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The Week in impact investing: Purpose-built



TGIF, Agents of Impact! 

Purpose-built for impact. As the world tries to grapple with emergencies like COVID and climate, racial injustice and inequality, it’s arriving at vehicles and approaches that have been incubated, in some cases for decades, by community and impact investors. The Local Initiatives Support Corp. and other community development finance institutions, or CDFIs, have grown since the 1990s into primary lenders in distressed communities. Now they’re essential infrastructure for getting COVID recovery loans out to businesses in low-income neighborhoods. They have also become go-to partners for corporations and billionaire philanthropists looking to make right on racial injustices in the financial system (see Agent of Impact MacKenzie Scott, below). Spring Lane Capital’s Christian Zabbal argues the fast growth of sustainable alternatives is attracting new capital to the kind of deals once the province of green investors (see No. 3). ESG investing, long dismissed as a niche affectation, is one of the few growth areas in financial services as investors look for resiliency and risk reduction in the COVID economy (No. 7). Practical, proven innovations are having their day. Revenue-based financing, which grew up as an alternative to venture capital and traditional lending, is increasingly being used to help entrepreneurs, especially women and founders of color, grow businesses and create much needed jobs (No. 2).

Each advance reveals its own limitations, of course. Even as impact and sustainable investing largely win debates within a financial world skeptical of the ability to make money investing for social good, it is part of a more profound critique of finance itself. “There is an underlying, simmering anti-capitalism among people for whom our current capitalistic economy has not delivered, which I completely support from a moral perspective,” Nonprofit Finance Fund’s Antony Bugg-Levine said on yesterday’s Agents of Impact Call (No. 1). Impact investing, he said, has so far delivered “nowhere near what is needed for us to be able to credibly sit down with those people and say that we are a legitimate way to organize resources.” To make impact investing truly purpose-built for change, impact investors must dig deeper, take more risk – and get ready to relinquish some of their own power and privilege.

Our next call, “10x’ing the impact of systemic investing,” will be Thursday, August 13. If you think systemic investing is more talk than action, you’ll want to hear The Investment Integration Project’s Bill Burckart, Cambridge Associates’ Sarah Hoyt, Sinclair Capital’s Jon Lukomnik and other Agents of Impact, yes, talk about making it real. RSVP today.

ImpactAlpha is taking a Brief summer break. We hope you’ll miss The Brief next week. We’ll be back in your inbox on Monday, Aug. 10.

– Dennis Price, editorial director

The Week’s Impact Briefing

On this week’s podcast, host Brian Walsh talks with Dennis Price about how impact investing is an ideas whose time has come, and we recap highlights from yesterday’s “election impact” subscriber-only conference call. Tune in, share, and follow us on Apple, Spotify or wherever you get your podcasts. 

The Week’s Big 8

1. Impact investors raise their voices in the November election. “At stake in the election is the enabling environment for effectively all of the investments impact investors are making, in the U.S. and around the world,” David Bank writes in his latest column. Yet, within the impact investing bubble, you might not even know there is an election coming up. With less than a hundred days to Nov. 3, it’s time to break out, he says. ImpactAlpha’s subscriber-only Agents of Impact Call No. 21 took up ‘election impact’; we’ll have a report and a replay when we return. Raise your voice

2. Founders First’s Kim Folsom on backing diverse founders. Entrepreneur-turned-investor Kim Folsom, with $100 million in debt capital through her investment firm Founders First Capital, is one of the largest “alt-capital” providers to diverse-led businesses. Folsom helps women and founders of color overcome business funding challenges as a means to addressing social, racial and economic inequality. “The fastest growing and largest group of diverse employers are other diverse founders,” she says in a Q&A with ImpactAlpha. The whole story.

3. This is what a virtuous cycle looks like. “Across many, many markets, the growth is almost entirely in sustainable, low-carbon alternatives to the status quo,” writes Spring Lane Capital’s Christian Zabbal in a guest post. “This is what a virtuous cycle looks like: more capital flowing into alternatives to carbon-heavy industries, creating options that respond to increasing public pressure to address climate change, which create success stories like Tesla that draw in further capital and shift public opinions more.” Dive in

4. CARE puts a lens on ‘gender justice.’ The venture arm of global nonprofit CARE is looking to create deeper impact for women through its Asia-focused CARE-SheTrades Impact Fund. “The global impact community must consider what more it can do to achieve critical structural change,” write CARE Enterprise’s Ayesha Khanna, Virginia Schippers and Doris Bartel in a guest post. Hear them out.

5. Impact face-off: Engie vs. Enel. The French and Italian utilities face off in the latest edition of Impak Battles, an ImpactAlpha series with Montreal-based impact ratings agency impak. Spoiler alert: “Being a positive impact company is still way down the road for both companies.” Ready, set, go.

6. Accelerating financing to respond to COVID. The crisis has many impact and venture capital investors in “wait and see” mode. Among the exceptions: The XX accelerator, which spun out of the crowdfunding site WeFunder, is enabling everyday investors to back the dozen COVID-related startups from its latest cohort. MIT Solve is rallying to provide bridge loans and revenue-based financing. Solve’s Casey van der Stricht discusses how in a guest post.

7. ESG fund investors go passive. Active managers, who command higher fees, are losing out to index and other passive funds when it comes to winning environmental, social and governance mandates. Morningstar said inflows to passive ESG funds hit $12.7 billion last year, topping actively managed funds by $4 billion. What’s more: passive funds have been outperforming active ones over the last year or so. Read on

8. Nia’s Kristin Hull walks the talk. Kristin Hull founded Nia Community Investments in 2010 to focus on racial justice in her hometown of Oakland, Calif., and Nia Global Solutions in 2013 to engage publicly-listed companies. In her own portfolio, Hull invests “at the intersection of environmental sustainability and social change,” she writes in the latest installment of ImpactAlpha’s Walking the Talk series with Confluence Philanthropy. Read on

The Week’s Agent of Impact

MacKenzie Scott, author and philanthropist. Call it “best practices for billionaires.” As her ex-husband, Jeff Bezos, and three other tech titans prepared to face hostile Congressional questioning this week, Scott detailed how she has started to give away her $36 billion fortune. Since signing the Giving Pledge a month after her divorce last year, Scott has given out $1.7 billion in direct gifts to 116 organizations. Her donations of nearly $587 million for racial equity made her one of the top U.S. racial justice funders, behind only the Ford Foundation. For some of the six historically Black colleges and universities that each received between $20 million and $40 million, it was the largest gift ever. Community finance development organizations, or CDFIs, like Local Initiative Support Corp and Capital Impact Partners got badly needed grant capital. Wrote Scott: “There’s no question in my mind that anyone’s personal wealth is the product of a collective effort, and of social structures which present opportunities to some people, and obstacles to countless others.” 

Many of the hundreds of billionaires who have signed the Giving Pledge would do well to study Scott’s example for actually doing such giving, and quickly. Scott has given directly, rather than through a foundation or donor-advised fund. She consults with diverse advisors and believes “people who have experience with inequities are the ones best equipped to design solutions.” Grants can be spent how the organizations deem best. Scott, an author, studied under Toni Morrison at Princeton University. The late novelist liked to tell her students, “When you get these jobs that you have been so brilliantly trained for, just remember that your real job is that if you are free, you need to free somebody else. If you have some power, then your job is to empower somebody else.” Scott is well trained to write the book on how to be a better billionaire. It has the makings of an Amazon bestseller. – Amy Cortese

The Week’s Dealflow

Returns on inclusion. TCF Bank pledges to lend $1 billion to diverse businesses and support homeownership… More than a dozen 2020 Echoing Green fellows are tackling systemic racism, educational inequities, unemployment, air pollution, and mental health… The Miller Center selected 15 female social entrepreneurs for its first 100% women-led cohort.

Agrifood investing. The Better Meat Co. secures $8.1 million to expand ‘hybrid meat’… PlantLab secures €20 million to bring its vertical farms to the U.S. 

COVID response. Community Investment Management raises $10 million for COVID lending in Colorado… IFC earmarks $2 billion to help emerging markets secure medical supplies. 

Impact tech. Weather forecasting company ClimaCell secures $23 million… CEMEX Ventures invests in plastics upcycling company Arqlite SPC. 

Frontier finance. Grassroots Business Fund secures $1 million for East African agribusiness finance. 

Inclusive fintech. Generation backs Guideline’s 401(k) plans for small businesses.

Institutional shift. BNP Paribas launches a long-short fund for green energy leaders and laggards. 

The Week’s Talent

Happy birthday to ImpactAlpha’s own Amy Cortese (@Locavesting)!… Richenda Van Leeuwen, ex- of Rocky Mountain Institute and the United Nations Foundation, will become ANDE’s executive director, starting Sept. 1… Cliff Worley, ex- of Nasdaq Entrepreneurial Center, joins Kapor Capital as senior director of portfolio growth marketing… The Global Impact Investing Network adds Zarmeen Pavri as senior advisor for Australia, and Maud Savary-Mornet as senior advisor for Southeast Asia. 

Dan Block, ex- of Global Innovation Fund, joins Mercy Corps Ventures as investment principal, while Sam Orji joins as an investment analyst in Lagos… Laurie Spengler of Courageous Capital Advisors and Alex Silva of Omtrix have joined the board of Global Partnerships… Jonathan Drew in Hong Kong, Farnam Bidgoli in London and Julie Bennett in New York will lead HSBC’s new ESG solutions unit.

The Week’s Jobs

Rural Innovation Strategies is recruiting a director of impact in Hartland, Vt… UNDP is looking for a research and communications intern of private sector engagement in Istanbul… PIMCO seeks an ESG sustainability research analyst in Newport Beach, Calif…. Microsoft is recruiting a chief of staff for sustainability in Redmond, Wash… Local Initiatives Support Corp. has openings for a senior director of diversity, equity, inclusion and justice in New York and a senior director of fund operations for strategic investments in Washington, D.C… Closed Loop Partners is looking for a project associate for its Center for the Circular Economy in New York.

Thank you for reading.

–July 31, 2020

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