The Brief | April 28, 2020

The Brief: Spotlight on stewardship, circular plastic investments, donor-advised COVID investing, social housing in the U.K., fintech in Nigeria

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Greetings, Agents of Impact!

Agents of Impact Call No. 16: Impact Step Up. Billions to trillions represents thousand-fold growth. But growth of even a single order of magnitude in response to the COVID crisis would signal impact investing’s ability to go exponential – in assets and impact (see, The 10x challenge). Can we bring existing and new efforts together to develop deeper and more effective ways to channel capital to individuals and businesses in need? Can we design and build a more inclusive and resilient financial system that will outlast the pandemic? Accelerate the arrival of that new financial system with your initiatives and inspiration on ImpactAlpha’s Agents of Impact Call No. 16, Thursday, April 30 at 10am PT / 1pm ET / 6pm London. RSVP today.

Are you an emerging market fund manager or capital provider? More than 100 survey responses so far are painting a picture of grit and urgency. The Collaborative for Frontier Finance is seeking additional participation to better understand COVID relief and recovery challenges for the businesses you support. Share this link.

Featured: ImpactAlpha Original

‘Stewardship’ under scrutiny as the shareholder season gets started. Even before the COVID crisis, this year’s annual general meeting season was shaping up as pivotal. The springtime ritual in which corporate directors meet shareholders face-to-face was to be the first since 181 CEOs signed a Business Roundtable pledge to elevate stakeholders – employees, customers, supplies and communities – along with shareholders. BlackRock warned corporations that the $7 trillion asset manager might vote against management at companies that failed to make progress on climate risk and sustainability. Both BlackRock, the world’s largest asset manager, and JPMorgan Chase, the world’s biggest bank, signed the Climate Action 100+ pledge to pressure the biggest emitters of greenhouse gases. The face-to-face part won’t happen, of course, but COVID-19 has only raised the stakes for corporations facing hundreds of shareholder resolutions on climate, social and governance action. Says As You Sow’s Andrew Behar, “This year can be an inflection point.”

The most engaged investors are now scrutinizing how companies have protected and treated employees through the crisis (see, Agents of Impact: Essential workers) and whether they have reevaluated share buybacks after many companies were caught without adequate cash reserves. More than 60 resolutions call on companies to explain how their strategies align with the Paris climate accord. Another 40 resolutions, prepared well before the pandemic, seek fair pay and equitable working conditions. BlackRock and Goldman Sachs face shareholder proposals asking for plans to implement the stakeholder-centric pledge itself. BlackRock is under particular scrutiny from large institutional investors, for whom ‘stewardship’ has become an important way to mitigate negative externalities of corporate behavior. Longtime shareholder advocates will believe in the changes when they see them. The COVID crisis “is really a wild card,” says Proxy Impact’s Michael Passoff. “We may see some interesting responses from companies.”

Keep reading, “‘Stewardship’ under scrutiny as the shareholder season gets started,” by Amy Cortese on ImpactAlpha.

Dealflow: Follow the Money

Circulate Capital invests in plastic recyclers in India and Indonesia. Singapore-based Circulate Capital spun off from Closed Loop Partners nearly two years ago to tackle plastic waste in Asia. Five countries are responsible for half of the plastic waste that ends up in oceans worldwide, and Circulate founder Rob Kaplan wanted to seize the “opportunity to build new value chains out of waste streams.” With a $15 million anchor investment from PepsiCo Foundation, the firm raised $106 million from Procter & Gamble, Dow, Danone, Unilever, Coca-Cola Company, Chevron Phillips and others (see, “Circulate Capital brings corporate customers to sustainable-oceans investing). Its first investments commit $6 million to Mumbai-based Lucro Plastecycle, which repurposes hard-to-recycle plastic scraps into new products like vehicle upholstery and steering-wheel covers; and Jakarta-based Tridi Oasis, a female-led company that recycles common PET plastic into “flakes” for textiles or new packaging materials.

  • COVID considerations. To back up its equity investments, Circulate is providing short-term lines of credit to help portfolio companies weather the coronavirus business disruption. “If the current health and economic crisis has taught us anything, it’s that we need to future proof our local supply chains and economies,” Kaplan said. “The resilience of critical infrastructure like waste and recycling goes hand-in-hand with protecting the health and livelihoods of our communities.” The U.S. International Development Finance Corporation and USAID provided partial guarantees (see, Catalyzing capital to prevent plastic waste).
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ImpactAssets sets COVID Response Fund to channel donor-advised funds to unmet needs. The fund will leverage the nonprofit investment manager’s network of investors to move flexible capital to companies and individuals hardest hit by the pandemic. A key strategy will be channeling charitable dollars to community banks and community development financial institutions, or CDFIs. Through the COVID Response Fund, “our family office is supporting mission-driven companies rapidly delivering products and services related to the crisis, as well as stabilizing affected social enterprises and small businesses,” says Blue Haven Initiative’s Liesel Pritzker Simmons, an ImpactAssets board member.

  • Impact step up. ImpactAssets says it has more than $1 billion in investment opportunities in its pipeline. “We have been thrilled to see impact investors leaning in at record levels to support critical needs in this moment of crisis,” said ImpactAssets’ Margret Trilli. Trilli says the nonprofit saw 3.5 times the normal volume in grants in the first quarter, and double the number of investments.
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Cheyne Capital raises £150 million to build and preserve U.K. social housing. The London-based asset management firm will develop and acquire affordable housing properties, then lease the properties to non-profit housing associations and local government ‘councils.’ The open-ended Cheyne Impact Real Estate Trust is Cheyne Capital’s second affordable housing fund.

Okra raises $1 million to improve Nigeria’s fintech infrastructure. For all of Africa’s fintech buzz and controversy, there are still significant obstacles to widespread access to financial services. Lagos-based Okra raised pre-seed funding from early stage fintech venture fund TLcom Capital to integrate mainstream banks with digital payment apps.

FINCA Impact Finance secures $15 million loan facility from Calvert Impact Capital. The network of 20 microfinance institutions will use the revolving facility to lend to subsidiaries supporting micro-entrepreneurs and small businesses across the world. It will also use a portion of the funds for working capital and long-term investments, including network-wide digitization.

Agents of Impact: Follow the Talent

Community Investment Management hires Bernhard Eikenberg, ex- of Bamboo Capital, as a partner; Jeff Hilton, ex- of Opportunity Fund, as managing director of investments and finance; and Louis Mrachek, ex- of Aura Financial, as chief credit officer… New Forests is hiring a senior analyst of investments in San Francisco… Bamboo Capital reports that over the past year, its portfolio companies impacted an additional 32 million lives in developing markets, supported an additional 5,000 jobs (including 1,900 jobs for women) and displaced an additional 680,000 metric tons of CO2 emissions.

Thank you for reading.

–Apr. 28. 2020