Greetings, Agents of Impact!
Featured: ImpactAlpha Original
Q&A with Jeremy Grantham: Hold fossil fuel companies to account and make them ‘pariahs.’ Jeremy Grantham called the Japanese bubble of the 1980s, the tech bubble of the 2000s, and the housing bubble of 2008. The British-born value investor has been warning of the risks of climate change long before it was fashionable. At this week’s Conservation Finance conference at Credit Suisse in New York, Grantham said oil companies “have behaved outrageously badly” and should be called out as “pariahs,” much like tobacco companies were several decades ago. Credit Suisse’s Wilson Ervin engaged Grantham, who manages $60 billion in assets as chief investment strategist of Grantham, Mayo, & van Otterloo, in a frank and, frankly remarkable, discussion about the role of finance in addressing climate change. Highlights:
- Carbon bubble. “The world is seriously underestimating the dangers of climate change, the rate at which it will eventually have to move, and the enormous amount of stranded assets that will result from being late,” says Grantham. He pins particular blame on recalcitrant oil companies. “Unless they are made to look like pariahs, politicians will never have the nerve to impose taxes on carbon, just as they imposed taxes on cigarettes. It took 20 years of making tobacco look like a pariah. We have to do that with the oil industry, unless they voluntarily start to behave well.”
- Larry’s letter. Grantham was skeptical about this week’s annual letter from BlackRock’s chairman Larry Fink. “Well done, Larry,” he said. “Now, can you vote your index funds a little greener?” Among asset managers, he said Legal & General votes its index fund shares “extremely well.” BlackRock falls woefully short, he said. What really made his day: the European Union’s plan to spend €1 trillion – one-quarter of its budget – to transition to a low-carbon economy.
- Effective divestment. Grantham took issue with Bill Gates, who recently opined, “Divestment, to date, probably has reduced about zero tons of emissions.” That “misses the whole point,” said Grantham. “This is not about the economics of the short term, this is about making them pariahs. That’s why you divest. If you divest without getting it into the newspapers, you’ve wasted your time.”
- Game changers. “Everything green will have a faster growth rate than everything black,” says Grantham. He cites electric cars, the greening of the grid, and energy efficiency as examples. One area where he’s placing bets: solid-state lithium ion batteries. “That’s a game changer. And there are lots of those game changers out there.”
- Profitless capitalism. Grantham said the only true profits, known as Hicksian profits in the trade, are those that leave the underlying asset as valuable and intact as it was before. “We are not doing that to our natural system. We are running it down, we are despoiling it, and we are not charging it on the balance sheet or the income statement,” he said. “If we did, it is not clear to me that in the last 10 or even 20 years, the developed world has actually been making any money.”
- Read the whole Q&A.
Dealflow: Follow the Money
Omnivore and Insitor invest in Indian online food marketplace TechnifyBiz. The online trading platform for non-perishable foods, such as nuts and dried fruits, connects India’s farming cooperatives directly with buyers. Behind the scenes, the Delhi-based startup works with India’s “farmer producer organizations” to boost the value of their products before listing them online. These organizations, similar to co-ops, don’t otherwise capture much value in the produce they sell, says Omnivore’s Mark Kahn. TechnifyBiz does “supply-level upgrading, while also working downstream with buyers to ensure that they’re getting the sort of produce that they require,” he says. Omnivore and Insitor Impact Asia Fund backed TechnifyBiz’s $2 million funding round.
- Supply chain efficiency. TechnifyBiz is one of a number of startups in India and elsewhere helping boost small-scale farmers’ incomes. Omnivore has backed other such disruptive middlemen, including Bajik, another B2B commodities marketplace, and agricultural (and aquacultural) platforms DeHaat and Aquaconnect. It has also invested in FR8, a delivery and logistics platform.
- Trial and error. Dairy delivery service Doodhwala – the first investment from Omnivore’s $97 million second fund – sought to improve market access for India’s small dairy farmers by collecting and delivering milk directly to households. The company recently discontinued its services.
- Read on.
Rebound Technologies secures $5 million for efficient cooling technology. The Denver-based company says its IcePoint refrigeration system for industrial cold storage use is 35% more efficient than current standard technologies and could prevent 681 million metric tons of greenhouse gas emissions annually. (Project Drawdown ranks alternative refrigeration above all other technologies in terms of its potential impact on GHG emissions.) Clean Energy Ventures,Skyview Ventures, and Autodesk Foundation backed the round.
Identity verification platform VerifyMe Nigeria raises Series A round from Consonance Investment Managers. Less than 40% of Nigerians have formal identity documents. VerifyMe Nigeria wants to boost responsible digital and financial inclusion by helping financial institutions and government agencies conduct background checks and preempt and catch identity fraud.
Agents of Impact: Follow the Talent
The Tipping Point Fund is looking for a lead program officer in New York or Washington, D.C. (see, “Funding the market infrastructure for impact investing’s tipping point”)… HBO is hiring a director of sustainability… Impact advisory firm Align Impact is recruiting investment interns for the spring and summer… RSF Social Finance is accepting applications for grant funding from its Seed Fund through Mar. 13… The Impact Engine’s Chicago Impact Investing Showcase is being held on Mar. 9 (not Mar. 8, as yesterday’s Brief stated.)
Thank you for reading.
– Jan. 16, 2020