The Brief: Faith-based climate finance, circular cleaning products, Airbnb’s housing fund, impact alpha in impact tech, UC to go fossil-free



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Last call. Join UBS’ Andrew Lee, author Richard Morais and ImpactAlpha’s David Bank, as well as fellow Agents of Impact, at our subscribers-only event this Thursday, Sept. 19, from 5:30-7:30 pm at Liquidnet’s headquarters in New York. RSVP today.

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Faith-based investors build direct-investment pipelines to finance climate action. Calls from U.N. Secretary-General António Guterres or billionaire media mogul Michael Bloomberg are fine, as far as they go. Catholic investors, at least, are answering to a higher authority. “We have caused a climate emergency that gravely threatens nature and life itself, including our own,” Pope Francis said in a prayer-day message from the Vatican this month. “Now is the time to abandon our dependence on fossil fuels and move, quickly and decisively, towards forms of clean energy and a sustainable and circular economy.” Catholic Relief Services is among a growing number of faith-based organizations designing investment initiatives with an increasing focus on climate action, as part of a broader move to carve out portions of their portfolio for direct, private impact investing strategies. The billion-dollar humanitarian agency launched its first impact investment vehicle last year, a blended finance fund called Azure to address water and sanitation in El Salvador. “We work with the most vulnerable people around the world, and a good chunk of our programmatic work ends up being climate-related,” Beth Collins, who heads impact investing at Catholic Relief Services, told ImpactAlpha.

In “Faith and Investing,” an ImpactAlpha series sponsored by the Global Impact Investing Network, we’re digging deeper into values-aligned investing across faiths. On the climate front, Wespath Benefits and Investments, the United Methodist Church’s pension agency, for example, poured $500 million into companies providing low-carbon products and services and has invested $30 million in companies like d.lightMercy Investment Services, a Catholic ministry of the Sisters of Mercy of the Americas, is also going direct with investments in Scoop Technologies, a San Francisco-based carpooling platform and Berkeley Energy’s Renewable Energy Asia fund, which invests in projects in the Philippines, Indonesia and India. These initiatives sit between a yawning divide in faith-based climate investing, with highly localized and grassroots efforts on one side and engagement through the public markets on the other. The efforts are bridging the gap for all investors. “I believe the investment capital is out there, if we have investable deals,” says Collins.

Keep reading, “Faith-based investors build direct-investment pipelines to finance climate action,” by Jessica Pothering on ImpactAlpha.

  • On the agenda. The Global Impact Investing Network is bringing faith-based investors together, including Candice Dial of The Church Pension Fund, John O’Shaughnessy of Franciscan Sisters of Mary and Séamus Finn of the Interfaith Center on Corporate Responsibility, at its annual investor forum in Amsterdam next month. Register now.

DealFlow: Follow the Money

‘Circular economy’ startup Truman’s raises $5 million from Germany’s Henkel. The six-month-old green cleaning product startup raised the seed funds in a round led by Henkel Ventures, the investment arm of the German consumer products conglomerate. Venture firms Uncommon DenominatorStarting Line and BFG Partners also invested. Lexington, Kentucky-based Truman’s makes non-toxic, direct-to-consumer cleaning products. To cut down on packaging and transport, the firm ships its four cleaners in concentrated form to which consumers then add water. Truman’s claims one truckload of its cartridges is the equivalent of 30 semi-trucks filled with conventional cleaners. “Convenience and sustainability are top-of-mind for an increasing number of today’s consumers,” said Henkel Ventures’ Robert Günther, adding that the company seeks to reduce plastic waste and “contribute to a circular economy.” More.

Airbnb to invest $25 million in affordable housing and small business in California. The short-term rental marketplace, which has been criticized for contributing to rising long-term rents, will invest through RBC Global Asset Management’s “access capital community investment strategy,” a fixed income product that allows investors to geographically target investments.

Bengaluru-based Acculi Labs secures angel funding for health diagnostics in remote locations. Angel investors, including Chandrashekar Kupperi of ANOVA Corporate Services, and Bengaluru-based consultancy Startup Basket provided the undisclosed pre-seed funding.

Mumbai’s WhiteHat raises $10 million to teach students to code. Omidyar Network India and Nexus Venture Partners led the round, which also included Owl Ventures.

Signals: Ahead of the Curve

‘Impact tech’ startups outperform at Techstars. When Zoe Schlag made the original case to the startup network for an impact-focused fund and accelerator she produced data showing that impact-aligned startups at Techstars outperformed their ‘non-impact’ peers. That was enough for Techstars to raise a pilot impact fund and launch an impact-themed accelerator to prove out the thesis. Three years and 73 investments on, a repeat of the analysis has found that each year between 2012 and 2018 “impact tech” startups have outperformed Techstars’ total portfolio, measured by multiple on invested capital (to be sure, nearly all of the value is yet unrealized). “The analysis we did three years ago is holding up,” Schlag told ImpactAlpha. “This validates the alignment between investing and impact in our core business.”

  • Impact investors. Schlag has invested nearly the full $7 million pilot fund, which counts among its limited partners Morgan Stanley’s Alternative Investment Partners and other family offices.
  • Impact portfolio. Nineteen investments have been made through the Austin-based Techstars Impact accelerator. Nineteen investments have been made through the Austin-based Techstars Impact accelerator. Techstars made the other 54 investments across its other accelerator programs and in Seed and Series A investments in impact-aligned startups across its network. These include in Austin-based Aunt Bertha (raised more than $22 million), Cincinnati’s Connxus (raised $17 million) and Seattle’s DroneSeed (raised $7.5 million). In the last three years, nearly 30% of startups across Techstars programs have had ties to the UN Sustainable Development Goals.
  • Opportunity set. “Impact tech” is a big market. Techstars identifies four reasons why: Technologies are creating first-time access to inaccessible markets. Falling costs of tech are enabling delivery of goods and services down-market. A growing number of consumers are demanding ethical and sustainable products. Corporations waking up to mounting social and environmental risks are turning to impact to mitigate them (see, “Techstars looks for startups to help mitigate mounting social and environmental risks).
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UC to shed “risky” fossil fuels from $83 billion of funds. University of California students have waged a campaign to divest the school’s $13.4 billion endowment from fossil fuels. In July, its faculty voted to support such a move. On Tuesday, they got a two-fer. In an op-ed in the LA Times, UC chief investment officer and treasurer Jagdeep Singh Bachher and UC Board of Regents’ Investments Committee chair Richard Sherman said the endowment would be fossil-free by month’s end and that university’s $70 billion pension fund would follow. Their clear-eyed analysis: “We believe hanging on to fossil fuel assets is a financial risk.”

  • Fossil-free club. UC joins a growing number of institutions divesting from fossil fuels. Since 2014, assets committed to divestment have increased 22,000%, from $52 billion to more than $11 trillion today, according to 350.org, which helped catalyze the divestment movement.
  • Fiduciary duty. The fund managers wanted to make clear they were acting in the financial interests of UC. “The reason we sold some $150 million in fossil fuel assets from our endowment was the reason we sell other assets: They posed a long-term risk to generating strong returns for UC’s diversified portfolios.”
  • Beyond divestment. “We have been looking years, decades and centuries ahead as we place our bets that clean energy will fuel the world’s future. That means we believe there is money to be made,” wrote Bachher and Sherman. “We have chosen to invest for a better planet, and reap the financial rewards for UC, rather than simply divest for a headline.”
  • Policy by op-ed? Pressure from UC faculty members appears to have spurred the announcement. The $1 billion in clean and renewable investments is significant, but recent equity divestment activity has mostly been limited to the smaller endowment fund. The carbon footprint of UC’s equity portfolio actually increased in 2018 over 2017, the university says.
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Agents of Impact: Follow the Talent

Stephanie Cohn Rupp joins Veris Wealth Partners as chief operating officer… Civic Exchange Chicago launches as coworking space and community for civic innovators… Candide Group is recruiting a portfolio manager for its Olamina Fund… Impact Investment Fund seeks a chief investment officer in Melbourne… New Forests is looking for a part-time sustainability analyst in San Francisco… Accion is hiring a program coordinator on its global investments team.

Thank you for reading. 

– Sept. 18, 2019

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