Impact Investing | December 14, 2021

The Brief: Today’s Reconstruction, impact beyond ESG, women’s livelihood bond, Indian agtech, circulating capital, charging EVs, fiduciary duty for pension funds

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Greetings, Agents of Impact! 

Hop on today’s Call: The Reconstruction This Time. 1863 Ventures’ Melissa Bradley, Bill Fletcher Jr., ex- of TransAfrica Forum, and playwright Gene Bruskin will join ImpactAlpha’s Monique Aiken and David Bank to plumb the past, present and future of The Reconstruction, today at 10am PT / 1pm ET. Zoom right in (no RSVP required).

Recommended reading (and viewing). Get up to speed for today’s Call:  

Featured: Capitalism Reimagined

Eight ways investors are going beyond ESG risk-mitigation to drive proactive real-world impact. The recent takedown of MSCI by a team of Bloomberg Businessweek reporters was the latest knock on environmental, social and governance, or ESG, investing. Investors have poured money into such funds, which benefit from the assumption they are helping to create a better world. But do they really make a difference? That question has nagged at ESG investing, even before ESG whistleblowers like Tariq Fancy and Desiree Fixler made headlines. Bloomberg’s expose laid out what impact investors have long known: ESG is a risk mitigation strategy that doesn’t necessarily translate into positive impact. ImpactAlpha has long drawn a distinction between largely passive and mostly public ESG investing, and more active and primarily private market-focused impact investing. Now, even public markets are seeing a shift in how ESG criteria are used, from mitigating risks towards proactive real-world impact. Investors are on the hunt for new indicators, metrics and strategies. Among them:

  • Universal ownership and beta stewardship. Investors are going beyond the identification of risks facing individual companies to push for corporate action on systemic risks that affect financial markets as a whole.
  • Transition investing. ESG presents a snapshot in time. Impact investors can reward corporations in transition. A key indicator: change in the share of revenues driven by products and services tackling major environmental and social challenges.
  • Impact benchmarks. New impact performance reports from the Global Impact Investing Network analyzed reporting on hundreds of investments to develop comparables on issues including climate change mitigation and quality jobs.
  • Activist investors. The term ‘activist investor’ used to refer to profit-maximizing hedge funds. The new activists are using board elections and proxy fights to push climate laggards to take action.
  • Keep reading, “Eight ways investors are going beyond ESG risk-mitigation to drive positive real-world impact,” by Amy Cortese and Dennis Price on ImpactAlpha

Sponsored by J&J Impact Ventures

Catalytic capital for local health startups. The COVID-19 pandemic has overwhelmed fragile healthcare systems and exacerbated social and racial health inequalities around the world. “Catalytic investments in innovative startups have the power to scale up the ‘lab to last mile’ vision,” and bring life-changing healthcare to vulnerable populations in underserved regions, writes Kris Sterkens of the Johnson & Johnson Foundation. One example: J&J Impact Ventures provided a catalytic grant to DANAdidik, a peer-to-peer lending platform in Indonesia that is helping aspiring health workers cover education costs. Building resilient health systems, says Sterkens, starts with supporting in-country entrepreneurs who “know the needs of their neighbors and communities best.”

Keep reading, “Nurturing local health startups in the communities that need them most,” by Kris Sterkens. Check out ImpactAlpha’s coverage of Investing in Health, in partnership with Johnson & Johnson Impact Ventures.

Dealflow: Catalytic Capital 

Women’s Livelihood Bond from Impact Investment Exchange closes at $30 million. Proceeds from the fourth bond will support social enterprises that can impact 500,000 underserved women and girls in India, Indonesia, Cambodia and the Philippines. Singapore-based IIX launched the Women’s Livelihood Bond series in 2017 to help low-income women in Southeast Asia find sustainable livelihoods. IIX has raised $77.7 million for the series to date, including $27.7 million for its third bond last December. “We’re building an entirely new asset class by and for the Global South that empowers developing countries with real results,” said IIX’s Durreen Shahnaz. Public and private investors including USAID, Standard Chartered Bank, Barclays backed the fourth bond.

  • Catalytic capital. IIX’s Women’s Catalyst Fund provided first-loss capital for the fourth bond. The fund is backed by a $10 million loan from the U.S. International Development Finance Corp. and a grant from the Australian Department of Foreign Affairs and Trade. By leveraging such catalytic capital, IIX is “demonstrating that collaboration is the way forward for inclusive growth and women’s empowerment,” said DFC’s Algene Sajery.
  • Onward

AgroStar secures $70 million to add stores for India’s farmers. The Pune-based company launched in 2013 to help small farmers secure seeds, fertilizer and other agricultural inputs at affordable prices. Today, it provides online and offline farming advisory services for five million farmers in Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, and Uttar Pradesh. The Series D round was led by Evolvence, Schroders Capital, Hero Enterprise and CDC Group. Existing investors Aavishkaar Capital and Accel also participated. The financing gives “us opportunities to go after acquisitions,” said AgroStar’s Shardul Sheth.

  • India expansion. AgroStar currently operates 1,000 stores and is hoping to add up to 4,000 more in the next two years as it expands into new states.
  • Check it out

Weather forecasting company Tomorrow.io to go public via SPAC. Weather disasters in the U.S. caused more than $100 billion in damages last year. Boston-based Tomorrow.io, formerly ClimaCell, uses data from cellular towers and connected devices to produce hyper-local weather reports for partners such as Uber, Delta and National Grid. Tomorrow.io is looking to raise $420 million at a valuation of $1.2 billion and list on the Nasdaq by merging with Pine Technology Acquisition Corp., a special purpose acquisition company, or SPAC. Tomorrow.io is hoping to launch dozens of mini-satellites next year, which will help the company more accurately predict and monitor global weather conditions. Share this post

Dealflow overflow. Other investment news crossing our desks:

  • Rise Fund and Spectrum Equity acquire a majority stake in edtech venture PresenceLearning, which provides software for special education and mental health counselors in K-12 schools. Bain Capital Double Impact and Catalyst Investors retain minority stakes.
  • Closed Loop Partners’ second venture fund raises $50 million to invest in growth-stage companies developing breakthrough circular economy solutions.
  • India’s Exponent Energy scores $5 million to develop fast-charging batteries and stations for electric vehicles.

Signals: Policy Corner

Clarifying the fiduciary duty of pension fund managers. The U.S. Department of Labor is proposing rules to once again green-light managers of pension funds and retirement accounts to consider the environment, social justice, and corporate governance in their investment decisions. The new rules would reverse an effort by the Trump administration to discourage consideration of ESG factors by ERISA fiduciaries, which itself was a reversal of Obama-era guidance.

  • Broad support. Thousands of public comments were submitted before the public comment period ended Monday. Members of the Coalition on Inclusive Economic Growth, led by B Lab and the U.S. Impact Investing Alliance, urged policymakers to end the “regulatory game of ping pong” that has caused market confusion with each change of administration. A dozen groups signed on to a separate letter in support of the rules submitted by the Sierra Club and the Americans for Financial Reform Education Fund.
  • Share this post.

Agents of Impact: Follow the Talent

Lydie Hudson is exiting Credit Suisse, where she was CEO of sustainability, research and investment solutions… Amanda Glincher, ex- of Fiserv, joins CNote as director of marketing. Tamra Thetford, ex- of Justine Petersen, is the impact platform’s new director of impact evaluation… Jason Martinez, previously with Tupper Lake Partners, joins Pickering Energy Partners to lead its energy transition advisory practice… Monica Ravi, ex- of Commerce Bancshares, joins North Sky Capital as an associate with the firm’s impact secondaries practice.

Dalberg is hiring a community of practice program manager for the Americas… Arctaris Impact Investors seeks applicants for its private equity analyst program and for a private equity operations analystGreat Lakes Protection Fund is hiring a communications manager… Yunus Social Business is looking for an investment and portfolio manager in India… Integrated Capital Investing is seeking applications for its “Transformative 25” funds transforming the economy for justice.

Thank you for your impact.

– Dec. 14, 2021