Greetings, Agents of Impact!
Featured: Muni Impact
How ‘racial equity audits’ of underwriters could mitigate risks in municipal bond markets. In the aftermath of George Floyd’s murder in 2020, a simple tool to identify and weed out discriminatory practices at corporations became a favorite of shareholders looking to mitigate racial equity risks in their portfolios. Now, investors are looking to deploy “racial equity audits” in the $4 trillion municipal bond market, which is still burdened by systemic inequities. Institutional investors have filed dozens of shareholder resolutions, forcing or triggering voluntary third-party assessments at some of the largest corporations, including Facebook, Citigroup and JPMorgan Chase. “The racial equity audit is the most rapidly taken up shareholder engagement strategy maybe ever,” says David Wood of Harvard’s Initiative for Responsible Investment, which has been working with institutional asset allocators to explore racial equity strategies across asset classes, including municipal bonds.
- Risk assessment. One shareholder proposal requesting an audit of Goldman Sachs highlights proceeds of Chicago-issued municipal bonds, underwritten by the investment bank, that have been used to pay hundreds of millions of dollars in police brutality settlements. Still, the current racial equity audit “doesn’t have specific instructions” for assessing risk in fixed income portfolios, says Wood. The plan from Wood and other proponents: tailor the racial equity audit to assess the fixed income portfolios of banks and other financial institutions. “They can be given a very specific set of instructions for what you’re supposed to look at in your muni desk,” he says.
- Auditing racial equity. The $1.5 billion master trust of Service Employees International Union, a union with two million members who are participants in 55 public sector pension funds, and activist shareholder organization SOC Investment Group have spearheaded the effort on shareholder proposals calling for audits. “We wanted to do the work to educate investors and create accountability mechanisms” that yield sustainable economic outcomes, says SEIU’s Renaye Manley. Manley is in talks with investors about applying the racial equity audit to fixed income strategies of banks and large asset managers.
- Follow the issuers. The push for racial equity audits dovetails conveniently with Public Finance Initiative’s work to uplift the best practices of municipal bond issuers for addressing racial inequities. Such practices, say Wood and Manley, could inform an audit of fixed income managers. Lourdes Germán, who leads the Initiative, warns that such audits could inadvertently lead to market penalties for issuers who can’t meet such standards due to a lack of resources. “A municipality could be committed to racial equity, but that commitment could manifest in different ways and be at different stages of maturity,” she says.
- Go deeper on The Call. Join Wood, Manley and other Agents of Impact on next week’s Call, “How asset allocators are driving racial equity in municipal bonds,” Wednesday, June 14, at 10am PT / 1pm ET / 6pm London. RSVP today.
- Keep reading, “How ‘racial equity audits’ of underwriters could mitigate risks in municipal bond markets,” by Dennis Price on ImpactAlpha. Check out all of ImpactAlpha’s “Muni Impact” coverage, made possible by Robert Wood Johnson Foundation.
Dealflow: Investing in Health
LeapFrog and Khosla Ventures reinvest in HealthifyMe to boost preventive health in India. HealthfiyMe’s app offers AI-based health and fitness advice in 10 languages to more than 25 million users in India, South and Southeast Asia, and North America. The 11-year-old company wants to expand nutritional information access in regions with rising rates of chronic disease. HealthifyMe has raised $30 million in debt and equity, led by LeapFrog Investments and Khosla Ventures. Both investors backed the company’s $75 million Series C round in 2021. Unilever, Blume and Chiratae Ventures and Healthquad also reupped in the latest round.
- Market need. Obesity and “lifestyle” diseases like diabetes and heart disease kill more than five million people in India per year and could cost the country more than $2 trillion by 2030. Founders Tushar Vashisht, Mathew Cherian and Sachin Shenoy launched HealthifyMe after working on India’s biometric ID system and witnessing malnutrition in impoverished regions. More than 60% of Indians live below the international poverty line. The founders experimented with living on a budget of 100 rupees (about $1.25) per day.
- Unicorn dreams. Impact investor LeapFrog projects HealthifyMe will become a billion-dollar company by 2026, largely by expanding its base of low-income users. About 80% of its users qualify as low-income, more than half are women, and 60% are based outside of major cities.
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Source.ag bags $27 million to give greenhouses an AI boost. Greenhouses provide climate-stable environments for growing food, while reducing water use and inputs needed on traditional outdoor farms. “The global demand for greenhouse agriculture is rising, but its growth is being hindered by the shortage of experienced growers and unprecedented economic and climate-based challenges,” noted Rien Kamman of Source.ag. The Netherlands-based startup is developing AI-enhanced greenhouse management software that “simulates plant biology and predicts expected resource usage and yield” on a plant-by-plant basis.
- High-tech farmers. Source.ag raised $27 million in Series A financing from Astanor Ventures, Acre Venture Partners, Hico Capital and E14. Several Dutch greenhouse operators also participated. The Netherlands, barely bigger than the state of Maryland, is second only to the US in agricultural exports, thanks to its high-tech greenhouses and other growing systems.
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The Russell Family Foundation launches Food for Climate Solutions grant program. The foundation will fund organizations in the western part of Washington state that are supporting farmers’ climate resilience and sustainable growing practices. It will focus on organizations working in communities of color and other underserved communities. Nearly 90% of Washington’s farms are classified as small, but they account for less than 7% of the state’s agricultural earnings.
- Climate commitments. The program is part of a new focus on “addressing the climate crisis while prioritizing equity, justice and belonging in all that we do,” said TRFF’s Kathleen Simpson. TRFF joined the Net Zero Asset Owner Alliance as part of its commitment to reaching net zero across its portfolio by 2030. The $100 million foundation, which jumped into impact investing in 2004, says more than 95% of its investment portfolio is aligned with its programmatic goals.
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Dealflow overflow. Other news crossing our desks:
- Irish NGO Vita closed a $10 million impact fund with backing from Catholic Impact Investing Collaborative members to generate carbon credits from clean cooking and water projects in Africa. (Total Impact Capital)
- Manulife committed $500 million to CleanCapital to develop solar + storage projects and acquire renewable power assets in the US and emerging markets. (Solar Builder)
- Aavishkaar and Sequoia Capital India made seed investments in green hydrogen venture Newtrace. (The Economic Times)
- Proparco and the Austrian Development Bank provided €34 million ($36.4 million) in credit to Gravita to develop recycling facilities in Ghana and Senegal. (Afrik21)
- Buffalo, NY-based CleanFiber, which makes building insulation from recycled cardboard, is the latest green building material company to raise investment capital. (Buffalo Inno)
Agents of Impact: Follow the Talent
Aeris Insight names PayPal’s Joanne Gan and CapShift’s Liz Sessler to its board of directors… Manuel Bueno, ex- of Abt Associates, is named senior lead for climate finance at DAI… US Bank is hiring a sustainable finance project manager in New York… Also in New York, Octopus Energy is looking for a senior investment manager… Echoing Green seeks a fund advisor for angel city investors in Los Angeles.
EIG is looking for an ESG assistant vice president in Washington, DC… The UN’s Istanbul International Center for Private Sector in Development has an opening for an impact investing analyst… The Impact Investing Institute is on the hunt for a CDFIs program coordinator in London… Franklin Templeton seeks a Poland-based impact bond analyst… Environmental Defense Fund is recruiting an energy transition manager in Germany.
New York University’s Institute for Policy Integrity is hosting a webinar to share research on place-based energy transitions on Wednesday, June 21… Slow Northern California and Food Funded are throwing a Farm Fest at Full Belly Farm in Capay Valley Guinda, Calif., June 16-17.
Thank you for your impact.
– June 8, 2023
