Greetings, Agents of Impact!
Featured: Gender Smart
How five women-led funds in South Africa are unlocking capital for women and small businesses. Too little capital is making it into the hands of women entrepreneurs and business owners in emerging markets. One solution for gender-lens fund managers: band together to strengthen the value case for investing in women, and for why institutional capital should rally behind them. “We’re seeing a lot of collaboration between women-led funds and angel investors, which is developing the value chain,” says Julia Price of South Africa-based Linea Capital, which provides revenue-based, non-dilutive capital alongside other gender-lens funds to meet businesses’ diverse capital needs. Price is among growing cohort of first-time fund managers ushering addressing persistent capital gaps for women in business. From Cape Town, ImpactAlpha’s Jessica Pothering reports on the tools South Africa’s female fund managers are using, from local market knowledge, to creative partnerships, to flexible, founder-friendly forms of finance.
- Women’s leadership. Lelemba Phiri of Africa Trust Group is tapping her experience as a female entrepreneur to build the pipeline of women-led startups, as well as female fund managers. Hema Vallabh of Five35 Ventures, an early-stage tech fund, is finding better terms on deals because entrepreneurs increasingly seek women on their cap tables.
- Impact incentives. Maya Burney’s Womvest is leveraging women’s angel networks to deploy impact-linked debt alongside gender-focused equity funds to encourage more women-centric business practices. Seja Kekana’s Makoti Kekana Capital is finding and unlocking local tech talent to meet the pressing needs of South African industry.
- Proof points. The fund managers are in the early stages of raising and deploying capital and building track records. Next: Break down barriers for women-led and gender-lens funds in raising eight- and nine-figure funds that could truly shift the marketplace. Burney is leveraging “network economics and multi-instrument approaches to create investment opportunities that are really impactful.” Argues Vallabh, “None of the other pieces make sense unless we can allocate more capital to women.”
- African Women Impact Fund. South Africa’s Standard Bank Group and the U.N. Economic Commission for Africa, or E.C.A., secured the first $60 million for a planned $1 billion fund for gender-lens investing in Africa. Supporting emerging African female fund managers will promote women’s entrepreneurship “and increase economic output, job creation and women’s economic empowerment and prosperity,” E.C.A.’s Antonio Pedro said of the Africa Women Impact Fund. More on this.
- Keep reading, “How five women-led funds in South Africa are unlocking capital for women and small businesses,” by Jessica Pothering on ImpactAlpha.
- Answer the Call. Lelemba Phiri of Africa Trust Group and fund managers and field builders Leila Charfi of Actawa Ventures, Anna Raptis of Amplifica Capital, Suzanne Biegel of GenderSmart and Nicole Garcia of USAID Invest, will explore “Creative capital for gender-smart investments” in this week’s Agents of Impact Call. Join the conversation with ImpactAlpha’s Jessica Pothering and David Bank, Wednesday, Sept. 28 at 9am PT / 12pm ET / 6pm Cape Town. RSVP today.
Dealflow: Climate Finance
Barbados’ debt-for-nature swap unlocks $50 million to protect nature and build resilience. Barbados is the latest nation to restructure its high-priced debt to free up funds for conservation. The Caribbean island will buy back a portion of its higher-priced sovereign debt with $150 million in lower-interest loans arranged by Credit Suisse and CIBC FirstCaribbean. Loan guarantees came from The Nature Conservancy and the Inter-American Development Bank. The $50 million savings will go into a conservation trust fund that will make grants to protect coral reefs, manage stormwater runoff and pursue other conservation efforts over 15 years. Island nations, among the most vulnerable to climate-driven extreme weather events and rising sea levels, also have some of the highest debt-to-GDP loads, in part due to storm-related damages. When the Covid pandemic tanked tourism revenues, many countries had little left to spend on conservation and climate adaptation.
- Sustainable development. Conservation and adaptation are converging with economic development goals. Barbados’ economy depends on the health of its waters for fishing and tourism. The debt-for-nature swap will “allow Barbados to secure and protect our marine environment and also help us expand our Blue Economy, both of which are of critical importance to our people and our very way of life,” Barbados Prime Minister Mia Mottley said. The deal is the third under TNC’s “Blue Bonds for Conservation” model, which requires that countries protect at least 30% of their waters. It follows a similar restructuring for Belize last year and the pioneering Seychelles blue bond in 2016. There are “creative solutions” to getting much-needed funding for conservation efforts that can boost economic growth, TNC’s Sherry Constantine told ImpactAlpha. The Barbados trust fund is designed to attract additional private capital.
- Pandemic clause. The new bond contains a natural disaster clause and, in a first for such bonds, a pandemic clause that will defer principal repayments for two years after a triggering event. Mottley, featured recently in ProPublica, used her U.N. address last week to call for such clauses and for reform of the International Monetary Fund and World Bank to facilitate more funds to fight poverty.
- Dive in.
Dealflow overflow. Other investment news crossing our desks:
- Paris-based Bump secured $180 million from DIF Capital Partners to finance and install new electric vehicle charging stations at no upfront cost for EV partners.
- Bump’s competitor Zeplug, which focuses on EV charging for residential and office buildings, raised €240 million ($232.6 million) to expand outside of France.
- Rentle, a Finnish online circular commerce platform for selling and renting used products, raised $3.8 million in seed funding from investors.
- Woman-led Human Ventures, which invests in early-stage founders from diverse backgrounds, scored an undisclosed commitment from Bank of America (see, “Deal spotlight: Inclusive fund managers”).
Impact Voices: Returns on Inclusion
How asset managers are digging in on diversity to stand out from their peers. ESG begins at home. As growing numbers of investors look for environmental, social and governance-based investment opportunities, they are looking more closely at the ESG attributes of asset managers themselves. That includes managers’ records on diversity, equity and inclusion, or DEI. The U.S. Securities and Exchange Commission has indicated to asset managers that disclosures of human capital, including DEI, are likely to follow its proposed climate change disclosure regulations. “Managers should make it a priority to get ahead of these developments while DEI is still emerging as a priority for investors and regulators,” Taleah Jennings of law firm Schulte Roth & Zabel writes in a guest post.
- Diversity infrastructure. An asset manager needs to examine itself as an organization, as well as how DEI factors are incorporated into its investment and allocation decisions, says Jennings. At least 16% of the executive ranks of U.S. asset management firms are members of racially-underrepresented groups; a quarter are women. Yet investors entrust only 1.4% of assets under management in the United States to firms owned by women or people of color.
- Fiduciary duty. The asset management industry cannot achieve genuine diversity and equality “unless that diversity and equality extend to the actual allocation of investment capital,” says Jennings. The S.E.C. is likely to clarify that a manager’s fiduciary obligations do not require it to exclude managers that are too small or too new – guidelines that often exclude women and minority-managed funds. Such exclusion could actually run contrary to an asset manager’s fiduciary duty, as research consistently shows outperformance by first-time fund managers and those with diverse management teams.
- Keep reading, “How asset managers are digging in on diversity to stand out from their peers,” by Schulte Roth & Zabel’s Taleah Jennings on ImpactAlpha.
Agents of Impact: Follow the Talent
The U.S. Biden administration launches an environmental justice office to distribute $3 billion in block grants to tackle pollution in underserved communities in the U.S… HSBC has added senior talent at its new Sustainability Center of Excellence, including Justin Wu, ex- of BloombergNEF, as co-head of climate change for the Asia-Pacific region; Milo Sjardin, also ex- of BloombergNEF, as managing director and head of climate analytics; and Susannah Fitzherbert-Brockholes, ex- of PwC, as director of sustainable finance.
Haydee Moreno, chief operating officer at JUST, the Austin-based financial services organization for women, is named co-founder and joins the board of directors… 2X Collaborative-GenderSmart seeks a director of finance and operations in the U.K. (see, “Merger of GenderSmart and 2X Collaborative”)… TruFund Financial Services is looking for a national director of New Market Tax Credits in New York.
Target seeks a sustainability insights manager, a director of sustainability policy and compliance, and a senior manager of sustainability governance and risk… USDA is hiring a remote agricultural market reporter in San Francisco and a loan analyst and a lead program specialist elsewhere in the U.S… PNC seeks a remote climate analyst.
Thank you for your impact!
– Sept. 26, 2022