TGIF, Agents of Impact!
🗣 Crossing climate. Another day, another billion-dollar climate fund. The latest announcement ahead of this fall’s climate conferences: California billionaire Tom Steyer’s Galvanize Climate Solutions, which aims to put billions into decarbonization solutions (see Dealflow). Now that climate investing is everywhere, ImpactAlpha is spotting opportunities at the intersections for impact, alpha and even beta (see Agents of Impact, below). Climate tech meets racial and economic justice in Earthshot’s spin-out from Elemental Excelerator, as ImpactAlpha’s Roodgally Senatus reports. Jessica Pothering surfaces opportunities that cross climate tech and India’s huge market (No. 4). Guest author Rob Lalka connects the disaster in New Orleans with cross-sector partnerships to turn business risk into opportunities (No. 3). And Amy Cortese and David Bank preview the brewing battles between empowered shareholders and corporate climate laggards (No. 1). If it seems like it’s all climate, all the time, that’s because climate change is cutting across every issue, sector and geography. The action is at the intersections. – Dennis Price
👏 The Call: Capitalism Reimagined: Universal owners, active stewardship and shareholder power. “We need to make sure we are collectively responsible for what’s happening to the whole economy,” says Hiro Mizuno, U.N. envoy and former chief investment officer of Japan’s Government Pension Investment Fund, who will join Engine No. 1’s Michael O’Leary, The Shareholder Commons’ Sara Murphy, Illinois State Treasurer Michael Frerichs and Zevin Asset Management’s Marcela Pinilla on Agents of Impact Call No. 30, Tuesday, Sept. 14 at 10am PT / 1pm ET / 6pm London. RSVP now.
🎧 Impact Briefing. On this week’s podcast, host Monique Aiken and ImpactAlpha’s David Bank preview next week’s Agents of Impact call and sample David’s conversation with Hiro Mizuno. Plus, the headlines. Tune in, share and follow us on Apple, Spotify or wherever you listen.
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Five recommendations for assessing real estate climate risk. How real estate investors can navigate data for measuring climate change risks. Learn more.
The Week’s Agents of Impact
Universal Owners. When you own everything, you don’t want everything to go to hell. That’s the simple concept behind the emerging doctrine of universal ownership, which is upending traditional asset management and laying the foundation for more active ‘stewardship’ to mitigate systemic risks to the economic system as a whole. The term has long been applied to the supertankers of global capital – huge pension, sovereign wealth and insurance funds that are so broadly invested that they effectively “own the market.” Increasingly it is being adopted as well by retail holders of broadly diversified and passively managed index funds, including through 401(k) and college savings accounts. Volatility and value-destruction driven by the changing climate, COVID, inequality and injustice are bigger threats to our financial security than any stock-picking mistakes. We’re all universal owners now.
The health of the entire market system – sometimes called ‘beta’ – has historically been seen as beyond the influence of any single player. No more. “We felt like we should find a way to make a contribution to make the whole system, or whole universe, of the capital markets more sustainable,” Hiro Mizuno, until recently the chief investment officer of Japan’s Government Pension Investment Fund, tells ImpactAlpha. The megafund, with nearly $1.8 trillion in assets, is perhaps the most universal of universal owners (see, “Hiro Mizuno, Agent of Impact“). Mizuno, now a U.N. special envoy on innovative finance and sustainable development, has rallied other universal owners to pressure major asset managers like BlackRock, Vanguard and State Street to more actively manage the ‘negative externalities’ created by companies in which they hold stakes. “If we are making money by investing in a company that actually produces a lot of negative externalities, who has to pay for that cost?” Mizuno asks. Usually government, communities – and the rest of your portfolio.
At least partly as a result of such pressure, the three large asset managers bucked management at ExxonMobil this year to vote for insurgent directors committed to more aggressive climate action. Mizuno left GPIF before the Exxon vote, but told ImpactAlpha he would have quizzed the fund’s managers on their positions – and graded them accordingly. Asset owners, he says, should send a message to their agents that “we want to make sure the capital market is sustainable for the long term.” The golden rule remains: They who have the gold make the rules. Universal owners are rewriting the rules of the financial markets. That’s capitalism, reimagined. – David Bank
The Week’s Big 5
1. Getting on Engine No. 1’s good side. The activist hedge fund’s unexpectedly successful campaign to shake up ExxonMobil’s board this spring got the attention of other climate laggards, including Chevron. Emboldened shareholders are readying a new set of shareholder proposals. “It’s like the shackles are off and let’s swing for the fences on some of these proposals,” says Engine No. 1’s Michael O’Leary. Wake up.
2. Pension fund disconnect. There’s a connection between the high investment returns of California’s teachers’ pension fund and the state’s high housing costs—and it isn’t necessarily a good one. “The entrance of institutional investors into the residential housing market, both directly and through investments in real estate and private-equity funds, is one contributor to the run-up in valuations that is pricing many teachers and other essential workers out of local markets,” observes Imogen Rose-Smith in her latest Institutional Impact column. Are pension funds’ spectacular returns coming at the expense of their own beneficiaries? The take.
3. Letter from New Orleans. After Hurricane Ida struck Louisiana, community organizations and more than 30,000 frontline workers went to New Orleans to help restore power, repair damage and cook for the city’s residents. In the face of climate change, “that barrier-breaking approach will increasingly become a business necessity,” writes Tulane University’s Rob Lalka. “Climate change is a societal risk but also a generational investment opportunity.” Reflections.
4. Capital flows to India’s climate innovators. Investments in new climate technologies quadrupled in India between 2016 to 2019. EV startups and other clean-mobility companies account for 60% of climate tech funding, according to a new report. “Solutions that make EV adoption affordable and easy will continue to see traction.” Go deeper.
5. Scaling nature investments. “There is growing interest from policymakers and investors to invest in nature,” says the International Union for Conservation of Nature’s Elmedina Krilasevic, who found that conservation investors are planning to make “substantially higher” investments this year. Needed: more publicly-traded conservation assets, and more opportunities in China, Japan and Latin America. Dive in.
- Amazon and The Nature Conservancy launched the Agroforestry and Restoration Accelerator to advance nature-based decarbonization solutions and support local farmers in Brazil.
The Week’s Dealflow
Spotlight: Climate funds. Hedge fund manager and environmental activist Tom Steyer is launching Galvanize Climate Solutions with Katie Hall of asset management firm Hall Capital Partners. They’re looking to invest “billions” into companies developing new decarbonization strategies. Backers include Marc Benioff’s investment fund Time Ventures and Laurene Powell Jobs’ Emerson Collective. Galvanize plans to commit 25% of profits to “climate and climate justice organizations.”
- Inclusive climate tech. Honolulu-based Elemental Excelerator launched Earthshot Ventures with $60 million to “increase catalytic funding for bold and diverse founders transforming markets” with new climate solutions. The fund is backed by a powerhouse roster of investors including Emerson Collective and Microsoft’s Climate Innovation Fund, as well as Tom Steyer (see above) and Kleiner Perkins’ John Doerr. Check it out.
- Other climate fund launches this week: 1.5 Degrees, a women-led hedge fund at AllianceBernstein with a long/short climate investment strategy; U.K.-based HYCAP, which raised £200 million ($276 million) to invest in British businesses focusing on hydrogen power from renewable energy; and Paris-based SWEN Capital Partners’ targeted €120 million ocean regeneration.
Agrifood investing. Nigeria-based spices processing and export company Agricorp raises $17.5 million to grow its smallholder farmer network… Australia’s New Forests and Canada’s Alberta Investment Management Corp. are buying Australian farmland owner and manager Lawson Grains from Macquarie Asset Management… Agricycle raises $2.4 million to repurpose food waste from smallholder farmers in Africa… Alt-protein startup Eat Just partners with Qatar’s state run agencies Doha Venture Capital and Qatar Free Zones Authority on a $200 million cell-cultured meat facility.
Economic inclusion. Employee Ownership Catalyst Fund raises nearly $5 million to back worker-ownership conversions… TheCut raises $5 million, led by Nextgen Venture Partners, to help barbershops generate revenue… Local Initiatives Support Corp. invests $8 million in a $100 million initiative to support small businesses in the Hampton Roads region of southeastern Virginia.
Financial inclusion. Addi rakes in $140 million to scale ‘buy now, pay later’ in Latin America… Ayoconnect scores $10 million to advance financial inclusion in Indonesia… Chennai-based Northern Arc Capital raises $50 million to expand lending and credit products for women entrepreneurs.
Skills and education. AV Ventures’ impact fund invests $700,000 in Kupuev Academy to build a campus for teaching STEM to underserved students in Kyrgyzstan… Microverse secures investment to expand income share agreements for global talent.
Circular economy. Italy’s Intesa Sanpaolo and SACMI secure a €40 million loan to improve the sustainability of ceramics manufacturing.
Impact milestones. MIT spin-off Commonwealth Fusion Systems conducted a successful test of its new superconducting magnet.
The Week’s Jobs
Zebras Unite is hiring an entrepreneur in residence for its Inclusive Capital Collective… Calvert Impact Capital is looking for an investment team professional in Bethesda, Md… Mercer is recruiting a sustainable investment senior associate in Boston… New Energy Nexus is hiring a managing director in Oakland… ImpactAssets seeks an in-house counsel in San Francisco… Energy Impact Partners is looking for an ESG and impact associate in New York… Catalyst Opportunity Funds is hiring a commercial real estate associate in Salt Lake City.
Beyond Capital Ventures seeks an investment fellow… Great Lakes Protection Fund is looking for a communications manager in Evanston, Ill… Mission Driven Finance is looking for a controller in San Diego or remote… ImpactEngine is hiring a senior associate for economic opportunity in Chicago… The David and Lucile Packard Foundation is hiring a communications officer in Los Altos, Calif…. DBL Partners seeks a director of impact in San Francisco… Resonance Impact Advisory is looking for an innovative finance analyst / senior analyst.
That’s a wrap. Have a wonderful weekend.
– Sept. 10, 2021