TGIF, Agents of Impact!
🗣 Reexamination. One of the most interesting revelations to emerge from this week’s smothering of the US east coast with smoke from Canadian wildfires: none of it was priced in (see The Week’s Chart, below). Shuttered travel. Canceled events. Long-term healthcare costs. “This is fully un-costed in all of the sort of headline climate-change cost numbers that we have,” climate economist Marshall Burke told Heatmap. Our climate accounting needs an audit and upgrade. An audit done well can identify hidden risks and surface overlooked opportunities. Since the murder of George Floyd and the summer of social unrest that followed, corporations from Google to BlackRock have undertaken racial equity audits to ferret out discriminatory business practices. Investors are now looking to the audit as part of a set of strategies to address racial equity risks in the municipal bond markets, as we’ll explore on next week’s Muni Impact Call. As investors take a defensive posture and rotate into bonds, “the moment is now,” for a conversation on impact in bond markets, says J.P. Morgan Private Bank’s Preeti Bhattacharji, who will join Harvard’s David Wood, SEIU’s Renaye Manley, and other Agents of Impact on Wednesday’s Call (RSVP today).
Other parts of the finance industry are looking under the hood to create value and improve risk management. In a guest post, Khalida Ali of Vista Equity Partners lays out three actionable steps that any private equity firm can take to capture the benefits of diversity and inclusion. Common Future’s Eric Horvath is expanding the impact talent pipeline by helping racially and socio-economically diverse policy students at The City College of New York understand how their unique lived experiences may make them better impact investors. Fund managers on this month’s Liist of impact funds raising capital are rewriting rules to demonstrate investable opportunities in conflict zones (Energy Peace Partner and Cameo), regenerative agriculture (Jive Investments and Maua Capital) and diverse-owned small businesses in underserved communities (Next Street). Institutional investors are getting over their “clean tech hangover,” argues contributing editor Imogen Rose-Smith. “From food systems to energy infrastructure, ‘sustainable’ is the opportunity now.” – Dennis Price
The Week’s Podcast
🎧 Impact Briefing. Contributing editor Imogen Rose-Smith joins host Brian Walsh to discuss why, despite the recent ESG backlash, institutional impact investors are doubling down on climate investing. Plus the headlines.
- Listen to this week’s episode, and follow all of ImpactAlpha’s podcasts on Apple, Spotify or wherever you listen.
The Week’s Chart
Wildfires drive home costs of climate inaction. The past eight years have been the warmest on record, according to the World Meteorological Organization. Eight of the worst wildfire seasons on record have also occurred in the past decade, as large swaths of Canada and the US were reminded this week. The Canadian wildfires pushed air quality indexes above 400 in parts of the densely populated East Coast, endangering health and disrupting everything from flights to baseball games. That such disruptions are not factored into economic accounts of climate costs suggests how much we underestimate the true impact of global warming – to health, ecosystems and the economy. Also omitted in calculations for one key measure – the US government’s social cost of carbon – are temperature extremes (vs. averages), humidity, water consumption, climate migration, and crucial ecosystem services.
Wildfires are also downplayed in countries’ emissions reporting, even though wildfire smoke accounts for some 20% of global emissions – as much as transportation. The costs of climate change are increasingly hard to ignore. State Farm and AllState will no longer insure homes in California because of wildfire risks. Florida is grappling with ballooning insurance costs for hurricanes and floods. Arizona is putting the brakes on new housing development around Phoenix due to dwindling groundwater supplies. Even lawmakers in Washington, DC, could not escape the smokey air this week. Reality is when it happens to you, as they say. With global warming on track to hit the 1.5-degree-Celsius threshold by 2037, let’s take this as a wakeup call.
The Week’s Dealflow
Deal spotlight: LeapFrog Investments highlights Asia’s appetite for impact. Impact investing strategies in emerging markets are seeing increased interest from global investors on the hunt for yield, impact, or both. In particular, Asia’s growing wealth – and with it, private and institutional investors’ capital – is driving more Asian asset owners into impact investing. This week, Hong Kong-based insurance firm AIA made a $200 million investment in LeapFrog Investments, which has a 14-year track record investing in basic products and services for billions of people in the emerging consumer class worldwide. LeapFrog is also backed by $500 million from Singapore’s Temasek.
- Asia opportunity. Investors from Asia once made up only 5% of LeapFrog’s limited partner base. Now they’re close to 30%. The opportunity for impact in home and regional markets is one draw. They’re also attracted to the commercial opportunity in Asia, a region with more than 4.5 billion people and projected GDP growth this year of 4% to 5%. “These are not your 100% impact investors. They’re very experienced commercial investors, and they’re very much focused on returns,” LeapFrog’s Yalin Karagodan told ImpactAlpha.
- Counter-cyclical. Rising interest rates, currency volatility and sovereign debt crises are disrupting many low and middle-income countries. Private equity impact players like LeapFrog and Elevar Equity see resilience and growth opportunities in products and services that meet people’s basic needs. LeapFrog this week reupped its investment in HealthifyMe, a nutrition app serving 25 million mostly low-income people in India, South and Southeast Asia and North America, where chronic disease is on the rise.
- Shift toward impact. Karagodan says the tide has shifted globally in terms of investor interest in impact. “There are investors who aren’t doing anything with impact investing, but that bucket is getting smaller and smaller,” said Karagodan, who spoke to ImpactAlpha from SuperReturn, an annual gathering of private equity and venture capital firms and investors, in Berlin. “It’s no longer a startup-like industry. There’s more evidence now that this actually works.”
- Read on.
Carbon markets. Charm Industrial secured $100 million after inking corporate carbon purchase agreements… Irish NGO Vita closed a $10 million impact fund to generate carbon credits from clean cooking and water projects in Africa.
Circular economy. Proparco and the Austrian Development Bank provided €34 million to Gravita to develop recycling facilities in Ghana and Senegal.
Clean energy. Brookfield Renewable took a $360 million stake in Mumbai-based CleanMax… Dallas-based private equity firm NGP clinched its $700 million energy transition fund… Manulife committed $500 million to CleanCapital to develop solar + storage projects… Aavishkaar and Sequoia Capital India made seed investments in green hydrogen venture Newtrace… Netherlands-based Supersola secured €1 million to make portable solar panels equipped with electrical sockets… UK-based OXCCU secured $22.7 million to commercialize sustainable aviation fuel.
Financial inclusion. Dutch startup Sevi raised €1.1 million to expand credit to micro-entrepreneurs in Kenya and Uganda… Lendistry, a Black-owned community development financial institution, secured a $20 million line of credit from KeyBank…MoCaFi raised $23.5 million to help deliver financial aid to underserved communities.
Green materials. CleanFiber is the latest green building material company to raise investment capital… Uncaged Innovations snagged $2 million to make a plant-based leather alternative… Debut, a San Diego-based maker of sustainable ingredients for cosmetics, clinched $34 million… Chile’s Ceibo dug up $30 million for more efficient copper mining.
Inclusive communities. The Dallas Housing Opportunity Fund, invested $5.4 million in a mixed-income housing complex in serving LGBTQ households.
The Week’s Talent
Rodney Foxworth is stepping down from Common Future to launch Worthmore, an impact investing and venture development firm. Common Future’s Sandhya Nakhasi, Jennifer Njuguna and Jessica Feingold will share CEO duties starting June 15… Maycomb Capital appointed Miljana Vujosevic, ex- of Prudential Financial, as partner and head of custom strategies… Lloyd Kurtz, ex- of Wells Fargo Wealth Management, joined Montecito Bank & Trust as senior portfolio manager.
Aeris Insight named PayPal’s Joanne Gan and CapShift’s Liz Sessler to its board of directors… Manuel Bueno, ex- of Abt Associates, was named senior lead for climate finance at DAI… Ajay Banga, the former Mastercard chief, formally takes over the World Bank leadership from David Malpass.
Demetric Duckett, ex- of Living Cities, joined Known as managing partner (listen to Duckett on ImpactAlpha’s podcast, “New decision-makers for the new majority”)… Ford Foundation’s Roy Swan joined the board of directors of Global Impact Investing Network… Former HUD Secretary Shaun Donovan was named CEO of Enterprise Community Partners.
Former US Education Secretary Margaret Spellings was named CEO of the Bipartisan Policy Center… Manarine’s Sara Minard returned to Columbia/SIPA as an adjunct professor and The Brandmeyer Fellow for Impact and Sustainable Investing… Bamboo Capital’s Florian Kemmerich will lead Palladium’s fund placement team. Kemmerich will remain in his role as managing partner at Bamboo.
The Week’s Jobs
💼 Share the week’s impact jobs. Want to post a job in The Brief? Drop us a note.
In New York: US Bank is hiring a sustainable finance project manager… Octopus Energy is looking for a senior investment manager… New York State Insurance Fund is looking for a senior ESG and sustainability lead… Palladium has several openings, including a financial inclusion director and capital advisory analysts and associates.
EIG is looking for an ESG assistant vice president in Washington, DC… Also in Washington, the Environmental Protection Agency is recruiting a director of the Office of the Greenhouse Gas Reduction Fund… The Coca-Cola Foundation is hiring a senior director of impact investing in Atlanta.
Echoing Green seeks a fund advisor for angel city investors in Los Angeles… The SCAN Foundation is recruiting an impact investing director in Long Beach, Calif… Illumen Capital is hiring a vice president of investor relations in Oakland.
Inuka Partners in Singapore seeks a senior investment manager for its energy transition and natural capital fund… Beneficial Returns is hiring a Latin America credit analyst… The UN’s Istanbul International Center for Private Sector in Development has an opening for an impact investing analyst.
The Impact Investing Institute is on the hunt for a CDFIs program coordinator in London… Franklin Templeton seeks a Poland-based impact bond analyst… Environmental Defense Fund is recruiting an energy transition manager in Germany.
That’s a wrap. Have a wonderful weekend.
– June 9, 2023