Greetings, ImpactAlpha readers!
“Sustainability is for millennials. Regeneration is for the…reGeneration.” That was my lead for The Impact Alpha column I didn’t quite get done yesterday. But I still want to stake a claim to naming the generation that comes after the millennials, who have been known only by the placeholder “Generation Z.” That sounds a bit too final for my taste.
Born since about the turn of the century, the reGeneration cohort is bigger than the baby boomers or the millennials and will likely be even more consequential. Our own 7th-grader, who is back in school this week, will be 24 in 2030. By then, we’ll know whether we’ve met the Sustainable Development Goals and whether we can keep global warming under 2 degrees Celsius, per the Paris climate agreement. Next week’s Global Climate Action Summit in San Francisco will take up regenerative agriculture, regenerative development and even regenerative urbanism. The hour is late, but concerted action now can still lay the groundwork for a 21st century regeneration, led by the rising reGeneration.
– David Bank, editor
Featured: The Brief’s Big 6
1. Small businesses are poised to deliver ‘impact alpha’ in new opportunity zones. The easy money is in shovel-ready real estate in the low-income opportunity zones that qualify for capital-gains tax benefits under last year’s tax bill. The real “impact alpha,” however, may lie in bridging the small-business capital gap that leaves four out of five enterprises without formal access to capital. Community development and small-business support leaders have worked with local entrepreneurs for years to build a pipeline of investible opportunities. Seize the opportunity.
- ‘Main Street’ opportunity fund. Enterprise Community Partners, the nonprofit affordable-housing financier, is teaming with Rivermont Capital and Beekman Advisors to launch a planned $250 million “opportunity fund” focused on opportunity-zone business development and entrepreneurship. The Emergent Fund aims to invest in “Main Streets” in small towns and rural areas, starting in North Carolina and Virginia. More here.
- Mapping small businesses. New York-based SMB Intelligence, which has identified hundreds of seed-stage firms inside opportunity zones, can determine which firms are minority or women-owned, and which are hiring or plans to add jobs in the future.
- Data drivers. “Data shows us where capital is flowing and how that capital is being used; it tells us a story about where there are structural barriers and where there are opportunities,” writes Fran Seegull of the U.S. Impact Investing Alliance in a guest post on ImpactAlpha. Yesterday, The Alliance sent a formal letter to Treasury Secretary Steven Mnuchin urging the collection of basic data and metrics.
- Bonus. Inside Goldman Sachs’ opportunity zone strategy. Calling Dina Powell?
2. Models for monetizing impact. The Green Outcomes Fund in South Africa is part of a new category of financial instruments that directly reward social and environmental impact in order to draw commercial capital to impact investments. The fund will pay local fund managers who hit targets for green sector jobs created, tons of carbon sequestered, access to renewable energy, improved water and waste management and other positive impacts. “By monetizing impact, the Green Outcomes Fund is able to mitigate the disproportionately high costs and risks associated with these investments, thereby developing the green finance sector,” says the World Bank unit that helped design the fund. Paying for outcomes.
3. Financing fish. Impact investors had a hard time finding deals when ImpactAlpha started covering sustainable seafood several years ago. Today’s solid pipeline of investible companies is due in no small part to the Fish 2.0 competition, which has helped dozens of companies hone their business plans and connect with investors. “The problems in seafood are solvable and they are being solved, says Fish 2.0’s Monica Jain. This cycle’s tracks: traceability, tuna, aquaculture, Australia, Pacific islands and California. Applications for Fish 2.0’s global tracks are due Oct. 28.
4. Deals of the week. Drink from the deal firehose all week long on ImpactAlpha.com. A few that stood out:
- 2030 finance. Swedish investors back the World Bank’s first oceans bond.
- Farmer finance. AgDevCo secures £55 million to expand small farmer support in Africa… Enterra to multiply insect farming.
- Creative economy. Social Impact Ventures backs We aRe SpinDye’s water friendly textile tech… Vinted raises €50 million to cater to waste-conscious fashion consumers.
- Off-grid energy. DiCaprio-backed Kingo secures $15.5 million in debt to expand off-grid solar… Tizeti secures $3 million to bring solar-powered WiFi to Ghana.
5. New Revivalist Arlan Hamilton to accelerate diverse startups in four cities. Los Angeles, London and Philadelphia, and a fourth city TBD will host the Backstage Accelerator for diverse founders. Backstage Capital has made a splash with a contrarian investment strategy that specifically backs underestimated women and LGBTQ founders and founders of color. Backstage has made investments (of up to $100,000) in more than 100 firms and is raising a second fund for larger investments in black women founders. The accelerator is looking to enroll six startups per city, beginning in spring 2019. More.
6. Impact investing principles have their moment. The Global Impact Investing Network is developing a set. The International Finance Corp. has 13 of its own. Now, a group of 40 impact investing leaders has issued the “Alpbach Declaration” to advance standards of practice and principles for impact investing. To gain long term support, the group says, impact investing “must balance risks and returns fairly across stakeholders.”
- The fuss about principles is driven by growing concerns about “impact washing” as big banks and legacy investment firms roll out green-finance commitments, impact fund announcements and strategies wrapped in letters like ESG (for environmental, social and governance factors) and SDG (for the Sustainable Development Goals).
- Impact investing is like medicine or law, says Transform Finance’s Andrea Armeni, “in the sense that you take on great responsibility and need to handle it carefully, in accordance with some accepted practice.” Like the low-carbon energy transition, adds Candide Group’s Aner Ben-Ami, “It’s coming anyway (the economics just work), so we view our role as ensuring that it’s being done in a more just and inclusive way.”
— September 7, 2018.