The Brief | February 14, 2022

The Brief: Evolution of fiduciary duty, emerging secondary markets, Brazil’s favelas, Nuveen’s impact fund, financial health innovation in Mexico and Morocco

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Greetings, Agents of Impact! 

Agents of Impact Call No. 38: Policies to catalyze private capital for public good. Impact investors are continuing to push for policies that catalyze private capital for public good. Fran Seegull of the U.S. Impact Investing Alliance, Cambria Allen Ratzlaff of the UAW Retiree Medical Benefits Trust, and Satyam Khanna, former ESG advisor at both the SEC and EPA, will talk disclosure, accountability and engagement, Tuesday, Feb. 22 at 10am PT / 1pm ET. RSVP today.

If crypto is the Wild West of finance, impact investing is the country club. Institutional investors are going to have to find a new excuse to ignore impact and ESG investing. For decades, a cramped conception of “fiduciary duty” has been an impediment to the consideration of environmental, social and governance factors, much less actual impact, by pension plans and university endowments. Federal regulatory guidance has swung between allowing and forbidding consideration of ESG factors. That pendulum has now swung all the way back, with regulators seemingly ready to back the position that allocators should take ESG factors into consideration because of their fiduciary duty. But even the new definition won’t open the institutional spigots for impact investing, ImpactAlpha contributing editor Imogen Rose-Smith argues in her latest column. “Allocators still see ESG and impact as something imposed on the investment office by stakeholders, not something they make money on,” she writes. “Unlike, say, the blockchain.”

Bitcoin and impact investing both date to around 2008, and arguably both responded to the social inequality and unease laid bare by the subprime mortgage and global credit crises. But the two streams went in very different directions. Crypto has shown it can make people rich, while impact investing hasn’t shown it can tackle the systemic problems we are facing. “Being staid and boring hasn’t exactly made institutional investors enamored of impact,” Rose-Smith writes. “Impact could arguably benefit from a bit more swagger, a little more scale, and a little less banging on about fiduciary duties and frameworks.” 

Dealflow: Innovation in Brazil

Brazil’s Velvet raises $200 million to give early emerging market venture investors an exit. Exits are a persistent and nagging question in the relatively young field of impact investing. Brazil’s Velvet wants to remove some of the uncertainty for founders, employee equity-owners and early investors in emerging market companies. The investment firm has launched a secondary market to which owners can sell their early shares as other investors buy in. It has raised $200 million, led by Yolo, to close its first 40 deals.

  • Big valuations. Velvet has paid more than $30 million to buy shares of companies valued at $500 million or more. Its portfolio includes e-commerce venture Nuvemshop, which in August raised $500 million, Mexican fintech CrediJusto, and Indian neobank Open. Founders Carlos Naupari and Edouard de Montmort say their primary mission is to deepen emerging markets’ bench of experienced entrepreneurs by enabling founders to cash out of their businesses and start new ones.
  • Check it out

Favelas Fundos raises $3.8 million to invest in entrepreneurs in Brazil’s slums. The seed fund is Brazilian entrepreneur Celso Athayde’s latest effort to bring economic opportunities to low-income residents of Brazil’s favelas. Athayde has for decades supported youth projects in favelas through Central Única das Favelas, a network of community centers. He has also helped start two dozen favela-based businesses through Favela Holding. Favelas Fundos aims to invest 50 million reais ($9.5 million) to seed tech startups serving the slum economy. “There is a thriving economy in the favela,” Athayde told Forbes. “Companies have started to realize that.”

  • Connectivity. Favelas have gotten a pandemic-era boost from the shift to remote learning and work. But tech and Internet connectivity are often not available or affordable. Through Favela Holding, Athayde has supported Alô Social to bridge such connectivity gaps. Favelas Fundos’ early commitments came from high-net-worth investors and companies that have backed the network of community centers.
  • Read on

Nuveen closes its inaugural impact fund at $218 million. The $1.3 trillion investment manager topped up its Global Private Equity Impact Fund with another $68 million since its first close in July 2020. The final raise falls far short of Nuveen’s initial goal of $400 million for the fund, which is focused on climate change and inequality. Danish pension fund Velliv was among the fund’s anchor investors. Nuveen did not announce the fund’s latest round of backers.

  • Early deals. The fund’s first two investments are in Indian microfinance company Annapurna Finance, which serves 1.7 million mostly female business owners, and Advanced Battery Concepts, a Michigan-based green battery developer. Nuveen’s broader impact portfolio includes $5.8 billion in public and private investments. The investment manager is known for direct deals in companies like New Jersey-based Do Good Foods, which recycles unused food as livestock feed, and Chennai-based farmer finance venture Samunnati.
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Dealflow overflow. Other investment news crossing our desks:

  • Paris-based SWEN Capital Partners raises €95 million ($108 million) for its Blue Ocean Fund to invest in ocean health.
  • Village Capital invests in Morocco’s Chari and Mexico’s Finerio Connect through its Financial Health Innovation Fund, backed by MetLife Foundation.
  • Insaan Group and Artha Impact co-invest in Aakar, which makes and distributes affordable, eco-friendly menstrual products in India.

Agents of Impact: Follow the Talent

Tiedemann Advisors is recruiting a vice president for impact in New York or Wilmington, Del… Wells Fargo seeks a senior social impact and sustainability specialist in Austin… Salesforce is hiring a senior director of sustainability operations in San Francisco… Energy Foundry is looking for a director of market intelligence in Chicago… Bloomberg Associates is hiring a sustainability program manager in New York… Omidyar Network seeks a principal of belonging in Redwood City, Calif. or Washington, D.C.

Chordata Capital is recruiting a client services associate… Imaginable Futures is looking for a contract and grants manager… Croatan Institute is hosting “Ten Years of Total Portfolio Activation,” with Melissa Bradley of 1863 Ventures, Matt Patsky of Trillium Asset Management, Nancy Rosenzweig of Values Aligned Capital, Inclusiv’s Ann Solomon, and Croatan’s Christi Electris and Joshua Humphreys, tomorrow, Feb. 15. 

The Investment Integration Project and Interfaith Center on Corporate Responsibility are co-hosting, “Systemic Stewardship: Investing to Address Income Inequality,” with Renaye Manley of Service Employees International Union, Delilah Rothenberg of Predistribution Initiative, TIIP’s William Burckart and JR Bascom, and ICCR’s Josh Zinner and Stephanie Lavallato, Friday, Mar. 11.

Thank you for your impact.

– Feb. 14, 2022