Greetings, Agents of Impact!
Call No. 39: Operationalizing impact and ESG inside the enterprise. Want to protect your enterprise from accusations of greenwashing? Interested in managing for impact without burdening your team? Looking to substantiate your public pledges and commitments? Cathy Clark of Duke’s Fuqua School of Business returns to The Call for a session on operationalizing ESG and impact inside corporations. Clark will walk through a four-step process with Brendan Morrissey of Walmart, which is undertaking Project Gigaton to reduce greenhouse gas emissions from the retail giant’s supply chain.
- Join The Call, Tuesday, Mar. 8, at 10am PT / 1pm ET / 6pm London. RSVP today.
Featured: Ukraine Fallout
Investors rush to dump Russian assets after years of ignoring ESG red flags. Russia is the new tobacco. Or forced labor. Or apartheid South Africa. Russia’s invasion of Ukraine has triggered a sudden withdrawal by global investors from Russian oil companies, banks, airlines and government debt. That investments in Russian government-controlled entities were not already excluded from many portfolios is prompting a reassessment of ESG standards around autocracy, political freedom and human rights. “This is the epitome of ‘ESG’ that companies are saying is their priority right now,” Russia expert Fiona Hill told Politico. “Everyone who has been doing business in Russia or buying Russian gas and oil has contributed to Putin’s war chest.”
- Autocracy risk. MSCI on Tuesday downgraded the ESG government rating of both Russia and Belarus and noted that even before the invasion, Russia’s “political governance” score was weak in stability and peace, political rights and civil liberties, and governance effectiveness. The “S” and the “G” in ESG, for social and governance, measure business ethics and the value companies create for society, Evgueni Ivantsov of European Risk Management Council writes in the Financial Times. “Enriching autocratic regimes and creating negative geopolitical externalities is, therefore, unlikely to be consistent with ESG requirements.”
- Sustainable defense? The European Union raised hackles several weeks ago when it included some natural gas and nuclear projects as “transitional” green investments. Now, the invasion of Ukraine has some lobbyists making the case that defense and armaments have a positive social impact. “I appeal to the E.U. to recognize the defense industry as a positive contribution to ‘social sustainability’ under the ESG taxonomy,” Hans Christoph Atzpodien of the German defense lobby group BDSV told Bloomberg. That didn’t fly with Antje Schneeweiss of the German church investment group Arbeitskreis Kirchliche Investoren, a rapporteur at the Platform on Sustainable Finance, which is developing the taxonomy. “Armaments cannot be classified as social,” she declared.
- Keep reading, “Investors rush to dump Russian assets after years of ignoring ESG red flags,” by Dennis Price on ImpactAlpha.
Dealflow: Inclusive Economy
Advantage Capital aims to invest $200 million in minority-owned businesses in underserved communities. The New Orleans-based firm has leveraged more than $3 billion since 1992 for small businesses in underserved communities in Missouri, Mississippi, Arkansas, Kansas and Nebraska. “We are working in the places where the data shows the jobs are being created, but private equity and venture capital just doesn’t go,” Advantage’s Sandra Moore told ImpactAlpha. The new impact fund will focus on “growth-ready” minority-owned businesses in such communities. “We’re reducing the wealth gap by growing these businesses,” Moore said. “We’re reducing the wage gap by making certain we are creating the opportunity for high-wage and high-benefit jobs.”
- Strategic partners. The Empower the Change Fund is aiming to raise $200 million, according to an SEC filing. The fund is backed by regional and national banks including U.S. Bank, Truist Bank, Midwest Bank and Southern Bancorp. New York-based NMSDC Business Consortium Fund will co-manage the fund and support deal pipeline, Moore said. The fund aims to invest in 40 to 50 minority businesses.
M-KOPA secures $75 million for pay-as-you-go financing for unbanked Africans. The Nairobi-based company launched in 2011 to help low-income rural households in Kenya, Tanzania and Uganda replace dirty and expensive kerosene lamps with solar lanterns. Since then it has provided more than $600 million in financing to two million customers to purchase smartphones, TVs and refrigerators, as well as health insurance. It is now adding buy-now, pay-later financing for merchants. M-KOPA has expanded to Nigeria, and most recently Ghana, and is looking to reach three million customers this year.
- Financial inclusion. M-KOPA doesn’t require collateral or a guarantor to secure financing; customers make flexible micro-payments. M-KOPA has raised $190 million to date. Generation Investment Management co-led the round with CDC Group and LGT Lightrock. Early backers include the Gates Foundation, Shell Foundation, Acumen and Blue Haven Initiative.
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CalSTRS invests $50 million in SoLa Impact for affordable housing in Black and Brown communities. The allocation from CalSTRS is the $320-billion pension fund’s first real estate investment from its Sustainable Investment and Stewardship Strategies program. L.A.-based SoLa Impact secured the equity allocation via Belay Investment Group, CalSTRS’ partner for investments in emerging real estate managers. SoLa Impact “is an organization that helps prove that ‘doing well by doing good’ is a viable business model,’” said Belay’s Eliza Bailey.
- Returns on inclusion. The capital will go to SoLa Impact’s Black Impact Fund, which has raised $250 million from investors including PayPal, Skoll Foundation, Ally Bank and Pacific Premier Bank. The fund will invest in building affordable housing in Black and Brown communities, primarily in South L.A. It will also invest in Oakland, Portland and Seattle. “The need for high-quality affordable and workforce housing in our target markets, primarily Los Angeles and Southern California, is significant,” SoLa’s Martin Muoto told ImpactAlpha. The fund had an initial target of $500 million; it now has a hard cap of $300 million.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- Flashfood raises $12.3 million in a Series A round led by S2G Ventures to help retailers sell excess food at low prices and reduce food waste.
- Truck It In scores $13 million to digitize road freight for truckers and small businesses in Pakistan.
- Blue Like an Orange invests $14 million in InvestFarma to improve access to affordable healthcare products and services for low-income people in Brazil.
- GridPoint raises $75 million to help commercial building owners improve properties’ sustainability using data, automation and machine learning.
Impact Voices: Labor Risk
Urging meat companies to protect workers and mitigate risks in their supply chains. COVID-19 put an ugly spotlight on the safety hazards, poor working conditions and supply-chain risks of the global meatpacking industry. JBS USA was one of the few meat giants to offer paid sick-leave for workers across its operations. Tyson Foods gave vaccinated U.S. workers the benefit of 20 hours of paid leave. Few other meat corporations have responded with such worker policies, Cristina Figaredo of food industry investor network FAIRR writes in a guest post. “These companies must recognize the opportunity to modernize worker protection and reporting standards in the global meatpacking industry while mitigating risks to their operations and profits.”
- Protecting workers, mitigating risk. Investors can demand that meatpacking companies implement better safety-reporting mechanisms for workers, and report on corporate human and labor rights policies, as well as worker engagement initiatives. The starting point: educating themselves about the “risks posed by poor labor management strategies in order to hold companies to account,” writes Figaredo.
- Keep reading, “Urging meat companies to protect workers and mitigate risks in their supply chains,” by Cristina Figaredo on ImpactAlpha.
Agents of Impact: Follow the Talent
Yalin Karadogan, ex- of Cinven, joins LeapFrog Investments as global head of investor solutions… Rethink Education names Andre (Dre) Bennin, ex- of Juvo Ventures, as managing partner, and Bridget Duru, ex- of EY-Parthenon, as associate… The Anchorage Museum is hiring a director of climate initiatives and programs in Anchorage, Alaska… North Star Fund seeks a finance and operations manager in New York.
SVX is looking for a remote senior associate in Canada… Y Analytics is looking for an impact associate in Washington, D.C… LGT Venture Philanthropy Foundation is accepting applications for its LGT Impact Fellowships in Nairobi and Cape Town… Social Value International kicks off “Beyond ESG,” on Tuesday, Mar. 8… Calvert Impact Capital invites Agents of Impact to take its annual benchmark survey.
Thank you for your impact.
– Mar. 2, 2022