The Brief | September 7, 2021

The Brief: Pension funds’ fiduciary duties, repurposing food waste, global income share agreements, financial inclusion in Indonesia, barbershop revenues

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Welcome to Tuesday, Agents of Impact! 

  • Agents of Impact Call: Capitalism Reimagined. Universal ownership. Beta stewardship. Investment guardrails. Shareholder democracy. The Shareholder Commons’ Sara Murphy, Illinois State Treasurer Michael Frerichs and Engine No. 1’s Michael O’Leary will join ImpactAlpha and Omidyar Network on The Call, Tuesday, Sept. 14 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Institutional Impact

Some of pension funds’ spectacular returns are coming at the expense of their own beneficiaries. The fund that pays pensions to California’s retired teachers has posted a banner year. At the same time, housing costs for the state’s current teachers are so high that many teachers can’t afford to live in the districts where they teach. There’s a connection between high investment returns and high costs for housing, writes ImpactAlpha contributing editor Imogen Rose-Smith in her latest Institutional Impact column. The entrance of institutional investors into the residential housing market, both directly and through investments in real estate and private-equity funds, is one contributor to the run-up in valuations that is pricing many teachers and other essential workers out of local markets. In ways both direct and indirect, public and private union pension funds may be investing at cross-purposes with the interests of the very people they are pledged to serve.

  • Split screen. The $311 billion California State Teachers Retirement System, or CalSTRS, America’s second largest pension plan, reported returns of more than 27% in the fiscal year ending June 30. CalSTRS’ private-equity portfolio performed even better, returning 42%. The results “offer another measure of how we’re delivering on our promise to provide California’s hard-working teachers and their families with a secure retirement,” said CalSTRS’ new CEO Cassandra Lichnock. The picture is less rosy for California’s still-working teachers. A 2019 study by EdSource found that in 40% of California’s school districts, first-year teachers cannot afford to rent even a modest one-bedroom apartment based on their salaries.
  • Universal owners. CalSTRS plans to invest between $250 million and $500 million per year in affordable housing as part of a $2 billion sustainable investment portfolio. “We need to look beyond only the showcases of sustainable investing initiatives,” Rose-Smith writes. As universal owners, public pension plans and other large allocators have an economic and ethical responsibility to take into account the overall health of the economy and the world at large, for the sake of their own long-term returns, as well as the well-being of their beneficiaries. Chief investment officers, Rose-Smith writes, “should expand their fiduciary duties beyond making money above all else, to include finding out what their beneficiaries really need.”
  • Keep reading, “Some of pension funds’ spectacular returns are coming at the expense of their own beneficiaries,” by Imogen-Rose Smith. Catch up on all of Imogen’s Institutional Impact columns.

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Dealflow: Food Waste

Agricycle raises $2.4 million to repurpose food waste from smallholder farmers in Africa. Many smallholder farmers without adequate storage options end up throwing away large portions of their crops. Milwaukee-based Agricycle has built a network of more than 15,000 small farmers in Africa since 2019, providing them with solar dehydrators to upcycle excess fruits like mangoes and jackfruit. The longer-lasting dry snacks are sold in the U.S. under the brand Jali Fruit Co. Agricycle’s women-focused program also upcycles agricultural waste, like coconut shells and palm kernels, into charcoal.

  • Supply chain. The seed financing round, led by Wisconsin’s MaSa Partners and CSA Partners, will help Agricycle launch its Field Better Ingredients business line to supply upcycled ingredients to consumer packaged goods manufacturers. Participating investors include Clean Energy Trust, Wisconsin Investment Partners, Brightstar Wisconsin, Kinetic Ventures and angel investors.
  • Check it out

Microverse secures investment to expand income share agreements for global talent. The San Francisco-based edtech venture, which is looking to connect one million young software developers from emerging markets to remote international jobs by 2030, received an investment from Amsterdam-based Rubio Impact Ventures (formerly Social Impact Ventures) as part of a recent $12.5 million Series A funding round. The financing “comes at a pivotal moment when demand from potential students to learn to code and from companies looking for global talent has never been higher,” said Microverse’s Ariel Camus.

  • Income share agreements. ISAs allow students to attend college, coding bootcamps and other educational and vocational training programs with little to no upfront tuition in exchange for a fixed percentage of their future income. Microverse is using ISAs to upskill young professionals. Nine out of 10 of its students, who hail from countries such as Nigeria, Mexico, Columbia, Brazil, Kenya and India, are employed within three months of graduating.
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Ayoconnect scores $10 million to advance financial inclusion in Indonesia. The fintech’s software platform helps banks and other partners collect data to offer more inclusive financial services for Indonesians. “Ayoconnect is democratizing access for the underbanked and unbanked population,” said Dondi Hananto of Patamar Capital, which backed the company. Ayoconnect works with more than 100 partners in Indonesia, including Bank BRI, Bank Mandiri, Permata Bank and Gopay.

  • Access to capital. In addition to Patamar, Ayoconnect’s financing round was backed by Bank Mandiri’s corporate venture arm Mandiri Capital Indonesia and angel investors. The company has raised $15 million to date.
  • More.

Dealflow overflow. A sampling of the other deal news crossing our desks:

  • Alt-protein startup Eat Just partners with Qatar’s state run agencies Doha Venture Capital and Qatar Free Zones Authority on a $200 million cell-cultured meat facility.
  • Chennai-based Northern Arc Capital raises $50 million from Japanese International Cooperation Agency to expand lending and credit products for women entrepreneurs.
  • Local Initiatives Support Corp. invests $8 million in a $100 million initiative to support small businesses in the Hampton Roads region of southeastern Virginia.

Agents of Impact: Follow the Talent

Zebras Unite is hiring an entrepreneur in residence for its Inclusive Capital Collective… Calvert Impact Capital is looking for an investment team professional in Bethesda, Md… Mercer is recruiting a sustainable investment senior associate in Boston… New Energy Nexus is hiring a managing director in Oakland… ImpactAssets seeks an in-house counsel in San Francisco.

ImpactAssets is hosting “Mitigating wildfire risk with innovative finance solutions,” with Adam Connaker of the Rockefeller Foundation, Abby Gritter of Blue Forest Conservation, Paul Hessburg of the U.S. Forest Service, and Siobhan King of ImpactAssets, Wednesday, Sept. 15… The Climate Salon is hosting “Investing in Climate,” October 26-27 in London.

Thank you for your impact.

– Sept. 7, 2021