TGIF, Agents of Impact! We’re getting out and about. Connect with ImpactAlpha’s Amy Cortese, who will be sniffing out signs of the sustainability disruption at New York Fashion Week. Dennis Price will make the scene at Latimpacto’s confab of Latin American capital providers in Oaxaca, Mexico.
- Roundup: Entrepreneurship and ownership
- Podcast: Riffing on the week’s top stories
- Chart: Impact infrastructure funds in Africa
- Spotlight: Social bonds step up
🗣 Own your power. The surprisingly resilient boom in new business starts has given rise to a powerful constituency: entrepreneurial voters. Since 2021, founders have filed applications for more than 5.3 million new businesses each year (up from less than 3.7 million per year in the previous four years). Vice President Kamala Harris wants to boost new business starts to more than six million a year, with increased tax incentives for startup expenses and low- and no-interest loans for businesses that want to expand. The new cachet of small business reflects its new look: younger, diverse and female (Black women are the fastest-growing group of entrepreneurs in the US).
The small business boom is part of an even bigger trend toward broad-based ownership – of homes, retirement assets and the companies they work for – as a strategy to redress income inequality and racial wealth gaps. Alison Lingane has rounded up practical public policy planks to mobilize dramatically more private capital for the ownership economy. Her new Ownership Capital Lab is “a field-level effort to help bring that marketplace to increased maturity so we can see more capital flowing, more deals being done,” she told me.
Broad-based ownership is only one way Agents of Impact are flipping the script on outmoded structures and obsolete assumptions. Changing – and, again, more diverse – consumer tastes are giving impact investors an opportunity to disrupt the $3 trillion global fashion industry around sustainability and authenticity. “Rather than betting on brands, these VCs are investing in the materials, operations and software they think may define the future of all brands,” as Dennis Price wrote this week. In Africa, USAID Invest has helped bundle projects and corral institutional investors to mobilize African capital for African infrastructure, largely without concessional financing, the agency’s Natalie Alm and Dipika Chawla reported in a guest post. Across emerging markets, incorporating climate and gender angles has become table stakes for fund managers seeking to attract investors, Jessica Pothering and Lucy Ngige wrote in this month’s Liist of actively raising impact funds.
And As You Sow’s Andy Behar and Whistle Stop Capital’s Meredith Benton neatly turned the tables on critics of so-called diversity, equity and inclusion by demonstrating that it’s corporations retreating from their diversity commitments that are undermining the meritocracy, and shareholder value. “When we say fight, it is a fight for something, not against something,” Harris said in Georgia announcing the small business initiative. “This is what we’re talking about when we talk about a new way forward. This is for something.” – David Bank
The Week’s Podcast
🎧 This Week in Impact: Policy planks for the ownership economy. Host Brian Walsh takes up ImpactAlpha’s top stories with editor David Bank. Up this week: bipartisan policies to mobilize private financing for transitions to worker ownership; African capital for African infrastructure; and the legal risks of backpedaling on corporate diversity commitments.
- Listen to the new episode of This Week in Impact. Get the podcast in your feed by subscribing on Apple or Spotify. Catch up on all of the podcasts on the ImpactAlpha Podcast Network. Leave us a review and let us know – we’ll give you a shoutout on the podcast and in The Brief (if it’s good, we may even buy you lunch).
The Week’s Chart
Impact investing in African infrastructure. The number of impact-focused infrastructure funds around the globe has more than tripled over the last decade, to 357. Managers remain concentrated in developed markets, but more than 120 of the funds now target social, economic and climate infrastructure in Africa. That makes the continent’s emerging markets the hotspot for impact investing in infrastructure, according to Phenix Capital. One reason: Returns on investment on African renewable energy “are about twice as high as renewable energy in developed countries,” said Anders Hauch of Copenhagen-based Frontier Energy, which manages $300 million across two renewable investment funds for Africa. (Chart credit: Phenix Capital)
- African capital. Though still a small overall portion of portfolios, an increasing amount of the infrastructure capital comes from Africa’s local insurance companies, pension funds and other institutional investors, as USAID Invest’s Natalie Alm and Dipika Chawla highlighted in a guest post on ImpactAlpha this week. After a recent policy change, South African retirement funds can now invest up to 45% of their cash in infrastructure. Johannesburg-based Alexforbes Investments in July launched the AF Infrastructure Impact Fund-of-Funds to give investors exposure to South Africa’s economic and social development, including renewable energy, transportation and public utilities. The fund will prioritize high-performing, Black-owned or managed infrastructure portfolios. Alexforbes’ South Africa Private Markets portfolio allocated one billion rand, or $56 million.
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The Week’s Deal Spotlight
Socializing the seriousness of social bonds. Social interventions have long been considered harder to measure and manage than environmental ones. But countries, companies and investors have persisted in experimenting with investments in social impact themes. Last year’s rebound in the sustainable bond market saw the number of social bond issuances (1,461) almost catch up to green bonds (1,629). This week, South Africa-based UsPlus, a fintech venture that provides working capital to Black-, women- and youth-owned enterprises raised 70 million rand ($4.5 million) in a social bond listed on the Johannesburg Stock Exchange. The bond’s themes directly target South Africa’s persistent, race-related economic exclusion and stubbornly high youth unemployment.
- Social in the South. The UsPlus bond is significant for another reason: It’s an emerging market issuance. Nearly 80% of social bonds issued last year came from just five countries: the US, France, Netherlands, Japan and South Korea. “We want to see more social bond issuance – particularly in the southern hemisphere and emerging markets,” said Trevor Allen of BNP Paribas, a prominent structurer of sustainable bonds. Financial group Letshego Holdings in May issued the first social bond in Namibia. In June, BancoSol issued the country’s first gender bond, a $30 million issue on the Bolivian Stock Exchange. Last week, the Thai financial institution Muangthai Capital Public Company raised $50 million from the International Finance Corp. for a gender-lens bond to support lending to women-owned enterprises.
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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.
Impact Capital Managers added Justin MacLennan, previously with Wellington Management, as a research and impact measurement and management analyst… Isabella Chan, previously with Bank of America, joined Blue Earth Capital as a private equity analyst. Robert Cierny, previously with Ardian, joined Blue Earth Capital as operations manager… Andrew Garrett, previously with Sorenson Impact Institute, joined Impact Capital Managers as senior analyst of member experience.
Viviana Alva Hart, who served as Inter-American Development Bank representative in Barbados, will be IADB’s representative in Argentina… Arnold Byarugaba, formerly with Mastercard Foundation, joined the Collaborative for Frontier Finance as chief operating officer and head of networks. Chinwe Egwin, formerly with the Central Bank of Nigeria and Fitch, joined CFF as chief economist and research director.
SOCAP Global named 14 keynote speakers for its annual conference, including Christiana Figueres, the former UN diplomat who helped wrangle the Paris climate accord; Cecilia Conrad of Lever for Change; and Dominic Hofstetter of the TransCap Initiative. SOCAP24 runs Oct. 28-30 in downtown San Francisco. Ticket prices go up soon.
That’s a wrap. Have a wonderful weekend.
– Sept. 6, 2024
