Greetings, Agents of Impact!
Featured: ImpactAlpha Original
Stretch goal for foundations: Shift power, as well as assets, for the post-COVID economy. A handful of philanthropic foundations have committed themselves to align 100% of their endowments with their social impact missions. Even before most of them reach that goal, some foundation leaders are raising the bar. The new stretch goal: changing who deploys the assets in the first place. The $300 million Heron Foundation, which in 2016 announced it had met its goal to screen its endowment investments for such “alignment,” is now working to move capital and decision-making – that is, power – about how to deploy it into the hands of community leaders themselves. The New York-based foundation plans to move its capital to local investment committees in five to 10 geographies. So far, it has helped build one such committee, to which it will soon turn over authority to commit Heron’s assets. “Instead of extracting the wisdom from these communities in order to make deployment decisions, why don’t we start a process of handing over the deployment?” Heron’s Dana Bezerra told ImpactAlpha.
- Structural change. At this week’s online Mission Investors Exchange national conference, the Rockefeller Foundation’s Rajiv Shah called for a doubling or tripling of the Earned Income Tax Credit, green infrastructure investments, and progressive tax policies “that are far more consequential in terms of achieving the equity, and sustainability goals that we are setting for ourselves.” Agreed Robert Ross of the California Endowment, “Now is the time for a real structural change agenda… not just a pilot program.”
- Shifting assets. The Rockefeller Brothers Fund says its portfolio has outperformed the market, five years after it began divesting its endowment of fossil fuels. The Nathan Cummings Foundation says it has moved more than $180 million to new impact investments and divested from another $100 million in unaligned funds in the two years since it announced (in ImpactAlpha) that it would align its $450 million portfolio with its mission.
- Inclusion alpha. In a post-COVID world, “those of us who lead foundations will be called to think more creatively about how we use all of our tools beyond 5% grant making,” Ford Foundation’s Darren Walker said to kick off MIE. Like Ford, Rockefeller Brothers and Nathan Cummings Foundation are shifting endowment assets to women and minority-run fund managers as a key strategy for increasing impact. RBF’s Gerry Watson said diversifying fund management was an easier decision than fossil-fuel divestment. “We could provide evidence that it was the right decision to make financially.”
Keep reading, “Stretch goal for foundations: Shift power, as well as assets, for the post-COVID economy,” by Dennis Price and David Bank on ImpactAlpha.
Dealflow: Follow the Money
Soros Economic Development Fund commits $15 million to Africa-based gender-lens funds. The Open Society Foundations’ impact investing arm put $10 million into Alitheia IDF (see, “Alitheia and IDF Capital raise $20 million for African gender-lens fund”) and $5 million to Women’s World Banking‘s investment fund. Both funds invest in small businesses owned, run or serving women.
DFC backs India’s Caspian Debt to fund high-impact businesses. Caspian Debt provides collateral-free loans to companies operating in microfinance, affordable housing, food and agriculture, and other high-impact sectors. The U.S. International Development Finance Corp. provided Caspian with $20 million in long-term debt capital. A third of the funding will support women-owned and women-focused businesses.
Creditshelf secures €62 million for small business lending in Germany. Creditshelf’s lending marketplace matches Germany’s small and mid-sized businesses with lenders and helps them negotiate favorable terms. The company launched its own loan fund to get more capital flowing. Now, investors have dialed up commitments amid the COVID pandemic, committing €32 million ($34.6 million) on top of €30 million raised from the European Investment Fund last November. Creditshelf is looking to raise €150 million.
Signals: Ahead of the Curve
Oil industry reckoning puts focus on pay incentives. The COVID crisis cratered demand for oil. Now it’s forcing oil and gas majors to reckon with a broken business model. “The world has fundamentally changed,” declared Shell CEO Ben van Beurden last week as he slashed the oil giant’s dividend by two-thirds. Other oil giants may be forced to follow suit, further pushing investors away from an indebted industry in long-term decline. “Cutting dividends signals to investors the business-as-usual growth strategy is no longer working,” CarbonTracker’s Mike Coffin told ImpactAlpha.
- Value over volume. Oil companies have two possible strategies: harvesting existing assets or transitioning to renewable sources of energy, Coffin says. “Even under stable business conditions, management should be incentivized to create value, rather than growing production simply to get bigger,” Coffin recently wrote.
- Aligning incentives. Executive pay incentives that reward ever-more production of oil and gas are increasingly outdated. All but four of the 30 global oil companies (Diamondback Energy, Equinor, OMV and Origin Energy) analyzed by CarbonTracker had growth metrics, such as production or reserves replacement, in their 2019 incentive structures. That’s starting to change: this year, BP removed direct growth metrics as part of its pledge to reach net-zero carbon emissions by 2050. A portion of Repsol executives’ pay will be linked to decarbonization and sustainability.
- Shareholder season. Exxon, Chevron and BP hold their annual shareholder meetings on May 27, where they will face shareholder pressure to detail their climate targets and plans. Aligning pay incentives with decarbonization plans “is the next phase,” says Coffin. Another closely watched resolution: The Church of England and The New York State Common Retirement Fund are looking to eject the entire Exxon board for the second year in a row.
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Social bond surge. The $48.5 billion in green, sustainable and social bond issuances last month was nearly triple the total in April 2019, and more than double the amount in March, reports Morgan Stanley. Leading the wave: Sovereign and governmental agencies, which issued $23 billion in COVID-related bonds (see, “Countries and companies tap fixed-income market with ‘social bonds’ for COVID relief”).
Agents of Impact: Follow the Talent
The Rockefeller Foundation is hiring a manager for innovation and a program manager for pandemics in New York… Kiva is looking for a managing director for its Kiva Invest in Women Fund in San Francisco, New York, Bogotá or Nairobi… Qontigo is hiring a head of ESG in New York… BMGI, which manages the assets of Bill and Melinda Gates and The Gates Foundation Trust, is recruiting an ESG analyst.
Thank you for reading.
–May 12, 2020