The Brief’s Big Eight: Impact at Milken, private-equity watch, walking the impact talk, Al Gore’s sustainability trend report



Welcome to the weekend, ImpactAlpha readers!

The leaker was none other than the former director of the CIA and Gen. (Ret.) David Petraeus. “We are raising our first impact investing fund where we’re going to…do good while still hopefully doing well,” said Petraeus, now chairman of private-equity giant KKR’s Global Institute, at this week’s Milken Institute Global Conference in Beverly Hills. As readers of ImpactAlpha know, KKR has launched what it expects to be a $1 billion Global Impact Fund (see No. 2 below); KKR itself has yet to officially confirm the news.

Petraeus wasn’t the only one talking impact at Michael Milken’s annual confab of finance powerbrokers. U.S. House Speaker Paul Ryan touted the “Opportunity Zones” in the new tax law as “one of our private sector ideas to flood the zone and get private capital helping to solve poverty and revitalizing poor communities, rural and urban.” Ryan called social impact bonds “the law of the land now,” with the $100 million pay-for-success program in the budget bill. “A huge shock was Michael Milken and Tidjane Thiam, the CEO of Credit Suisse, from the main stage, talking about the SDG’s and impact investing,” writes Equilibrium Capital’s Dave Chen.

Some speakers checked the hype. “I see a lot of talk about ESG and impact investing,” said World Bank president Jim Yong Kim at the same luncheon. “But I don’t see the actual money moving.” Do you agree with Kim? Check out No. 3 below and and join the discussion on ImpactAlpha’s subscriber-only Slack channel.

The Brief’s Big 8

1. The Impact Alpha: Impact-washing isn’t just bad marketing, it’s bad investing. “The era of impact-washing is over,” declared David Bank in his latest column. Yes, there will be a long tail of overinflated rhetoric, underdeveloped measurement and deals with questionable impact. But as a stage of market-development, impact-washing no longer serves a purpose. If impact, and more broadly, environmental, social and governance factors, are indeed pointers of longterm outperformance and risk-reduction, it follows that you can’t just fake it with marketing. Impact hype may help launch a fund, but impact outperformance will be what counts in the end. Capture the impact alpha.

2. KKR’s Global Impact Fund looks for commercial solutions to global challenges. The $150 billion private-equity fund is telling potential investors in its planned $1 billion Global Impact Fund, “We believe that we can generate private equity returns, while driving positive impact to global challenges.” The arrival to impact investing of big private equity players like KKR, TPG and Bain Capital means larger raises, bigger tickets and a broader range of possible exits for early-stage impact investors – and raises the stakes for impact measurement and management. The latest private-equity giant to jump in.

3. Impact ‘holdcos’ and other gaps between impact investor talk and action. Impact holding companies, or “holdcos” in the lingo, take long-term stakes in operating companies and would seem a good match for many impact enterprises. ImpactAlpha’s report on the reluctance of many investors to embrace the structure prompted as much discussion about impact investor fickleness as about holdcos themselves. “Great insight into the disconnect between what [the impact investing] community says it wants, and what it will actually commit to,” tweeted Caprock Group’s Matthew Weatherly-White. “All hat, no cattle,” agreed Bryan Birsic of Wunder Capital (which has sponsored ImpactAlpha’s Returns on Investment podcast). Read the holdco piece.

  • “Raising impact funds is hard enough… without the battle around liquidity/new structures,” tweeted Tripp Baird of the Builders Fund. “Progress not perfect.”
  • “Investors are right to be wary… of funds that claim a decade isn’t long enough to realize liquidity in [impact investing],” tweeted Leapfrog Investments’ Stewart Langdon.

4. Blood and Gore in the sustainability disruption. Generation Investment Management, the $19 billion public and private equity investment firm co-founded by former VP Al Gore and Goldman Sachs’ veteran David Blood, is building the case for sustainable investing, starting with its own returns. Generations’s sustainability trends report – think Mary Meeker’s internet trends report for the sustainability disruption – documents (with more than 100 charts and graphs) commercial progress in mobility, energy, the built environment, food systems and wellbeing. Dig into the trends.

5. Deals of the week… Drink from the firehose every morning in our new Dealflow newsletter, or check the stream anytime on ImpactAlpha.comHere’s a peek:

6. Global index of financial inclusion ticks up. The share of adults with a bank account of some kind rose to 69%, up seven percentage points in the last three years, according to the World Bank’s Global Findex report. Gaps persist: Women in emerging markets remain nine percentage points less likely than men to have a bank account. Digital technologies and platforms help bypass traditional branches and serve women, says Zar Wardak of FINCA Impact Finance, a microfinance holding company that runs 20 microfinance institutions and banks on five continents. Closing remaining financial inclusion gaps.

7. Big banks step toward full carbon accounting. Sixteen major banks backed new guidance to assess ‘transition risks’ in the low-carbon economy. ANZ, Barclays, BBVA, BNP Paribas, Bradesco, Citi, DNB, Itaú Unibanco, National Australia Bank, Rabobank, Royal Bank of Canada, Santander, Société Générale, Standard Chartered, TD Bank Group and UBS collaborated to address a key recommendation of the Task Force on Climate-Related Financial Disclosures, the new bible of climate-risk reporting. Climate accounting is destiny.

8. Will impact investors wake up to the opioid crisis? “Why hasn’t the impact community embraced this issue more aggressively, given that it ticks so many boxes of things they care about and things they are good at?” asks Imogen Rose-Smith, an investment fellow at the University of California, in the most recent episode of ImpactAlpha’s Returns on Investment podcast. One reason: One person’s addiction-treatment breakthrough is another person’s profiteering from the crisis. Read on and listen in.

— May 4, 2018

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