The Brief: New fiduciary duty (podcast), Mitsubishi’s off-grid push, community impact notes, Blackstone’s impact



Greetings, Agents of Impact!

ImpactAlpha Podcast: Returns on Investment

New corporate ‘purpose’ signals updates to ‘fiduciary duty’ and ‘materiality’ (podcast). The next dominoes to fall in the new logic of stakeholder capitalism: outmoded conceptions of ‘fiduciary duty’ and ‘materiality.’ The latest episode of ImpactAlpha’s Returns on Investment podcast took up the impact of the revised statement of corporate purpose signed by 181 CEO members of the Business Roundtable. The logic: By embracing the interests of customers, employees, suppliers and communities, along with shareholders, the Business Roundtable statement makes such interests material to the long-term performance of those corporations. And if corporations deem such factors material, investors may well be duty-bound to consider them as well. It could become a dereliction of fiduciary duty not to account for factors previously seen as externalities. “It’s a tactical victory,” editor David Bank argues in the podcast’s, uh, roundtable discussion. “Let’s go from win to win.”

Podcast roundtable regulars Imogen Rose-Smith and Brian Walsh cautioned the 300-word statement hardly means all that. CEOs, after all, have worked to weaken the voice of shareholders, who have been seeking to hold corporate managers accountable for everything from climate risk to executive compensation (see “Shareholders for stakeholders,” below). “I don’t think a bunch of corporations saying, ‘Yes, we care,’ is the victory you say it is,” Rose-Smith told Bank. “At best it’s accepting that there has been a shift in the discourse.” That shift, Bank argued, is precisely the point. “They’re feeling some heat. That heat is what we have to turn up.”

Read on and listen in, to “New corporate ‘purpose’ signals updates to ‘fiduciary duty’ and ‘materiality,’” on ImpactAlpha.

  • Shareholders for stakeholders. CEOs that signed the Business Roundtable commitment to stakeholders should drop obstacles to shareholder engagement says Laura Campos of the Nathan Cummings Foundation. In a guest post on ImpactAlpha, Campos calls out the Roundtable for efforts at the U.S. Securities and Exchange Commission to restrict shareholder resolutions. The Cummings Foundation has filed more than 200 shareholder proposals on issues ranging from climate change to hate speech and has won commitments from dozens of companies. “To fulfill the new pledge,” Campos writes, “CEOs and the Business Roundtable should be lobbying the SEC to safeguard shareholder voices, not silence them.” Read “CEOs should safeguard, not silence, engaged investors,” by Laura Campos on ImpactAlpha.

Dealflow: Follow the Money

Mitsubishi adds off-grid solar assets in Africa with stake in BBOXX. The Japanese conglomerate has been in the solar energy game for 40 years. That business didn’t have much of a footprint in Africa, where 600 million people have little or no access to electricity. Mitsubishi led a $50 million Series D equity round for BBOXX, a signal of the growing appetite for African off-grid investments among major energy players, including France’s Engie and EDF, Spain’s EDP RenováveisGEShell and Mitsubishi, which last year backed off-grid investor NEoT Offgrid Africa to support energy access in the Ivory Coast. Companies like BBOXX, Zolad.light and M-Kopa have demonstrated African consumers’ willingness to pay for high-quality energy products and services, but have skimmed less than 20% of the potential market. Read more.

Capital Impact Partners rolls out $150 million note offering to boost underserved community services. The community development financial institution’s impact investing notes will give institutional and individual investors access to social projects in high-need areas with minimum investments of as little as $1,000. The proceeds support healthcare, education, affordable housing initiatives in underserved communities around the U.S.

Underestimated business owners awarded $1.4 million to help communities eat healthier. Reinvestment Fund’s Healthy Food Financing Initiative, backed by the U.S. Department of Agriculture, distributed grants to 10 businesses and organizations trying to improve healthy food access through mobile produce markets, new grocery stores, and other initiatives. Seven are rural-based and eight are run by women, minority, and Native entrepreneurs.

BharatPe raises $50 million to link vendors with digital payments. Delhi-based BharatPe aims to bring ‘mobile money’ to shopkeepers and business owners with an app for accepting digital payments. The financing, led byRibbit Capital and Steadview Capital, is the latest to boost startups that seek to small and often informal businesses a digital makeover.

Signals: Ahead of the Curve 

Blackstone’s embrace of impact investing brings added scrutiny. As legacy private equity firms move into impact investing (see, “For private equity giants, $1 billion is table stakes for entry into impact investing), the impact of the rest of their portfolios is getting a closer look as well. The latest case in point: Blackstone, the $512 billion private equity giant that announced its new impact investing platform in May. At the time, Blackstone’s Jon Gray said the firm seeks to deliver value for investors “while also having a positive impact on the communities in which we operate” (see, “What we know about Blackstone’s impact initiative). That made the firm’s decision not to sign the recent Business Roundtable’s recent CEO commitment to “stakeholders” stand out. Blackstone was among only eight firms not to sign the pledge; financial institutions like BlackRock and Vanguard did sign the statement.

  • Standing alone. A person familiar with the decision said the firm believes its portfolio is too diverse for it to sign on to a sweeping commitment to stakeholders. Blackstone maintainscorporate social responsibility policies that are tailored to its owners and other stakeholders, the person said, and viewed the statement as potentially inconsistent with the firm’s commitments to its investor clients. Blackstone accounts for environmental, social and governance, or ESG, factors in its investment decisions, the person added, and plans to share more on its practices in coming weeks.
  • Stranded assets. Blackstone is doubling down on an oil and gas pipeline company it invested in earlier this year. Blackstone, which raised a $12 billion infrastructure fund, invested $3.3 billion for a 44% stake in Tallgrass Energy, a Kansas-based pipeline company. Tallgrass’ stock has fallen by nearly half in the bear market for energy stocks. Rather than cut ties, Blackstone is offering to take the company private. Blackstone may find it hard to divest quickly from fossil fuels, but holding on brings its own dangers. Over the past decade, for example, BlackRock’s fossil fuel investments have lost investors $90 billion in value (see, “BlackRock’s stranded assets).
  • Amazon burning. Blackstone is pushing back against a report in The Intercept that highlighted the role of two Brazilian companies, part owned by Blackstone, in deforestation in the Amazon rainforest. The firm says the projects in question were approved by International Finance Corp., an affiliate of the World Bank, which determined the projects would reduce carbon emissions.
  • Impact watch. Apollo Global Management, which is raising its own $1 billion impact investing fund, is also facing criticism. The $280 billion firm “has a history of investing in businesses that prey on low and moderate income people,” according to the Private Equity Stakeholder Project. The February report cites investments such as OneMain Financial, one of the nation’s largest subprime installment lenders; Apollo Education, which owns for-profit University of Phoenix; and Inspire Communities,a developer and owner of manufactured housing communities.
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Agents of Impact: Follow the Talent

New Media Ventures is hiring an entrepreneur-in-residence in Oakland… Uncharted is looking for a director of business development and an accelerator director in Denver… Sustainalytics seeks a senior associate or manager in New York… Mission Driven Finance is recruiting a senior manager of content and communications in San Diego… Opportunity Virginialaunches to connect investors, project sponsors and communities in the state’s Opportunity Zones.

Thank you for reading.

– Aug. 29, 2019

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