Greetings, Agents of Impact!
Signals: Ahead of the Curve
Fires worldwide renew attention on the brands and banks driving deforestation. Lightning strikes sparked the wildfires scorching climate-parched California. But intentional – and preventable – deforestation is the cause of the even larger blazes destroying the Amazon, Borneo and other tropical rainforests. Brazil’s research agency, INPE, says forest fires in the Amazon this summer, even more numerous than last year’s, can be blamed on the clearing of forests for palm oil, soy, beef, pulp and other commodity crops. In Indonesia, the world’s largest palm oil producer, fires that swept across Borneo in July caused the Kalimantan government to declare a state of emergency. Already in 2020, deforestation has increased by 50% in Africa and Asia. Around the world, one football field of rainforest is lost every second, accelerating global warming, undermining Indigenous cultures and sacrificing biodiversity.
The slash and burn practices are enabled by major brands, banks, forestry and agribusiness corporations, many of which have pledged to work to end such practices and committed to reach zero net deforestation by this year. “Our store shelves are lined with products made at the expense of rainforests and human rights, and banks are using our money to invest in this destruction,” Rainforest Action Network charges in a new report. “Brands and their long-reaching supply chains, together with the banks providing the capital, are major drivers of the deforestation of tropical rainforests and the destruction of peatlands.”
- Unfulfilled pledges. In 2010, hundreds of companies including Colgate-Palmolive, Mars, Mondeléz, Nestlé, Nissin Foods, PepsiCo, Procter & Gamble, and Unilever, committed to achieve zero net deforestation by 2020. In the New York Declaration on Forests, and the ‘Soft Commodities’ Compact in 2014, hundreds of corporations and more than a dozen banks, including JPMorgan Chase, committed to a similar goal. “All have missed the mark,” say the authors of the Rainforest Action Network report. “Not a single corporate group has published evidence” of enforcing their pledges, says RAN, which contacted companies before publishing (see some responses here). A March report from Global Canopy also concluded that no corporations are on track to meet deforestation goals.
- Banking on deforestation. Since the 2015 Paris Agreement, banks have funded $154 billion in the production and trade of commodities driving deforestation in Southeast Asia, Brazil and Central and West Africa, according to RAN affiliate Forests & Finance. Chase and other banks, including Japan’s MUFG, Industrial and Commercial Bank of China and ABN Amro “are either failing to do proper checks on their clients or are choosing to ignore and hide the real impacts of their financing.” Recommended: conditioning loans on companies meeting standards of “No Deforestation, No Peatland and No Exploitation.”
- Alternative models. Impact investors are funding projects generating revenue from tropical forestry and agriculture products and committing to benefit smallholder farmers and forest-dependent communities (see, “More than two dozen funds investing in tropical forests and communities”). The fund of funds Terra Silva aims to help eight to 10 investment fund managers prove that sustainable tropical forests are a profitable bet for commercial investors (see, “Terra Silva has $90 million in ‘catalytic capital’ for carbon reduction in tropical forests”). The Althelia Climate Fund is using cacao and carbon credits to restore degraded areas of Peru’s Amazon (see, “Can carbon credits and cacao outcompete gold mining and deforestation in Peru’s Amazon?”).
Dealflow: Follow the Money
Triodos Bank develops impact bond fund for U.K. retail investors. Nearly half of retail investors in the U.K. want impact investment options. Triodos Bank U.K. is responding with an impact bond fund that starts at £20 ($26.55) per share. The fund, launching in early November, will invest in corporate, social and green bonds, and U.K. “gilts,” or sovereign bonds. Individuals can invest directly or via tax-exempt individual savings accounts, or ISAs.
- Climate-motivated. Concerns about climate change are driving U.K. investor interest in impact investing, according to a Triodos survey last year. “Investors are waking up to the fact that there really is no such thing as a neutral investment,” Triodos Bank UK’s Bevis Watts said in a statement. Still, more than 70% of everyday investors lack adequate information about the climate impact of their existing investments—specifically, how companies in their investment portfolios contribute to greenhouse gas emissions.
- Risk spectrum. The new Triodos Sterling Bond Impact Fund is intended to be a “lower risk” complement to the bank’s Global Equities Impact Fund and its Pioneer Impact Fund, which invests in small and mid-cap stocks. The fund is the Dutch bank’s first British-pound denominated fund.
- Read on.
LeapFrog backs $54 million round for affordable insurer PasarPolis. Indonesian insurance tech company PasarPolis partners with large insurance firms to develop health, vehicle and life insurance products for lower-income customers. The five-year-old company expanded into Vietnam and Thailand last year. LeapFrog was joined in the Series B round by ride-hailing company Gojek’s venture arm GoVentures, along with SBI Investment, Alpha JWX, Intudo Ventures, Chinese electronics company Xiaomi. Check it out.
Three Latin American social enterprises join IKEA and NESsT accelerator. The startups get support to modify their businesses in the wake of COVID disruptions. The cohort includes Peruvian coffee processing and tech venture Compadre; empanada maker Empanacombi, which hires and trains individuals with disabilities; and 3D-printed prosthesis maker Pixed.
Series: Impak Battles
Corporate impact face-off: Novartis vs Sanofi. European food companies Nestlé and Danone and energy utilities Engie and Enel went head-to-head in earlier editions of Impak Battles, an ImpactAlpha series with Montreal-based impact ratings agency impak, which assesses the positive impact and sustainability of corporate operations. Next up: Novartis vs Sanofi. The pharmaceutical giants are racing to complete vaccine trials as part of the global response to COVID-19. And a relatively high percentage of the activities of both companies are linked to SDG No. 3: Ensure healthy lives. Switzerland’s Novartis dedicates about 30% of its activities to developing medicines to treat cancers, diabetes, respiratory and cardiovascular diseases. About 22% of France-based Sanofi’s activity is linked to manufacturing and distribution of products to increase access to treatments for such non-communicable diseases.
- Mitigating negative impacts. Novartis faces a number of ongoing trials and recent convictions, including a $642 million fine from the U.S. Securities and Exchange Commission for bribing foreign health workers to use Novartis-branded products. Impak knocks Sanofi for the company’s opaque drug-pricing system in the U.S. – specifically, a 170% insulin price increase from 2010 to 2018. While Novartis edges out Sanofi in the head-to-head assessment, “Both companies have the potential to become impact leaders if negative impacts are better managed,” says impak.
Agents of Impact: Follow the Talent
Jean Hynes will replace the retiring Brendan Swords next year as CEO of Wellington Management… Beeck Center is hiring three researchers and one Fritz Fellow… The Sustainable Economies Law Center is looking for a staff attorney and a policy and legislative advocate in Oakland… The 2020 Global Philanthropy Forum, “Facing the Future: A Changing Climate in a Changing World,” will be held virtually on Sept 14-16… The Aspen Network of Development Entrepreneurs is hosting a launch event for its Impact Investing in Latin America Report on Wednesday, Sept. 23.
Thank you for reading.
–Sept. 3, 2020