The Brief | February 1, 2019

The Brief’s Big 7: Local blueprints, making housing affordable, climate-risk signals, investor diversity, Ceniarth’s agent of impact

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TGIF, Agents of Impact!

Agents of Impact Call No. 7: Optimizing for impact with data-driven management. The challenges of driving impact through investments start with the underwriting, continue through the growth, and may even outlive the exits. Investors are getting savvier with new tools and frameworks. The Call will help impact practitioners sort through The Rise Fund’s ‘Impact Multiple of Money,’ the Impact Management Project’s ‘Five Dimensions of Impact’ and other emerging approaches. Join (Rise Fund spinoff) Y Analytics’ Maryanne Hancock, Impact Management Project’s Clara Barby, Wharton Social Impact’s Maoz (Michael) Brown and ImpactAlpha’s David Bank and Dennis Price for Agents of Impact Call No. 7, Thursday, Feb. 7 at 9 am PT / noon ET / 5 pm GMT. Register for The Call (for subscribers only).

Featured: The Brief’s Big 7

1. Ross Baird’s blueprint for local entrepreneurial revival. The Village Capital founder has assembled the pieces to help local investors invest in local entrepreneurs to revive local communities across the U.S. Baird, who is stepping back from his day-to-day role at VilCap, launched Blueprint Local with venture, real estate and impact investment partners. The first in a planned series of geographically focused investment funds of $50 to $100 million each is an Austin-San Antonio fund that will take advantage of new Opportunity Zone capital-gains tax breaks. Blueprint Texas will promote inclusive economic growth through clusters of real estate projects and operating businesses. “The average person with wealth in a community doesn’t have meaningful ways to invest their wealth in the community,” Baird told ImpactAlpha. “We need to connect asset management and community engagement.” The blueprint.

2. Tech titans mitigate risks with affordable housing finance. Amid a public backlash over tech-fueled dislocation, tech giants and their founders are beginning to pony up for affordable housing. That’s part business strategy—their employees need somewhere to live— and part political insurance policy. It’s also risk-reduction for affordable housing investors. The $40 million in first-loss capital from Chan Zuckerberg Initiative will let a new $500 million affordable housing fund for the San Francisco Bay Area provide developers with lower-cost loans and attract additional investors. The big slug of concessionary financing from Facebook founder Mark Zuckerberg and his wife Priscilla Chan could become a model for how to stack capital for maximum effect. “It’s a game changer,” LISC’s Maurice Jones told ImpactAlpha. Let’s play some ball.

  • Affordable housing is sexy. Already in 2019: four affordable housing partners announced a $100 million acquisition and rehab of 13 buildings in New York’s South Bronx… Virginia-based Middleburg reached the first close on a $75 million fund for distressed workforce housing in the U.S. Southeast and mid-Atlantic… Goldman Sachs’ Social Impact Fund committed $15 million to New Jersey Community Capital’s low-cost housing fund… and non-profit healthcare giant Kaiser Permanente and Enterprise Community Partners formed a $100 million loan fund to link low-income housing and community health. Stable assets.

3. Risk—rather than returns—may drive impact investment (podcast). Bank of America foresees  storm-caused mortgage defaults. AT&T is concerned about its cell towers in hurricanes and wildfires. Coca-Cola worries about the water needed to make Coke. Major companies are starting to face the very practical implications of climate change. “The markets are not accurately pricing the risk associated with catastrophic climate change,” says Imogen Rose-Smith, an investment fellow with the University of California, on the latest episode of ImpactAlpha’s Returns on Investment podcast. The roundtable regulars sketch the connection between such risks and the investments needed to address them. Risky business.

  • Frightening fast food. More than 80 investors, representing $6.5 trillion in assets, warned Domino’s Pizza, McDonald’s, Restaurant Brands International (owners of Burger King), Chipotle Mexican Grill, Wendy’s Co. and Yum! Brands (owners of KFC and Pizza Hut) that they face a March deadline for plans for managing climate and water risks in their supply chains. “Those firms that fail to meet this challenge face regulatory and reputational risks that put their long-term financial sustainability under threat,” said Heike Cosse of Aegon Asset Management, which manages $380 billion in assets. Chow down.

4. Agent of Impact: Ceniarth’s Diane Isenberg. “For me, the most responsible choice I can make is to abandon the need to make more money, while trying to preserve and recycle it to do future good,” Isenberg wrote in ImpactAlpha last year. The founder and director of Ceniarth, her $400 million family office, staked out a provocative strategy that is proving appealing to other ultra-high-net-worth impact investors: Impact-First Capital Preservation. “If you are rich today and invest in a manner that generates deep impact and returns your capital with a yield in line with inflation and reasonable expenses,” she says, “you will still be rich tomorrow.” Last year, Ceniarth moved $40 million into 21 investments, including $32 million into the impact-first capital-preservation strategy, primarily to improve rural livelihoods. Isenberg leads Ceniarth from rural Wales, where she, and her husband ran a sheep farm and she has worked as a teacher and with community organizations. Earlier, she worked in Bangladesh on family planning and maternal health. Her father, Eugene Isenberg, was the longtime CEO of Nabors Industries, one of the largest land and offshore oil and gas drillers. “I have the privilege of doing what I do because my father was very good at making money,” she says. “The choice is now mine, though, to use my capital to its highest impact.” Follow ImpactAlpha on Instagram.

5. The investment imperative of ‘inclusive’ gender diversity. Venture capital doesn’t just have a gender-diversity problem, it has an experience problem, argue Kapor Capital partners Freada Kapor Klein and Ulili Onovakpuri, and Allison Scott of the Kapor Center in “Can women save VC?”. Investors with similar backgrounds and mindsets fund a too-narrow set of entrepreneurs. Research suggests that gender-diversity is good for business and financial performance; racial and ethnic diversity yields even better returns. Mixing up the venture capital pool provides “not only a competitive advantage for us as investors, but [an opportunity to] grow successful businesses that tackle deep social problems,” the trio write in a guest post on ImpactAlpha. Catch up here.

  • Impact’s diversity problem. Boards and leadership teams at social investment firms in the U.K. are overly white, male and “Oxbridge”-educated, reports the Diversity Forum. Says Danyal Sattar of Big Issue Invest, “How can we deliver social change if we look like part of the problem? Digging for diversity.

6. Deals of the week. Drink from the deal firehose all week long on ImpactAlpha.com. A few that stood out:

7. Blockchain for impact, in action. Blockchain is a trust accelerator, say New America Foundation researchers in a report on blockchain pilots for social and civic impact. The distributed-ledger technology, they say, is “giving individuals and organizations a head start in cultivating solid relationships, built on a foundation of security, accountability, and transparency.” Blockchain initiatives are seeking to improve price transparency and incomes for co-op farmers in Kenya and Papua New Guinea; streamline municipal bonds in California; and boost turnout and cut fraud with mobile election voting. Trust, accelerated.

— February 1, 2019.