The Week in impact investing: Operating environment

TGIF, Agents of Impact!  Mark your calendars for two valuable events next week:

• The Call: Investing behind federal funding for water quality, community health and climate resilience. Join us to identify high-impact water investment opportunities (see Deal Spotlight, below) with North Star Strategy’s Radhika Fox, who led the EPA’s Water Office, Shaun O’Rourke of Quantified Ventures, which designs investable solutions for water and health, and Rogelio Rodriguez of the nonprofit WaterFX, which helps communities finance equitable water infrastructure, Thursday, Aug. 29 at 10am PT / 1pm ET / 6pm London. RSVP today.
  
• Build your network, and ours. As part of the ImpactAlpha community, you have access to an incredible network of professionals putting finance to work for good. Join us on Monday, Aug. 26 at 1pm PT / 4pm ET for an hour of facilitated introductions with other Agents of Impact who are pushing the boundaries of impact investing. Register today.

In today’s brief:

• The new operating environment
• Podcast: Amy Cortese on pro- and anti-ESG pensions’ performance 
• Creative muni bonds for water infrastructure 
• Two dozen new jobs in impact investing

🗣 Good governance. The work, as you’ve no doubt heard, is just getting started. The manufacturing fueled by more than $133 billion in private investments in EVs, batteries and green energy is ramping up even before tax credits under the Inflation Reduction Act fully kick in. Community development finance institutions and state-level green banks are likewise just getting ready to lend for green upgrades and community infrastructure in underserved communities, after the EPA’s release of $27 billion in Greenhouse Gas Reduction Funds. For every driver of the racial wealth gap, there are opportunities for patient capital to help unlock lost potential, as Bridgespan’s Stephanie Kater, Andrew Key and Simon Stephanos detail in a guest post. Promising trends, such as the record number of new business starts (a boom led by Black female founders), the modest uptick in home ownership among Black families, the increasing adoption of employee ownership (even by private equity giants like KKR and Blackstone) and especially the rising real wages of workers – all can be nurtured and accelerated, as the whole ImpactAlpha team lays out in this week’s roundup (contributing editor Sherrell Dorsey spiffed up our report with dispatches from the lively scene outside the Democratic National Convention in Chicago).

Good governance goes beyond specific policy planks. The rule of law, and what economists call the “safe harbor premium,” have for decades conferred huge advantages on the US economy; conversely, the prospect of debt defaults, mass deportations, domestic military intervention and unchecked immunity inflict political risks and economic burdens. Even absent high drama, uncertainty can be costly. Take, for example, the Department of Labor’s guidance to federally regulated pension plans, which has ping-ponged between pro- and anti-ESG positions through five administrations. That’s a disservice to beneficiaries: Pension funds in anti-ESG “red” states have underperformed those in pro-ESG “blue’ states to the tune of $159 billion over 12 years, as Lynnley Browning reports, based on data provided by HIP Investor. Conversely, Ford Foundation’s Margot Brandenburg argues in a guest post, companies that consider consumers, communities and workers along with shareholders may be less prone to take advantage of inflationary pressures to gouge customers. “If we want companies to do more than maximize profits for investors, we need to give them that mandate,” she says. And if we want a broader operating environment that also is conducive to positive outcomes for all stakeholders, we need to give our political leaders that mandate as well. – David Bank 

Sponsored by SOCAP Global

Connect and collaborate for positive outcomes at SOCAP24. In less than 10 weeks, more than 2,500 impact practitioners and leaders will gather in San Francisco for SOCAP’s annual convening. The largest and longest-running event for the full spectrum of impact, SOCAP24 has designed networking opportunities for attendees to make the right connections with people from across the space and around the globe, including:

• Sessions designed for connection. Speed networking, interactive workshops, and pass-the-mic conversations.
• Networking app. Connecting attendees based on shared interests and needs.
• Designated meeting spaces. Scheduled meetups and spur-of-the-moment conversations.

Learn more and join us at SOCAP24 in San Francisco, October 28–30.

The Week’s Podcasts

🎧 This Week in Impact. Host Brian Walsh takes up ImpactAlpha’s top stories with Amy Cortese. On the agenda: the outperformance of pension funds in pro-ESG “blue” states, the Harris campaign’s opportunity agenda, and the boom in off-grid energy and rooftop solar in India. 

• Listen to the new episode of This Week in Impact. Get the podcast in your feed by subscribing on Apple or Spotify.

Women’s World Banking brings women’s financial habits online. New York-based Women’s World Banking works with financial institutions to expand the economic participation of low-income women and their households and, increasingly, to bolster their climate resilience as well. CEO Mary Ellen Iskenderian shares her “aha” moments with ImpactAlpha’s David Bank on the latest Agents of Impact podcast.

• Keep reading, “Women’s World Banking is accelerating financial inclusion by bringing women’s financial habits online,” by David Bank, and listen to the Agents of Impact podcast. Check out all the shows on the ImpactAlpha Podcast Network.

The Week’s Deal Spotlight

From Newark to North Carolina, communities get creative to tap muni markets to finance water upgrades. Water upgrades are badly needed in cities and towns across the US – to remove lead pipes, improve wastewater treatment, filter contaminants and guard against increasingly frequent floods and droughts. To pay for such upgrades, bigger cities with strong credit ratings can readily issue bonds and access capital markets. Smaller towns, like Sanford, NC, a majority-minority town of 31,000 people 40 miles from Raleigh, have often struggled to tap the $4 trillion municipal bond market for affordable financing. Sanford bucked the trend earlier this month when it issued the first tranche of $71 million in municipal bonds to upgrade and expand its water infrastructure. Underserved communities like Sanford are banding together to finance their infrastructure needs, including by piggybacking on the ratings of better-resourced issuers.

• Sharing costs. In North Carolina, Sanford teamed up with the neighboring towns of Holly Springs, Fuquay-Varina, and Pittsboro to share the cost of upgrading its water and wastewater treatment system, which will serve all four towns. “We understood the value of having partners, because you get to spread capital costs,” Victor Czar, Sanford’s public works director, told a town hall meeting last month. The upgrades will more than double the facility’s capacity to 30 million gallons per day. The nonprofit Water Finance Exchange helps facilitate such regional partnerships and is exploring bond insurance for disadvantaged communities where such partnerships aren’t possible. “We think this will allow access to communities that have typically been disenfranchised by the capital markets,” said WaterFX’s Rogelio Rodriguez, a guest on next week’s Agents of Impact Call (RSVP here).
  
• Lead leader. It’s not just small towns that need credit enhancement. Facing a government mandate to get rid of its lead pipes, the city of Newark, NJ, in just two years replaced 23,000 lead service lines with copper lines. The unlikely success story was enabled by a $120 million bond floated in 2019 – by Essex County. The county’s AAA rating saved Newark an estimated $15 million to $20 million in interest payments and eliminated the need to charge homeowners for the work (for context, see, “Muni investors see through mispriced risks to find alpha and impact”).

• Mispriced climate risk. More frequent and intense storms, floods and droughts make urgent the need to upgrade aging water infrastructure. This month, Clyde, Texas, a city of 4,000 three hours west of Dallas, defaulted on a bond that had been issued to improve the city’s water systems. The culprit: lower water revenues due to rationing amid a prolonged drought. An estimated $630 billion is needed over the next two decades to repair and replace aging water infrastructure across the US. The 2022 bipartisan infrastructure law earmarked $50 billion for water infrastructure, the largest such investment ever. That includes $15 billion for lead pipe removal.

• Join the Call. “Investing behind federal funding for water quality, community health and climate resilience,” Thursday, Aug. 29 at 10am PT / 1pm ET / 6pm London. RSVP today.
  
• Go with the dealflow. Share this post and check out our full roundup of ImpactAlpha’s deal reporting this week. Robert Wood Johnson Foundation sponsors ImpactAlpha’s Muni Impact coverage.

The Week’s Talent and Jobs

💼 See and share more than a dozen new impact jobs posted this week on ImpactAlpha’s Career Hub and view hundreds of more jobs in impact investing and sustainable finance. Have a job listing to post? Submit it here.

Stax promoted Tyler Veit to managing director… The California Coalition for Community Investment tapped Nate Schaffran from Community Vision CA as its inaugural executive director… Roy Messing joined the Michigan Center for Employee Ownership as a part-time program coordinator… Teresa Kashaba, previously with Dexus, joined Conscious Investment Management as a senior associate in Sydney.

Illumen Capital promoted Jeremy Sookhoo to principal… Maya Burney, previously with Caleo Capital and founder of Womvest, joined Calvert Impact Capital as a senior investment officer… Illumen Capital promoted Leila Mengesha to senior impact associate… Social Finance added Kandasi Griffiths-Williams, previously with Ruthless for Good, as an impact investments associate director.

That’s a wrap. Have a wonderful weekend. 

– Aug. 23, 2024