Welcome to Friday, ImpactAlpha readers!
We’re on the lookout for signals here at ImpactAlpha, especially ones missed in the glare of the big headlines. This week’s counterintuitive hashtag might be #Revival. The crush around “opportunity zones” (see Dennis Price’s excellent story, No. 2) is part of a larger uplift already underway. In every city and state and around the world, the early movers are investing in diverse, bottom-up, tech-driven, social-impact makers and hackers and founders. The bandwagon is rolling – can it stay on track?
My column this week took a swing at fusing those New Revivalists with an even more fundamental call for moral revival. Morals are usually out of my journalistic comfort zone, but it’s time to chart a path to what comes next. It would seem such a moral revival, harnessed to that entrepreneurial passion and finance savvy could have a powerful impact. #Revival, anyone?
– David Bank, editor
Featured: The Brief’s Big 10
1. The Impact Alpha: A minister’s call for moral, as well as economic, revival. The Rev. William Barber II of North Carolina has revived Martin Luther King’s Poor People’s Campaign with a modern-day call for voting rights, universal health care, fair wages and affordable food, education and housing. In his latest column, ImpactAlpha’s David Bank connects that call for moral revival with New Revivalists building entrepreneurial ecosystems across the U.S. “The fusion,” Bank says, “may lift up both.” The Impact Alpha column.
2. Opportunity zone tax breaks stir that FOMO feelin’. The final rules aren’t even in place but we found a dozen impact fund managers already working to ensure that opportunity-zone investment strategies align with community goals to fund local businesses that create good jobs, raise wages and build wealth for local communities as well as investors. The early movers are getting a jump on investments in the zones, designated low-income census tracts in which investments can qualify for capital-gains tax deferrals or even reductions. Get smart quickly.
3. The Brest Test: How does your investment add impact? “Impact investors—encouraged by fund managers—can readily delude themselves into thinking they’re actually having impact on these issues when their investments are not moving the needle at all,” says Stanford’s Paul Brest. Do impact investors settle for too little impact? “Great question,” says Beeck Center’s Sonal Shah (@SonalRShah). The answer, adds Nonprofit Finance Fund’s Antony Bugg-Levine (@ABLImpact), “will determine whether impact investing realizes its huge potential to improve the world or becomes a forgotten way that rich people got to feel better about themselves for a spell.” Eight cautions for impact investors.
- Money well spent. Brest, former president of the Hewlett Foundation, and Hal Harvey of Energy Innovation are out with a second edition of “Money Well Spent,” their 2008 guide to “strategic philanthropy.”
4. Podcast: Can new buyers rescue ambitious global health strategy? Bidders are vying for the assets of Abraaj Group, now in liquidation, including the $1 billion Abraaj Growth Markets Health Fund. The latest Returns on Investment podcast tries to measure the social impact of a failed firm once hailed as a model for investing in the Sustainable Development Goals. Limited partners in the health fund include the Gates Foundation, International Finance Corp., CDC Group and Proparco. In the Returns on Investment podcast, David Bank calls on those investors to clarify, “This is how we’re going to safeguard that mission, and double-down on that mission.” Knock, knock.
5. Deals of the week. Drink from the deal firehose all week long on ImpactAlpha.com. A few that stood out:
- Inclusive fintech. Alt-credit scoring startup Cignifi secures $4.3 million… LendingTree acquires Student Loan Hero for $60 million… ResponsAbility extends $5 million in debt to Indian small business lender Kinara Capital.
- Climate and conservation finance. Autodesk Foundation invests $250,000 in Closed Loop Ventures… Carbon capture venture Inventys raises $11 million… Solar startup Oolu secures Series B funding.
- Food and farmer finance. Oprah jumps into the healthy restaurant fray, backing True Food Kitchen… Apollo Agriculture raises $500,000 for Kenyan farmers.
- Health tech. LeapFrog backs Indian healthcare company Ascent Meditech… Gray Matters backs Ghanian health-tech firm RedBird.
6. Ocean plastic is having its impact investing moment. More than half of all ocean plastic comes from South and Southeast Asia. For Circulate Capital, his new firm, Rob Kaplan is borrowing the playbook from Closed Loop Partners, his old shop, and bringing in corporate partners with unmet demand for recycled material. Circulate, along with Ocean Conservancy, is seeking to mobilize $150 million for investments in Asia’s waste management and recycling infrastructure. Among the corporates on board: Pepsico, Coca-Cola, 3M, Kimberly Clark, Dow and Procter & Gamble. Ocean investment boomlet.
7. Development impact bond bet on educating girls pays off. In 2015, the UBS Optimus Foundation placed a small bet on a “development impact bond,” to be repaid with interest, if Educate Girls, an Indian charity, could improve enrollment rates and improve education for girls in Rajasthan, India. The charitable arm of the Swiss Bank now says the three-year bet has paid off. The results.
- Flexibility. The real breakthrough of development bonds is, “how organizations deliver programs differently when they’re given the flexibility to focus on outcomes,” says the Global Innovation Fund’s Michael Eddy, who helped set up the experiment.
8. Rehana Nathoo: Impact investing needs a big tent for talent. An impact investor without financial training is ill-equipped. But so too is an impact investor without systems-level understanding of challenges and opportunities. That argues for specialists in development, public policy, communications and diplomacy, as well as business, argues Spectrum Impact’s Rehana Nathoo in a guest post on ImpactAlpha. In training the next cohort of talent, says Nathoo, “let’s invite students and educators from across disciplines to learn more about this space in the same way we attempt to work within it – together.” More perspectives, more impact.
9. Charles Moore: The social impact of community banks is undervalued. There are roughly half as many community banks in the U.S. as there were four decades ago. “Community banks provide capital for new and growing businesses and housing loans,” writes Banc Funds Co.’s Charles Moore in a guest post on ImpactAlpha. “Community growth, community prosperity, and bank success go hand-in-hand.” More than lending.
10. Reading Up. These posts from other publications are helping us think about the challenges ahead. What are you reading? Share it with the rest of us on our subscriber-only Slack channel.
- Basic income could work—if you do it Canada-style. In Ontario, “The Canadians are testing it as an efficient antipoverty mechanism, a way to give a relatively small segment of the population more flexibility to find work and to strengthen other strands of the safety net.” That’s different from what Silicon Valley seems to imagine, Brian Bergstein writes, “which is a universal basic income that placates broad swaths of the population.” (MIT Technology Review)
- Turning Trump’s trade war into a tool to fight climate change. To avoid giving free riders a competitive advantage in world trade, a carbon price would be collected on their products as an import tariff at the border. The border tax writes Sabrina Shankman, would ‘level the emissions playing field by imposing the same economic burden on domestic and external manufacturers.” (Inside Climate News)
- How venture capital is hurting the economy. The flood of venture capital lets money-losing firms undercut incumbents for far longer than previously. “Arguably, these firms are destroying economic value. This new dynamic has social consequences, and in particular, a drive toward disruption without social benefit. Indeed, in some cases, they may be destroying social value while also devaluing labor and work in the enterprise,” write Martin Kenney and John Zysman in “Unicorns, Cheshire Cats, and the New Dilemmas of Entrepreneurial Finance?” H/t to Anthony Mirhaydari for sorting it all out. (PitchBook)
— July 20, 2018.