Greetings, Agents of Impact!
Featured: Worker Power
Employees: The Missing ‘E’ in ESG. Workers, the people most important to capitalism, have been buried in the “S” in ESG, which stands for environmental, social, and governance risk factors in business and investing. More conversations – and actions – need to consider how best to emphasize employees, Ford Foundation’s Margot Brandenburg, Bob Eccles of University of Oxford’s Said Business School’s, and Leo Strine, former chief justice of the Delaware Supreme Court, argue in a guest post on ImpactAlpha. Strine’s idea: updating the moniker to “double-E, S, G,” or EESG, to put workers at the forefront (for context, see “Leo Strine on worker power and fair and sustainable capitalism“). A survey last month by the nonprofit Just Capital shows that Americans believe workers to be business’s most important stakeholder. Both political parties claim to be the party of workers. Institutional investors and business leaders talk about the war for talent. Yet the way a company manages its human capital is underrepresented in ESG disclosures, investment strategies and advocacy.
- Compensation disclosure. Only 15% of companies in the U.S. disclose wage data, and even fewer report on benefit costs, worker retention and training initiatives. Public companies are required to disclose executive compensation, but – without better disclosure about how companies pay their workers at each level – neither boards nor investors can understand whether an overall pay plan has been optimized for productivity. The S.E.C. is expected to issue human capital disclosure rules in the coming months (for context, see “Inside the generational opportunity to reshape rules of corporate disclosure”).
- Investment strategies. Very few investment strategies center on investing in companies with the most human ingenuity and productivity. The Ford Foundation’s Mission Investments team has been actively seeking to invest endowment capital in funds that have focused on creating “quality jobs” over the past five years. The positive impact on workers and economic growth has been encouraging, Brandenburg says. Mainstream private equity players recently launched Ownership Works, a nonprofit organization that “partners with companies and investors to provide all employees with the opportunity to build wealth at work.”
- Popular support. Neglect of workers has fueled massive inequality. Workers experienced strong real wage growth from 1945 to 1980, but lost ground between 1981 and 2014, despite a large increase in productivity. Wages for the top 1% increased 176% over the same period. “This level of inequality is unsustainable, hurts communities of color the most, and it’s bad for our democracy as well as the economy,” the authors write. ESG investors would broaden their base of support by focusing more on workers, they say. “If hardworking taxpayers and voters can see themselves in ESG strategies, they are much more likely to favor them.”
- Keep reading, “Employees: The Missing ‘E’ in ESG,” by Margot Brandenburg, Bob Eccles and Leo Strine on ImpactAlpha.
Dealflow: Renewable Energy
BP acquires U.S. renewable natural gas producer Archaea Energy in a $4.1 billion deal. BP became one of the first oil majors to embrace the low-carbon transition when CEO Bernard Looney took over in February 2020 and committed to net-zero greenhouse gas emissions by 2050 or sooner. That goal encompasses BP’s operations as well as emissions from the oil and gas it sells (see, “Net-zero pledges by BP’s new chief raise the stakes for oil majors”). The acquisition of Houston-based Archaea will help the energy giant reach more customers and reduce the carbon intensity of its products. Archaea manages more than 50 renewable natural gas and landfill gas-to-energy facilities in the U.S. “This is a product that our customers want,” Looney told Reuters. “There’s more demand for this product than there is supply.” The $4.1 billion deal, subject to approvals, includes $3.3 billion in equity, or $26 a share, as well as approximately $800 million of debt. Earlier this year, Chevron Corp. purchased biodiesel maker Renewable Energy Group for nearly $3.2 billion.
- Post-acquisition plans. Looney said BP will grow Archaea’s renewable natural gas production five-fold to 30,000 daily barrels of oil-equivalent fuel by 2030. The acquisition will increase BP’s biogas supply by 50%. BP will invest an additional $1.7 billion to support Archaea’s growth.
- Market forecast. Renewable natural gas, derived from biomass and other organic waste, is pipeline-quality gas that is fully interchangeable with conventional natural gas. RNG has the potential to reduce greenhouse gas emissions by up to 260 million tons by 2040, but RNG pipelines can also leak methane, a potent greenhouse gas, like their fossil fuel counterparts.
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India’s EKI Energy Services commits $25 million to launch a climate impact fund. Indore-based EKI Energy is a global carbon credits supplier and project manager with its own trading platform. EKI Energy is committing $25 million of its own capital to raise a $125 million climate impact fund for rural communities in India and other emerging markets. “We also want to strengthen our focus on community development,” said EKI Energy’s Manish Dabkara. The fund will target clean drinking water filtration systems, energy efficiency, waste management solutions and clean cookstoves. A clean cookstove manufacturing facility in India run by GHG Reductions Technologies, EKI Energy’s subsidiary, produces up to five million stoves per year.
- Strategic partnerships. Singapore-based fund manager Impact Capital Asset Management will manage the fundraising and investments in the fund. The pitch: high-quality carbon credits can be used to offset carbon emissions or sold on EKI Energy’s carbon credits trading platform.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- Australia’s AgriWebb snagged $6.8 million to help ranchers and farmers digitize livestock management and implement regenerative agriculture practices.
- Convective Capital raised $35 million to invest in early-stage startups with tech solutions that can detect and contain wildfires.
- Germany’s Ecoligo scored €10 million ($9.8 million) to expand its solar-as-a-service with commercial and industrial partners in emerging markets.
- The Black Economic Alliance Foundation secured a five-year, $10 million commitment from Deloitte to develop research, investment and philanthropic programs to bridge the racial wealth gap.
Impact Voices: Gender-Lens Investing
Six ways to support women entrepreneurs in the Global South. More women than ever are starting their own businesses, making them key drivers of economic growth. In Uganda, one in three businesses are owned by women. Still, gender bias and institutional exclusion make it difficult for women-owned and led businesses to access affordable capital and support services. Key to closing the financing gap: “Expanding the scope of financial intermediaries to include gender-lens investing and gender-smart business development,” write Tokunboh Ishmael of Alitheia Capital and Richenda Van Leeuwen of Aspen Network of Development Entrepreneurs in a guest post. Investors are gathered in London for this week’s GenderSmart Investing Summit.
- Gender-smart lessons. Alitheia runs a $100 million gender-lens fund that provides catalytic capital to women-owned and led businesses in Africa. ANDE’s Gender Equality Initiative supports organizations that provide business development support services to women entrepreneurs. Their lessons: Understand local challenges facing women-led businesses. Create space for peer-to-peer learning. And be intentional about outcomes.
- Female fund managers. Perhaps the biggest lesson is to back female fund managers, who remain underrepresented in decision-making (see, “Creative capital for gender-smart investments“). Write the authors, “Diverse representation at the decision-making level of funders, through to the businesses that benefit from their funding and the value-chains of such businesses, is essential.”
- Keep reading, “Six ways to support women entrepreneurs in the Global South,” by Tokunboh Ishmael and Richenda Van Leeuwen.
Agents of Impact: Follow the Talent
Peter Bruce-Clark, ex- of Social Impact Capital, joins Radian Capital as a venture partner… Climate-focused nonprofit RMI appoints Jon Creyts, who has worked with the organization since 2012, as CEO, succeeding Jules Kortenhorst… Candide Group is hiring a client services associate… The 2X Collaborative and GenderSmart, which are merging, have several open positions, including climate lead and program manager.
The Global Impact Investing Network seeks an associate in New York… The University of Pennsylvania seeks a senior associate director for its Wharton ESG Initiative… Green Century Funds is looking for a communications director in Boston… SVG Ventures’ Shell Climate-Smart Agriculture Challenge is accepting applications from startups focused on climate-smart agriculture practices.
Thank you for your impact!
– Oct. 19, 2022
