The Brief | June 15, 2018

The Brief’s Big 10: What’s next for SDG investing, breakthrough energy, Opportunity Zone mobilization, spreading sustainability

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Greetings, ImpactAlpha readers!

The World Cup has arrived. So has your weekly roundup Brief from ImpactAlpha. May you enjoy the beautiful games and the beautiful weekend. Goooal!

– The ImpactAlpha team

Featured: The Brief’s Big 10

1. The Impact Alpha: Abraaj Group liquidation tests champions of SDG investing. It’s time for the mission-driven investors behind the $1 billion Abraaj Growth Markets Health Fund to explain not just what went wrong, but what’s next for investments in the 2030 Sustainable Development Goals, ImpactAlpha’s David Bank argues in his weekly column. Abraaj, the $14 billion private-equity firm managing the fund, filed today for liquidation. The health fund was one of the most ambitious efforts yet to muster private capital to meet SDG No. 3, “Ensure healthy lives and promote well-being for all.”

  • What set off Abraaj’s descent? An investigation of the health fund demanded by the Gates Foundation and other investors, which triggered inquiries across the firm.
  • Ambitious strategy. Abraaj’s Arif Naqvi’s strategy for building integrated health systems across megacities like Mumbai, Karachi and Lagos was developed with Bill Gates himself.
  • After Abraaj. It’s time for Naqvi and Gates, along with other global investors, to explain what happens next. Not to the $1 billion fund, but to the $140 billion in health-system investment needed, each year, to hit the 2030 goals. Step right up.

2. Impact investors mobilize around inclusive Opportunity Zones. After the enthusiasm came the anxiety about what could go wrong. Now comes the mobilization around tax-advantaged investments in low-income Opportunity Zones. The Kresge and Rockefeller foundations are dangling $25 million for “Opportunity Funds” designed to benefit low-income people and communities. Access Ventures and Village Capital’s Ross Baird already are designing an Opportunity Zone fund. Economic Innovation Group, the think tank behind the provision in last year’s U.S. tax bill, is pulling together a network of investors. Keep up.

3. Can impact investments stem the rising tide of ocean plastic? A growing sense of urgency about the overwhelming glut of plastics in the world’s oceans is spurring investments in alternative materials for single-use plastics, circular business models, and innovations in waste collection, tracking and sorting. Only the U.S. and Japan whiffed on backing the ocean plastics charter at the recent G-7 meeting in Canada. Sea of opportunity.

4. Public-finance power to the people. Municipal bonds are literally private investments in public goods like parks and schools, roads and bridges, clean energy installations and municipal broadband. That makes them perhaps the original impact investments. Yet somehow, “this is just not that sexy,” says Neighborly’s Jase Wilson. The fintech platform connects muni-bond issuers directly to individual and institutional investors. A Q&A with Neighborly.

5. Breakthrough Energy Ventures leads with energy-storage investments.This is what a climate-action deal pipeline looks like: The BEV, with $1 billion in commitments from Bill Gates, Jeff Bezos, Jack Ma, Mukesh Ambani, Richard Branson and others, joined a $6.4 million funding round for Quidnet Energy, which turns old oil wells into energy storage vaults. ImpactAlpha readers know Quidnet as the first investment from Prime Coalition, Sarah Kearney’s network of clean-energy investing foundations, which spots high-potential, early-stage climate solutions. BEV also invested in a $9 million round for Form Energy, which is developing battery chemistries to lower renewable-energy storage costs, reports Quartz. Grid-scale energy storage is one of BEV’s five priority clean-energy sectors.

6. Deals of the week. Drink from the deal firehose all week long Deals this week that caught our eye:

7. Asia’s private investors wake up slowly to environmental, social and governance risks. The $1.4 trillion Government Pension Investment Fund of Japan is integrating environmental, social and governance, or ESG, factors. Hong Kong mandates ESG disclosure requirements for listed companies. The Japan Exchange Group and Singapore Exchange are promoting sustainable investing. But family offices, wealth management teams, private equity and venture capital investors in Asia are lagging in adopting ESG risk-management frameworks, Michael Standaert reports for ImpactAlpha from the Asian Venture Philanthropy Network gathering in Singapore. The differentiator.

8. Civic tech startups in India reprogram government. Streamlining services for India’s 21st century cities and towns presents a coding challenge of the first order. “The size of the opportunity makes it financially very attractive,” says Omidyar Network’s Roopa Kudva. Omidyar and Village Capital are hosting the six-month Civic Tech: India 2018 accelerator, which is looking for ventures using physical community-building as well as tech to connect citizens and improve government. Check it out.

9. Blended finance is key to hitting goal of $3 billion investment in women by 2020. The U.S. Overseas Private Investment Corp. joined development finance institutions from Canada, the U.K., France, Italy, Japan and Germany to endorse the “2X Challenge” at last week’s G7 summit. The plan to mobilize $3 billion for investments in developing countries that advance women’s leadership, employment and access requires the DFIs to use their own funds to “crowd in” private capital by blending financing to mitigate risks and boost returns. Gender-smart investing.

10. Backstage Capital breaks VC patterns with 100 diverse founders. Back in 2015, Arlan Hamilton, founder of upstart venture capital firm Backstage Capital, pledged to back 100 woman, LGBTQ or person of color founders by 2020. Last week, she said her Backstage Capital already has hit that goal. “If the problem is that people are pattern-matching, that means there should be more people like me writing checks,” Hamilton told ImpactAlphaFollow the leaders.

  • Context: 34 black women founders raised more than $1 million last year; that’s up from 12 in 2015, according to the biennial ProjectDiane report. Since 2009, black women founders have raised only $289 million of the $424.7 billion in total venture funding.

— June 15, 2018.