The Brief | October 15, 2019

The Brief: Farewell to Paul Polak, IFC’s Neil Gregory, de-risking cleantech, affordable lab-grown meats, sustainability-linked loans, climate-smart in Africa

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Greetings, Agents of Impact!

Farewell to Paul Polak. We salute serial social entrepreneur Paul Polak, who died last week. The global development approaches Polak pioneered are now accepted wisdom for thousands of Agents of Impact. “We need to see the poor as customers rather than charity recipients,” said Polak, author of “Out of Poverty” and co-founder of Windhorse International. “I think it’s entirely feasible to help 100 million poor people at a time move out of poverty with technologies they need to raise their incomes, with the right distribution systems and with business incentives at all levels.”

SOCAP ticket giveaway. ImpactAlpha is giving away two tickets to SOCAP19 in San Francisco, Oct. 22-25. Yes, there’s a catch. To enter, follow @ImpactAlpha on Instagram, then comment and tag two friends. Winners will be randomly selected and announced Friday, October 18th and are responsible for their own transportation and other expenses. Void where prohibited!

Featured: ImpactAlpha Original 

Q&A with IFC’s Neil Gregory: A deadline looms for transparency in impact investing. Scaling impact investing with integrity requires, well, integrity. The International Finance Corp. has a plan for that. The IFC, the private sector arm of the World Bank, upped the ante on impact investment practices earlier this year with the introduction of the Operating Principles for Impact Management. Come next April, the first anniversary of the pact, the original 60 signatories are due to publicly disclose – and verify – their plans to align with the principles. “It’ll be a real step change in transparency,” says Neil Gregory, the IFC’s chief thought leadership officer. At this month’s Global Impact Investing Network investor forum In Amsterdam, Gregory was upbeat about uptake of the principles. At least 18 firms, including Neuberger BermanChristian Super and Finance in Motion, have signed onto the principles since the April launch.

The IFC has said the principles will “bring greater transparency, credibility, and discipline to the impact investing market” and combat “impact washing.” Unlike many pledges and commitments, the IFC principles have teeth, through its disclose-and-verify principle. “It’s not something you can just sign up to and worry about implementation later,” says Gregory. He anticipates a race to the top, as public disclosure and verification puts pressure on fund managers to raise their game. The IFC is now pushing adoption among asset owners, who have long sought a mechanism to authenticate impact among fund managers. Asset owners on board include Zurich InsuranceAXA Insurance and Prudential Financial. “They will use it in deciding where to allocate funds and that will really drive adoption by the asset managers,” he says. “Watch this space.”

Keep reading ImpactAlpha’s Q&A with IFC’s Neil Gregory, “A deadline looms for transparency in impact investing.”

Dealflow: Follow the Money

Clean Energy Ventures closes $110 million fund for energy innovation. The Boston-based investment firm has backed clean energy technologies for nearly 15 years. But there’s still too little investing in new innovation, says co-founder Dan Goldman. “More wind and solar capacity alone won’t address climate change,” he tells ImpactAlpha. “We need new technologies.” The firm’s first fund will help de-risk and build the clean energy pipeline for later-stage investors. It is targeting companies that, at scale, can displace at least 100 million tons of carbon dioxide emissions. The fund has made seven investments and is looking to make more than a dozen more with capital committed by financial advisors, family offices, oil and gas companies, utilities and consumer goods firms. At the early stage at which it invests, Goldman says, portfolio companies’ greenhouse gas emission offsets are more predicted than actual. Get the full story.

Future Meat and Wild Type raise Series A funding for lab-grown meats. Israeli startup Future Meat secured $14 million to roll out its plant-based/lab-grown meat hybrids next year and fully lab-grown products by 2022. Separately, U.S.-based Wild Type raised $12.5 million to develop lab-grown lox and salmon fillets. Both companies are part of the hot “alternative protein” market that promises to deliver more sustainable plant and/or cruelty-free proteins to feed a growing population. Affordability is the biggest challenge facing cultured meat companies like Future Meat and Wild Type. Future Meat’s chicken and beef products currently cost $150-$200 per pound to produce, while a few slices of Wild Type’s salmon cost about $200. Both companies say the financing will help them shrink those unit costs to $5 to $10. Agritech investor S2G Ventures backed Future Meat, while CRVMaven VenturesSpark Capital and Root Ventures backed Wild Type. Check it out.

BlackRock commits $20 million to circular economy fund. The BGF Circular Economy Fund, a partnership between $6.8 trillion asset management firm BlackRock and the Ellen MacArthur Foundation, will invest in public companies that are improving or profiting from sustainable consumption and waste reduction. The fund will be among the small portion of BlackRock’s actively managed equities. “As an investment idea, the circular economy is quite nascent,” BlackRock’s Sumana Manohar said. “There are genuine opportunities for companies that are frontrunners.”

ING issues sustainability-linked loan to Quadria Capital. The Dutch bank is basing the interest rate of a $65 million revolving debt facility on whether Singapore-based Quadria achieves environmental, social and governance-related milestones (see, “An incentive for companies that deliver on sustainability: lower-cost capital). ING structured the financing to incentivize “socially responsible behavior.” Quadria is raising a $500 million fund to invest in Asia’s healthcare sector.

PepsiCo issues $1 billion green bond to finance sustainable practices. It is the first green bond issued by the food and beverage giant. The company will use proceeds to improve water use, develop greener packaging and boost the number of electric vehicles transporting its products.

Impact Voices: Pass the Mic

Climate-smart private equity investors take leadership in Africa. Rather than viewing climate change as a threat, Africa’s investors should seize the opportunities. “We are in the midst of an innovation cycle where transformative and sustainable business models are gradually replacing their predecessors,” says Michelle Kathryn Essomé, CEO of African Private Equity and Venture Capital Association. In a guest post for ImpactAlpha, Essomé calls on Africa’s 140 private equity firms to seize opportunities in renewable energy, climate-smart agriculture and climate-resilient infrastructure and lead in the fight against climate change.

  • Climate mandates. Institutional investors are asking fund managers to pay attention to climate change at all stages of decision-making. Climate-smart fund managers will have an edge in raising funds, says Essomé. One example: emerging markets renewables investor Climate Fund Managers recently raised $850 million, well above its initial $530 million target.
  • Risk mitigation. Growing global momentum for monitoring, reporting and disclosure of climate-related risks means more reporting for PE firms. That’s an opportunity to help portfolio companies transform into greener, better managed and more valuable businesses. In actionCDC Group helped Jacoma, a Malawian farm, enable local smallholders to manage resources better and protect themselves from extreme climate change.
  • Keep reading, “In Africa, climate-smart private equity investors have the opportunity to lead,” by AVCA’s Michelle Kathryn Essomé.

Agents of Impact: Follow the Talent

Economists Abhijit Banerjee and Esther Duflo of MIT and Michael Kremer of Harvard University won the Nobel prize in economics for their “experimental approach” to fighting global poverty. Duflo is the youngest economist, and just the second female, to win the prize… Stephanie DiMarco (Advent) and Jennifer Grancio (iShares) join Ethic’s board of directors… Pure Strategies is hiring a sustainability advisor in Gloucester, MA… Rethink Impact is looking for an associate in San Francisco or New York… WindSail Capital GroupUrban Us and Wave Equity Partners join the Impact Capital Managers network.

Thank you for reading. 

– Oct. 15, 2019