The Brief | December 13, 2023

The Brief: Today’s Call: Hidden impact in muni bonds, shuttering Jeffrey Ubben, women’s livelihood bond, Omidyar Network exits India, decarbonizing your banking

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Greetings, Agents of Impact! 

👋 Hop on today’s Call: How to spot overlooked impact and risk in municipal bonds. Join Activest’s Homero Radway, Kestrel’s Monica Reid, R. Paul Herman of HIP Investor, Court Street Group’s Matt Posner and special guest RJ McGrail of the Lincoln Institute of Land Policy, in conversation with ImpactAlpha’s David Bank and Dennis Price, today at 10am PT / 1pm ET / 6pm London. Zoom right in

Featured: Institutional Impact

Don’t take Jeffrey Ubben’s shutdown of Inclusive Capital Partners for more than he’s worth. News broke this month that Jeffrey Ubben, the activist fund manager who rose to prominence with ValueAct Capital, is closing down his new investment firm, Inclusive Capital Partners, and returning capital to its investors. Inclusive’s sustainable investment approach “unfortunately hasn’t been rewarded in the public markets,” the firm, which had $2.6 billion in assets, shared with investors. The shuttering was taken as a sign of a broader pullback for sustainability and impact investing. Not so fast. “Take Ubben’s exit more as a signal of the dominance of (sometimes fickle) rich, white males in finance, and less about the fate of sustainable investing,” ImpactAlpha contributing editor Imogen Rose-Smith writes in her latest Institutional Impact column. 

  • Oil winnings. At COP28 in Dubai this month, Ubben slammed the “green echo chamber” for not being inclusive enough about who it allows at the clean energy transition table, and made the case for oil majors and oil-producing countries to be a part of the conversation. ExxonMobil appears to have been one of Inclusive Capital’s most successful positions. In May 2021, a few months after Ubben joined the ExxonMobil board, Inclusive reported a position of almost 1.7 million shares valued at $94 million or roughly $56 a share. In its most recent filing, Inclusive reported a position of 1.8 million Exxon shares worth $215 million, or $118 a share (today, Exxon trades at around $90 a share).
  • Bad bets. One of Inclusive’s early holdings was Nikola, the electric truck manufacturer, whose founder and CEO was convicted of fraud last year. Ubben admits to pushing the upstart carmaker to go public too soon. Today, the company trades at below $2 a share, down from $15.26 in February 2021. Inclusive Capital is a major holder in Enviva, the world’s largest producer of wood pellets for energy production. In December 2021, Enviva was valued around $45 a share. Then the short seller Blue Orca Capital accused the company of clear-cutting trees and perpetuating an “ESG farce.” Enviva denies the claims; a class-action suit followed. Today Enviva trades at under $2 per share. Ubben resigned from Enviva’s board last month. Indoor farming startup AppHarvest and sustainable fiber company Unifi have lost most of their value since Inclusive invested, the Financial Times reported.
  • Stay the course. Environmental, social and governance challenges aren’t going away. “But that doesn’t mean investing around them is easy,” Rose-Smith writes. Back in 2020, when Ubben launched Inclusive Capital, it seemed like the sustainability wave was building. After his two decades of short-term profit-seeking, Ubben’s defection from ValueAct to Inclusive was taken as a proof point in itself. “I’m on a crusade,” he said at the time. “I’ve got five years to fix the harm I’ve done.” It’s going to take hard work to right the global economy, Rose-Smith writes. “Even by his own timeline, Jeffrey Ubben still owes us a couple years to fix the harm he’s done.”

Sponsored by Tideline

Tideline’s ten years of impact. The impact investing consultancy is celebrating a decade of guiding clients on their impact investing journeys. Over the next decade, Tideline, whose clients collectively manage over $200 billion in impact capital, is committing to “an intentional shift from ‘navigating’ impact to ‘centering’ impact,” writes Tideline’s Ben Thornley. In an excerpt fromTen Years of Impact,” Tideline shares a message to the field: Get started. Be transparent. Experiment and innovate. “The time to start investing for impact is now,” writes Thornley. “The journey toward a goal is marked by learning, adaption and progress.”

Dealflow: Gender + Climate

IIX scores $100 million for its sixth Women’s Livelihood Bond. Since launching the bond series in 2017, the Singapore-based impact investment firm has raised nearly $230 million to support women’s economic empowerment in Asia. With ever-larger issuances, IIX has evolved its investment thesis, focusing on the intersection of gender and climate issues. Women’s Livelihood Bond 6 is the second in the series to be issued under the Orange Bond framework, which IIX helped develop for social bonds supporting gender equity (“orange” is used for Sustainable Development Goal No. 5). Proceeds are expected to support livelihood improvement and resilience for nearly 900,000 women and girls in India, Cambodia, Indonesia, Kenya and Vietnam.

  • Catalytic capital. Dutch pension fund APG and Nuveen are among WLB6’s backers. The bond is backed by a partial guarantee from the Swedish International Development Cooperation Agency as well as a $12 million first-loss tranche from the US International Development Finance Corp. Combined they protect senior investors for at least $20 million in losses. Each bond in the series has used similar de-risking mechanisms for investors. 

Omidyar Network India to shut down. The firm was an early mover and impact ecosystem builder in India when it was launched more than a decade ago by Omidyar Group. It is ceasing new investments and will close its operations by the end of next year, YourStory reported. Omidyar Network India says it “achieved our primary objective of catalyzing impact,” the outlet reported, citing a statement circulated to media in India. “We are proud of our work in this space, which is now attracting larger pools of capital from local venture capital or impact investors and domestic philanthropists than ever before.” Omidyar Network India has invested more than $500 million in over 80 Indian startups advancing financial inclusion, education access, independent media and other social goods. It was spun out in 2019, as part of Omidyar Group’s devolution of its fund strategies. The firm had announced its latest deal, leading the Series A round of DGV, a fintech venture serving India’s dairy farmers, earlier this month.

  • Troubled waters. Many investors’ portfolios have taken a hit from the tech and economic turbulence in the past 18 months. Last week, news broke that Omidyar Network India portfolio company ZestMoney was shutting down after eight years in the buy-now, pay-later business after unsuccessfully seeking a buyer. Edtech portfolio company Doubtnut, once valued at $150 million, was reportedly acquired for just $10 million. Omidyar Network India’s managing partner Roopa Kudva departed the group last month. Kudva and Omidyar Network India could not be immediately reached for comment.

British insurance broker Thomas Carroll Group transitions to an employee ownership trust. Employee ownership trusts are inexpensive to execute and flexible in design compared to other ownership structures like employee stock option plans, or ESOPs (see, “Through ‘ownership trusts,’ investors can help employees become owners and owners retire). The UK has seen a surge in employee-ownership conversions since the government introduced EOTs in 2014. “We’ve seen many competitors being sold and swallowed up by larger companies,” said Rhys Thomas, who leads Thomas Carroll Group, which was co-founded by his father in 1972. Thomas wanted to pass ownership on to the company’s 181 employees to “respect the legacy and heritage of those that built this wonderful company and to find a suitable way to achieve a successful succession plan,” he said. The number of EOT businesses in the UK more than doubled between 2020 and 2022. Share this post.

Dealflow overflow. Other investment news crossing our desks:

  • Monashees led a $30 million Series A equity and debt funding round for São Paulo-based Vammo, a manufacturer of electric motorcycles and batteries. (TFN)
  • Fourth Power scored $19 million in a Series A round, backed by Breakthrough Energy Ventures and Black Venture Capital Consortium, for low-cost thermal energy storage. (Fourth Power)
  • Comun, a New York-based neobank for immigrants from Latin America, snagged $4.5 million from investors. (TechCrunch)
  • EQT Infrastructure acquired a majority stake in Heritage Environmental Services, which offers waste management and sustainability services. (Heritage)

Short Signals: What We’re Reading

📜 Progress in reimagining capitalism. Despite the “anti-ESG movement,” advocates for responsible capital markets have achieved “notable progress,” writes Chris Jurgens of Omidyar Network. For example: the Securities and Exchange Commission’s introduction of new rules to protect shareholder rights and enhance transparency in the private funds market. (Omidyar Network)

🔋 COP28 negotiators, take note. Battery sales are on track to grow eightfold by 2030, driving costs down and expanding markets. The upshot: batteries are “set to enable the phase out of half of global fossil fuel demand,” according to a new report. (RMI)

📏 Measuring the impact of systems-level investing. Progress on impact measurement in recent years has focused on the individual and portfolio level investments. A new framework from The Investment Integration Project guides investors on advancing system-level progress on issues such as income inequality. (TIIP)

🏦 Decarbonize your banking. Moving $8,000 from a “carbon-intensive” bank to a “climate-responsible” bank would achieve a larger annual reduction in indirect emissions than the direct carbon emissions reductions of adopting a vegan diet. (Project Drawdown)

🍌 Pipeline of global food waste solutions. A new roadmap details $300 million in ready-to-fund catalytic investment opportunities to reduce food waste and food-waste related emissions in China, Indonesia, Kenya, Mexico, South Africa, the US and Brazil. (FOLU, ReFED, WRAP and WRI)

🌿 Roads to (carbon) removal. Cropland soil and forest-based carbon storage are ready to scale. Direct air capture and biomass carbon removal need development. A new report details county-by-county opportunities to help the US remove one billion metric tons of carbon per year and create 440,000 jobs. (Lawrence Livermore National Laboratory)

Agents of Impact: Follow the Talent

Betty Irene Moore, founder of the Gordon and Betty Moore Foundation, has died at 95… William Sonneborn, an alum of International Finance Corp. and KKR, is named president of Generate Capital… Stéphane Detobel and Francis Verpoucke, both ex- of TOBAM, join Mirova US as executive VPs for institutional business in North America… Garrett Jaso, ex- of Global Impact Investing Network, joins Impact Capital Managers as senior manager of communications and policy.

Clearway Energy Group is looking for a senior analyst of portfolio finance in San Francisco… Also in San Francisco, Acumen seeks a health associate… Credit Agricole has an opening for an energy and infrastructure finance associate in New York… Also in New York, the Rockefeller Foundation is recruiting an innovative finance summer associate… Jumpstart Health Investors is on the hunt for a venture capital analyst… Impact Justice seeks a director of finance in Washington, DC.

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Dec. 13, 2023