The Brief: Greenwashing graveyard, Elon Musk’s climate risk, HSBC’s natural capital funds, healthcare in Africa, women’s livelihoods, climate resilience debt

Greetings, Agents of Impact!

Fusion ignition. “It’s the first time it has ever been done in a laboratory, anywhere in the world,” U.S. Energy Secretary Jennifer Granholm said about this week’s achievement of “net energy” from a fusion reaction. “This is a BFD.” Watch here and catch up on the race to commercialize fusion power. 

Featured: Public Impact

The case of the suddenly missing trillions in ESG investments. It’s an ESG whodunnit. Sustainable investment assets in the U.S. totaled $17.1 trillion in 2020, according to US SIF. This year? Just $8.4 trillion. Where did $8.7 trillion – more than half of sustainable investments – go? To the greenwashing graveyard. For the latest edition of the biennial “U.S. Sustainable Investing Trends” report, US SIF tightened its methodology to include only funds and vehicles that identify environmental, social and governance, or ESG, as integral to their investment decision-making, or that point to specific ESG criteria used. Labeling a fund “ESG” or “sustainable” is no longer enough. “It’s very important to raise the bar with this report,” said US SIF’s Diederik Timmer. “We believe the shift in the Trends report methodology contributes to this goal.” 

• Naming rules. The change coincides with a crackdown by regulators on greenwashing. The Securities and Exchange Commission in the U.S. is readying rules to require funds and advisors to back up their ESG claims, causing some firms to drop the labels. In Europe, some $2 trillion of sustainable investments vanished after the E.U. passed the Sustainable Finance Disclosure Regulation requiring more rigorous labeling and disclosure by funds. “We’re the canary in the coal mine on the impact of this ESG disclosure proposal by the S.E.C.,” said US SIF’s Lisa Woll.
  
• Keep reading, “The case of the suddenly missing trillions in ESG investments,” by Amy Cortese on ImpactAlpha. 

Are Elon Musk’s Twitter escapades putting Tesla’s climate impact at risk? Some Tesla shareholders are frustrated that CEO Elon Musk is hurting the electric vehicle maker’s share price with his acquisition of Twitter and flirtation with right-wing extremism. Some impact investors have another worry: that Musk’s increasingly erratic behavior threatens Tesla’s broader mission “to accelerate the advent of sustainable transport.” “The long-term goal is threatened,” says Kristin Hull of Nia Impact Capital, who is rallying institutional Tesla shareholders to pressure Tesla’s board to reel in Musk. Hull says poor performance on ESG issues hinders a company’s ability to deliver real-world impact and innovation. “We want to see strong and effective governance across ESG issues, which are underlying business issues. And we’re not seeing that at Tesla,” Hull tells ImpactAlpha. “If your whole brand is based on innovation, I want to see the business practices in your company run to support that innovative brand.”

• Track record. At Apple, Nia led a campaign with the Minderoo Foundation and other collaborators to end employee “gagging” restrictions. Apple last week agreed to end the use of nondisclosure agreements and other rules that prevented employees from speaking up about workplace harassment. Nia has filed and won approval for worker rights proposals at Sunrun, IBM and cybersecurity firm Fortinet (for background, see, “Kristin Hull: How I invest in environmental sustainability and social change”).

• ESG for impact. Oakland-based Nia first invested in Tesla in 2013 on the basis that the company’s products and services contributed to a more just, inclusive and sustainable economy. Hull has since pushed the company on worker rights issues ranging from racial descrimination to sexual harassment. Musk’s latest antics, Hull says, are turning off consumers and hindering the company’s ability to attract and retain talent. “The sky’s the limit over there and to see them throwing away half the sky based on this management, it breaks my heart,” she says. “As an investor, it’s like, ‘What the hell is going on over there?’”

• Keep reading, “Are Elon Musk’s Twitter escapades putting Tesla’s climate impact at risk?” by Dennis Price on ImpactAlpha.

Dealflow: Natural Capital

HSBC-backed Climate Asset Management raises $650 million for natural capital funds. The U.K.-based asset management firm launched in 2020 to prove that protection and restoration of natural resources can be attractive to institutional investors. The firm’s Natural Capital Strategy is looking to raise $1 billion to acquire land parcels in advanced economies and restore then for regenerative agriculture and agroforestry. Investors will earn a return from both the land’s appreciated value and revenues from its productive use. For its first investment, Capital Asset Management has acquired almost 1,000 acres of poor quality farmland in Spain, which it will restore and convert to almond and olive production. The strategy includes planting cover crops and using drip irrigation to conserve water.

• Advanced markets. The fund is anchored by HSBC, which launched Climate Asset Management in partnership with climate investor Pollination. “Having a new product as a new asset manager, investors wanted us to restrict this [strategy] to developed markets,” Climate Asset Management’s Martin Berg told ImpactAlpha. Even with one of the biggest natural capital strategies in the market, fundraising has not been easy. Says Berg, “Anything in finance that is new and that not everyone else is investing in is difficult to do.”
  
• Carbon credits. A second fund, Nature Based Carbon Strategy, also anchored by HSBC, will invest in carbon projects in emerging markets to generate carbon credits for corporate investors. Rather than acquiring assets, Climate Asset Management will invest in projects owned by local stakeholders and other developers. The firm is partnering with the Global EverGreening Alliance and is looking to raise $600 million for the fund. There is a pipeline of projects in six African countries. The partners aim to restore nearly five million acres of farmland and support 1.5 million smallholder farmers.
  
• Read on.

Transform Health Fund scores $50 million from investors for healthcare in Africa. Impact investor AfricInvest and internationally-backed Health Finance Coalition are partnering on a planned $100 million fund to improve access, affordability and quality of care in Africa’s underinvested healthcare sector. With 16% of the global population, Africa receives just 1% of global health spending. Transform Health Fund, announced at last week’s U.S.-Africa Leaders Summit hosted by President Joe Biden, will blend financing to make mezzanine and debt investments for “locally-led health supply chain, care delivery and digital solutions.” The fund aims to demonstrate “that health enterprises serving the most vulnerable communities are investible,” said Martin Edlund of Health Finance Coalition and its parent organization, Malaria No More. “To solve the health financing gap in Africa, we need to crowd in substantial private investment.”

• Many backers. Innovation in healthcare “provides an opportunity to leapfrog” in underserved regions like Africa, said Makhtar Diop of International Finance Corp., which has committed to the Transform Health Fund along with USAID, the U.S. International Development Finance Corp., Merck, Philips, FSD Africa, MCJ Amelior Foundation and others. The fund “demonstrates what’s possible when you combine a ‘capital stack’ approach to financing with a genuine commitment to transformational impact,” said MCJ Amelior’s Ray Chambers, a World Health Organization ambassador for global strategy and health financing.

• Check it out.

IIX raises $50 million for fifth Women’s Livelihood Bond. The bond will support 300,000 low-income women and girls in Asia and Africa. It’s the fifth in IIX’s Women’s Livelihood Bond series and the first to finance women-centric initiatives outside of Asia. It is also the first designated under the Orange Bond Principles, which IIX spearheaded to shift capital in the $130 trillion global bond market to support women and girls (orange is the color used for Sustainable Development Goal No. 5, achieving gender equality). The newest Women’s Livelihood Bond “will set the momentum for many Orange Bond transactions to come in the near future, making it a game changer for the sustainable financing market,” said Stephen Liberatore of Nuveen, which invested in IIX’s latest bond.

• Climate + gender. IIX is a pioneer of gender-focused listed bonds, launching its first Women’s Livelihood Bond in 2017. It raised $8 million. Earlier this year, the impact investment firm closed its fourth bond in the series, which invests in women’s climate resilience. A portion of the fifth bond’s proceeds will also be used to “empower women to advance climate action,” the firm said.
  
• Dive in.

Dealflow overflow. Other investment news crossing our desks:

• Rwanda is the first African country to be approved for lower-cost climate resilience debt from the International Monetary Fund’s Resilience and Sustainability Facility (for context, see, “Development finance institutions face calls for reform in the face of cascading climate and energy crises”).
  
• Atlanta-based EnviroSpark raised an undisclosed amount of Series A funding to expand its network of electric vehicle charging stations in the U.S. and Canada. 

• Canada-based pension manager Public Sector Pension Investment Board invested $250 million to scale up offshore wind turbine production from Norway’s Havfram and private equity firm Sandbrook Capital.

• Lendable-backed Finclusion Group rebranded as “Fin,” and raised $2 million to provide African consumers with access to credit (for context, see, “Finclusion Group raises $20 million to become a credit-first neobank”).
  
• Moove, which provides vehicle financing to Uber drivers, raised $30 million in an Islamic finance-compliant bond to accelerate EV adoption in the Middle East.

Agents of Impact: Follow the Talent

The U.K.’s Financial Conduct Authority names six members to a new ESG advisory committee: Desiree Fixler of RYSN Consulting and VentureESG, Sonali Siriwardena of Simmons and Simmons, Harald Walkate of the University of Zurich’s Center for Sustainable Finance and Private Wealth, Tom Gosling of London School of Business, Catherine Howarth of ShareAction, and Tim Mohin, ex- of Persefoni and the Global Reporting Initiative… Guild Education selects Dean Carter, ex- of Patagonia, as “Chief People Officer.”

The Draper Richards Kaplan Foundation names Dallas’ police chief Renee Hall, former Superior Court judge Shelyna Brown, and Revolution Foods founder Kristin Groos Richmond as senior fellows. Mobola da-Silva, ex- of Alitheia Capital, and Karen Serem Waithaka, ex- of Global Partnerships, join the foundation as Africa portfolio advisors… Aisha Francis of Benjamin Franklin Cummings Institute of Technology joins Sunwealth’s board of directors. 

Thank you for your impact.

– Dec. 14, 2022