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The Week in impact investing: Scenarios



TGIF, Agents of Impact!

Best-case scenarios. Business leaders and investors are used to mitigating downside risks and planning for worst-case scenarios. That may be prudent in the face of a pandemic, climate emergency and global recession. But such caution makes it harder to see what might go right. Case in point: Even the most ambitious “net zero” scenario in the new World Energy Forecast from the International Energy Agency falls short of what’s required, and may well understate the growth of solar power, as the IEA has for decades (see No. 3, below). Investors only recently began reckoning with the possible return of U.S. policy leadership for stability, stimulus and sustainability (No. 1). Prevailing skepticism about the speed and scale of the transitions ahead creates opportunities for contrarian fund managers to go long on the sustainable future and to short extraction and exclusion (No. 2). Best-case scenarios can let social enterprises like Tugende in Uganda envision post-lockdown growth (No. 5). And the notion that things can yet be made right is what animates protesters in Nigeria and the U.S., along with Belarus, Kyrgyzstan, Hong Kong, Chile and other places around the world (see, Agent of Impact). Prepare for the worst, certainly. Keep fighting for the best. 

– David Bank

Impact Briefing. On this week’s podcast, co-host Brian Walsh welcomes back Imogen Rose-Smith and David Bank for a quick roundtable, ‘From ESG to impact.’ We also meet Nigerian activist Aisha Yesufu, this week’s Agent of Impact, who has been part of the country’s protests against police brutality. Plus, the headlines. Tune in, share, and follow us on Apple, Spotify or wherever you get your podcasts.

Evidence of impact. The Catalytic Capital Consortium, an initiative of the MacArthur Foundation, the Rockefeller Foundation and Omidyar Network, is calling for proposals to build the evidence base for catalytic capital, why and where it’s needed, how it has been deployed and what the outcomes have been. Make the case.

  • Get up to speed. Take a spin through ImpactAlpha’s catalytic capital coverage, which is supported by the Catalytic Capital Consortium.

The Week’s Big 6

1. Investors eye a blue wave of opportunity. Just a few weeks ago, investors were fretting about higher taxes in a potential Biden administration. Now, they’re eyeing a ‘blue wave’ of opportunities in green energy, electric vehicles, health care and education. The new meaning of “pro-business”: policy changes and public investments that drive not only stability and stimulus, but sustainable growth. Catch a break.

2. Asset managers look beyond ESG. ESG funds are the hottest trend in financial services. But some investors are wondering what the fuss is about if the top five holdings overall are Microsoft, Alphabet, Procter & Gamble, Apple and Home Depot. Active asset managers are competing by investing in small- and mid-cap companies that are driving the transition to a more sustainable and inclusive economy. Key indicator: Change in the share of revenues driven by products and services that solve major environmental and social challenges. Step it up

3. Four scenarios for the energy transition. The pandemic “has caused more disruption to the energy sector than any other event in recent history,” reports the International Energy Agency in its annual energy outlook. In two of the IEA’s four scenarios, humanity fails to take steps to prevent catastrophic warming. New this year: a scenario for “net-zero” emissions in 2050, and a roadmap for what needs to happen to get there. Future forward

  • NEW: An energy scenario to match the climate emergency. Even the IEA’s sustainable development strategies lack the necessary ambition, critics say. Solar costs are falling and deployment is rising faster than the IEA projects. Setting a more aggressive strategy would make the net-zero scenario seem modest, not radical, suggests CarbonTracker’s Kingsmill Bond. The critique.
  • Trillion-dollar risk. The new Business Ambition for 1.5°C campaign by investors representing $20 trillion in assets is urging more than 1,800 high-emitting companies to set science-based emissions targets to achieve net zero emissions by 2050. Feeling the heat
  • Engagement with consequences. The $1.5 trillion asset manager Legal & General will vote against directors at companies that don’t meet climate goals. “We’ve found a protest vote against chairmen has been quite effective,” said John Hoeppner, LGIM’s U.S. stewardship chief. “You need a stick.” Take charge

4. Opportunity Zones’ second act. Opportunity Zones have plenty of critics, most of which argue that capital is largely going to real estate, rather than operating businesses that create jobs and wealth in undercapitalized communities. That criticism is “misleading,” says NES Financial’s Reid Thomas. But what is needed to get a clearer picture of how Opportunity Zone incentives are being applied is a mandate from regulators and legislators for impact measurement. Hear him out

5. Helping Uganda’s motorcycle taxi drivers survive the lockdown. When Uganda went into COVID lockdown in March, social lender Tugende paused loan repayments and offered emergency grants for its borrowers, motorcycle taxi drivers who have taken loans to buy their own bikes. Now, Tugende has raised $6.3 million to finance future growth, providing an example of the risks and opportunities for emerging market social enterprises as they look beyond COVID. Rev up

6. Putting an impact spin on litigation funds. Litigation funds may evoke a whiff of “ambulance chasing,” admits Capricorn Investment’s Ion Yadigaroglu. Capricorn nevertheless backed London-based Aristata Capital’s litigation fund for its social and environmental impact – and potential for big awards. “This is new space and a new strategy,” says Aristata’s Rob Ryan, “We need to be using every tool possible.” File suit.

The Week’s Agent of Impact

Aisha Yesufu, Nigerian activist. The world’s most populous Black nation is standing up to police brutality. The demand of protesters in Nigeria: #ENDSARS – that’s the Special Anti-Robbery Squad – which since 2017 has been accused by Amnesty International of more than 80 cases of police brutality, harassment, rape and extra-judicial killings. Yesufu, a Nigerian businesswoman and activist, emerged in 2014 as a leader of the #BringBackOurGirls movement to fight for the return of 200 girls abducted by terrorist group Boko Haram. She is again on the front lines of social protests. This week, an instantly iconic photo of a defiant Yesufu, fist in the air, protesting in front of police, went viral on social media. In a video message to protestors, she urged focus. “You are doing so great. You’ve woken up. You’ve found your voice. You’ve even given us… voices.” 

Yesufu is an “elder” in the diverse, women- and LGBTQ- and youth- led movement. #ENDSARS, which has been growing since 2017, is the latest in Nigeria’s rich history of protests. “We are Nigerians,” Yesufu tweeted on her active Twitter account with more than 300,000 followers. “We help each other.” Like Black Lives Matter in the U.S. and social protests worldwide, Nigeria’s activists are fighting for freedom and rule of law – conditions necessary for all Nigerians to grow and thrive. The fight is not only pro-democracy and pro-impact, but pro-economy and pro-business. Nigeria has the largest population and largest economy in Africa and is a hub of tech innovation and impact investing. (Stripe this week acquired Nigerian payments company Paystack, a portfolio company of impact investment firm Blue Haven Initiative.) That makes it all the more important that protestors remind us that the government is one of the continent’s most corrupt, according to Amnesty. Along with Segun Awosanya, who helped jumpstart #ENDSARS, Matthew Blaise, who is lifting up LGBTQ voices, and activists around the world, Yesufu represents an early warning system for systemic risk. – Dennis Price

The Week’s Dealflow

Energy transition. French oil giant Total backs hydrogen-powered truck maker Hyzon Motors… Rockstart raises €21 million to back energy startups in Europe… Clean Energy Ventures backs SunDensity to increase the efficiency of solar panels…  SunForAll commits $4 million to expand solar energy access… DFC offers technical assistance for Ethiopian clean energy project. 

Inclusive fintech. Evolve Credit raises early funding to help Nigerians navigate fintech options… Unnati secures seed funding to give India’s farmers access to seeds… Greenwood raises $3 million for a digital bank for Black and Latinx customers. 

Impact tech. Alt-plastic maker Newlight Technologies clinches $45 million… Dryad Networks raises €1.8 million for wildfire sensors… Acculi Labs secures seed funding for health diagnostics for India’s poorest.  

Returns on inclusion. JPMorgan commits billions to build Black and Latinx wealth.

The Week’s Talent

Leonie Kelly-Farley steps away from the Sustainable Finance Initiative, backed by RS Group, to head up ESG and impact at a Hong Kong law firm… Kathleen Simpson becomes CEO of The Russell Family Foundation after serving as the foundation’s interim CEO since January and chief financial officer since 2015… Women of Renewable Industries and Sustainable Energy names Norton Rose Fulbright’s Becky Diffen, US Bank’s Lan Adair Sasa, BlackRock’s Daniela Toleva and Goldman Sachs’ Yoomin Hong to its board of directors.

The Week’s Jobs

The Nathan Cummings Foundation is requesting proposals for an external chief investment officer to manage its endowment and mission-aligned investment strategy… The Initiative for a Competitive Inner City is looking for a communications director in Boston…. Peloton is recruiting a senior manager, social impact, in New York… Philadelphia’s Office of Sustainability is hiring a data analyst… MSCI is hiring an ESG climate specialist in New York… ioby is looking for a finance operations senior associate… The American Heart Association is recruiting a portfolio manager for its social impact fund in the San Francisco Bay Area or Seattle.

The Pisces Foundation has an opening for a climate and energy program associate in San Francisco… WWB Asset Management seeks a principal investment officer / head of Asia… Jordan Park is hiring an impact advisory associate in San Francisco… Rockefeller Capital Management is looking for an ESG engagement analyst in New York… Capshift seeks an impact investing fellow… Applications are open for the Impact Capital Managers’ Mosaic Fellowship for first-year graduate students from under-represented backgrounds.

Thank you for reading.

–Oct. 16, 2020

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