Greetings! It was great to see so many Agents of Impact on yesterday’s Call, the last of our spring season. We’ll share the recap and replay in Friday’s Brief, and kick off our fall lineup of calls in September.
- Situational awareness. Shareholders at Sturm Ruger’s annual general meeting Wednesday approved a resolution, brought by members of the Interfaith Center on Corporate Responsibility, to urge the gun maker to undertake a “human rights impact assessment.” Institutional investors tuned out the opposition of Sturm Ruger’s management. CommonSpirit Health’s Laura Krausa said the massacres in Buffalo, N.Y., and Uvalde, Texas, “created urgency to act, including efforts to engage with gun manufacturers to ensure they better understand the impacts of their products.”
- ICYMI: “Can investors respond to the systemic risks gun violence poses to the American economy?”
Featured: Housing Solutions
Catalyzing capital and sizing solutions to homelessness: A blueprint for Los Angeles. As a parting challenge to his successor, outgoing Los Angeles Mayor Eric Garcetti announced in April the settlement of a longstanding lawsuit over homeless housing that will compel the city to move about 17,400 unsheltered residents into rooms over the next five years. The price tag: between $2.4 and $3 billion. Responses to the homelessness crisis may well determine the winner of next week’s primary election for mayor of the nation’s second-largest city – a race that is currently led by developer Rick Caruso and U.S. Representative Karen Bass. The city’s next leader has an opportunity to create a model for the kind of incentives and partnerships that can draw in private capital to finance solutions at scale. That means controlling development costs, de-risking investments and, yes, increasing public subsidies, writes Daniel Heimpel, editor of The Giving List.
Innovative solutions and catalytic capital could meet the city’s challenge and provide a roadmap for other cities grappling with the homelessness crisis. Elizabeth Collet Funk of Dignity Moves, a nonprofit that is standing up temporary and more permanent housing for people experiencing homelessness, suggests using city-owned land to build temporary communities. Portland-based modular construction company Quantum Assembly uses recycled steel to drive down maintenance and insurance costs, bringing the per unit cost of its 12-unit modular homes to about $180,000. On the front end, loan guarantees go a long way in assuaging investors’ concerns. The Community Investment Guarantee Pool offers loan guarantees on a range of socially-conscious private enterprises, including $15 million in catalytic housing guarantees. And enhanced subsidies, such as L.A. County’s Flexible Housing Subsidy Pool, can spur new construction by promising developers years of uninterrupted rents. “What we need is an ecosystem of solutions,” says Jonathan Rose of Jonathan Rose Companies.
- Keep reading, “Catalyzing capital and sizing solutions to homelessness: A blueprint for Los Angeles,” by Daniel Heimpel on ImpactAlpha.
Dealflow: Food Waste
Bogotá-based RobinFood raises $32 million to expand food access and cut waste. The Colombian startup operates physical and virtual restaurants that make and deliver affordable homemade food. The company deploys artificial intelligence to forecast demand and reduce food waste. To serve Latin America’s large low-income population, the company focuses on mega cities in Colombia, Mexico and Brazil and allows customers to pay with a variety of new digital options.
- Maximizing impact. The round was led by Blue like an Orange, which invested $10 million, Palm Drive and Minerva Capital. “We are excited to support a company which aims to reduce food waste and improve its sustainability practices, including employment practices, with such seriousness,” said Rashad Kaldany of Blue Like an Orange, which says it will work with the company “to maximize its positive social impact, while minimizing environmental harm.”
- Cut it out.
New Delhi-based Revamp Moto raised $1 million for electric two-wheelers. Designed for India’s micro-entrepreneurs, the scooters can be customized for different uses, such as transporting refrigerated milk cans and crates of vegetables or people. The pre-seed funding was led by early stage investors Veda VC and Venture Catalysts. EVs are already displacing demand for 1.5 million barrels of oil per day, mostly because of use of electric two and three-wheelers in Asia, notes BloombergNEF in its just-released 2022 electric vehicle outlook.
- Hypercars. On the other end of the spectrum, Croatia-based Rimac hauled in €500 million ($534 million) to grow its EV-parts business. Softbank and Goldman Sachs led the Series D round, with participation from Porsche. Rimac will use the funds to build facilities in Europe to manufacture its Nevera high-performance electric car, as well as batteries and other components to supply EV partners. The funding round positions Rimac for an IPO.
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Signals: Impact Management
To understand the impact of microfinance, ask borrowers directly. Critics of microloans to the poor have often lacked a crucial perspective: comprehensive feedback from borrowers. “Billions of dollars are flooding into a system that promises the world’s poor a better life while often compounding their misery,” report Bloomberg’s Gavin Finch and David Kocieniewski, who spoke to a couple dozen microloan borrowers in Cambodia, Jordan, Sri Lanka and Mexico. Interviews with almost 18,000 borrowers of 72 microfinance institutions in 40 countries tell a different story. According to the 60 Decibels Microfinance Index, nearly 90% of clients surveyed say their quality of life has improved; 73% of borrowers report increased household incomes; and three-quarters of borrowers say their loan repayments are “not a problem” and “strongly agree” that they understand their loan terms. Anecdotal outliers aside, says 60 Decibels’ Lindsay Smalling, “billions is flooding into something that the majority of 18,000 people say is improving their quality of life, is giving them access where they had no access, and is not overly indebting them.”
- Economic empowerment. 60 Decibels deploys more than 800 researchers to collect data directly from customers through mobile, voice-based surveys. The index, which will be updated annually, sheds perspective on 25 million microfinance clients, representing 15% of the global market, the firm says. Two-thirds of those surveyed were women and 30% live below the World Bank poverty line of $3.20/day. Nearly 60% were accessing a loan for the first time.
- Consumer protection. To be sure, 6% of borrowers surveyed by 60 Decibels report their payments to be a “heavy burden,” an issue that Finch and Kocieniewski document. “That’s something for the field to pay attention to,” says Smalling. Hundreds of microfinance institutions now commit to frameworks like the Client Protection Pathway, a successor to the SMART Campaign, that push for borrower protections and ethical lending practices. “But you can’t discount that for the other 94%,” adds Smalling, “this is a huge driver of economic development.”
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Impact Voices: Policy Corner
Rules and regulatory trends impact investors should be tracking. As the midterm elections approach and political dynamics in Washington shift, regulatory action has become an important avenue for progress on issues that are front-and-center for impact investors, Fran Seegull of the U.S. Impact Investing Alliance writes in a roundup for ImpactAlpha. Among the actions the Alliance is tracking:
- U.S. climate disclosure. The Securities and Exchange Commission’s proposed corporate climate disclosures would mandate enhanced climate-related disclosures by public companies, helping ensure that investors have clear, consistent and comparable disclosures of climate-related risks and impacts (see, “Agents of Impact eye corporate disclosure rules on climate and human capital“). To comment by the June 17 deadline, follow this guidance on suggested topics and complete this comment form, or send an attachment to rule-comment[email protected] (include “File Number S7-10-22” in the subject line). Also: Weigh in on the Federal Deposit Insurance Corporation’s draft principles for banks’ consideration of climate-related financial risks.
- ESG fund transparency. A pair of proposed rules from the S.E.C. would enhance requirements and disclosures for funds and advisors and prevent misleading or deceptive fund names. Comment periods will be open for 60 days following publication in the Federal Register.
- Community Reinvestment Act reform. The three U.S. banking regulators released a joint Notice of Proposed Rulemaking to strengthen and modernize the civil rights-era banking law passed to combat disinvestments from primarily Black neighborhoods (see, “Institutionalizing the racial reckoning in Community Reinvestment Act reforms”). The agencies are accepting comments through Aug. 5.
- Keep reading, “Rules and regulatory trends impact investors should be tracking,” by Fran Seegull. The U.S. Impact Investing Alliance sponsors ImpactAlpha’s Policy Corner.
Agents of Impact: Follow the Talent
Asoka Woehrmann, CEO of Deutsche Bank’s asset management subsidiary DWS Group, resigns after the firms’ offices were raided by German authorities over allegations of greenwashing… Cambria Allen Ratzlaff, ex- of UAW Retiree Medical Benefits Trust, joins JUST Capital as managing director and head of investor strategies (see, “Call No. 38: Inside the generational opportunity to reshape rules of corporate disclosure”).
Advisory firm CohnReznick is accepting applications from U.S.-based companies for its Gamechangers in ESG Awards program… TripleJump seeks an office manager in Amsterdam… Dutch pension fund PGGM is looking for an intern for its responsible investment team… Impact investor Norrsken VC is recruiting a senior and junior investor in Stockholm.
Thank you for your impact!
– June 2, 2022