TGIF, Agents of Impact!
Featured: ImpactAlpha Original
Impact investing on the ballot. When Deval Patrick left public office in 2015, he raised eyebrows by joining Bain Capital, the private-equity firm co-founded by another former Massachusetts governor, Mitt Romney. Rather than pursue distressed companies to “buy, strip and flip” with leveraged buyouts, however, Patrick was looking for plays in companies expanding economic opportunity, healthy living and a more sustainable economy. With its $400 million Double Impact Fund, Bain became one of the first major private-equity firms to raise a dedicated impact fund, and Patrick became perhaps the country’s best-known “impact investor.” As he mounts his late bid for the Democratic presidential nomination, Patrick will decide for himself whether to run on, or away from, that identity. But even if Patrick doesn’t highlight his private-equity career, his critics certainly will. Like it or not: impact investing is on the ballot.
“I think impact investing is an incredibly interesting and exciting way to participate in growth capitalism,” Patrick told CNN’s Jake Tapper. Indeed, funds and policies that seek to leverage and incentivize private capital for public good have technocratic appeal in a world awash in cash and urgent needs. But in a climate of both left- and right-wing populism, the social impact investment prerogatives of billionaires and other high-net-worth families, as well as corporate and institutional investors, can be skewered as an elite affectation rather than a popular movement. “Impact investors will always be squeezed by people on the left who say profit is evil,” tweeted Nonprofit Finance Fund’s Antony Bugg-Levine, “and on the right who say seeking impact is sloppy capitalism.” Critics of Patrick’s private-equity career are “seeking to negate the space we have worked to create for the impact investing movement,” Bugg-Levine added. “We need to push back.”
Keep reading, “With presidential bid, Deval Patrick puts impact investing on the ballot,” by Dennis Price and David Bank on ImpactAlpha
The Week’s Agent of Impact
Adesuwa Okunbo Rhodes, Aruwa Capital Management. One early deal stands out in Adesuwa Okunbo Rhodes’ accomplished but traditional career in finance: Quality Chemicals. The Ugandan pharmaceutical company supplies antiretroviral therapy and antimalarial drugs in East Africa. Rhodes invested for private-equity firm TLG Capital, and took a personal stake as well. The nice return “spurred my interest in impact investing on the continent,” Rhodes told ImpactAlpha. To fuel more such deals in Africa, and for women in particular, Rhodes founded Lagos-based Aruwa Capital Management. She is raising a $20 million private equity fund, primarily from West African individuals and family offices, to invest in growth-stage businesses across the continent. She is keying in on gender throughout the process, from who is leading Aruwa’s investment decisions to the executives, suppliers and customers of the companies Aruwa invests in.
“I want us to have a coherent and consistent story from inception,” Rhodes says, “so that when people look at the impact and the success that I know will follow, they will think about allocating capital to women-owned funds and gender-lens funds in the future.” Aruwa’s first investment is Nigerian personal hygiene company, Wemy Industries (whose male CEO is eager to recruit more women). Aruwa aims to make three or four more investments of up to $5 million over the next two years. Most private equity dry-powder on the continent is looking for deals between $50 and $100 million, which very few African companies can absorb. “This segment of the market is the bread and butter of the African economy,” Rhodes says. “There is a significant mismatch between small- and mid-size businesses’ demand for growth capital and the supply.” – Jessica Pothering
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The Week’s Big 8
1. Corporate sustainability value-add (podcast). Corporate investment in climate adaptation and low-carbon solutions dwarfs private-equity and institutional investments. Equilibrium Capital’s Dave Chen and ImpactAlpha’s David Bank explore companies on the front lines of sustainability in the latest Returns on Investment podcast episode. John Deere & Co., the Moline, Ill.-based farm equipment giant, is developing climate change solutions for farmers globally. Fund managers are paying attention. Listen in.
2. Bank leaders and laggards. A small but growing cohort of banks across Europe, Japan and yes, the U.S. are taking steps to mitigate the climate-related risks of business as usual. Banks still have a “systematic reluctance” to press their high-carbon clients, according to Boston Common Asset Management. But 37 of 58 large carbon funders reported substantive progress across climate-related strategy, risk management and opportunities. Dig in.
3. “Vetrepreneurship” revival. A developing ecosystem shows promise in reversing the plummeting rates of veteran entrepreneurship. Roughly half of returning World War II service members started their own ventures and 40% of Korean War vets. Since 9/11, less than 5% have pursued their own ventures. Best regions for vetrepreneurs: the Washington-Baltimore corridor and Austin, Texas. More.
4. Inside the stakeholder economy. The ‘Trust Protectors’ were the first hint this wasn’t your run-of-the-mill shareholder meeting. Candide Group’s Aner Ben-Ami reports from the first “stakeholder” meeting of the Sustainable Food Perpetual Purpose Trust, which owns Oregon-based Organically Grown Co. The three Trust Protectors are tasked with stewarding the company’s mission. Take a peek.
5. Worker buy-outs. Worker ownership structures such as co-ops and Employee Stock Ownership Plans could be an antidote to the growing wealth divide, says Transform Finance. As a wave of Baby Boomer business owners move to retire, a new crop of funds are pursuing leveraged buyouts to convert firms to worker-ownership. OK Boomer.
6. Investing with a “whole-system” lens. Impact investors can’t invest their way out of structural problems like inequality, discrimination and resource exploitation. More than 55 impact investors are mapping systems and investing along the capital continuum to catalyze structural change. Take a spin.
7. Closing the persistent gap in smallholder finance. Digital technologies that improve credit scoring, distribution infrastructure and farmer training programs are changing the landscape of agricultural finance. Impact-driven agricultural funds with at least $19 billion dollars are seeking deals. Both are needed to overcome an annual shortfall of $170 billion in rural and agricultural finance in emerging markets. Smarter money.
8. Weaving systems in Antigua. The more than 600 participants in Guatemala at this week’s Central America and the Caribbean edition of the FLII are “weaving systems” rather than disrupting them. Central America “is an ideal place to pilot schemes and understand if a financial instrument works or not, in the fastest way possible,” Alterna’s Daniel Buchbinder told ImpactAlpha. The Twitter hashtag #FLIICAC19 is abuzz with the conversation. Our preview.
The Week’s Dealflow
Climate and clean tech. India’s Hero Future Energies eyes global growth with $150 million infusion… European ride-hailing company Bolt earmarks €10 million for carbon offsets… Member-owned Canadian bank acquires clean energy finance company CoPower… Kilara Capital backs carbon offset startup TEM.
Education and jobs. Reskilling frontline workers, Guild Education becomes a B Corp unicorn… French entrepreneurs raise $5.5 million for Lalilo’s U.S. literacy app… Pearson snaps up Lumerit Education to help workers advance their education.
Growth markets. Pakistan and China-based venture capital firms team up to support Pakistani entrepreneurs… Rise Fund backs Uganda’s Pearl Dairy Farms… Doble Impacto and Quest Capital launch $10 million Chilean impact fund.
Financing fish. Oceano Fresco raises €2.7 million for offshore clam farm… Fish 2.0 wraps up after supporting 600 seafood innovators… Aqua-Spark backs Scottish aquatech firm Ace Aquatec.
Impact tech. U.K.’s Visionable raises £9.1 million for video-based health consultations.
Innovative finance. “Kangaroo bond” helps Australians export financial inclusion.
The Week’s Jobs
LOCUS seeks a credit analyst and an underwriting and credit manager for its community investment guarantee pool… BlueOrchard Finance is looking for an associate fund manager for its blended finance and impact management team in Geneva… Triple Jump is hiring an operations manager of investment management in Amsterdam… Circularity Capital is recruiting an investment associate in Edinburgh.
Equilibrium Capital seeks an analyst for its water, waste and energy team in Portland… Frankfurt School Financial Services GmbH is hiring an investment manager for its microfinance fund in Latin America… US SIF is looking for an operations and membership services manager in Washington D.C… FaithInvest is recruiting an executive director in Bristol, U.K.
UBS seeks a sustainable investing strategist in New York and Hong Kong or Singapore… Women Moving Millions is looking for a director of programs in New York… Global Citizen is hiring a philanthropy policy director and a senior director of environment and climate in New York… Co-Impact is recruiting a director of programs and learning in London.
Thank you for reading.
– Nov. 15, 2019