact fund managers represent an emerging source of impact alpha,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
Sokowatch raises $14 million to expand services for informal retailers. The Kenyan e-commerce company launched in 2016 to help informal kiosk and retail owners streamline ordering and payments for inventory, particularly from consumer goods giants like Unilever and Proctor & Gamble. Sokowatch, which got early backing from Catalyst Fund, plans to expand into data analytics and working capital lending. Quona Capital led the company’s $14 million Series A round.
Danone allocates supplier funding to incentivize regenerative agriculture. The French food giant’s North American group, a B Corp, has established two sources of funding to help farmers in its supply chain convert to organic and regenerative practices. A $20 million debt fund will be managed by rePlant Capital, a “soil wealth” impact investing firm. A partnership with National Fish and Wildlife Foundation will help farmers apply for U.S. Department of Agriculture conservation grants. Danone will match up to 30% of the grant funding.
Arctaris acquires Maine ski resort to revitalize rural economy. The Boston-based impact investor purchased Saddleback Mountain Ski Resort in Rangeley for $6.5 million. The resort shut down five years ago, hurting the Rangeley community. Arctaris plans to invest nearly $40 million in the resort and reopen it with 200 full-time staff.
Accion Venture Lab backs Prayaan Capital’s $1.2 million round. Chennai-based Prayaan provides financial services to small businesses otherwise unable to access credit or bank loans. The company has disbursed 80 million rupees ($1.1 million) to businesses in the southern state of Tamil Nadu.
Goldman Sachs launches environmental impact portfolio. The Global Environmental Impact Equity portfolio, developed by Goldman Sachs Asset Management, will screen for five environmental criteria: clean energy, resource efficiency, sustainable consumption and production, circular economy, and water sustainability.
HealthJoy raises $30 million to help employees navigate healthcare benefits. HealthJoy offers services like virtual assistants and price comparison tools to help users compare prices for medical procedures and services among healthcare providers. Its Series C round, which was led by Health Velocity Capital, follows a $12.5 million funding round last year.
Signals: Ahead of the Curve
JPMorgan plays catch-up on climate. Under pressure from investors and activists, the world’s largest financier of fossil fuels will quit funding new oil and gas developments in the Arctic and impose new restrictions on financing coal companies. The policy, to be unveiled this morning by Jamie Dimon at the bank’s investor meeting, puts JPMorgan Chase on par with Goldman Sachs, which announced a similar policy in December (see, “Climate Finance 2020: Leaders and laggards in the race to net-zero”). JPMorgan economists are warning of potential “catastrophic outcomes” and threats to “human life as we know it” in a climate change report that was leaked last week. “JPMorgan Chase can’t not say something on climate right now,” Rainforest Action Network’s Alison Kirsch said, adding, “It’s nowhere near commensurate with their responsibility as the world biggest banker of fossil fuels.” Activists are calling for even bolder action, namely a ban on new fossil fuels funding. JPMorgan’s fossil fuel financing totaled $196 billion in the three years after the Paris Agreement was signed in 2015, according to RAN’s “Banking on Climate Change” report. But like this month’s reversal by BP, Dimon’s effort to go from laggard to leader will put pressure on other CEOs (see, “Net-zero pledges by BP’s new chief raise the stakes for oil majors”).
- Low bar. Banning coal financing is now table stakes for major banks. The industry’s deteriorating economics mean it’s not a risky move and coal already represents a tiny fraction of JPMorgan’s business. Missing from the bank’s new policy: restrictions on destructive and expansionary activities such as tar sands drilling, pipelines and deep sea drilling. “These are the things that make it clear they’re committed to an endless expansion of the fossil fuel era,” said 350.org founder Bill McKibben.
- Hot seat. Longtime JPMorgan director Lee Raymond is the target of a campaign by shareholder activists to oust him. As CEO of ExxonMobil from 1993 to 2005, Raymond oversaw the oil and gas giant’s climate obfuscation campaign. Raymond is “uniquely poorly qualified to provide the oversight needed to protect long-term shareholder value,” Majority Action writes in an S.E.C. filing.
- Green funding. JPMorgan said it was five years ahead of schedule on a 2017 pledge to fund $200 billion in projects that further the U.N. Sustainable Development Goals, including climate mitigation. In December, Goldman committed to $750 billion over 10 years to finance the climate transition and inclusive growth.
- European leaders. Climate policies at both JPMorgan and Goldman Sachs lag European counterparts such as Crédit Agricole, BNP Paribas and UniCredit. The bank to beat: Royal Bank of Scotland, now called NatWest Group, which this month said it will become “climate positive” by 2025, capturing or eliminating more carbon than it emits. NatWest will halve emissions linked to its lending activities by 2030. Says Kirsch: “We need those ripple effects to cross the Atlantic.”
- Drill down.
Agents of Impact: Follow the Talent
The Community Foundation for Greater Atlanta is searching for a CEO… Calvert Impact Capital seeks an associate general counsel in Bethesda, Md… Wellspring Climate Initiative is looking for a project director in Irvine, Calif… Pictet Asset Management is hiring an ESG strategist in Geneva… The Catholic Impact Investing Collaborative is searching for a director of membership and partnerships (see, “Catholic institutions pledge to increase impact investments”)… New Forests is recruiting an associate director of investments in natural climate solutions and other roles in Sydney and Singapore… Upstart Co-Lab seeks a senior associate in New York… Participant Media is looking for an assistant to the president of worldwide marketing and communications in Los Angeles… Pacific Community Ventures is hiring a data operations analyst in Oakland.
Thank you for reading.
–Feb. 25, 2020