Greetings, Agents of Impact!
Featured: ImpactAlpha Original
Here are 10 ways investors are riding the sustainability wave into 2021. The table was set with last year’s flows of capital into sustainable funds, renewable energy “SPACs,” community development financial institutions, and initiatives to redress racial injustice. This year, investors are expecting a feast of opportunities for progress, not only on pandemic relief, but on climate action, racial justice and inclusive prosperity as well. In the U.S., impact and sustainable investors are expecting policy tailwinds from a new congressional majority and a new administration – yesterday’s chaos notwithstanding. Agents of Impact shared their ideas of what lies ahead on ImpactAlpha’s recent Call (see, “What Agents of Impact are expecting in 2021”). The challenge now is to spur thinking big enough to match the moment, as this roundup of forecasts from investors, economists and other experts suggests. Collect all 10.
- Financial institutions are optimizing for sustainability. Bloomberg rounds up more than 500 key calls from global investors. Says BlackRock Investment Institute: “We prefer sustainable assets amid a growing societal preference for sustainability.” BNP Paribas “expects the year to be marked by increased transparency in climate objectives and disclosures of corporates and financial institutions, as well as a rapid acceleration in sustainable products and investment.”
- Declining costs and cheap capital are propelling climate solutions to scale. “The technology is ready, our infrastructure is old, and everyone seems to understand that clean energy is our way to full employment,” argues Generate Capital’s Jigar Shah.
- Climate competition is heating up. “As the U.S. scrambles to catch up to China in what will quickly become a global clean energy arms race, it will make climate and the energy transition a matter of industrial and national security policy,” write Eurasia’s Group’s Ian Bremmer and Cliff Kupchan.
- Institutional and retail investors are shifting public markets toward ESG. More than $168 billion poured into global environmental, social, and governance, or ESG, funds in 2020. Nasdaq calls ESG “one of the hottest trends” of the new year.
- Tech leaders are on the hook for diversity investments. “We predict that these commitments will be the leading topic of discussion across this year’s business leadership climate in all sectors,” writes The Plug’s Monica Melton.
- Emerging market companies are emerging as sustainability leaders. “Global sustainability commitments should provide a tailwind to emerging market companies that are developing products and services that contribute to low-carbon goals,” Cartica’s Kate Ahern told ImpactAlpha.
- Global development is going local. A power shift around the globe could finally put more funds into the hands of local groups closest to emerging and frontier market needs. “It has become easier to identify credible local organizations and fund them directly,” writes Devex’s Raj Kumar.
- Investors are recognizing that gender is material. GenderSmart’s Suzanne Biegel advises investors “to invest in women-led businesses, economies with higher rates of women’s participation in the workforce, and businesses that are paying attention to the gendered impacts of unpaid care, remote work and gender-based violence.”
- Accountability for impact could trip up some ESG darlings. Seabreeze Partners Management’s Doug Kass, for example, expects Tesla, a staple of ESG funds (and now the S&P 500) to lose its luster and its lofty share price. A truckload of competition in the electric vehicle space is one danger. Another: Tesla’s less than stellar record on the “S” and “G” aspects of ESG.
- As investors go ‘impact on,’ they are going to ImpactAlpha. SVX Mexico’s Laura Ortiz lists ImpactAlpha No. 2 among her recommendations for resources for impact investing and the regenerative economy in Latin America. “The Brief is the quintessential tool for the impact investing network,” she says. “ImpactAlpha is part of my staple diet since 2014 and every year I love it even more.” Hear! Hear!
Dealflow: Follow the Money
Morgan Stanley backs fund to acquire affordable housing in Atlanta. A quarter of American renters spend more than half of their income on housing. Morgan Stanley is backing National Equity Fund, an affiliate of the Local Initiatives Support Corp., to finance affordable housing property owners in Atlanta to help low-income families stay in their homes as rents rise near mass-transit routes.
- Transit-centric. The National Equity Fund will manage the Greater Atlanta Transit Oriented Affordable Housing Preservation Fund in partnership with the Metropolitan Atlanta Rapid Transit Authority to provide five-year bridge financing for owners of affordable property near Atlanta’s metro stations. NEF’s Scott Zeigler told ImpactAlpha the fund will back transit-proximate housing “to allow people to be able to walk to those stations and get to their jobs.”
- Workforce housing. Low vacancy rates and stable cash flows are making affordable and workforce housing attractive to institutional investors. Turner Impact Capital is looking to deploy up to $1.25 billion in affordable workforce housing (see, “Turner Impact Capital closes $357 million affordable workforce housing fund”).
- Check it out.
Investors back small business inventory financing in Pakistan and Egypt. Lahore-based Finja, which partners with banks to offer credit to small groceries and other micro-businesses, raised $9 million in Series A financing from BeeNext, Vostok Emerging Finance, Quona Capital and Gray MacKenzie Engineering Services. Cairo-based Cassbana launched its alt-credit scoring system last year to help unbanked micro-businesses secure inventory financing and build a pathway to mainstream financial services. The company raised $1 million from Egyptian fintech-focused venture capital firm Disruptech.
- Small business resilience. Emerging market tech startups that are supporting the digitization of micro and small businesses are helping lead the COVID recovery (see, “African tech startups are peddling pandemic resilience”).
- Read on.
PAIRIN raises $4.4 million to support workforce development amid COVID. The Denver-based tech venture helps workers upskill and connect to employment services. PAIRIN closed its Series A round with backing from New Markets Venture Partners, Juvo Ventures, JFFLabs, Village Capital, Voqal and Potencia Ventures. Prior funding came from Jobs for the Future and Zoma Capital.
Symbiotics’ bond supports affordable housing in Colombia. The $10.5 million bond by the Swiss impact investing firm will support mortgage lending by the Colombian arm of La Hipotecaria Compañia de Financiamiento. The social bond is being listed on the Luxembourg Green Exchange.
Agents of Impact: Follow the Talent
Former Treasury Secretary and head of Goldman Sachs Hank Paulson joins TPG Rise Climate as executive chairman… Renée Willette, ex- of Stantec, becomes vice president of programs and strategy for US Water Alliance… Skoll Foundation is looking for a talent and engagement program manager in Palo Alto, Calif.
Just Capital has openings for a head of research in London and operations, programs and engagement associates in New York… The Investment Integration Project and Moving the Market will share their “Understanding systemic social risk” project, Jan. 12… The Clean Energy Leadership Institute is accepting applications for its 2021 fellowship program.
Thank you for reading!
– Jan. 7, 2020