Greetings, ImpactAlpha readers!
The theme of the week, not surprisingly, was “impact alpha.” A new network of impact fund managers staked out high-impact, high-returns investing. There’s an “institutional shift” toward impact, driven by risk reduction, big pension funds and others, as we explored in our Returns on Investment podcast. How much is impact alpha worth? Markets are beginning to price impact, as Olam’s sustainability-linked loans and cities’ “environmental impact bonds” are demonstrating.
What we didn’t know was that the announcement of an impact fund rollout from Ellevest would be the item that stirred the most controversy. We’re taking a closer look. As I promised in my column, we’ll course-correct when we’re wrong, and we’re sure you’ll let us know. The column laid out some “impact alpha” hypotheses, along with a few lessons of beat reporting. One of them was, Do it Daily (or at least weekdays). In a time of trade wars, real wars and market rollercoasters, you can count on ImpactAlpha for your daily dose of impact.
This week, we rolled out a raft of new offerings and features, and launched a new web platform to boot. We know there’s been some sticker shock (“When I said y’all needed a scalable, impact-aligned media business model, I didn’t mean me!”). Thanks to the whole team and thanks to all of you for sticking with us. And a huge thanks to the many Special Agents who have already stepped up to subscribe (and tweet!).
Featured: The Brief’s Big 10
1. Impact Capital Managers to carve out high-impact, high returns investing category. More than two-dozen market-rate impact investment fund managers, representing more then $5 billion in capital, are staking a claim to high-impact, high-returns investing. “There is a category of return-maximizing strategies that also drive impact,” says SJF Ventures’ Dave Kirkpatrick. Adds Bridges Fund Management’s Brian Trelstad: “We want to reinforce and make it clear that market-rate impact investing is possible.” There’s a track record.
2. Returns on Investment podcast charts the “institutional shift.” Pension and sovereign wealth funds increasingly come for the risk reduction and stay for the impact. That demand is triggering “a wave of institutional-quality strategies and institutional scale,” says Equilibrium Capital’s Dave Chen in the latest episode of ImpactAlpha’s podcast series. In conversation with David Bank, Chen discusses stranded assets, upside opportunities and one happy European pension fund manager. “In the institutions, it’s all about risk and opportunity,” The institutional shift.
3. Environmental impact bonds promise ‘positive externalities.’ The environmental impact bonds to be offered by Baltimore and Atlanta offer a glimpse into a new way to finance green infrastructure. Baltimore is looking to raise $6 million through its bond, as part of a $10 million effort to reduce polluting runoff into the Chesapeake Bay. Atlanta seeks to raise $12.9 million to minimize flooding and improve drainage on the city’s west side. Quantified Ventures’ Eric Letsinger, who helped structure an earlier environmental impact bond for Washington, DC, talked with ImpactAlpha about lowering financial risks to cities for creating open space, permeable pavement and other ways to capture and absorb rainwater. “Nature reduces risk, and by necessity, we have to move away from paving everything and expensive gray infrastructure,” he says. Yes, these are real bonds.
4. Other dealflow of note. Olam, the Singapore-based food giant, closed a $500 million revolving credit facility with a “club” of 15 major banks that would lower its interest payments if it hits sustainability targets. Also this week:
- Bain Double Impact’s healthy lifestyle play. The $390 million fund backed vegan restaurant chain by Chloe.
- SoftBank goes big on solar. The $93 billion SoftBank Vision Fund backed the first phase of a $200 billion Saudi solar project and a $930 million solar project in India building four gigawatts of generating capacity.
- 2030 finance. Partners Group starts $1 billion fund for SDG investing… Calvert Impact Capital puts $10 million into billion dollar BlueOrchard microfinance fund.
- Impact watch. Ellevest debuted its women-focused impact portfolio…and drew scrutiny.
Special: The New ImpactAlpha
The impact investing story is hot. And getting hotter. Impact is the next global growth story. Women are leading. Inclusion pays off in economic, racial, gender and geographic diversification and differentiation. A global 21st century regeneration is urgent, possible and already underway. The trillions of dollars in play are reshaping not only the economy, but finance itself. How will it all play out? We’re as eager to find out as you are, and we’re on the beat. Subscribe now and get:
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5. How investors can get the most climate-change impact for their bucks. Current impact investing measurement tools fall short in assessing ventures’ future carbon-reduction potential. “Emissions Reduction Potential,” a new metric developed by the PRIME Coalition, the Boston nonprofit connecting families and foundations to climate ventures, and NYSERDA, New York State’s energy innovation agency, assesses companies’ potential for climate impact as they scale up. Calculate your ERP.
6. Smarter subsidies, more inclusive small farmer finance. The ‘S’ word is still sensitive for many investors. But more than two dozen funders, including the Skoll Foundation, the Gates Foundation, Rockefeller Foundation, Shell Foundation and MasterCard Foundation are deploying “smart subsidies” to tilt global agriculture finance markets toward small farmers. ISF Advisors details strategies in a new briefing. Wonk out.
7. Rick Alexander: Why fiduciaries should care about the systemic risks of gun violence. The legal head of B Lab, which certifies socially-minded B Corps, argued in a guest column that index investors like BlackRock, State Street and Vanguard must pressure gun makers to reduce such costs and avoid systemic risks. BlackRock may have gotten the message: the huge asset manager announced plans to launch two exchange-traded funds that exclude civilian gun makers and firearms retailers. What’s a fiduciary’s responsibility?
8. Kusi Hornberger and Shyam Sundaram: Four suggestions for a new US development finance institution. A proposal to replace and expand OPIC has bipartisan momentum in Washington. Two strategists with Dalberg say policymakers should expand the institution’s set of financing tools and embed impact management in its DNA. Four ways to build a better OPIC.
9. Rehana Nathoo: Busting myths about impact investing. To achieve the ambitious roadmap to transform global financial markets, impact investors need to dispatch some persistent misperceptions, writes Nathoo, who left the Case Foundation this year and founded Spectrum Impact as an advisory firm. In a guest post on ImpactAlpha, she takes on three. “We need to make space for both incremental progress and sweeping disruption,” she writes. Bust a myth.
- Got a myth that needs busting? Share it with [email protected].
10. Talking and walking the impact investment beat. David Bank launched his new column with some ways ImpactAlpha tries to stay ahead on the impact beat. Follow the money: A real investor putting real money into a real venture is worth a dozen white papers. Follow the talent: People pursuing career opportunities will shape the marketplace. See around corners:Knowing where the story is going lets you get there early. Watch this space.