The Brief: Impact investing assets top $1.5 trillion

Greetings Agents of Impact!

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In today’s Brief:

• The state of impact investing 
• Nuveen’s $170 million global impact credit strategy 
• Solar energy for Nigeria’s small businesses
• New podcast: The Market Makers, with Troy Duffie and Lenore Champagne Bearne

Featured: State of the Market

And the size of the impact investing market is $1.5 trillion…ish. Pension and insurance funds that are increasing their allocations to impact investments pushed total impact assets under management to $1.571 trillion, according to the Global Impact Investing Network, which kicks off its annual Impact Forum in Amsterdam today. That number will no doubt be invoked in conversations at the GIIN about how strongly the field is advancing. But the total is less important than the performance, and the impact. In guest posts on ImpactAlpha, Agents of Impact cite evidence for higher than expected private equity returns and lower than expected lending risks. AlphaMundi Group’s Tim Radjy calls for elevating “the true narrative of impact investing performance and market return tradeoffs.” Fresh from PRI in Person in Toronto, TIIP’s Bill Burckart is bringing to Amsterdam what he says is investors’ growing appreciation of the need for “system-level” solutions to the growing web of interconnected global risks.

By the way, the $1.5 trillion-plus number in the GIIN’s latest sizing study is far from precise, as the report acknowledges. And it cautions that the fudge factors make it hard to compare this year’s total with previous estimates. Still, it doesn’t hurt that the new number is a decent jump from 2022’s extrapolation to $1.164 trillion, and slightly more than triple the GIIN’s 2019 estimate of $504 billion. As David Bank writes from Amsterdam, the GIIN’s commendable methodological detail is likely to be lost as the new number gets cited and rounded in the months ahead. “To shorten the cycle, let it be known that impact assets under management now total $1.5 trillion…ish.”

• Risk-adjusted impact alpha in private equity. Impact investments can and do outperform, and are often much less risky than perceived. In a guest post for ImpactAlpha, Radjy, with contributions from Clare Sewell of AMG and Ramkumar Narayanan of Tameo Impact Fund Solutions, cites historical data showing that impact equity and debt strategies run by private equity firms offer the best places in emerging markets to find risk-adjusted returns. “Impact investing in emerging markets has been tried and tested, and it seems to offer one of the best paths to SDG funding for developing countries and asset owners alike,” Radjy writes. Most impact portfolios, he adds, “have not yet monetized the financial value of the positive impact their investments are fostering.” Read the post from Radjy, Sewell and Narayanan.
  
• Low-risk, high-impact lending in emerging markets. For private investors, there’s a lot to like in the latest data release from the GEMs Consortium of 21 multilateral development banks and development finance institutions on the historical credit risks of lending to emerging markets and developing economies, argues ODI’s Neil Gregory. His exclusive analysis of the recent GEM data drop for ImpactAlpha finds that country-level sovereign lending is incredibly low risk. Lending to private entities is also less risky than commonly perceived. And infrastructure – key to mobilizing private capital to address climate change while meeting rising energy demand – has shown relatively low default rates for loans to private parties (for background see, “New release of GEMs loan data debunks misperceptions of risks”). The big takeaway: Private investors should “see loans in emerging and developing markets as a long-term asset class which repays patient investing and a thorough approach to asset selection.” Read Gregory’s post.
  
• Charting a systems-level path forward. “You are the first generation of investors to understand climate risks—but you are also the last generation that can do something to mitigate them,” Brookfield’s Mark Carney told the audience at PRI in Person earlier this month. In his report from the Toronto conference, Bill Burckart of The Investment Integration Project said that, while he’s “a glass-half-full person,” many of the conversations at the gathering were pulled toward the interconnected risks that are exacerbating one another and our path, without more decisive action, towards systems-collapse. “System-level solutions offer our best chance at addressing these interconnected crises,” Burckart argues. “We do not have to choose between progress or stalemate – we can reconceptualize our entire approach to investing to include a systems lens.” Read Burckart’s post.

Sponsored by BlueMark

BlueMark introduces fund-level impact rating. This week, BlueMark launched the Fund ID, an online benchmarking tool that offers investors an assessment of a fund’s impact credentials. BlueMark piloted the Fund ID with 37 leading sustainable and impact funds, whose feedback helped refine the tool, aiming to set a new market standard for impact accountability. The pilot results, along with details of the Fund ID’s methodology and rating system, are showcased in a new white paper, available for download. Get started.

Dealflow: Institutional Impact

Nuveen debuts $170 million global impact credit strategy.Nuveen, the $1.2 trillion investment manager and subsidiary of insurance giant TIAA, raised €157 million ($170 million) for its new impact credit fund. The investments came from TIAA and from Norwegian life insurer Gjensidige Pensjonsforsikring, or GP, and others. The fund is part of Nuveen’s $413 billion fixed income strategy, which has backed the World Bank’s Rhino Bond, the Seychelles Blue Bond, the Barbados Blue Bond and the Amazon Reforestation Bond supportingwildlife conservation, sustainable marine projects and reforestation efforts. Nuveen has signaled that it is seeing more interest for “impact only” investment options. The launch follows a first close of C$200 million ($147 million) for Nuveen’s second impact-focused private equity fund in July.

• Impact strategy. The impact credit fund will invest mainly in investment-grade corporate bonds earmarked for environmental and social outcomes, particularly around affordable housing, community development, climate change and natural resource regeneration. It will also screen for issuers committed to transparent impact reporting. The strategy, said Nuveen’s Jessica Zarzycki, will seek to “consistently outperform the global corporate bond market on an excess and risk-adjusted basis” and “lower the cost of capital for environmental and social projects by funding initiatives through the easily accessible, liquid public fixed income markets.”
  
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Earthbond raises $200,000 to bring solar energy to Nigeria’s small businesses. Small businesses in Nigeria rely on polluting diesel generators as backup to the country’s unreliable electricity grid. Solar panels are an attractive alternative, but upfront costs hamper their adoption. Earthbond, a Lagos-headquartered startup, runs a solar energy marketplace connecting businesses with solar providers and financiers. It raised $200,000 in pre-seed funding from African early-stage incubator Madica Ventures, a spinout of venture capital firm Flourish Ventures in San Francisco. 

• Solar marketplace. Nigeria’s unreliable national grid collapsed 46 times over six years through 2023, costing businesses more than $29 billion a year. Small enterprises, from manufacturers to schools to agricultural processors, are forced to rely on diesel-powered generators. Nigeria buys nearly half of all generators sold in Sub-Saharan Africa. Limited awareness and a scarcity of financing for upfront installation costs have held back solar adoption. But interest in alternative sources has grown after fuel costs tripled following a government fuel subsidy lift. 
  
• Carbon reduction. Earthbond, launched last year as a “one-stop” solar shop, collects bank statements and energy usage details from small businesses to estimate costs and their ability to pay. It then connects them with solar panel installers and helps them apply for financing from local microfinance partners. Panels or battery storage systems can be set up in as little as four weeks. The startup plans to offer discounts based on carbon emission reductions, and founder Chidalu Onyenso is looking to generate qualified carbon credits to bolster Earthbond’s business model (see, “Carbon markets fall short as a climate solution, but go far in financing sustainable development”). So far, Earthbond has facilitated more than 20 megawatt hours of clean energy.
  
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Dealflow overflow. Investment news crossing our desks:

• Opportunity Finance Network and MassMutual Foundation announced a $25 million, five-year partnership to scale community development finance institutions. (OFN)
  
• UK’s Turnover Labs, which helps chemical plants turn their carbon emissions into chemical building blocks, landed $1.4 million in a pre-seed round led by Pace Ventures & GC Ventures. (Yahoo Finance)
  
• International Finance Corp. invested $25 million in a blue bond and $50 million in a green bond, both issued by QNB Türkiye to enhance climate financing for small and large businesses in the country. (IFC)
  
• Achieve Partners, an education-focused private equity fund in New York, invested an undisclosed amount in RiseNow, a Kansas-based boutique advisory and strategy firm focused on procurement and supply chain issues.
  
• Seattle-based Carbon Robotics raised $70 Million in a Series D round led by global VC BOND to scale its AI-powered precision weed control tool LaserWeeder, which cuts chemical herbicide use. (Business Wire)

Podcasts: The Market Makers and Capitol Gains

📈 The Market Makers: Building an inclusive capitalism with Troy Duffie and Lenore Champagne Bearne (video podcasts). In the latest addition to the ImpactAlpha Podcast Network,the Milken Institute’s Troy Duffie and Bright Ventures’ Lenore Champagne Bearne seek out asset allocators, investors, founders and policymakers who are building an economy that works for everyone. In their inaugural episode, Duffie and Champagne Bearne introduce the show and discuss their backgrounds and career trajectories. Duffie, raised in Miami, was influenced by the stark economic contrast between North Miami Beach and Overtown, known as the Harlem of the South. Champagne Bearne grew up shuttling between the homes of a white parent and a Black parent, an experience she says “raised a ton of questions for me about differences in race as well as differences in socioeconomic status, and what neighborhoods look and feel like, and what kinds of businesses can exist there.” The incongruities and missed opportunities Duffie and Champagne Bearne saw led each to pursue a more inclusive capitalism through their careers, and now launch The Market Makers.

• Innovating financial security with Wemimo Abbey. Some 45 million people in the US are “credit invisible,” lacking credit history with the major credit bureaus. Without a credit score, it’s almost impossible to build equity in large assets such as home mortgages. In episode two of The Market Makers, Duffie and Champagne Bearne talk to Wemimo Abbey, the founder of Esusu, a company that helps people leverage their rent payment history in order to improve or inform their credit score. When Abbey’s mother arrived in the US from Lagos, she was turned away by banks because of her lack of credit history; instead she borrowed from a payday lender at a more than 400% interest rate. Inspired by that experience, he and his cofounder started Esusu on a core premise: “No matter where you come from, the color of your skin and your financial identity shouldn’t determine where you end up in the wealthiest nation the world has ever seen.” Esusu, which is backed by Serena Ventures and SoftBank Opportunity Fund, has unlocked $22 billion dollars in mortgages, auto loans, personal loans and other financing for 120,000 people who have used its service. Listen to or watch episode two of The Market Makers.

🏛️ Capitol Gains: Joel Rogers on taking the high road to sustainable and equitable development. “High road development is essentially about prospering better together in places forever,” explains Joel Rogers of the University of Wisconsin-Madison in the latest Capitol Gains podcast. “It’s about reducing waste, adding value, capturing the benefits, and doing it again.” That stands in contrast to what Rogers calls “low road” development, where people, the environment, and democracy are treated as expendable resources. In a wide-ranging conversation, Rogers speaks with hosts Matt Posner and James McIntyre about how local governments can implement strategies that foster economic equity, sustainability, and resilience while navigating the complex challenges of modern governance.  

• Listen to the latest Capitol Gains podcast with Joel Rogers. 

For more smart conversations by and for impact professionals, check out all of the shows on the ImpactAlpha Podcast Network.

Agents of Impact: Follow the Talent

KOIS adds Florian Kemmerich, previously a managing partner with Palladium, as managing partner… Norsad Capital taps Vusi Raseroka, previously with Public Investment Corp., as CEO… Brian Wyborn steps down as managing partner of First Australians Capital to join Aboriginal Investment NT, an Australian firm that invests in Indigenous communities in Australia’s northeast region… The Center for Sustainable Finance and Private Wealth North America, or CSP North America, appoints WakeUp Capital’s Faye Walsh Drouillard to board chair.

ClimateWorks Foundation is looking for a funder collaborations associate director in San Francisco… Platform or Social Impact seeks a communications director in Puerto Rico… DC Green Bank has an opening for a solar investments director… The Carlyle Group is on the hunt for a sustainability manager in New York… Also in New York, Neuberger Berman is hiring a private markets ESG and impact investing associate.

The New York State Insurance Fund is recruiting an ESG and sustainable investments senior lead…  The Taskforce on Inequality and Social-related Financial Disclosures seeks applications for new members. The deadline to apply is Nov. 4… Convergence will host its State of Blended Finance 2024 (Climate edition), Wednesday, Oct. 30 at 9am ET.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

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