The Brief’s Big Eight: Gun money, billion-dollar babies, alt-credit, values of inclusion



Greetings, ImpactAlpha readers!

Investors flex their muscles on guns. Guns are the new carbon…or cigarettes…or South Africa. The $70 billion State of Michigan Retirement System sold its holdings in Olin Corp., maker of Winchester ammunition. New Jersey legislators will vote on a bill to ban guns from the portfolios of state employee pension funds. BlackRock, with $6 trillion under management, asked the three public US gun companies in their index funds — American Outdoor Brands, Vista Outdoor and Sturm, Ruger — to account for their risk exposure and mitigation plans. Teachers are pressing the Florida State Board of Administration, and other teachers’ pension funds, to cut their ties to gunmakers. Retail investors are scrutinizing the gun holdings of mutual fundsin their retirement and other accounts.

Meanwhile, American Outdoor Brands, parent of Smith & Wesson, said quarterly sales fell 32% and profits 60% under a “continuation of challenging market conditions.” Remington Outdoor Co. is in bankruptcy after private-equity giant Cerberus handed the company to creditors. Of course, some of the gun industry’s troubles come precisely from the expectation that President Trump and Republican lawmakers will in the end not do much on gun control in the aftermath of the Valentine’s Day massacre at a Parkland, Florida, high school. Gun sales surged under President Obama in the brief moments, as after the 2012 Sandy Hook elementary school slaughter, when strong action on guns actually seemed likely.

Do sinking firearms companies’ share prices (they ticked up Friday) reflect accelerating divestment activity — or falling prospects for meaningful gun control? With Marjory Stoneman Douglas High survivors in the lead, “March for Our Lives” protests nationwide are set for March 24. For their part, investors can vote with their portfolios and their proxies. Let us know what you think investors can do (in an email to TheBrief@impactalpha.com).

David Bank

#Featured: The Brief’s Big Eight

  1. A half-dozen impact investment firms on the new ImpactAssets 50 list manage more than $1 billion. They are (drumroll…) Kairos Investment Management Co., North Sky Capital, Bridges Fund Management, Leapfrog Investments, Finance in Motion and Enterprise Community Partners. (Thanks to Calvert Impact Capital’s Beth Bafford for a good try!) In all, the 50 funds on this year’s list manage $29.3 billion in assets, more than double the total of last year’s firms. New to impact investing? Here’s a good place to begin.

Pin the tail on the billion-dollar impact investing funds

2. In Latin America, is tech driving impact or is impact is driving tech? At this week’s Latin America Impact Investing Forum, investors debated whether investment = new jobs = growth = impact. “Job creation isn’t the issue for Mexico,” SVX Mexico’s Laura Ortiz told ImpactAlpha. “Our issue is the growth of the working poor. So new jobs is no guarantee or promise of wellbeing for Mexico.” Join the debate.

In Latin America, tech is driving impact and impact is driving tech

3. In San Francisco, tech pundits took on bugs in the market system. At the NewCo Shift Forum, speakers took on the prevailing notion that workers will be obsolete in the Age of the Robots. “The fundamental question is not jobs, but work,” said media entrepreneur Tim O’Reilly. “Is there work to be done that’s not getting done? The answer is yes.” The policy-fueled tech forum attracted pols like L.A. Mayor Eric Garcetti, Colorado Gov. John Hickenlooper, former New Jersey Gov. Chris Christie and former (briefly) White House communications director Anthony Scaramucci (for what it’s worth, the Mooch follows ImpactAlpha on Twitter). Keep up.

Tech pundits start to take on the bugs in the market system

4. Yes, forest restoration is investable…Political urgency on climate action, along with emerging tech and new business models, is making restoration of forests and farmland increasingly attractive. Hundreds of businesses and investors are jumping on the opportunity, according to The Nature Conservancy and World Resources Institute. The kicker: restoring forests and land can deliver more than one-third of the emission reductions needed to keep global warming below two degrees Celsius, the goal of the Paris climate accord. Meet the restoration economy.

Restoring forests is investable

5. …As a $95 million sustainable landscape bond demonstrates. Proceeds from the bond will finance sustainable natural rubber production on highly degraded land in Indonesia and support 16,000 jobs. The bond is the first transaction of the Tropical Landscapes Finance Facility, a partnership between UN Environment, the World Agroforestry Centre, ADM Capital and the French bank BNP Paribas. “Institutional investor clients have the appetite” for such deals, says BNP Paribas’ Eric Raynaud. To repeat, restoration is investable.

TLFF issues $95 million sustainable rubber bond in Indonesia

6. How alternative credit-scoring can drive financial inclusion. Forget FICO. Fintech startups are crunching call-logs, app installs and even punctuation to help individuals and businesses get loans in Kenya — and the US. Globally about two billion adults do not have a bank account, let alone a FICO or other credit score. With hundreds of millions of potential new customers, loan providers have begun to pay attention; a raft of alternative credit-scoring startups are ready to help them. ImpactAlpha teamed with Engineering for Change to explore the new algorithms. Alternative credit-scoring is a big deal.

Forget FICO: How alternative credit-scoring is driving financial inclusion

7. New Revivalists are finding hidden value. From the informal entrepreneurs of the Navajo Nation to the founders of color in the neighborhoods east of Washington DC’s Anacostia river, New Revivalists are tapping underestimated talent to build value for the US economy. One New Revivalist is taking on asset managers themselves, helping investors and fund managers overcome implicit racial and gender biases and improve decision-making. Watch and learn.

The New Revivalists – ImpactAlpha

8. …And tackling wealth inequality. The New Revivalists profiled in ImpactAlpha’s 18-part series ask themselves questions like, “How do we foster equality, transfer power, and enable community wealth through our capital?” more often than they ask, “How do we get more deals done?” The first set of questions are crucial for impact investors and philanthropists, argues BALLE’s Rodney Foxworth, in his provocative essay, “Wealth Inequality and The Fallacies of Impact Investing.” System-change, not just deal-making, is necessary to close the racial wealth gap. Writes Foxworth, “A significant delta exists between what mainstream impact investors deem as investable and the cash-strapped innovations coming from communities throughout the country.” Read the essay.

Wealth Inequality and The Fallacies of Impact Investing

Onward! Please send news and comments to TheBrief@impactalpha.com.

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