The Brief | November 2, 2023

The Brief: Republicans’ big chill on shareholder action, rural electrification in Côte d’Ivoire, upskilling workers in Colorado, lessons from Acumen’s failures

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Greetings, Agents of Impact!

📞 Agents of Impact Call: Women as agents of change for climate resilience. If and when we meet the climate challenge, women will have been a key success factor. Heading for Change, the investment fund and legacy project of the late Suzanne Biegel and her husband, Daniel Maskit, is investing at the intersection of climate and gender – and opening its processes to others. To put a gender lens on climate investing, join Camilla Nestor of MCE Social Capital, Shally Shankar of AiiM Partners, Noramay Cadena of Supply Change Capital, and Samantha Anderson and Rose Maizner from Heading for Change, Wednesday, Nov. 15 at 10am PT / 1pm ET / 6pm London. RSVP today.

⚡ Plugged In: Sherrell Dorsey in conversation with VertueLab’s Aina Abiodun. Join LinkedIn Live, Wednesday, Nov. 8 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: ESG Backlash

With subpoenas, Rep. Jim Jordan seeks to chill shareholder action on climate. The Republican majority on the House Judiciary Committee escalated its showdown with shareholder activists and industry initiatives that are urging companies to monitor and mitigate their climate risks. Subpoenas demanding documents and communications went to the nonprofit shareholder advocacy organization As You Sow and the Glasgow Financial Alliance for Net Zero, or GFANZ. “Corporations are collectively adopting and imposing left-wing environmental, social, and governance (ESG)-related goals,” Jordan wrote, expressing concerns “that As You Sow appears to facilitate collusion that may violate US antitrust law.” In a sign of the times, the activist group Ceres, on a webinar this week, posted a disclaimer that it “does not require or seek collective decision-making or action” and facilitates only the exchange of public information. “This is a serious issue, but based on the growing body of legal analysis, we don’t think investors should abandon their commitments,” says John Cochrane of the US Impact Investing Alliance.

  • Shareholder voice. The committee appears to be targeting Climate Action 100+, an investor effort to press large corporate greenhouse gas emitters to adopt transition plans and enhance disclosures. As chairman of the committee, Jordan wrote that As You Sow “has entered into apparently collusive agreements with Climate Action 100+ and other ESG cartels.” As You Sow’s Andrew Behar called the committee’s actions anti-business and an attack on shareholder rights. “We own the company. The board reports to us,” Behar told ImpactAlpha. “We can’t have a conversation with them and identify risks? The committee is jumping into private-sector business decisions.”
  • Climate reaction. The committee this summer also sent letters to Institutional Shareholder Services, Glass Lewis, Engine No.1, Trillium Asset Management, Arjuna Capital and Aviva Investor Americas and other firms. In those letters Jordan said climate activists could be violating antitrust law “by entering into agreements to ‘decarbonize’ corporations and reduce emissions to net zero,” which could have “potentially harmful effects on Americans’ freedom and economic well being.” In March, President Biden vetoed a GOP-led bill aimed at preventing pension fund managers from considering climate change and other ESG factors in investment decisions.
  • Legal showdown. In response to the earlier letter, GFANZ, chaired by Michael Bloomberg, and its affiliates such as the Net Zero Asset Managers initiative, produced nearly 800 documents, with redactions. “GFANZ’s response without compulsory process has been inadequate,” Jordan wrote. Several banks and insurance companies have dropped out of the group, in part due to Republican pressure tactics (see, “Political backlash and legal threats sap shareholder support for climate action and ESG”). As You Sow has not provided any documents to the committee. “We just think that this whole effort is a misguided anti-climate effort,” Behar says. “So I’ll send them back a letter and describe in more detail why we think this is misguided.”
  • Keep reading,With subpoenas, Rep. Jim Jordan seeks to chill shareholder action on climate,” by David Bank on ImpactAlpha.

Sponsored by BlueMark

Impact management for asset allocators. Pension funds, family offices and other asset allocators face common blind spots when entering the world of impact investing. Chief among them: Measuring and managing impact throughout an investment’s life cycle. To help orient new asset allocators, BlueMark and CASE at Duke University have teamed up to produce “A field guide: Impact due diligence and management for asset allocators.” To accompany the release of the report, BlueMark and CASE will host a live discussion with leading asset allocators and asset managers.

  • Join the conversation. ImpactAlpha invites you to join Luyen Tran of the IFC, Leslie Kapin of Astanor Ventures, Emily Schiller of Jordan Park and Kenza Himmi of the United Nations Joint Staff Pension Fund, in a discussion moderated by CASE’s Cathy Clark and BlueMark’s Sarah Gelfand, Wednesday, Nov. 8. RSVP today.

Dealflow: Social Bonds

EAIF commits $48 million to ‘social bonds’ for rural electrification in Côte d’Ivoire. Nearly half of Côte d’Ivoire’s 28 million people live in rural areas; less than 40% of them have access to electricity. The Emerging Africa Infrastructure Fund is backing a 60 billion West African franc ($98 million), local currency bond series to finance last-mile electricity delivery. The group says the series is the first certified, asset-backed “social bond” in West Africa. EAIF is a $1 billion investment arm of the Private Infrastructure Development Group that commits senior debt to critical infrastructure projects in Africa. The International Finance Corp. is also investing in the bonds.

  • Asset-backed. The bonds will be repaid from electricity connection fees collected under the Ivorian government’s Electricity For All program. The cost of a new household connection is 150,000 francs ($240). Households pay 1,000 francs ($1.60) upfront and pay off the remaining balance over two to 10 years, based on household income level. The bonds, issued by Fonds Commun de Titrisation de Créances Electricité Pour Tous, are being listed on the West African Economic and Monetary Union exchange. Moody’s certified the social designation based on alignment with the International Capital Market Association’s Social Bond Principles.
  • Dive in

Colorado foundations back Social Finance’s fund to upskill local workers. Gary Community Ventures, the Colorado Health, Colorado Gives and Walton Family foundations and other local backers committed $8 million to the new Pay It Forward Fund in Colorado. The fund aims to remove financial barriers for Coloradans from low-income and minority neighborhoods to get training for higher-paying and high-demand jobs. That includes IT, healthcare and skilled trade jobs that don’t typically require college degrees. “In the past, the student had to assume 100% of the risk of their education upfront, regardless of the post-education employment outcome,” said Ben Bynum of the Colorado Health Foundation. The fund offers zero-interest loans to enroll in training or cover living expenses during training. It uses an income-based repayment model to recycle capital back into the fund to “pay it forward” for training future workers. 

  • Inclusive economy. The Colorado Pay It Forward Fund has deployed zero-interest working capital loans to three training providers, CrossPurpose, ActivateWork and CareerDash, to train more than 1,000 Coloradans. CrossPurpose trains workers for healthcare, tech and commercial trucking jobs; ActivateWork trains workers for IT jobs; and CareerDash trains workers for business development and recruiting jobs. The fund aims to “provide a pipeline of skilled talent to Colorado employers and accelerate the state’s economic growth,” said Michael Grossman of Social Finance.
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Dealflow overflow. Other investment news crossing our desks:

  • Two Sigma Investments, the $60 billion hedge fund, is spinning out its impact investing unit, Two Sigma Impact, as an independent company. Two Sigma Impact raised $677 million of a targeted $750 million earlier this year to back “human capital-centric” businesses. Two Sigma will invest up to $75 million in the new entity’s second fund. (Bloomberg)
  • Just Climate led the $185 million Series E equity round for Infinitum, which is developing less carbon-intensive motors for the industrial sector. (Just Climate)
  • Brazil’s b4waste raised two million reais ($400,000) to partner with food retailers to curb food waste by discounting and selling items that are close to expiring directly to consumers. (Startupi)
  • Goodwell Investments backed Inclusivity Solutions, which offers “embedded insurance” products to consumers via telecom companies, banks and other digital service providers in Cote d’Ivoire, Rwanda and Kenya. (Goodwell Investments)

Impact Voices: Impact Management

In impact investing, failure is good – if we learn and share the lessons. Investors excited to expand energy access over the past decade poured capital into pay-as-you-go models for home solar systems. “Along with the excitement came overselling, faulty diligence and limited underwriting,” writes Acumen’s Amrita Bhandari in a guest post on ImpactAlpha. “People living in poverty were harmed.” But the failures served a purpose. Entrepreneurs and investors acknowledged the problems and the industry association GOGLA in 2019 introduced “consumer protection principles” to help companies avoid customer harm and scale responsibly. “Failures are moments of understanding of what continues to be broken in the system and where we need to keep iterating,” Bhandari says. 

  • Case studies. In Failing forward,” Acumen takes stock of its 167 investments over more than two decades. It considers bout one-quarter to be “home runs”; the vast majority “were unsustainable financially, did not have the impact we had hoped, or it is too soon to tell.” For example, some of Acumen’s efforts in the late 2000s to nudge companies to serve low-income customers backfired, such as a clinic operator that tried unsuccessfully to reach low-income communities. “We saw commercially-successful businesses fail that tried to pivot downmarket, where they did not understand the customer nor how the offering needed to shift,” Bhandari recounts.
  • Trial and error. The failure of many efforts to increase financing for smallholder farmers has led to solutions like Aceli Africa, which bridges the gap between microfinance and commercial banking with incentives (see, “Smart subsidies for Africa’s high risk, low return smallholder finance market”). Even when experimenting, put people first, Bhandari says. “When we get it wrong or fall short, the people who end up paying the price often cannot afford it,” she writes. But investors and entrepreneurs can’t let the fear of failure stop them from taking necessary risks. “In a world of dire problems and limited resources,” says Bhandari, “the only real failure is to keep making the same mistakes.”
  • Keep reading, “In impact investing, failure is good – if we learn and share the lessons,” by Acumen’s Amrita Bhandari on ImpactAlpha. What have you learned from your failures? Drop us a line

Agents of Impact: Follow the Talent

The Nature Conservancy names Neel Broker, former CEO of Laureate Education, chief operating officer… Equitable Facilities Fund appoints Jon Rybka, ex- of RePublic Schools, as chief program officer… Meghan McCormick, ex- of MDRC, joins Overdeck Family Foundation as a research and impact officer.

Founders First Capital Partners is looking for a chief financial officer in San Diego… NY Green Bank is recruiting for several roles… Calvert Impact seeks a technical services and impact officer in Washington, DC… The deadline to apply for the Summit Impact Climate Fellowship, a one-year leadership program for climate entrepreneurs, is Tuesday, Nov. 14. 

Ajim Capital, in partnership with Amazon Web Services, will host a demo day for female founders shaping the future of tech in Africa, Wednesday, Nov. 8… 2X Global and Sagana invite fund managers that invest with a gender lens to participate in Project Catalyst – a scan of private market funds that builds on Project Sage – by completing this survey by Friday, Nov. 10.

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Nov. 2, 2023