Greetings, Agents of Impact!
On the impact beat. Impact investing and sustainable finance are generating prototypes for a new financial system and a new economy. As finance goes “impact on,” it is arriving at purpose-built vehicles and approaches incubated, in some cases for decades, by community and impact investors. ImpactAlpha’s David Bank joins Laurie Lane-Zucker to talk about “Reporting on Impact” as part of Impact Entrepreneur’s Luminarias webinar series, tomorrow at 12pm ET. The beat, as Agents of Impact know, is hopping. Join us.
Dealflow: Follow the Money
Inclusio seeks to anchor its social mission by going public. Brussels-based Inclusio develops and manages affordable housing, schools, reception centers for asylum-seekers and other social housing and infrastructure projects. Last week, it listed shares on the Euronext Brussels exchange, with the aim of raising about €60 million ($72 million) and becoming one of the first impact finance products in the public markets. KOIS, the Belgian impact investor that set up Inclusio in 2015 with Degroof Petercam bank and real estate developer Revive, said the IPO anchors the company’s mission by giving investors liquidity without the sale of its real estate assets. “As such, you protect your inventory of buildings dedicated to social housing,” KOIS’s Francois de Borchgrave told ImpactAlpha. “It is critical for the social mission protection of Inclusio to go public.”
- Public markets. Inclusio’s European IPO is part of a broader wave of managers and companies tapping the public markets to raise capital for electric vehicles, green infrastructure, alternative proteins and other sustainability-themed companies. Bridges Fund Management, TPG, Revolution and Equilibrium Capital among others have leveraged special purpose acquisition companies, or SPACs, as an alternative route into the public markets. Vital Farms, an Austin-based B Corp, listed on the Nasdaq this summer. Last month, Schroders and Big Society Capital announced a £100 million IPO for a social impact investment trust to acquire impact funds and debt portfolios. With a public listing like Inclusio, “every single person is able to invest their capital into a fund in which societal and environmental impact is held to the same standards as profit,” de Borchgrave said.
- Low-risk assets. Inclusio manages a portfolio of 62 properties valued at €141 million ($168 million). Belgium, like most countries, faces a deficit of affordable housing; Brussels has 49,000 households on its 10-year-long social housing waiting list. Affordable and workforce housing is one of the most stable asset classes in real estate, with low vacancy rates and insatiable demand. In the U.K., the Ethical Housing Company raised capital to build more social housing in the country’s high-need northern region. U.S.-based Affiliated Development launched an impact fund to invest in workforce housing in Florida.
- Dig in.
Blue like an Orange backs Mexican neobank kubo. Digital financial institutions have expanded financial inclusion in Latin America. Still, in Mexico, only 37% of adults have a bank account. Blue like an Orange Sustainable Capital provided mezzanine debt financing to Mexico-based kubo, which began as a simple saving and lending platform for low-income borrowers before getting a banking license. It now serves about 8,000 borrowers earning less than $1,000 per month. Kubo’s loans are generally in the range of $500 to $2,500 – larger than microfinance loans but smaller than commercial banks or even most non-bank small business lenders (see, “Latin America’s micro-, small- and medium-sized enterprises need working capital to survive and thrive”). The company aims to grow its customer base five-fold, focusing in particular on women and women-owned small businesses.
- Neobanking. Kubo launched in 2013, along with Brazil’s Nubank and several years before Argentina’s Uala and Mexico’s Albo. Most of kubo’s competitors are focusing on middle-class millennials. BlueOrange’s Pablo Gonzalez Rueda told ImpactAlpha that kubo is distinguished by its full range of financial services “for those that are underserved (or not served at all) by traditional banks.” BlueOrange’s financing will help the company build up its alternative credit assessment technology.
- SDG alignment. Blue like an Orange touts the Sustainable Development Goal ‘report cards’ it prepares for each investment (listen to our podcast interview with BlueOrange’s Bertrand Badré and Suprotik Basu). Basu told ImpactAlpha that kubo “very comfortably cleared our thresholds” with regards to SDG No. 8 (inclusive and sustainable economic growth) and No. 5 (gender equality). More than half of kubo’s beneficiaries are expected to be women or women-owned small businesses.
- Read on.
Texas foundations make emergency loans to strengthen community clinics for COVID. Health facilities in many parts of the U.S., and particularly low-income and rural areas, are buckling under the weight of the coronavirus disaster. The Episcopal Health Foundation in Houston and the Austin Community Foundation launched an emergency loan fund “to keep more clinics up and running to serve low-income families who may need the care now more than ever,” said Episcopal Health’s Elena Marks. The Texas Clinic Emergency Loan Fund will provide low-interest loans of up to $1 million to community-based health centers and charity-funded clinics. It already has issued checks of $250,000 to $1 million to six facilities. More.
Series: Impak Battles
Corporate impact face-off: Total vs. Neste Oyj. The renewable energy sector is expected to reach $1.5 trillion by 2025, spawning a new class of energy supermajors. At least some oil and gas majors are maneuvering to grab their share of the pie in the high-stakes transition. The latest edition of Impak Battles, an ImpactAlpha series with impak, a Montreal-based impact ratings agency, pits Finnish energy company Neste Oyj against French oil company Total. Neste Oyj began its gradual shift towards renewable energy a decade ago and now dedicates almost 20% of its activities to the production of renewable diesel and renewable petroleum products. At Total, sales of renewable electricity to client companies represents just 1% of company activities. Writes impak, “The battle felt as if one of the two companies already knew what the future holds.” Face-off!
- Catch up on earlier face-offs. Nestlé vs. Danone, Engie vs. Enel, Novartis vs. Sanofi and Crédit Agricole vs. BNP Paribas.
“Diversify or delist.” The Nasdaq stock exchange filed a proposal with the U.S. Securities and Exchange Commission to require all 3,249 listed companies to disclose the diversity of their boards of directors. The rules would require companies to have at least one director that identifies as female and one who identifies as either an under-represented minority or LGBTQ. Currently, 75% of companies listed on the Nasdaq do not meet the requirements, reports The New York Times.
Agents of Impact: Follow the Talent
Taryn Goodman Gallery, former food and agriculture lead for TPG Rise Fund, joins Cultivian Sandbox as managing director… Irvin “PeDro” Cohen is the new executive director of the Jacksonville, Fla. arm of Local Initiatives Support Corp…. The FAIRR Initiative seeks an investor outreach manager in London… Coalition for Inclusive Capitalism is looking for an operations manager in New York… Gratitude Railroad is hiring an impact investing analyst and hosting an “Advancing diversity in asset management” pitch event, Tuesday, Dec. 8.
Thank you for reading.
– Dec 2, 2020