Greetings, Agents of Impact!
Next week’s Call: Fintech, crypto and financial inclusion in Africa. As the economic tide goes out, investors will see which of Africa’s fintech and crypto startups were swimming naked. Products and underwriting tied to productive uses, rather than speculation and gambling, may prove the most resilient and sustainable.
- Join Olu Oyinsan of Nigeria-based Oui Capital, Nelly Chatue-Diop of Cameroon’s crypto-trading startup Ejara, Mercy Corps Ventures’ Scott Onder and other Agents to discuss the impact alpha in responsible financial inclusion, Wednesday, June 1 at 8am PT / 11am ET / 6pm Nairobi. RSVP today.
Featured: Proxy Season
Engine No. 1 opts for accommodation over confrontation with Big Oil and big banks. A year ago, the tiny fund manager Engine No. 1 was The Little Engine That Could. This year, it’s more like the dog that didn’t bark. Shareholder advocates and climate activists are wondering what happened to the momentum Engine No. 1 built a year ago when it jolted ExxonMobil by getting three members of its insurgent slate of directors elected to the oil giant’s board. Engine No. 1 parlayed its celebrity status to launch an exchange-traded fund, Transform500, which trades under the ticker VOTE. The sales pitch: rather than screening out stocks, VOTE would drive impact through proxy voting, engagement and activist campaigns. “We’re always going to be aggressive on how we use our vote,” Engine’s CEO Jennifer Grancio told Time in March.
Engine has been anything but aggressive with VOTE’s votes. Last month, it sided with management in opposing climate proposals put forth by shareholders of Citi, Bank of America, Goldman Sachs and Wells Fargo. Last week, it voted down a shareholder proposal aimed at curtailing fossil fuel funding at JPMorgan Chase, the world’s largest financier of oil and gas expansion. “Engine No. 1 wants to be seen as a force for transformation and climate action, but they seem to be just pushing for business-as-usual with better PR,” said the Sierra Club’s Ben Cushing. At yesterday’s key meeting at Exxon, Engine No. 1 voted against a proposal by Arjuna Capital asking for a report on Exxon’s low-carbon business strategy, amid a general softening in support for climate proposals as the war in Ukraine puts a focus on energy security. “We have seen Exxon continue capital discipline on fossil work and develop a low-carbon business – which is significant progress from before our proxy campaign,” Engine No. 1’s Yusuf George told ImpactAlpha. And there were no fireworks in this year’s board election. ExxonMobil CEO Darren Woods praised the entire board.
- Proxy wins… At Chevron, 98% of investors voted for a resolution asking the company to report on its methane measurement. The vote “is a crystal-clear statement on the benefits of aggressive action to measure and reduce methane emissions for the climate, as well as companies’ and investors’ bottom lines,” said Ceres’ Andrew Logan. Chevron supported the proposal. Studies indicate that the industry underestimates methane emissions by at least 60%.
- …and misses. Majority Action failed to unseat Chevron CEO Michael Wirth and lead director Ronald Sugar from the board after the company ignored shareholders’ request for emission-reduction targets in line with the Paris accord last year. “On matters ranging from climate change to racial justice, it appears that large asset managers likely voted to shield the board of Chevron from accountability, potentially undermining key votes from reaching majority support,” said Majority Action’s Eli Kasargod-Staub (for context, see, “Shareholders test their power with votes at Exxon, Chevron, BlackRock and McD’s”). At Meta, just 3% of shareholders voted for Shareholder Commons’ request for a report on the external costs of misinformation.
- Keep reading, “Engine No. 1 opts for accommodation over confrontation with Big Oil and big banks,” by Amy Cortese on ImpactAlpha.
Dealflow: Ownership Economy
Moves raises $5 million to help gig-economy workers become owners. Roughly 57 million U.S. workers participate in the gig economy, and that workforce is expected to grow to 86 million within five years. Gig workers face unpredictable incomes, lack of worker benefits and more. Toronto-based Moves helps gig workers access banking, savings and investing services – and opportunities to acquire shares in the companies they work for. “With increased gas prices impacting take-home earnings, and rapid inflation increasing cost of living, the biggest worry for our members at this time is the sustainability of how they earn a living,” Moves’ Matthew Spoke told ImpactAlpha.
- Worker ownership. Moves partners with Uber, Lyft, Doordash, Grubhub, Target and Amazon to help its network of 10,000 gig workers earn free, fractional stock rewards for referring a friend, participating in surveys and other activities. The Moves Collective program holds over 4,500 shares in participating companies. “The Moves Collective is a brilliant solution to a persistent issue for gig workers, who traditionally don’t share in any of the value they have helped to create,” said Laura Lenz of OMERS Ventures, which led the seed round.
- Financial inclusion. Investors in the round also include senior executives from Airbnb, eBay, Facebook, Shopify and some of the companies in the Moves Collective program. Spoke said the Moves Collective aims to “create more ways to earn stock and continue expanding our set of features that help gig workers manage their money.”
Catalytic Capital Consortium goes global with support for flexible, risk-tolerant investments. The consortium formed by the MacArthur and Rockefeller foundations and Omidyar Network aims to expand the use of patient, risk-tolerant, concessionary and flexible capital (see, “Catalytic capital: Reshaping risks and rewards to make markets work”). Grants to Latimpacto in Latin America and venture philanthropy networks in Asia, Africa and Europe will help expand the use of catalytic capital to advance inclusion, health and climate action. C3 last year provided funding to more than a dozen research projects to expand the evidence base of what’s working.
- Bridging capital gaps. “Africa remains a major impact opportunity in the world but is largely held back by inadequate financing for social investments,” said African Venture Philanthropy Alliance’s Frank Aswani. He said the network will train African grant-makers and investors in catalytic investing, “thus enhancing their ability to work with and mobilize private capital for sustainable impact on the continent.”
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Dealflow overflow. Other investment news crossing our desks:
- Alphabet, Microsoft and Salesforce will spend a combined $500 million on CO2 removal as part of The First Movers Coalition, a public-private decarbonization partnership that gained new commitments at Davos.
- Collaborative Fund’s new Shared Future Fund will invest in 100 climate projects with $100,000 uncapped Y Combinator-style SAFE notes.
- Community Carbon received a $20 million commitment from Carbon Streaming Corp. to support access to clean cookstoves and clean drinking water in Africa.
- Boulder, Colo.-based Wunder secured a $650 million partnership with ClearGen, a Blackstone Credit portfolio company, for commercial solar projects.
Signals: Policy Corner
S.E.C. rules would require funds to back up their ESG claims. The $1.5 million fine levied on BNY Mellon this week by the U.S. Securities and Exchange Commission over misleading ESG statements signaled the agency’s intent to crackdown on “greenwashing” in asset management. The S.E.C. followed up with two proposed rules to force funds calling themselves “ESG,” “green,” “sustainable,” or “low carbon” to market themselves more accurately and disclose their practices. The first rule would expand the Fund Names Rule to require that the investment theme in a fund’s name reflect at least 80% of the fund’s assets. The second rule would amend ESG Disclosures for Investment Advisers and Investment Companies to require funds to disclose ESG strategies, including how they define environmental, social and governance and how they vote their proxies. “I think investors should be able to drill down to see what’s under the hood of these strategies,” said S.E.C. Chair Gary Gensler. The proposals, which are open for public comment through July 24, get “to the heart of the S.E.C.’s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs.”
- Under the hood. Under the new rules, funds focused on environmental factors would be required to disclose the greenhouse gas emissions associated with their investments. Funds claiming to achieve a specific ESG impact would be required to describe the specific impacts and summarize progress on achieving those impacts. And funds that use proxy voting as part of their ESG strategy would be required to disclose information regarding their voting of proxies on ESG-related matters.
- First step. U.S. SIF’s Lisa Woll called the proposals “a significant day for sustainable investors.” Ceres’ Steven Rothstein said the rules will “result in greater investor confidence that sustainable funds are what they say they are.” As You Sow’s Andrew Behar called the amendments “a good first step.” But by continuing to use the “flawed” 80/20 framework, says Behar, managers can still abuse the rule, for example by calling funds “fossil fuel reserves-free” even with up to 20% of investments in dozens of fossil fuel companies. “It’s time for the S.E.C. to develop a new structure to remove the loopholes and level the playing field to make honest disclosure mandatory,” Behar said.
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Agents of Impact: Follow the Talent
Coleen Lynch, ex- of Eaton Vance Asset Management, joins Impax Asset Management as senior vice president and relationship manager for national accounts… Christine Gabbianelli, ex- of Fairview Capital Group, joins Green Rock Energy Partners as head of investor relations… Gratitude Railroad is hiring an impact investment analyst and an impact investment associate.
Thank you for your impact!
– May 26, 2022