The Week in impact investing: Taking ownership

TGIF, Agents of Impact! 

• The ownership economy has arrived
• Commercial investors boosting blended finance funds
• Making “sustainable attainable” in Wisconsin
• How asset owners can scale climate finance

🗣 Equity means equity. The ownership economy has arrived. Or at least the vanguard of the movement to usher it into being has taken the field. This week’s gathering in Denver to establish ownership-lens investing had a present-at-the-creation feeling that went beyond the usual collective high. Driving ownership of real assets – land, homes, businesses, communities and, yes, equities – down the quintiles of the country’s wealth pyramid has become a viable, and arguably essential, investment strategy. “The feeling of a unifying mission was palpable,” said Social Capital Partners’ Jon Shell, one of the earliest ownership-lens investors. Gary Community Ventures, the Aspen Institute and Bridgespan assembled previously disparate people to establish an investment ecosystem that could, in rough numbers, 10x the wealth of households of color and those in the bottom half of US wealth distribution, which now own less than 2% of US household wealth. Indeed, wealth inequality already is slightly decreasing after decades of widening to a chasm. Nurturing that nascent trend represents a cycle of economic uplift that could carry the country through all manner of social division. 

Participants in the ownership economy include the millions of baby boomer owners who could sell their business to their workers, or first-time home buyers like the ones who are buying at least a fraction of their own home through shared-equity schemes, as Roody Senatus reported this week. That gives real power to the ownership narrative, which flips the script from redistribution to predistribution, from zero-sum to bigger pie, from scarcity to abundance, and from disadvantage and division to “let’s get richer, together.” That narrative of shared uplift is crucial to the green rebuild and, indeed, to Climate United’s $7 billion strategy to establish an ecosystem for green community lending, as Beth Bafford explained to Amy Cortese. There’s a similar vibe to the $100 million pot of capital to accelerate climate tech deployments that Elemental Impact will manage as a subawardee to the Coalition for Green Capital, which has its own $5 billion strategy to boost green banks and capital markets. Rewarding the systems-level climate impact of “entrepreneurial corporations that are driving down emissions beyond their own doors,” could set off another virtuous cycle, as Lynnley Browning reported. The ImpactAlpha team will be out in force at Climate Week NYC to catch a whiff of that uplift ourselves.

“All wealth is from the dirt,” Jay Bailey of Atlanta’s Russell Innovation Center for Entrepreneurs, who is on a mission to restore Black land ownership, said in Denver. Expect ownership lens investors to show up in the new, bigger tent of impact investors in Latin America that ImpactAlpha’s Dennis Price has been tracking. And in the UK, where the impact investing market has been gaining traction. And certainly in gender-lens investing, where 2X Global rolled out a new certification to boost transparency and intentionality, as Jessica Pothering laid out. A shared commitment to improving livelihoods in vulnerable and marginalized communities doesn’t mean there won’t be contentious moments between capital providers and investees, as Ceniarth’s Diane Isenberg and Greg Neichin forthrightly acknowledged. Ownership stakes make livelihoods less vulnerable and make more tangible what some might call “the opportunity economy.” It is a parade that politicians and investors of all stripes can jump in front of, and should. – David Bank

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The Week’s Podcast

🎧 This Week in Impact. Host Brian Walsh takes up ImpactAlpha’s top stories with editor David Bank. Up this week: clips from this week’s Agents of Impact Call (see below); the ownership economy comes into its own in Denver; and finding the alpha in climate investing at Climate Week NYC.

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

This Week’s Calls

Agents of Impact Call: How commercial investors are crafting structures to blend finance (video). Blended financing deals are rebounding, with a twist. This time, it is commercial investors who are stepping up to drive some of the biggest blended-finance funds for climate and development. Financial institutions like Allianz and Mitsubishi UJF Financial Group, hand-tied by strict regulatory rules around risk-taking, are overcoming obstacles to back much needed climate and development interventions. They’re doing it by working with development finance institutions, multilateral development banks, impact-first investors and philanthropic organizations on funds and deal structures with built-in risk buffers like guarantees, insurance and first-loss reserves. “Institutions have wanted to put money behind the Sustainable Development Goals, but need investment-grade opportunities to do it at scale,” observed Debra Schwartz of the MacArthur Foundation on this week’s Agents of Impact Call, “Blending billions.” (Disclosure: MacArthur Foundation is a mainstay of the Catalytic Capital Consortium, which supports ImpactAlpha’s coverage of catalytic capital.) 

• Inflection point. By leveraging first-loss capital from Dutch development bank FMO and a guarantee from MacArthur, German insurance giant Allianz became the anchor institutional investor in the $1 billion SDG Loan Fund. The fund is one of a spate of recent billion-dollar vehicles dedicated to the SDGs and underinvested climate needs in emerging markets (for context, see “Blending billions: Lessons in catalyzing capital at scale for climate and development”). Strategies that layer concessional and commercial capital have long struggled to deliver on their promise of accelerating investment for sustainable development and climate action. Promisingly, blended deals are on the upswing, hitting a five-year high of $15 billion last year, reports Nnamdi Igbokwe of Convergence. “We’re in the midst of a very punctuated moment where we’re going towards scale,” he said. “We actually see the needle moving.”
  
• Investment-grade capital. Commercial investors are stepping up to streamline blended deal structures. Setting up Project GAIA, a $1.5 billion debt facility for climate adaptation and mitigation in low-income countries, marked a “turning point” for Mitsubishi UJF Financial Group, said MFG’s Ariane Pevide. “We’re among the first that’s setting up blended finance as a product office.” More banks are following suit. Alongside desks for capital markets, equity, derivatives and such, “you have a blended finance office to make this part of our DNA and strategy,” she said. To mobilize investment-grade institutional capital for climate mitigation and adaptation in emerging markets, Climate Fund Managers levered first-loss capital. Said Climate Fund Managers’ Rajashree Padmanabhi. “There are still areas where it is a high-risk business.”

• Read the recap and watch the video replay. 

Plugged In: In Wisconsin, Forward Together’s Mandela Barnes makes sustainable attainable (video). The head of Forward Together Wisconsin helps residents and businesses tap federal funding from the Inflation Reduction Act to green the state’s communities. On the latest Plugged In with ImpactAlpha contributor Sherrell Dorsey, Barnes highlighted the historic opportunity to create cleaner, healthier communities and economic opportunity in underserved areas. The former Wisconsin lieutenant governor told Dorsey, “It’s important to have navigators who are going to be able to equitably disperse those resources.”

• Equitable transition. Many IRA benefits come in the form of tax credits or reimbursements. That means lower-income homeowners and renters “have fewer opportunities to take advantage of the abundance of resources out there,” said Barnes. Many residents aren’t even aware that the funding exists. Forward Together works to spread word, canvassing door-to-door to educate homeowners and businesses about the clean energy incentives and savings available, and assists Tribal communities in submitting grant applications. “We’re going to do this in the most inclusive and equitable way possible,” Barnes said.
  
• Read the recap and watch the replay.

The Week’s Deal Spotlight

Easing the way for asset owners to scale climate finance. Family offices, sovereign wealth funds, public and private pensions, endowments and insurers want to invest in climate solutions. The financial ecosystem needs to make it easier to do so. That’s the crux of a new report from S2G Ventures that looks at the barriers and solutions to scaling climate finance. The Chicago-based investor, which oversees $2.5 billion in assets, surveyed more than 50 such asset owners and found they believe that climate-related investment is a growth area “with significant opportunity for alpha generation in the coming years.” With more than $250 trillion in collective institutional capital, even marginal increases in asset owners’ climate investments could propel a net-zero economy by 2050.

• Overcoming barriers. Three-quarters of asset owners surveyed expect to boost their climate investments over the next three years. But they face market, political and institutional obstacles. “We believe the most impactful and perhaps swiftest approach to designing a fit-for-purpose capital market system is partnership with asset owners,” wrote S2G in the report. Such an alliance would spawn an “enabling ecosystem” that includes large asset management firms like BlackRock, convening organizations, catalytic capital providers, policymakers and academics.

• Innovative financing. A “fit-for-purpose” capital market system geared to the unique needs of climate startups, including “missing middle” growth ventures, is needed to fund the green transition, argues S2G. That means new financing models for first- and second-of-kind plants and deployments. Designing those models requires research and packaging of investments to target “high-priority opportunities.” Among S2G’s prescriptions: “Leading with the opportunity and upside, versus the reputational risk or importance of values alignment to climate investment, can keep consideration of the climate megatrend active.”
  
• Dive in.

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.

Donald Felix, formerly with Citizens FInancial Group, will become president and CEO of Carver Federal Savings Bank in November… Vision Ridge Partners tapped Pete Murphy, previously with Nuveen Private Equity Impact, as head of impact… The Pivot Fund added Susan Smith Richardson, previously with The Guardian, as managing director… Beyond Capital Ventures promoted Christophe de Montille to principal and Pooja Monga to senior investment associate.

The Pivot Fund welcomed Paola Nicole Marizan, previously with America Amplified, as communications manager… Raphaele Chappe, formerly research and development strategy economist and director at DeVol Network, returned to Predistribution Initiative as economic research director… Laurie Felker Jones joined Antler as a visiting partner… Blue Earth Capital added George Wheeler, previously with Legal & General Investment Management and BlackRock, as vice president of fundraising and investor relations.

Marquette Associates’ Ibrahim Rashing joined Harris for President as engagement and phone banking co-chair… Dominik Mjartan is stepping down as CEO of Optus Bank and will become vice chairman of the board… The National Coalition for Community Capital appointed Jackie Koney of Paper City Development to its board of directors… Galway Sustainable Capital welcomed Harry Hegeman, previously with AES Clean Energy, as an investment associate.

Nathan Eskender, formerly with the Ford Foundation, joined Open Society Foundations as a senior investment analyst… Michele Joo Shank, formerly with Social Finance, joined Ascent as vice president of impact and senior counsel… Stefan Okhuysen of HCAP Partners was named a director member of the Latino Corporate Directors Association… Susan Lane, formerly with Mercy For Animals, joined 1% for the Planet in the new role of director of philanthropy.

That’s a wrap. Have a wonderful weekend. 

– Sept. 20, 2024