The Brief | October 10, 2019

The Brief: Nutrition lens investing, Bristol’s place-based fund, faith in Atlanta housing, impact in emerging markets, de-risking Japan’s economy

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Greetings, Agents of Impact!

ImpactAlpha hot take: Impact washers should fear real impact investors, not the other way around.” Live on the SOCAP blog.

Featured: Impact Voices 

Investing with a ‘nutrition lens’ to drive progress on the Sustainable Development Goals. Ahead of World Food Day next week, the Global Alliance For Improved Nutrition is calling on impact investors to seize overlooked investment opportunities in global food systems. The international health nonprofit is developing a ‘Nutritious Food Financing Fund’ to direct capital into sustainable nutritious food businesses. Investors with a ‘nutrition lens’ can help take on the biggest health risk factor in every country: malnutrition. Nutrition has a multiplier effect on sustainable development, driving progress on not only health and hunger (SDG Nos. 2 and 3), but also gender equality (No. 5), inclusive growth (No. 8) and resilient infrastructure (No. 9). Many impact investors are asking, “How can we deploy our resources in a way that maximizes our impact on the U.N. Global Goals?” write GAIN’s Lawrence Haddad and Sofia Condes in a guest post on Impactalpha. “Investing in more sustainable and nutritious food systems to improve diets and tackle malnutrition provides a compelling answer.”

Most people in low-income countries source their food from small and mid-sized businesses along the agri-food value chain. Big ticket agricultural and food investments miss this dominant market segment and focus mainly on larger companies and export crops, say Haddad and Dondes. Blended finance structures can help de-risk these investments and create opportunities for investors across the risk-return spectrum. Small businesses also lack the expertise to bring nutritious food to market and need technical assistance to produce the most sustainable nutritious foods. Still, in Africa, GAIN has helped develop a promising pipeline of more than 100 companies in the agri-food space, representing about $168 million in credible unmet funding demand. Despite this unmet need and growing investment opportunity, only 10% of impact investment globally is allocated to food and agriculture. Half of that goes into export crops like coffee and cocoa, which offer no nutritional value to local populations. To meet the global goals, say Haddad and Condes, “we need impact investors’ appetite for sustainable, nutritious food to grow.”

Continue reading “Investing with a nutrition lens to drive progress on the Sustainable Development Goals” by GAIN’s Lawrence Haddad and Sofia Condes on ImpactAlpha.

Dealflow: Follow the Money

Bristol’s place-based fund secures £10 million to tackle hunger, inequality and climate. The city of Bristol, U.K. has a hopeful vision of itself in 2050: to be “a fair, healthy and sustainable city of hope and aspiration, where everyone can share in its success.” As many as 16% of its 500,000 residents live in areas considered the “most deprived” in the U.K. One in five children are in low-income households and 30% of students are considered disadvantaged. A new impact investing fund that aims to shift these statistics has reached a £10 million first close to invest in economic inclusion; environmental transformation to achieve carbon neutrality and zero-waste; access to healthy and affordable food, particularly for children; and community resilience. The fund will make investments from £50,000 to £1 million using flexible financing structures. Impact investor Big Society Capital and the Bristol City Council backed the fund. Read on.

Faith-based nonprofit to invest in affordable housing in Atlanta. Focused Community Strategies, or FCS, is a faith-based non-profit that aims to boost community stability and wealth in South Atlanta by investing in affordable housing. The organization has been a long-standing partner of the $1.1 billion Community Foundation for Greater Atlanta. Now, it’s becoming a portfolio company of GoATL, the foundation’s $10 million impact fund. GoATL is extending a $500,000 loan to FCS to support the acquisition and conversion of single-family homes into affordable and workforce housing. “We are both financially and socially invested in the success of thriving families and prosperous communities,” FCS’s Jim Wehner said. GoATL, which makes flexible debt investments, has invested $6.3 million since launching last year. Check it out.

The Lab launches six new financing structures to tackle climate change. The Global Innovation Lab for Climate Finance in San Francisco has helped catalyze $2 billion in capital into 41 projects tackling climate change adaptation and mitigation. Among them: six finance structures the Lab identified earlier this year targeting blue carbon in marine and coastal ecosystems, sustainable agriculture for smallholder farmers in Africa, sustainable energy access and sustainable cities. They’ve passed the incubation phase and are heading into pilot mode.

Portland B Corp Fully gets acquired by design brands company Knoll. Knoll, a $1.2 billion dollar enterprise, bought furniture ecommerce company Fully for $35 million, though Fully will continue to operate independently. Big Path Capital advised the deal.

Signals: Ahead of the Curve

Redefining risk: Overheard at EMPEA’s sustainable investing summit. Private equity investors seeking impact in emerging markets are grappling with risk on both fronts. Strategies to measure and mitigate risk were on display in London at a summit of the Emerging Markets Private Equity Association, or EMPEA. We plucked some high-level takeaways:

  • Mitigating risk. Investment in emerging markets already comes with a higher degree of risk because there are more unknowns and less structure. Any additional risk in investments with high-impact potential on environmental or social factors should invite risk mitigation strategies that can then help shape norms.
  • Catalytic capital. Catalytic capital can be a “bridge” – a patient, risk-tolerant, concessionary and flexible bridge – to attract conventional investments while deepening impact. Its use in emerging markets has implications well beyond attracting conventional capital: it can yield data that can be used to identify, measure, and manage future impact investments.
  • Benchmarking impact. In order to improve their impact performance, enterprises and their investors will need to be able to compare themselves to their peers. Transparency with impact measurement methodology – as well as financials – will be increasingly important as measuring impact becomes normalized. Investors in emerging markets need to bake this into their strategy.
  • Returns on inclusion. Portfolio companies in emerging markets are full of entrepreneurs seeking success, just like those in developed markets. Investors must suspend biases to identify opportunities. There are plenty of cross-market challenges to address: gender parity among senior investment professionals, for example, is at a paltry 10% for both emerging and developed markets.
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Can sustainable seafood and energy de-risk Japan’s economy? Japan has staked out a leadership position in sustainable investing. Still, two of its largest industries, energy and seafood, present continued environmental risks. Two reports call out opportunities to reduce risks and reap benefits by going green.

  • Overpaying for energy. Carbon Tracker is urging Japanese policymakers to rethink their pro-coal stance, or face a potential $71 billion in stranded coal assets. “Despite policy signals from the Japanese government, it is still investing heavily in coal,” said Carbon Tracker’s Matt Gray. Renewable sources such as on- and off-shore wind and utility-scale solar photovoltaics will become cheaper than coal starting as early as 2023. That could raise costs for consumers and undermine economic vitality.
  • Underpaying for seafood. Japan’s seafood industry may be facing a bubble, says Planet Tracker (a subsidiary of Carbon Tracker), which analyzed 41 Japanese seafood companies with a combined market cap of $134 billion. The shares of publicly-traded Japanese seafood companies have risen in the past decade even as overfishing and climate change have led to declining production. Sustainably managed fisheries could yield an extra $51 billion to $83 billion each year, benefiting investors. Noting positive signals, such as the Japanese government’s 2018 revision of the Fisheries Act in 2018, Planet Tracker suggests actions such as certification, monitoring and reporting by investors, asset managers and seafood companies that can steer the industry in a more sustainable direction.
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Agents of Impact: Follow the Talent

Abhilash Mudaliar, previously with the Global Impact Investing Network, joins the Paul Ramsay Foundation… Fledge is kicking off a new angel accelerator with a series of free workshops for investors… Institute for Local Self Reliance seeks a senior researcher and writer in Washington DC or Portland, ME… SRI Conference will hold its 30th annual gathering of socially responsible investment professionals Nov. 13-15 in Colorado Springs.

Thank you for reading. 

– Oct. 10, 2019