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The Week in impact investing: New norms



TGIF, Agents of Impact! 

New norms. Perhaps the most striking thing about the selection of Kamala Harris as Joe Biden’s running mate is that she was the conventional choice. Harris is the first Black woman and the first Indian-American on a presidential ticket. That a first-generation immigrant and graduate of Howard University, a historically Black university, is the politically safe bet suggests how quickly norms can shift (see No. 7, below). The norms that inform our economic and social systems can shift as quickly, as people and institutions shed archaic constructs. At least one giant private-equity firm is seeing that sharing wealth with employees drives better performance than beating them down (No. 3). Corporations are collaborating to invest in solutions they all need to transition to a low-carbon economy (No. 4). Investors in tropical forests are looking out for local communities as well (No. 5). The new conventional wisdom, for private and public-markets investors, is that environmental, social and governance, or ESG, accountability safeguards both impact and financial returns (No. 6).

Like high-carbon fuels and worker exploitation, racism is an anachronism in the emerging economy of the  21st century. On ImpactAlpha’s Agents of Impact Call yesterday, Living Cities’ Demetric Duckett said systemic racism has not only disadvantaged Black and Brown people in building wealth and generating incomes, it’s a drag on an economy dependent on consumption. By around 2040, people of color collectively will surpass white people in the U.S. population. That the New Majority has depressed spending power is a systemic risk; investing in racial justice and dismantling racism in finance are systemic opportunities (Nos. 1 and 2). Race “is as archaic as every other socially oppressive model we’ve ever used,” said Duckett. “If we want to move forward smartly, comfortably, then we’ve got to attack it.” Community development financial institutions, or CDFIs, have had a breakout moment as a result of their response to the COVID crisis (see, Agent of Impact). The new conventional wisdom is that access to capital for small businesses, health clinics, and affordable housing in underinvested communities is essential for the economic recovery. Here’s to making that a new norm. 

– Dennis Price

The Week’s Impact Briefing. On this week’s podcast, host Monique Aiken and David Bank recap yesterday’s “systemic investing” call. And we hear from Maurice Jones, CEO of the Local Initiatives Support Corp., this week’s Agent of Impact. Plus the headlines. Tune in, share, and follow us on Apple, Spotify or wherever you get your podcasts. 

The Week’s Big 7

1. Purchasing and investing for racial justice. Path to 15|55 founder Tynesia Boyea-Robinson argues that it wouldn’t be so hard to “buy Black,” if investors better understood systemic challenges for Black business owners when designing solutions. Babcock Foundation’s Susanna Hegner writes that the $171 million foundation has committed to “a deeper examination of how we can better use all our tools, particularly our grantmaking and our endowment, to advance racial equity.”

  • Check out new resources and tools to advance racial equity in finance from Robasciotti & Philipson, Cornerstone Capital and Cambridge Associates. More

2. Dismantling racism in community finance. New Markets Tax Credits have generated more than $52.5 billion in economic development investments in low-income communities. But the program underperforms in allocating credits to entities owned or led by Black, Native, and other people of color, writes Annie Donovan of Local Initiatives Support Corp. (see Agent of Impact, below). “This is structural racism at play, and we must work to dismantle it.” Hear her out

3. Ownership stakes for hourly workers. The private-equity playbook doesn’t often benefit frontline workers. But KKR has pioneered a new play in its industrial manufacturing portfolio by distributing $500 million in dividends and other proceeds to about 20,000 hourly employees who own equity in their companies. Listen to ImpactAlpha’s conversation with KKR’s Pete Stavros in the latest Agents of Impact podcast. Tune in.

4. The corporations speeding the low-carbon transition. The first investment from Microsoft’s Climate Innovation Fund last month backed not just climate friendly tech, but innovation in corporate strategic investing. Energy Impact Partners’ multi-corporate investment model is helping companies pool capital and share solutions as they cut emissions and try to get in front of the low-carbon transition. Dive in

5. Mobilizing capital for tropical forests. More than two dozen funds with $2.6 billion in capital are backing firms and projects generating revenue from tropical forestry and agriculture products, while benefiting smallholder farmers and forest-dependent communities. Among the investors: corporate giants like Michelin and Danone seeking to secure their supply chains. Check it out.

6. ESG’s private market impact. Most environmental, social and governance, or ESG, investing strategies have focused on managing risks and capturing opportunities in the public markets. Impact Engine’s Jessica Droste Yagan and Priya Parrish argue that private investors should integrate ESG strategies with their impact targets to boost impact and improve returns. Read on

7. Getting real in the November election (audio). Political disengagement is a luxury impact investors can no longer afford. On ImpactAlpha’s The Call No. 21, Agents of Impact agreed that the enabling environment for effectively all impact investments is at stake in the election. “We see our civic engagement and our political work as being fundamental to how we engage as investors,” said Blue Haven Initiative’s Liesel Pritzker Simmons. Catch the replay.

The Week’s Agent of Impact

Maurice Jones, Local Initiatives Support Corp. Jones has had a busy summer. Community development financial institutions are an overnight sensation three decades in the making and Jones’ Local Initiatives Support Corp., or LISC, is a standout. In June and July alone, LISC landed a $60 million economic development partnership with Kaiser Permanente, a $25 million investment from Netflix to support Black-owned financial institutions, a $55 million grant from home improvement retailer Lowe’s to boost entrepreneurs of color and rural businesses, and a $40 million gift from Agent of Impact MacKenzie Scott (formerly Bezos), LISC’s largest-ever gift from an individual. In May, New York Gov. Andrew Cuomo chose LISC to manage the state’s $100 million New York Forward Loan Fund, which provides working capital to small businesses and nonprofits reeling from the COVID shutdowns (see, “New York loan fund for small businesses is a model for a $1 billion national fund). The fund has disbursed $3 million to date, mainly to minority- and women-owned businesses. The attention is gratifying, says Jones, who grew up on a tobacco farm in rural Virginia and went on to become a Rhodes Scholar. 

It’s also part of his plan. For decades, the loan capital for CDFIs has come primarily from banks, as a way to fulfill community lending obligations under the Community Reinvestment Act. When Jones took the helm of LISC four years ago after a career government, he found healthcare organizations looking to address jobs, shelter and other social determinants of health; tech giants grappling with an affordable housing crisis they helped create; and a sports world in the midst of a racial-justice awakening. LISC, founded in 1979, with $10 million in seed funding from the Ford Foundation, has invested $22 billion in underserved communities. Its comprehensive community development work has made it the go-to partner for organizations looking to have a positive impact. “We have seen Corporate America step up with us like never before,” says Jones. If the commitment of long-term patient capital for underinvested communities becomes a new norm, “there is no question in my mind that we can collectively achieve much greater economic mobility,” he says. “But you can’t do it just for the summer of 2020. That is the real test.” – Amy Cortese

  • “More than profit.” Check out Jones’ interview with Bryce Butler on Access Ventures’ podcast
  • Share Jones’ Agent of Impact story and like it on Instagram

The Week’s Dealflow

Agri- (and aqua-) food tech. S2G Ventures closes $100 million for sustainable oceans fund… Mirova closes $132 million Sustainable Oceans Fund… Bayer and Temasek launch Unfold to accelerate vertical farming… AgFunder launches impact fund for agrifood tech startups… AppHarvest closes $28 million for its high-tech rural farms… Equilibrium invests in Mexico-based greenhouse operator Finka… EIT Food invests €5.5 million in COVID relief for European food startups. 

Smart mobility. Communal ride-hailing startup Plentywaka closes a pre-seed round… ChargePoint raises $127 million to expand electric vehicle charging network… Barn Investments backs Brazil’s e-motorcycle manufacturer Origem Motos Elétricas.  

Returns on inclusion. Echoing Green creates a $50 million Racial Equity Philanthropic Fund… How Women Invest closes first $5 million for its new gender lens fund… Freedom for Immigrants and Mission Driven Finance launch a bond fund for detained immigrants.  

Impact bonds. Visa and Alphabet issue more than $6 billion in green bonds… Online investment platform SMBX raises $2.5 million to scale small business bonds.

Impact tech. Okta puts up $300,000 for TechSoup’s capital campaign… TemperPack closes $31 million for eco-packaging.   

The Week’s Talent

Renewable energy veteran Mark Gainsborough joins the board of directors at Husk Power Systems… Chris McIntire, ex- of KPM Analytics, is the new CEO of KKR and XPV Water Partners’ water-quality platform… One Nation Party USA’s Andrew Murray Dunn joins JumpScale as an advisor.

Christian Super appoints Mark Rider as chief investment officer. Outgoing CIO Tim Macready joins Sydney-based Brightlight Group as chief investment officer… Justin Kulla, BusinessBlocks founder, joins TZP Group as a partner and head of impact investing… Sophia Mendelsohn, ex- of JetBlue Airlines, joins Cognizant as chief sustainability officer and global head of ESG.

The Week’s Jobs

Shift Capital is hiring a vice president of real estate operations in Philadelphia… How Women Invest is looking for an investment associate in California… Asian Development Bank seeks a senior investment specialist in Manila… Housing Trust Silicon Valley is recruiting a chief executive in San Jose… Microsoft seeks a business development manager of U.S. societal impact in Bellevue, Wash… Pacific Community Ventures has an opening for an associate director/director of impact investing research and consulting in Oakland. 

AARP is looking for a senior advisor for impact investing in Washington, D.C… Rural Innovation Strategies is hiring a director of impact in Hartland, Vt… Nonprofit Finance Fund is hiring a strategy senior associate in Boston, Los Angeles, New York, Oakland or Philadelphia… Next Street is looking for a senior analyst in New York… ImpactAssets seeks a business development associate in San Francisco… Rockefeller Foundation is recruiting a manager of equity and economic opportunity in New York. 

Endeavor Global is hiring a senior associate to join Endeavor Insight in New York… Urban Us is looking for a capital associate in New York… Digitalundivided is hiring a program manager and program associate in Newark… Ethic is looking for a relationship management associate in New York… Vista Equity Partners is recruiting an ESG project manager in San Francisco… NorthStar Asset Management is hiring an investment analyst in Boston.

Thank you for reading.

–August 14, 2020

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