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The Brief: Stakeholder claims on corporate cash + 10 ways to deploy it, sharing micro-insurance, pay-gap transparency, JPMorgan director in the hot seat



Greetings, Agents of Impact!

The Call: 10x Community Capital. Small businesses and nonprofits will need affordable and accessible loans to re-open and recover from the COVID crash. “Community recovery vehicles” can provide community development financial institutions with the liquidity they need to underwrite thousands of loans in underserved communities. On Agents of Impact Call No. 17, Calvert Impact Capital’s Beth Bafford and Community Reinvestment Fund’s Patrick Davis will outline such a capital stack. Join place-based lenders and other Agents of Impact this Thursday, May 21, at 10am PT / 1pm ET / 6pm London. RSVP now.

Featured: ImpactAlpha Original

Stakeholders stake new claims on corporate cash to finance an inclusive recovery. Buy out this. That’s the increasingly loud message from employees, suppliers, communities and customers – all essential stakeholders in the new corporate purpose to which CEOs pledged themselves last summer. With those stakeholders now facing hardships and financing challenges of unprecedented scope, they are starting to lay claim to an obvious stash of capital that could be deployed to preserve that new corporate purpose: hundreds of billions of dollars held as cash or marketable securities on corporate balance sheets. Some companies, of course, depleted their cash reserves even before the COVID shutdowns, through years of stock buybacks and dividend payments. But U.S. non-financial corporations still are sitting on over $4 trillion in cash. Apple’s $200 billion hoard makes it, effectively, the nation’s 13th-largest bank.

Companies are finding their use of the corporate treasury under scrutiny as a key part of ‘G,’ for governance, ‘S’ for social and ‘E’ for environment, in the new era of ESG investing. For its May 26 shareholder meeting, the pharmaceutical giant Merck is being asked about its plans for its savings from the 2017 tax reform. Merck reaped an estimated $1.2 billion tax windfall in 2018, and stands to save nearly $7 billion from tax changes. At the same time, the company more than doubled its share repurchases to $9 billion in 2018 – and cut R&D by $450 million. Last week, New York City’s pension funds and Dutch pension asset manager APG fired off a letter to Amazon seeking details on the company’s $4 billion pledge to worker health and safety. “Effective management of human capital is a driver of long-term value creation,” the pension funds said. Stock buybacks may not even benefit shareholders in the long run. Senior executives with a value-extracting approach to corporate resources, says the University of Massachusetts’ William Lazonick, “lose the ability (if they ever had it) to envision opportunities for new types of value-creating investments.”

Keep reading, “Stakeholders stake new claims on corporate cash to finance an inclusive recovery,” by Amy Cortese and David Bank on ImpactAlpha.

  • Beyond buybacks: 10 ways to put corporate cash to work. Corporations looking to build a business environment of shared prosperity have a range of options, including: Forging a new social contract. Strengthening supply chains. Paying taxes. And financing affordable housingCollect all 10.
  • Add your own ideas for deploying corporate cash in ImpactAlpha’s #System-Change Slack channel. Not yet on Slack? Sign up here (or drop a note to editor@impactalpha.com.)

Dealflow: Follow the Money

ABN Amro and Symbiotics launch mutual fund to drive emerging markets small business finance. Symbiotics invests in emerging markets’ microfinance institutions, small business banks, commercial banks with small business initiatives and leasing companies. Symbiotics recently listed Symbiotics Sicav II, to make debt investments, including bonds, promissory notes and loan agreements, that provide financial institutions with access to capital. As part ABN Amro’s growing impact investing strategy, the Dutch bank’s Emerging Markets Impact Debt fund will act as a feeder fund for Symbiotics Sicav II. Check it out.

Insure-tech startup Omocom raises €3.7 million to encourage the sharing economy. The Swedish startup offers “micro-insurance” for users of sharing platforms like Nordic equipment rental site hygglo, and MIOO, a Stockholm-based bike-maintenance subscription service. Omocom says it aims to encourage people to use existing products longer. The funding round was backed by Lisbon-based impact fund Mustard Seed MAZE, as well as Alma Mundi Insurtech Fund and LuminarMore.

Clean Crop Technologies secures $2.5 million for electricity-based crop treatment. The Massachusetts-based company uses “ionized gases” – produced by electrically charging ambient air – to reduce molds, toxins and pests in grain and nut harvests and fight food waste. The financing round was backed by four investors per an SEC filing.

Emerson Collective backs Syndio’s pay-gap transparency software. Seattle-based Syndio’s software helps employers resolve salary discrepancies among workers. Emerson Collective co-led the $7.5 million funding round with Voyager Capital.

Signals: Ahead of the Curve

JPMorgan shareholders rally support to oust Exxon’s ex-CEO from board. As companies get better at defecting shareholder resolutions, there is one vote they can’t duck: board elections. It’s rare that shareholders can muster enough votes to oust a sitting director, but the effort sends a powerful – and personal – message. For shareholder activists, Lee Raymond would be a trophy head. Raymond, former CEO of Exxon and architect of its campaign of climate obfuscation, has served as JPMorgan’s lead independent director since 2001. Raymond’s record is “incompatible with climate-competent leadership,” says Majority Action, which spearheaded the proposal to remove him. On the eve of the bank’s annual shareholder meeting today, climate activists projected protest signs in lights across from JPMorgan CEO Jamie Dimon’s Manhattan home.

  • Momentum. JPMorgan in early May demoted Raymond from his lead director role. Treasurers from 10 states, along with the New York City Comptroller and pension giant CalPERS, are calling for Raymond’s removal altogether. “As part of a broader plan for the bank to seriously grapple with the risks climate change pose to investors, Raymond should plan to retire from the board entirely,” said Maryland’s state treasurer Nancy Kopp. Proxy advisor Glass Lewis has thrown its weight behind the proposal.
  • Climate action. Shareholders also are asking the world’s largest financier of fossil fuels to align its lending with the Paris climate accord and address risks stemming from its financing of Arctic oil and Canadian oil sands projects. A fourth proposal seeks to split the roles of chairman and CEO now held by Dimon.
  • Exxon exits? Raymond’s former company is facing heat, too. Legal & General Investment Management, the U.K.’s largest asset manager, announced it would vote against the re-election of Darren Woods, Exxon’s CEO and chairman. The Church of England and the New York State Common Retirement Fund are urging shareholders to boot the oil giant’s entire board.
  • Get out the vote.

Agents of Impact: Follow the Talent

Palatine Private Equity names Tristan Craddock as partner for its Impact Fund… Deutsche Bank AG appoints Kamran Khan as its first Asia Pacific head of environmental, social and corporate governance… Capria is hiring an investment director… Upstart Co-Lab is looking for a program assistant in New York.

Aspen Institute is hosting “Increasing Equity in a Post-Pandemic Economy: The Potential for Growing Worker Ownership,” today at 2pm ET… Finalists in the Green for Growth Fund’s clim@ competition will present ventures targeting climate impact on June 2… Impact Entrepreneurs is hosting “Understanding the Impact of the Creative Economy” with Upstart Co-Lab’s Laura Callanan, Fundación Compromiso’s Carolina Biquard, HEVA Fund’s George Gachara, and Conscious Endeavors’s Jack Meyercord on June 11.

Thank you for reading.

–May 19, 2020

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