The Brief | May 31, 2022

The Brief: Gun violence as a systemic risk, biofertilizers, decarbonizing construction materials, food ingredient footprints, rebooting ESG for social value

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Greetings, Agents of Impact!

Tomorrow’s Call: Fintech, crypto and financial inclusion in Africa. For Africa’s fintech and crypto startups, products and underwriting tied to productive uses, rather than speculation and gambling, may prove more resilient and sustainable as the economic tide goes out. Agents of Impact Call No. 43 will explore the impact alpha in responsible financial inclusion.

  • Join Olu Oyinsan of Nigeria-based Oui Capital, Nelly Chatue-Diop of Cameroon’s crypto-trading startup Ejara, Mercy Corps Ventures’ Scott Onder and other Agents of Impact, tomorrow, June 1 at 8am PT / 11am ET / 6pm Nairobi. RSVP today.

Featured: Gun Money

Can investors respond to the systemic risks that gun violence poses to the American economy? Investors may not be primarily responsible for finding ways to reduce the risk of mass shootings. That mostly falls on our political leadership. But investors do have their responsibilities. America’s staggering level of gun violence has become a systemic risk that undermines the long-term health of portfolios. “As an investor, if a country had a known track record of killing its children in acts of terrorism, we would start a movement to divest,” says Nia Impact Capital’s Kristen Hull, who wrote Investors Can Help Stop Another Massacre,” in the days following the Parkland school massacre in 2018. “It’s time for all of us to raise our voices for pragmatic gun laws.” Investors have leverage. Will they use it? Banks have softened previous stances on gun industry financing in the wake of laws, passed by Texas and being considered by other states, to ban government agencies from awarding contracts to banks that “discriminate” against gun makers.

  • Gun toll. The continued risk from guns is very human: More children die each year from gun violence than do police officers in the line of duty and active military personnel. It’s also an economic issue. The bill for taxpayers, survivors, families, employers and communities is at least $280 billion a year, according to Everytown for Gun Safety, the nonprofit advocacy group chaired by Michael Bloomberg. As other countries have shown, sensible gun control saves lives.
  • Risk transparency. Shareholder activists are calling on fellow investors in gunmaker Sturm Ruger to approve a proxy resolution at the firm’s annual meeting on Wednesday that would trigger a third-party human rights assessment. Not taking every possible step to prevent mass shootings “is an abdication of responsibility that almost ensures they will recur,” says Laura Krausa of nonprofit health provider CommonSpirit Health. Asset management giant BlackRock, the largest shareholder in Sturm Ruger and other publicly traded American gun makers, voted against a similar shareholder proposal brought by Catholic nuns in 2020 that called on Smith & Wesson to adopt a comprehensive human rights policy, denying it majority approval.
  • Systemic approach. The teenager that just weeks ago killed 10 people in a Buffalo supermarket was radicalized online and subscribed to racist ideologies such as the “great replacement” lie promoted by Fox News’ Tucker Carlson. Shareholder advocacy group Shareholder Commons has introduced resolutions at Fox pressing for it and other media companies to provide an “accurate understanding of current events through the exercise of journalistic integrity.” Their case: disinformation that may boost ratings for a single company poses a systemic risk to entire portfolios. “Investors are failing grievously to account for the deep wounds disinformation is inflicting on our society,” Shareholder Common’s Sarah Murphy tells ImpactAlpha.
  • Keep reading, “Can investors respond to the systemic risks gun violence poses to the American economy?” by Dennis Price and Amy Cortese.
  • Listen in. ImpactAlpha’s roundtable regulars Imogen Rose-Smith, David Bank and Brian Walsh take up the promise, and the limits, of institutional impact on gun policy on the latest Impact Briefing podcast.

Dealflow: Agrifood Investing

Switch Bioworks raises $4.3 million for sustainable nitrogen biofertilizer. Biotech companies are promising to help farmers cut down on synthetic and expensive nitrogen fertilizer. San Carlos, Calif.-based Switch Bioworks is using microbes to provide a more sustainable and cheaper alternative. The microbes are formulated into a powder farmers can rehydrate to produce their own biofertilizer. “Our approach gives us precise control over microbial fertilizer production,” said Switch Bioworks’ Tim Schnabel. Other fertilizer plays: Kula Bio, Pivot Bio and Ginkgo Bioworks.

  • Climate finance. The pre-seed funding round was backed by Acre Venture Partners, Anthos Capital and Emerson Collective. Switch Bioworks’ technology “is a huge opportunity for the biofertilizer space because of the unparalleled precision and tunability it enables,” said Anthos’ Emily White. “With the clock ticking on climate change, we need innovations, now!”
  • Regenerative agriculture. Separately, Regrow scored $38 million to take its regenerative agriculture platform global. The Series B funding was backed by Rethink Impact and Marc Benioff’s TIME Ventures. Regrow was formed last year when crop science company FluroSat acquired the soil health startup Dagan.
  • Check it out

Dealflow overflow. Other investment news crossing our desks:

  • U.K.-based Converge snagged over £15 million ($19 million) in Series A funding, led by OGCI Climate Investments, to digitize and decarbonize construction materials and processes.
  • Dutch impact investor Shift Invest raised €110 million ($118.5 million) to invest in sustainable mobility and logistics, food tech, agtech and other cleantech ventures.
  • U.K.-based Foodsteps raised €3.8 million ($4.8 million) to help food businesses track the environmental footprint of their ingredients.

Impact Voices: Public Impact

Three ways to reboot ESG for social value. Altria, maker of Marlboro cigarettes, gets a “medium” ESG risk rating. Gun maker Smith & Wesson, a “low” risk. And ExxonMobil lands on an ESG index while Tesla gets booted, as Elon Musk has been loudly noting. Individual investors may think that an ESG score measures a company’s adherence to socially-positive practices. Rating agencies typically consider environmental, social and governance risks as they relate to a company’s profitability – not the impact of the company on the environment, communities or the world. “ESG today is nothing more than the handmaiden of shareholder value,” Developing World Markets’ Brad Swanson writes in a guest post on ImpactAlpha. “ESG must take into account the impact of a company’s actions, whether intended or not, on the world in which it lives. Good corporate citizens should be recognized and bad actors exposed.”

  • Social value. “Companies whose business models harm consumers and the environment cannot be awarded high ESG ratings, no matter how well they manage risks in their operations,” Swanson says. “Similarly, companies that pay no taxes are simply passing on these common costs to the rest of us.” More broadly, Swanson argues for separating ESG ratings from profitability. Refocusing ESG on social value would give investors a valuable decision-making tool, he argues. “ESG needs a reboot.”
  • Keep reading, “Three ways to reboot ESG for social value,” by Brad Swanson on ImpactAlpha.

Agents of Impact: Where to Meet

  • Confluence Philanthropy hosts its Advisors Forum and Climate Solutions Summit at the Ford Foundation Center for Social Justice in New York, June 1-3. The first day is members-only; guests may apply to attend June 2-3.
  • US SIF’s Forum 2022, June 6-8 near Albuquerque, N.M., will feature S.E.C. Commissioner Caroline Crenshaw and U.S. Representative Jamie Raskin.
  • PayPal’s Dan Schulman will keynote the Sorenson Impact Summit, June 13-15 in Park City, Utah.
  • The GIIN Investor Forum will convene in The Hague, Netherlands, Oct. 12-13.

Thank you for your impact!

– May 31, 2022