The Week in impact investing: Catalyzing capital



TGIF, Agents of Impact!

It’s called impact investing for a reason. The real action at the Global Impact investing Network’s investor forum this week was in de Grote Zaal, the grand hall of the Beurs Van Berlage, Amsterdam’s old commodity exchange. Dealmakers and fund managers from at least six of the seven continents hawked their wares and largely skipped the panels that exhorted delegates to simultaneously scale up and protect the integrity of impact investing.

That the gathering presented such a target-rich fundraising environment signals impact investing’s arrival, in a way. But it meant that few of the managers even heard the provocative question from Royston Braganza of Grameen Capital: How many investors have pulled the plug on an investment for failing to reach targets for impact? (For the answer, and other takeaways from the GIIN’s forum, see No. 1, below).

– Dennis Price, editorial director

The Week’s Agent of Impact 

Agent of Impact: Nuveen’s Vijay Advani. The $1 trillion asset-management arm of TIAA is the world’s largest farmland owner and an increasingly visible impact investor. “You cannot be in farmland and not look at water conservation,” Advani said at this week’s GIIN investor forum. “You cannot buy Nike stock, or Volkswagen or Exxon or IBM, without looking at governance, the environment and sustainability.” The Mumbai-born CEO, who spent two decades at Franklin Templeton Investments, has committed Nuveen to align its entire portfolio with the Principles for Responsible Investment by the end of 2020, from about $650 billion now. About $30 billion is in environmental, social and governance, or ESG, products and $5 billion in impact investments. The firm invested in the Seychelles’ $15 million “blue bond” last year and International Finance Corp.’s $152-million forests bond in 2016.

Nuveen produces about one-quarter of all of Napa Valley’s wine and owns 1.9 million acres of farmland, including more than 700,000 acres in Brazil. The vast holdings and lofty rhetoric are bringing added scrutiny. Last year, Nuveen adopted a zero-deforestation policy for its current and future assets in Brazil, but a report last year said earlier purchases may have contributed to deforestation and land grabs. Nearly half of the institutional mandates Nuveen competes for require an accounting for the firm’s ESG performance. “Impact investors, including Nuveen, are seeking to make a difference while earning competitive returns,” Advani said upon joining the GIIN’s board last month. Environmental and social considerations are being absorbed into the financial mainstream, he said this week. “I’m an optimist that the arrow has left the bow.” – David Bank

The Week’s Big 7

1. Overheard at the Global Impact Investing Network investor forum. It was drizzly in Amsterdam, but the weather report from this week’s GIIN investor forum: It’s getting hot. “The time for empty words is over,” said Triodos’ Marilou van Golstein Brouwers. “Students are protesting at our door every day,” said Liza Jonson of Scandinavia’s Swedbank Robur. “We need to move capital at a vastly different scale,” exhorted the GIIN’s Amit Bouri. Other takeaways:

  • Transparency watch. The first 60 global investors who signed onto the IFC’s impact principles will disclose by next April how their investment practices stack up to the development finance institution’s nine principles, as well as independent verification of that alignment. KKR Global Impact Fund and LeapFrog Investments already have enlisted the consultancy Tideline to verify their approaches. “It’ll be a real step change in transparency,” IFC’s Neil Gregory told ImpactAlpha.
  • Common faith. Christian, Jewish and Islamic institutions are energized about the growing investability of their values. Accountability and stewardship are values all faiths share, said Omar Shaikh of the U.K. Islamic Finance Council. Faith-based investors, with hundreds of billions in assets, can add purpose to the dominant narrative of risks and returns, he said.
  • Impact in public equities. Don’t be satisfied with current offerings, said Anthos Asset Management’s Dimple Sahni. Sahni, who is developing a public-markets impact strategy for the ultra – ultra – high-net-worth Brenninkmeijer family, dropped this hint: “I wouldn’t mind anchoring a public markets fund mapped to the SDGs.”
  • Impact accountability. The answer to Braganza’s question (above): Among hundreds of impact investors in the room, only two had halted investments that failed to deliver on impact.
  • Essential info, without the jet lag.

2. All eyes on catalytic capital. Financing that can accept higher risks or lower returns is the scarcest resource in the impact investing market.

  • Foundations. The MacArthur Foundation turned up a bumper crop of proposals with its call for funds that demonstrate the value of catalytic capital. MacArthur is planning to invest another $120 million in such vehicles, to be at least matched by other investors. Made, not found.
  • Development finance institutions. Many DFIs, tasked with spurring private capital into emerging and frontier markets, are often just as risk-averse as commercial capital. The U.K.’s CDC Group announced in ImpactAlpha this week that it has $1.5 billion to deploy for “catalyst strategies” that take on additional risk to shape nascent markets and build more inclusive economies. Smarter money.

3. To change the markets, change the indexes. Most investments in public equities are held in “passive” accounts that track broad market indexes, such as the S&P 500. Major institutional investors, like the $1.6 trillion Government Pension Investment Fund of Japan, are starting to shift capital to indexes that steer capital toward companies making faster transitions to the low-carbon economy – and starve the slowpokes. Track the change.

4. New U.S. Development Finance Corp. on hold. The successor to the Overseas Private Investment Corp. was set to begin operations Oct 1. But the new capacities of the DFC, including its authority to make equity investments, are on hold pending the passage of a federal budget. “Right now we continue to operate as OPIC,” says David Bohigian, who as acting CEO has been working to institutionalize social impact in the new DFC. More.

5. Aggregating impact across investments. Building on recent advances in impact measurement and management practice, the GIIN rolled up the impact performance on sets of clean energy and affordable housing investments, and shared its new methodology at the investor forum. Dig in.

6. Alaska Natives drive impact in video games. The Cook Inlet Tribal Council created a video game rooted in Alaska Native culture to engage local youth – and then traded its ownership stake for equity in E-Line Media, an independent, impact-focused game producer. The latest installment of ImpactAlpha’s “Creating Impact” series, produced in partnership with Upstart Co-Lab, looks at how authentic voices, top-notch production and entertainment value are driving impact through gaming. Press play.

7. Building trust with blockchain for SDG finance. Billions, but not trillions, of dollars are being invested to advance the U.N. Sustainable Development Goals. To coax more capital in the door, ConsenSys and the World Wildlife Federation have launched a new blockchain-based match-making platform to connect investors with SDG-aligned opportunities. Get smart.

The Week’s Dealflow

Inclusive finance. Mexico’s Klar raises $57.5 million to expand digital credit… Kresge Foundation invests $5 million to support credit unions serving the underbanked… CDC invests $30 million in Bangladesh’s BRAC Bank to promote financial inclusion… Atlanta’s Civic Loan Fund backs four female impact founders.

Impact tech. Renewal Funds closes fourth impact fund at $109 million… MaxAB raises $6.2 million to help Egypt’s informal retailers with logistics… Aquaconnect raises $1.1 million to help manage shrimp farms… Textile recycling venture Evrnu raises $9.1 million.

Climate finance. The Conservation Fund closes $150 million green bond to preserve forests… Danish private pension funds pledge $50 billion to fight climate change.

Farmer finance. Oikocredit extends expansion loan to Uganda’s farmer-owned Kayonza Tea Factory… French and Dutch banks invest in Neumann Group’s sustainable coffee initiative.

Clean energy. Sympower secures $3.3 million to reduce fossil fuels in the electricity grid… African Development Bank takes on ‘energy poverty’ with $15 billion pledge.

The Week’s Talent 

Monica Varman, previously with Tesla and Zola Electric, joins venture capital firm G2VP’s investment team to focus on sustainability… Lisa Hall will lead the Beeck Center’s Fair Finance Initiative… Andrew Parry joins Newton Investment Management as head of sustainable investment… Katherine Milligan joins Bamboo Capital Partners as head of diversity and gender lens investing… KKR appoints Stanislas de Joussineau to lead KKR’s Global Impact team in Europe, while Sharon Yang joins KKR Global Impact as a senior investor in Asia.

The Week’s Jobs 

Acumen America is looking for a portfolio manager in San Francisco… SJF Ventures is hiring a senior analyst or associate in New York, San Francisco or Durham… Upstart Co-Lab is looking for a senior associate in New York… Social Capital Partners seeks a senior associate in Toronto.

Thank you for reading. 

– Oct. 4, 2019

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