Greetings, ImpactAlpha readers!
We’ve got an extra-big helping for you (Thanksgiving leftovers, anyone?) as we catch up after last week’s holiday. The emerging theme: It’s time for impact investors to up their game.
—David Bank, Editor
Featured: The Brief’s Big 11
1. Increases in climate finance are no match for the compounding crisis. Global climate-finance flows ticked up by about 15% last year to an estimated $510 to $530 billion, according to the Climate Policy Initiative. That’s an improvement from 2016, when climate financing actually fell from the previous year. But the modest increase didn’t match the urgency reflected in the U.S. government’s National Climate Assessment Report issued on Black Friday. An earlier U.N. report put the needed investment at between $1.6 and $3.8 trillion per year to keep global warming below 1.5 degrees Celsius. “While these increases are undoubtedly good news, we are still falling far short of what is needed to transition the overall economy to a low-carbon, climate-resilient future,” the Climate Policy Initiative concluded. The mismatch.
- Move your money? Blue Dot Law’s Bruce Campbell weighed in on ImpactAlpha’s subscriber-only Slack channel: “I often wonder why, with this and other existential crises, impact investors generally have so much allocated in public securities with pretty much zero direct additionality on critical issues like climate change.”
2. For uncorrelated returns, look to companies meeting basic needs in emerging markets. Stock market volatility has investors looking beyond the FAANG stocks (Facebook, Amazon, Apple, Netflix and Google). “Growing consumer populations continue to consume essentials,” note Will Poole and Dimitrios Lagias of Capria, which invests in emerging market private-equity funds backing early- and growth-stage companies that provide food, healthcare, energy, and housing and other essentials in emerging markets like Mexico, Indonesia and Egypt. “You want to be in the domestic-consumption part of emerging markets,” Poole advises. Demand resiliency.
3. Cities mobilize for inclusive growth, with or without Amazon. With Amazon’s HQ2 beauty pageant finally over, runners-up like Birmingham, Kansas City, Baltimore and 200 other cities are moving ahead on their own. “Every city that competed for Amazon HQ2 should quickly determine how their pitch can convert to a purposeful strategy for Opportunity Zones,” suggests Brookings Institution’s Bruce Katz. Venture capitalist Steve Case suggested, “Take half the energy and half the capital you are willing to devote to Amazon and put it towards your startup sector—that will bear far greater fruit over the next 10 to 20 years.” More alternative ideas.
- This just in: Five fund managers – Craft3, New Orleans Startup Fund, Gulf Coast Housing Partnership, Renaissance HBCU Opportunity Fund and Fifth Ward Community Redevelopment Corporation – are joining a Calvert Impact Capital incubator (backed by Kresge Foundation) to develop Opportunity Zone funds.
4. Sir Ronald Cohen presses the G20 to join ‘the impact revolution.’ The British venture capitalist told world leaders in Buenos Aires this weekend that adding “impact” to the risk-return model of financial analysis will bring “out the best in entrepreneurs and the private sector in addressing our urgent social and environmental problems.” Writing in ImpactAlpha, Cohen said, “We can deliver high rates of return because of impact, rather than in spite of it. Valuing impact.
5. Turner Impact Capital cracks $1 billion for schools, housing and health clinics. In just the last month or so, the four-year old impact investment firm has christened a charter school in Washington, D.C., opened several new health clinics in Florida, and acquired new apartment buildings for affordable workforce housing in San Antonio, Houston, Atlanta and Las Vegas. Now, the firm has secured investor commitments to push its assets above $1 billion across five funds. ImpactAlpha caught up with founder Bobby Turner (see Agent of Impact, below). What we know.
6. Agent of Impact: Bobby Turner. After a midlife crisis of conscience, the “evolved capitalist” is moving money, and quickly, into what he calls “the three-legged stool of social injustice” – education, housing and health care. Turner has deployed star power, including tennis star Andre Agassi, actress Eva Longoria and basketball star Chris Paul, to mobilize more than $1 billion for charter schools, health clinics and affordable workforce housing in the U.S. He says “arrogance” and “distrust” are the two words that have described social impact investing. “Arrogance from the people with capital who think they know how to solve everything,” he explains. “And distrust from people in the community who think capital is there just to make a buck.” Follow ImpactAlpha on Instagram.
- Agents of Impact weekly roundup: Follow the talent with career moves, job openings, events and opportunities.
7. Deals of the week. Drink from the deal firehose all week long on ImpactAlpha.com. A few that stood out:
- Inclusive fintech. Elevar, Rise Fund back Uruguayan fintech firm Bankingly… Skype founder’s Oriente raises $105 million to bank Asia’s unbanked… Aye Finance closes $10 million in debt capital from BlueOrchard… Chatbot Charlie raises $9 million… Fluidly raises £5 million to help small businesses manage their money.
- Food tech. Beyond Meat files for a sustainable-protein IPO… Germany’s Katjesgreenfood backs sustainable food company Wild Friends… Sustainable Ocean Fund’s first investment is in Kampachi Co.’s sustainable tuna farm.
- Market building. Canada pledges C$800 million to seed social finance market… SVX.US debuts with a ‘direct public offering’ from TechSoup… Big Issue launches a Big Exchange for SDG investing.
- Development finance. OPIC commits $50 million for Global Partnerships’ base-of-the-pyramid fund… Dutch development bank FMO adds €20 million to Green for Growth Fund.
8. How to choose an impact investment advisor. To check the impact cred of a potential investment advisor, Stephanie Cohn Rupp and Brad Harrison of Tiedemann Advisors suggest a few questions: What kinds of diagnostic tools do you use? Do you integrate impact and financial reporting? How do you manage for impact post-investment? Impact-oriented investors can now choose from more than 1,000 funds ranging from broadly focused ESG offerings to thematic strategies around sustainable food and farming, carbon reduction or financial inclusion. “In this evolving milieu, an advisor versed in the nuances and prerogatives of impact investing can add meaningful value,” the pair write in a guest post on ImpactAlpha. The questions.
9. Raising the bar for impact management practice. The Impact Management Project has achieved something few in the impact measurement space thought possible: consensus. CEO Clara Barby, a partner at Bridges Fund Management, is working with practitioners to build shared norms for impact measurement and management. Managing impact means figuring out which impacts matter, Barby writes in the wrap-up to ImpactAlpha’s and Acumen’s Measure Better Series, “and then trying to prevent the negative and increase the positive.” Measure better.
- Target, measure, manage. Positive Impact Finance, a program of United Nations Environment’s Finance Initiative, released a set of frameworks and an “impact radar” to turn impacts like mobility, energy access and efficiency, good jobs, education and healthcare, into financial revenues. The impact alpha.
- Learn from Acumen’s Sasha Dichter and Tom Adams, Alnoor Ebrahim of the Fletcher School at Tufts University, blended value pioneer Jed Emerson, Jessica Kiessel of Omidyar Network, Chiara Kovarik and Laura Birx of the Gates Foundation, and CDC Group’s Martina Castro and Sara Taylor in the rest of the Measure Better series.
10. Getting beyond tradeoffs to scale capital for impact. The tired debate about the investment “tradeoff” between social impact and financial returns misses a key development: The range of investment strategies that already exist all along the spectrum of risks and returns. We’ve distilled the takeaways from Omidyar Network’s ‘Beyond Tradeoffs’ essay series, with insights from Ford Foundation, Elevar Equity and The Rise Fund, the Blue Haven Initiative, Goldman Sachs, Prudential, Lok Capital, Big Society Capital and the Gates Foundation. Tradeoffs no more.
11. Take sustainable investing to the next level, stat! (podcast). There may be less than meets the eye in the large-sounding numbers in last month’s report from the U.S. Forum for Sustainable and Responsible Investment. The US SIF survey found that $12 trillion in assets, or more than one-in-four professionally managed dollars in the U.S., now use one or more sustainable investing strategy. “It doesn’t necessarily tell you that all these investors are considering these factors as germane and central to their investment processes,” said Imogen Rose-Smith, a regular on ImpactAlpha’s Returns on Investment podcast. Read on and listen in.