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Three questions for JPMorgan’s new development finance institution. JPMorgan Chase & Co., the U.S.’s largest bank, last month took the unorthodox step of creating a “development finance institution” within its corporate and investment bank. DFIs, as they’re known, are usually government-backed organizations tasked with mobilizing private capital for public good. In a guest post on ImpactAlpha, Nick O’Donohoe, CEO of the U.K’s CDC Group, poses some tough questions to JPMorgan. CDC, chartered in 1948 as the Colonial Development Corp. and owned by the British government, has a $5.5 billion portfolio across Africa and South Asia. Last year, CDC announced a set of “catalyst strategies” with greater risk-return flexibility and plans to put $1.5 billion to work to shape more inclusive and sustainable economies (see, “How CDC Group is innovating with catalytic capital”). O’Donohoe, formerly with the Gates Foundation and a co-founder of Big Society Capital with Sir Ronald Cohen, says he “knows from personal experience that JPMorgan is well placed to lead efforts” to finance the Sustainable Development Goals; he has been a senior banker at both JPMorgan and Goldman Sachs.
That makes his call for “tough questions” especially salient. Unlike most government-funded DFIs, JPMorgan appears to be aiming to mobilize third-party capital, rather than investing from its own balance sheet. “There is nothing wrong with that,” O’Donohoe writes, arguing the market needs strong intermediaries able to make often-complex transactions happen,” O’Donohoe writes. But O’Donohoe wants to know whether the DFI will just be a new way to describe activities the bank is already planning. How will the new development finance institution increase capital in the world’s toughest markets, many with fragile systems and internal conflict? With JPMorgan facing criticism for its leading role in fossil-fuel financing, O’Donohoe questions why oil and gas, extractive industries, non-coal thermal power and captive coal have not been excluded from the new DFI (see, “Laggards and leaders among biggest bankers of carbon”). And while estimating the anticipated impact of investments is a good start, O’Donohoe wants to know whether JPMorgan will measure actual impact as well. “Clarifying whether / what transactions will be turned down based on this scoring” will increase transparency, he says. The biggest question for the new DFI: “Can it find new and innovative ways to direct more capital towards critical development issues?”
Keep reading, “Three questions for JP Morgan’s new development finance institution,” by CDC Group’s Nick O’Donohoe on ImpactAlpha.
- Agent of Impact: Faheen Allibhoy, JPMorgan Development Finance Institution.
Dealflow: Follow the Money
India’s WayCool scores $32 million to improve farmer incomes and food chain efficiency. WayCool got its start in 2015 to improve farmer livelihoods around Chennai by connecting them with retailers and other buyers. Today, the company handles more than 300 tons of fresh fruit, vegetables and other products supplied by 40,000 smallholder farmers daily. WayCool’s model extends from “soil to sale,” including sourcing, processing, branding, marketing as well as pick-up and delivery logistics. That cuts out middlemen along India’s fragmented food chain who can knock down farmers’ incomes. Mumbai-based venture capital firm Lightbox led the company’s $32 million Series C round; prior investors LGT Lightstone and Dutch development finance institution FMO re-upped their support, following WayCool’s $16.9 million equity round last January.
- Supply chain startups. Indian startups leveraging tech to connect farmers directly to markets and customers include TechnifyBiz, which raised $2 million in January to give farming cooperatives a productivity boost and help them sell their products online. Aibono raised a small Series A round last year to use predictive data to help farmers sell their products.
- Growth phase. WayCool’s latest round of funding will be used to build out its tech platform, including automating supply chain functions, expanding its agricultural extension services for farmers, and building an agricultural research center, YourStory reports.
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Louisville’s Access Ventures debuts $15 million Render Capital fund for local entrepreneurs. The new fund will provide early stage equity, debt and revenue-based financing of up to $250,000 to entrepreneurs in Louisville, Ky. and southern Indiana. An annual Render Competition will award up to $100,000 each to eight startups working in advanced manufacturing, health innovation, food and beverage, and other areas. “Entrepreneurship is foundational to economic mobility in the U.S., and greater availability of capital means that more entrepreneurs are able to start and grow their businesses,” says Access Ventures’ Bryce Butler (see, “Quarterbacking capital into Louisville’s neighborhood economies”).
- Capital gap. More than half of Americans cite access to funding as the biggest barrier to starting a business; 83% of entrepreneurs start and grow their companies without venture capital or bank financing. Flexible, patient capital that reaches beyond the coasts is a key pillar of “America’s New Business Plan,” a four-part plan from the Kauffman Foundation to revive entrepreneurship in the U.S., where new business starts have stagnated.
- New Revivalists. Mortar in Cincinnati, Propeller in New Orleans, Runway Project in Oakland, Ben Franklin Tech Partners in cities across Pennsylvania, and Village Capital in cities across the U.S. all support local entrepreneurs with flexible funding (see, “New Revivalists are using these six strategies to revive entrepreneurship and the American Dream”).
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Community Preservation Corporation raises $150 million for affordable housing via sustainability bonds. The non-profit multifamily housing investor is the latest community development financial institution to tap the public bond markets for capital. LISC was first to float such a bond, in 2017, followed by The Reinvestment Fund (see, “A private bond market emerges for low-income community development”). CPC’s bond offering is the largest bond sale yet by a CDFI. The organization is rated AA- by S&P Global. Proceeds will finance “affordable and sustainable” multifamily housing in New York and the Northeast U.S.
GoATL impact fund backs The Reinvestment Fund in Atlanta. GoATL, the Community Foundation for Greater Atlanta’s $10 million impact investing initiative, is committing $1.5 million to The Reinvestment Fund’s existing education, job creation and housing work and new early childhood education programs. The Reinvestment Fund intends to replicate its Philadelphia-based Fund for Quality technical assistance support for Atlanta’s child care operators.
Peruvian government invests $21 million in early-stage fund of funds. The Capital Fund for Innovative Enterprises will make investments of $1 million to $10 million in funds supporting Peru’s small and growing businesses. The national development bank COFIDE will manage the fund.
Good Capital backs Entri’s local language app for India’s job candidates. Kerala-based Entri raised $1.4 million to help India’s majority non-native English speakers prepare for public-sector recruitment exams.
Signals: Ahead of the Curve
Gates Foundation to focus on climate change and gender equality. Bill Gates has for years backed technology to thwart climate change, from solar upstart Heliogen to alternative protein maker Impossible Foods to the Breakthrough Energy Ventures fund. Partly for that reason, the Bill and Melinda Gates Foundation stayed away from climate as a program area. Now, the Gates Foundation, the world’s largest, with $47 billion, will put climate change at the top of its agenda. In their annual letter, the Gates’ write that after spending two decades and nearly $54 billion on global health and education, they will turn their attention to climate change (Bill) and gender equality (Melinda). “Tackling climate change is going to demand historic levels of global cooperation, unprecedented amounts of innovation in nearly every sector of the economy, widespread deployment of today’s clean energy solutions like solar and wind, and a concerted effort to work with the people who are most vulnerable to a warmer world,” writes Gates.
- Giving gap. No more than 3% of global philanthropy is addressed to climate change. “The amount of global philanthropy aimed at putting the world on the path to a reasonable climate future is disgraceful – there’s no other word for it,” Hewlett Foundation’s Larry Kramer wrote in a plea to grantmakers last month. It’s not that climate is more important than everything else, he said, but that it is inextricably connected to everything else. “Simply put, if we fail on climate, we fail on everything.” Hewlett has committed $600 million over five years to catalyze climate solutions (see, “Blending philanthropic, public and private capital to finance climate infrastructure in emerging economies”).
- Mitigation and adaptation. The Gates Foundation’s climate strategy will support zero-emission energy sources that can be deployed in low-income regions, and help vulnerable populations, such as subsistence farmers, withstand droughts and other climate-related effects. The foundation recently created a new nonprofit, St. Louis-based Agricultural Innovations, to help smallholder farmers adapt to climate change.
- Gender gap. The foundation will support a range of partners to combat gender inequality and change societal norms. In October, Melinda Gates’ Pivotal Ventures committed $1 billion over the next decade to accelerate gender equality in the U.S.
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Georgetown University to divest its endowment from fossil fuel companies. The divestments will take place over the next five to 10 years. No new fossil fuels investments will be made. John DeGioia, the Jesuit university’s president, cited Pope Francis’ encyclical on the environment (see, “Catholic institutions pledge to increase impact investments in climate action and social equity”).
Agents of Impact: Follow the Talent
Brandee McHale, ex- of Wells Fargo, rejoins Citigroup as head of community investing and development… Hewlett Foundation is calling for ideas and fund solutions to drive passive asset management for climate action (see, “Passive investors are actively tilting stock indexes toward sustainability”)… Pacific Community Ventures is hiring a business advising program manager in Oakland.
Thank you for reading.
–Feb. 11, 2020