Greetings, Agents of Impact!
Signals: Ahead of the Curve
With billions as bait, development financiers seek to hook private investors on gender-lens investing. Private equity and venture capital fund managers have an added incentive to apply a “gender lens” in their investment strategies: billions of dollars in capital dedicated to advancing women as entrepreneurs, employees and consumers in emerging markets. Two initiatives championed by development finance institutions and development banks have nearly $5 billion to invest in intermediary funds and enterprises. The 2X Challenge, backed by 14 development finance institutions, or DFIs, in North America, Europe and Asia, has mobilized $4.5 billion. A separate effort, the Women Entrepreneurs Finance Initiative (We-Fi), an alliance of International Finance Corp. and emerging market development banks, has raised $355 million from donor countries and invested $300 million in 18 fund managers, banks and companies.
- Flagship funds. To encourage established private-equity funds focused on emerging markets to commit to 2X criteria, CDC Group and other DFIs including Germany’s DEG, European Investment Bank, FinDev Canada, FMO, Proparco, SIFEM and SwedFund are co-investing in a series of designated “2X Flagship Funds.” In September, Development Partners International’s ADPIII became the first such fund. CDC had earlier anchored the fund with an $80 million commitment. “We want to emphasize the benefits that gender-focused investing can provide, not just in terms of returns, but in helping to drive economies, unlock opportunities, and improve the quality of life for women across Africa,” DPI’s Runa Alam said at the time. With the Global Impact Investing Network, the CDC developed metrics for gender impact.
- Gender equity. The World Bank’s We-Fi effort, originally announced by Ivanka Trump at the G20 summit in 2017, is working to mobilize $3 billion for women entrepreneurs in emerging markets. The IFC, part of the World Bank Group, has allocated the bulk of the $355 million raised so far. Partner development banks include the AfDB (Africa), ADB (Asia), EBRD (Europe) IDB (Latin America) and the Islamic Development Bank. We-Fi-backed investments need not be women-led. Lahore-based venture capital firm Sarmayacar, for example, pledged to expand the pipeline of women entrepreneurs in Pakistan, while in Lagos, TradeDepot committed to increase the number of women-led businesses on its supply-chain platform.
- Capital mobilization. The $4.5 billion committed to the 2X Challenge to date surpasses its initial goal of $3 billion for gender-lens initiatives by 2020. Of the total, $2.4 billion was committed by participating DFIs and $1.2 billion by private investors. The U.S.-based International Development Finance Corp., a founder of the 2X Challenge, committed this year to spurring an additional $6 billion for gender-focused initiatives globally.
- Gender-smart Call. To equip more private investors to apply a gender-lens, the U.K.’s CDC Group and the IFC have developed “Private Equity and Value Creation: A Fund Manager’s Guide to Gender-Smart Investing.” CDC’s Nick O’Donohoe and IFC’s Stephanie Von Friedeburg will launch the guide on ImpactAlpha’s Agents of Impact Call No. 25. Join Sarmayacar’s Rabeel Warraich, Trade Depot’s Onyekachi Izukanne, Alitheia’s Temilade Denton, SME.NG’s Thelma Ekiyo, the Collaborative for Frontier Finance and hundreds of other Agents of Impact on The Call, tomorrow, Tuesday, Nov. 17, at 9:30am ET / 2:30pm London / 5:30pm Nairobi / 8:00pm New Delhi. RSVP now.
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U.S. sustainable investing tops $17 trillion, one-third of all assets under management. U.S. investors added more than $5 trillion to environmental, social and governance, or ESG, strategies from the start of 2018 through the end of 2019. The 42% increase is more than quadruple the growth of assets under management overall, according to US SIF Foundation’s biennial survey of U.S.-based asset owners and managers, to be released today. Sustainable investment, broadly defined, now accounts for one-third of the $51.4 trillion in total U.S. assets under management, up from just one-quarter two years ago. The momentum has accelerated further this year, as the pandemic and climate and racial justice crises have brought ESG and sustainable investing to the fore. Investors poured $30.7 billion into sustainable funds through September, according to Morningstar, even as the Trump administration worked to turn back the tide (President-elect Biden is expected to take a more proactive stance). “Perhaps more than any other year in recent memory, 2020 has exposed the urgent need to work towards a more just and sustainable society,” said US SIF’s Lisa Woll, who will launch “U.S. Sustainable and Impact Investing Trends 2020” today at 1pm ET.
- By the numbers. US SIF tallied $16.6 trillion in U.S.-based assets incorporating ESG at the start of 2020. The assets were held by 530 institutional investors, 384 money managers and 1,204 community investing institutions. Another 205 institutional investors or money managers representing $2 trillion in U.S.-domiciled assets filed or co-filed ESG-related shareholder resolutions (the overlap accounts for the $17.1 trillion total). Assets have increased more than 25-fold since US SIF began tracking them in 2005. Red flag: Specific ESG investment vehicles and issues are only identified for about 30% of the assets. “We hope that there will be greater disclosure by asset managers,” says Woll.
- Hot buttons. Climate change is the top ESG issue identified by money managers, accounting for $4.2 trillion in assets, an increase of 39% over 2018. Investing in sustainable agriculture and natural resources was top of mind for both asset owners and managers, nearly doubling to more than $2 trillion. More than one-quarter of shareholder proposals targeting corporate behavior on environmental and social issues received majority support in 2018 through 2020, compared with just three wins between 2012 and 2015. The No. 1 issue: corporate political spending and lobbying, including companies fighting greenhouse gas regulations. Also on the ballot: climate risk and fair labor and equal employment opportunity.
- Alternative assets. Investment funds, including venture capital, private equity and real estate, increased their ESG assets by 22%, to $715 billion. The number of such funds rose 16% to 905. Community-based financial institutions increased their assets by 44% to $266 billion. Credit unions drove the growth. US SIF counted nearly 600 community loan funds with $27 billion in combined assets in 2020.
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Dealflow: Follow the Money
Better World Acquisition Corp. lists ‘healthy living’ SPAC on Nasdaq. The special purpose acquisition company is looking to raise $110 million to acquire and take public a company focusing on healthy consumers and smart cities. The SPAC is led by Rosemary Ripley and Peter Grubstein of sustainability-focused private equity firm N*GEN, which invests in sustainable agriculture, renewable energy and “circular product” companies, including healthy school lunch provider Revolution Foods and energy management software company Encycle. Better World Acquisition Corp.’s targets include “healthier, cleaner, more sustainable products and ingredients,” and technologies making cities “safer, more convenient, and more comfortable,” according to its SEC filing.
- Year of the SPAC. SPACs are on a tear in 2020, with 80 SPACs raising $32 billion in the third quarter, and 20 more listing in October. Many have an environmental or social focus (see, “Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers”).
Envoy secures $11 million to boost access to electric vehicles. For California to become carbon neutral by 2045, more than three-quarters of all cars on the road will need to be electric. Culver City, Calif.-based Envoy is working to improve access to electric vehicles through car-sharing programs for apartment and office buildings. The startup has 200 cars in place, including 30 in low-income communities in Sacramento, and is looking to add 800 more in the next year. Envoy’s Series A round was led by Shell Ventures and Building Ventures. Read on.
‘Justice tech’ and edtech ventures selected for gener8tor social enterprise accelerator. The Madison, Wis.-based gBeta Social Impact’s virtual accelerator is supporting 10 founders addressing equity in education and criminal justice reform. Its Fall 2020 cohort includes The Way Out, which has an “anti-bias” employment platform to connect the formerly incarcerated with jobs; bail insurance venture Vonzella; school district transportation provider Go Together; and Beereaders, which helps Spanish speaking students boost English comprehension.
- Justice tech pipeline. The sponsor of the accelerator, the American Family Insurance Institute for Corporate and Social Impact, has also backed Village Capital’s work on justice tech (see, “Justice tech entrepreneurs look to disrupt the cycle of recidivism”).
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Agents of Impact: Follow the Talent
Camilla Nestor, ex- of MIX, is MCE Social Capital’s new CEO… Blackstone names Eric Duchon, ex- of LaSalle Investment Management, to the new position of global head of real estate ESG… Bonika Wilson, ex- of Wilson Capital Management, becomes Invest Atlanta’s first chief equity and inclusion officer… CapShift is recruiting a director of impact investments based in Boston, Washington, D.C. or San Francisco… Flat World Titan is looking for an impact and ESG investment director in Stamford, Conn…. Climate Policy Initiative is accepting applications for its 2021 Global Innovation Lab for Climate Finance… Citizens’ Climate Lobby will host an online discussion on the prospects for climate action after the U.S. election on Saturday, Dec. 5.
Thank you for reading.
– Nov. 16, 2020