Greetings ImpactAlpha readers!
Featured: The Brief’s Big Nine
1. The Impact Alpha: Capturing the opportunity in the mispriced risk of lending to the underserved. Impact lenders are using new algorithms and their own track records to expand lending to women- and minority-owned businesses, low-income consumers and other borrowers who have had limited access to credit. In this week’s column, David Bank says this means that millions of people may finally get access to the kind of appropriate, affordable capital they need – to build a school, buy a rickshaw or motorcycle, light their homes, or start or grow a business. Better understand risk.
- Reaction: Jed Emerson, aka @Blended Value, says the implications are broader. “What in part makes for ‘alpha within impact investing is that we’re harvesting value not appreciated or considered by mainstream investors. Not only do they misprice risk, they mis-assess the whole field, viewing it as riskier than it really is…”
2. With second sustainable meal investment, Bain Capital Double Impact calls a trend. Healthy eating led to sustainable foods, which led to Bain Capital Double Impact fund’s double investment in the past week in healthy, sustainable restaurant ventures. Bain’s team is trying to get in front “of what we believe will be an impactful trend,” Warren Valdmanis, who moved from Bain’s private equity business to the impact fund, told ImpactAlpha. A double shot.
3. Corporate venture capital tilts towards impact investing. Venture funds at SoftBank, Salesforce, Orange, Pearson, Patagonia, Centrica, Unilever, Tyson, Cargill and many of the oil and gas giants are looking to “impact,” directly or indirectly, for growth and innovation. “When you’re looking for great companies solving big social and environmental challenges, you find founders with less common backgrounds than those in the tech world,” Salesforce’s Claudine Emeott told ImpactAlpha. This is strategic.
4. Deals of the week. Drink from the firehose every morning in our new Dealflow newsletter, or check the stream on ImpactAlpha.com. Here’s a peek:
- Southern Africa’s first green bank… The Climate Finance Facility will blend public and private finance for off-grid electricity and water projects.
- Decarceration… Edovo closed financing to expand tablet-based inmate education… Recently… Jay-Z and Kapor Capital backed bail alternative Promise… inmate communications startup Pigeonly spoke at the Economist’s conference.
- School finance… Varthana raises to finance affordable private schoolsin India… Walton Family Foundation bankrolls two charter-school funds… Holberton School raises for ‘pay it forward’ tech training model.
- Inclusive lending… Tienda Pago raises for super-short small business loans in Mexico and Peru… Alt-credit scoring marketplace Namaste Credit raises for small business lending in India. Grameen Crédit Agricole Foundation funds microfinance in Jordan. Indian fintech Kaleidofin raises for services to unbanked.
- TED’s audacious giveaway… $250 million for seven projects, including the Bail Project’s bail fund…The Environmental Defense Fund’s emissions-tracking satellite… GirlTrek’s health activities… Sightsavers’s trachoma solution… Woods Hole Oceanographic Institution’s deep oceans map… Living Goods/Last Mile Health’s community health workers… One Acre Fund’s plan to accelerate the end of hunger… Cool: Echoing Green seeded three of the seven winners of the first Audacious Project.
5. DanoneWave becomes world’s largest B Corp. French food multinational Danone acquired US dairy company WhiteWave last year for $10 billion and combined it with its own operations. Now called Danone North America, the company completed B Lab’s impact assessment and became the largest B Corp-certified company to date. Next up: Danone itself. The parent company has been working with B Lab to define a B Corp model for public companies. Go deeper.
6. Tools for capturing the alpha in gender inclusion. MEDA, the international economic development organization, launched the Gender Equality Mainstreaming, or GEM, framework to help investors capture the value of gender inclusion. Up your gender-lens game.
7. When New York State’s activist pension fund asks… Three US energy companies agreed to report to the $209 billion New York State Common Retirement Fund on the impact on their businesses of efforts to achieve the goals of the Paris climate accord. Comptroller Thomas DiNapoli has moved the fund to mitigate climate risks and seize opportunities in the transition to a low-carbon future. A climate finance program.
8. Rip Rapson: Opportunity Zone ‘first principles.’ In a guest post on ImpactAlpha, the president of the Kresge Foundation proposed “first principles” of investing in low-income communities to guide implementation of the newly passed Investing for Opportunities Act in the tax bill. Entities investing in these communities, says Rapson, should meet community needs, be transparent and accountable to residents and channel capital to where it’s most needed. Lift community voices.
- Bonus: The first round of Opportunity Zone designations for 18 states.
9. Amber Larsen: Community foundations key in on place-based impact investing. Foundations in Charleston, Atlanta, Lancaster County, Oregon, Michigan, Virginia, Minnesota and New Mexico are committing funds and placing capital in local opportunities. In a guest post on ImpactAlpha, Larsen, the executive director of Intermountain Impact Investments, explores how Northern California’s Humboldt Area Foundation teamed with a community development finance institution to manage loans and mitigate risks. Read all about it.
- More to come: Mission Investors Exchange and the Urban Institute are studying place-based investment strategies and sharing insights.