TGIF, Agents of Impact!
Welcome to The Week in impact investing. Enjoy this edition of ImpactAlpha’s weekly roundup, compliments of Morgan Stanley. While you’re here: Save 25% on an annual subscription to ImpactAlpha – that’s $100 off. Grab our limited-time offer.
🎧 Impact Briefing. Roundtable regulars David Bank and Imogen Rose-Smith return this week to join host Brian Walsh for a conversation about Imogen’s Institutional Impact column on carbon lock-in, stranded assets and yes, Harvard’s endowment. Plus, the headlines. Tune in, share and follow us on Apple, Spotify or wherever you listen.
🗣 The Call (recap): Universal owners aim to turn shareholder power into real-world impact. Pension and sovereign funds, and even 401(k) investors, are leaning into their power as long-term stewards of capital to mitigate systemic risks to the value of their portfolios. The next step: turning commitments to environmental, social and governance, or ESG, investing into better outcomes in the real world. Hundreds of Agents of Impact joined The Call to talk universal ownership, negative externalities and active stewardship (we’ve started a glossary of key terms). “We just felt like we should find a way to make a contribution to make the whole system, or whole universe, of capital markets more sustainable,” said Hiro Mizuno, who until last year was the chief investment officer of the $1.75 trillion Government Pension Investment Fund of Japan, on Agents of Impact Call No. 30.
- Fiduciary duty. “This is common sense,” Illinois State Treasurer Michael Frerichs said on The Call. Frerichs spearheaded the state’s 2019 Sustainable Investing Act, requiring government entities managing public funds to integrate sustainability factors into their decision-making. “Companies that align their business with the interests of workers and customers and communities, regulators and shareholders,” he said, “are best positioned for long term success.”
- Active ownership. Engine No. 1 led the high-profile rebuke to ExxonMobil’s management earlier this year. “We are seeing evidence of stakeholder capitalism everywhere but where it matters, which is the actual lives of stakeholders,” said Engine No. 1’s Michael O’Leary. To push ESG from commitments to real-world outcomes, he says, investors must become more active as owners.
- Follow the activist. Activist investors, meet actual activists. Zevin Asset Management consulted with Amazon workers before filing a shareholder proposal pushing for an independent director to improve the company’s safety record. “Once we have selected a stock and we do our due diligence, we also want to understand the impacts and who is experiencing those impacts,” explained Zevin’s Marcela Pinilla.
- Better stewardship. Attending to systemic risks like climate change, antimicrobial resistance, injustice and disinformation “is actually the best way to honor our fiduciary duties and to return value to our beneficiaries,” said Sara Murphy of The Shareholder Commons. Such strategies, said Chris Jurgens of Omidyar Network, “extend our prism of fiduciary duty to holistic impact on beneficiaries.”
- Keep reading (and watch the video replay of) “Universal owners aim to turn shareholder power into real-world impact.” Catch up on all of our Capitalism Reimagined coverage.
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The rise of sustainable bonds for affordable housing. Are sustainable bonds key in helping solve the U.S. housing crisis? Learn more.
The Week’s Agent of Impact
Hilda Moraa, founder of Pezesha. Hilda Moraa was ahead of the trend of enterprise technology providers popping up all over Africa and other emerging markets. The founder of Nairobi-based fintech Pezesha understood sooner than most the links between digital commerce and financial inclusion. “Small and mid-sized enterprises rely on antiquated business models, particularly in retail trade, which limits their productivity” and drives information asymmetry with potential lenders, she says. The result is a $330 billion small business financing gap in Africa, with a disproportionate effect on women. The remedy: better data on how these businesses operate and perform. That’s what enterprise tech companies are collecting as they improve supply chain efficiency and enable business owners manage inventory and collect online payments. Pezesha helps turn that data into improved access to finance. Pezesha secured seed funding this week from GreenHouse Capital and Venture Garden Group.
Moraa spotted the potential of small business enterprise technology in Africa more than a decade ago as an analyst of last-mile distribution for Coca-Cola. She left to launch WezaTele in 2011 to help small businesses order and pay for inventory from their mobile phones. She sold WezaTele to AFB, a financial services firm in Ghana (now owned by Lesotho-based Letshego). With Pezesha, Moraa’s mission is to unlock working capital loans for small businesses by sharing data from enterprise tech providers like Twiga Foods and MarketForce with financial institutions (see No. 2, below). Moraa also wants to ensure access to finance is net-positive for small business owners (see “Investors called to account for fintech lending practices as debt-traps emerge“). Financial education, she says, is key to addressing “how credit can be a tool for wealth creation for our customers to invest in the future.” – Jessica Pothering
The Week’s Big 8
1. Institutional carbon lock-in. Environmental activists have for months been protesting the Line 3 pipeline that will bring tar-sands oil from Alberta, Canada to Superior, Wis. Less visible, writes columnist Imogen Rose-Smith, are the institutional investors that directly and indirectly fund high-carbon infrastructure that will live on for decades. Many of the Canadian pension funds and others with stakes in pipeline builder Enbridge have made net-zero pledges and committed themselves to address environmental, social and governance issues. Keep it in the ground.
2. Enterprise tech in emerging markets. ‘B-to-small-B’ enterprise tech ventures, such as MarketForce and Sokowatch in Kenya, Boost and KudiGo in Ghana, and Kirana247 in India, are collecting digital data to extend credit and financial services to customers traditional sources don’t reach. Enterprise tech ventures are “an on-ramp to financial inclusion,” says Maelis Carrarro of inclusive tech accelerator Catalyst Fund. Get wired.
3. Natural asset companies. The New York Stock Exchange is seeking approval for a new kind of publicly-traded asset based on payments for ecosystem services provided by nature. “Nature has value and we want to give investors the ability to directly invest in it,” said Douglas Eger of Intrinsic Exchange Group, which developed the concept for ‘natural asset companies’ with grant funding from the Rockefeller Foundation, IDB Lab and Inter-American Development Bank. Dig in.
4. Criminal justice footprints. Racial justice investing requires new ESG metrics. With its first set of corporate ratings, FreeCap Financial has identified 10 indicators that give investors a picture of a company’s criminal justice footprint. “Our role is to focus on transparency,” says FreeCap’s Tanay Tatum-Edwards. To wit: Starbucks, JPMorgan Chase and other companies now considered leaders have earlier been called out for the use of prison labor in their supply chains. Read on.
5. Catholic impact collaborative. The Catholic Impact Investing Collaborative has garnered commitments to impact investing from more than 30 Catholic organizations with more $40 billion in assets. The collaborative is now formalizing a membership program and online investment platform to accelerate the flow of Catholic financial assets toward impact. Among the early members: Catholic Relief Services, Mercy Investment Services, the OIP Investment Trust, the Franciscan Sisters of Mary and Ascension. Faith-based investing.
6. How you can invest sustainably. Upstarts as well as legacy financial institutions are rushing to meet demand for ESG and impact products that work for everyday investors. “This is the year when ESG investing by U.S. retail investors will really take off,” SustainFi’s Lana Khabarova writes in a guest post. The founder of the ESG and impact-focused personal finance site counts at least a dozen robo-advisors and apps that offer socially-responsible investing strategies, including Carbon Collective and EarthFolio. Walk the talk.
7. Disinformation risk. The Shareholder Commons is pushing shareholder proposals to ask Fox Corp. and other media companies to embed “accurate reporting” and “journalistic integrity” into their charters. The organization is rallying investors around the systemic risk that disinformation – on vaccines, climate, election integrity and other issues – poses to the rest of their portfolios. “We’re trying to solve for an underlying problem: that spreading bad information pays,” says TSC’s Sara Murphy. Fair and balanced.
8. Optimizing for impact. Familiarity with the emerging industry standards for impact management is becoming de rigueur for finance professionals of all kinds. “It’s time for ESG and impact reporting to transform from goals to accountable, verifiable impact management,” writes Cathy Clark of the Center for the Advancement of Social Entrepreneurship at Duke University’s Fuqua School of Business. CASE has released a free online Coursera course, “Impact measurement and management for the SDGs,” with the United Nations Development Programme. ImpactAlpha will share a multi-week selection of lessons and video clips from the course. Dive in.
- 👏 RSVP to The Call: Optimizing for impact. Join a special hands-on workshop, led by Clark, for a quick how-to on impact measurement and management, Tuesday, Sept. 28 at 10am PT / 1pm ET / 6pm London. RSVP today.
- 🔍 Take the ‘Optimizing for Impact’ challenge. 1. Complete the Coursera course “Impact measurement and management for the SDGs.” 2. Add the certificate of completion to your LinkedIn profile. 3. Share your updated profile with us (by replying to this email). ImpactAlpha will recognize the first 100 Agents of Impact displaying the certificate, who also will receive a small prize from CASE.
The Week’s Dealflow
Spotlight: Deep tech. Breakthroughs in science and technology are combining to decarbonize industries, remake the food system, and accelerate health and drug discovery research. Capital is flowing to solutions. Solugen raised $357 million to turn chemical production “carbon negative” by replacing fossil fuels such as petroleum and natural gas with renewable feedstocks. Singapore’s sovereign wealth fund GIC and Baillie Gifford led the round, valuing the company at more than $1.8 billion.
- Deep dealflow. Nigerian genomics startup 54gene raised $25 million to expand the use of African genetic material in global pharmaceutical research… AgBiome raised $116 million to provide farmers with naturally-derived crop protection products… Wild Earth raised $23 million to make pet food from cell-based meat… Berlin-based Formo raised $50 million to expand its menu of lab-grown cheeses… Compound Foods raised $4.5 million for lab-grown coffee to climate-proof your morning cup of joe.
Low-carbon transition. Bangalore-based REVOS snags $4 million to expand its smart EV charging stations in 500 Indian cities… Carbon-capture project Sustainable Thinking Scotland secures a £190,000 loan from Scotland’s Catalyst Fund… Paris-based Greenly secures $3 million to help small and mid-sized businesses track and lower their greenhouse gas emissions… Bain Capital Double Impact invests $45 million Cotopaxi, a sustainable outdoor gear and apparel brand.
Returns on inclusion. Impact Engine and Mosaic back employee ownership at Zero Waste Recycling… Matchstick Ventures looks to back diverse founders in pre-seed and seed rounds with its $55 million third fund… Black Venture Capital Consortium closes $7.5 million for student-led fund… Opportunity Finance Network’s Finance Justice Fund secures $23 million… The Rise Fund acquires a majority stake in Teachers of Tomorrow, an alternative certification program for teachers.
Fund news. Jeb Bush launches Finback Investment Partners with $350 million for ‘impact aligned’ private equity… Lever VC secures $80 million for alternative protein fund… U.K. asset manager Schroders is launching an Emerging Markets Equity Impact fund… Arctaris launches $20 million Opportunity Zone fund in Pittsburgh.
Clean energy. New Energy Equity secures $50 million to build community solar projects… Solarise Africa secures $5.9 million in debt financing from Trine… CrossBoundary Energy and Zoodlabs develop solar-powered internet in Sierra Leone.
Conservation finance. The Nature Conservancy and Timberland Investment Group team up to scale forest conservation… Quintet Private bank commits €200 million to Amundi Funds Emerging Markets Green Bond.
Impact management. Measurabl raises $50 million to help real estate investors measure for ESG… Danish startup Responsibly raises a $2 million pre-seed round to bring transparency and sustainability to corporate supply chains.
Small and growing businesses. A risk-sharing agreement between BlueOrchard Finance and the Asian Development Bank will expand access to capital for microfinance institutions and banks… Egyptian B2B e-commerce startup Capiter raises $33 million from Quona Capital and MSA Capital.
The Week’s Talent
Lauren Cochran, ex- of Blue Haven Group, is named vice president of equity and investment funds at U.S. International Development Finance Corp… Adam Riggs-Zeigen joins Founders First Capital Partners as head of member success and expansion advisory… Selen Ucak, ex- of Building Markets, joins Refugee Investment Network as refugee entrepreneurship lead… Cervest names Microsoft’s Lila Tretikov chairman of its board… Allison Spector, ex- of Nuveen, joins One Rock Capital Partners as head of ESG.
The Week’s Jobs
Capshift is looking for a managing director of business development… CDC Group is recruiting a climate change executive and an impact executive for development impact management in London… Refugee Investment Network seeks an Africa director in Nairobi… Camelback Ventures is looking for a chief operating officer… Arabesque is recruiting a climate research director in Boston… Black Farmer Fund seeks an investment director… Vancity Community Investment Bank is hiring an account manager of banking and investments in Toronto.
In New York: Global Impact Investing Network has openings for a grants officer, an institutional impact investing manager and more… Rockefeller Foundation is looking for a community experience lead and a manager of impact investment… Apollo Global Management seeks an impact measurement and monitoring associate… New York Life Insurance Co. is recruiting an impact investing senior associate.
The Nature Conservancy is looking for a manager of investment fundraising in New York City, San Francisco or London… LOCUS Impact Investing seeks a manager of asset management and servicing in Richmond, Va… Impact Frontiers seeks an operations associate in Providence, R.I… Blue Earth Capital (formerly PG Impact Investments) is recruiting a private equity analyst for its climate growth fund in London… Ann Arbor Area Community Foundation is hiring an impact investing manager.
That’s a wrap. Have a wonderful weekend.
– Sept. 17, 2021