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#Featured: ImpactAlpha Original
Tracking the rotation toward impact in the world’s biggest pools of capital. The potential for “universal owners” to shift the tide of global capital has for years had strong (if not universal) appeal, but not a clear plan. As more pension and sovereign wealth funds align with the 2030 Sustainable Development Goals, the apparatus of global finance now has a center of gravity around which to do its thing.
The new list of the world’s “25 Most Responsible Asset Allocators,” representing $4.9 trillion, is an excellent tool for tracking the early adopters. The largest asset allocator on the list, published by New America Foundation, is the Government Pension Fund of Norway (with $981 billion in assets under management), followed by APG Groep in the Netherlands ($532 billion) and National Pension Service in South Korea ($522 billion). The largest U.S. pension fund is CalPERS, with $332 billion.
In all, the think tank rated 121 funds, representing $15 trillion. The divergence of ratings is striking between leaders and laggards. Many of the funds have public trustees, including elected officials, so pensioners, citizens and other stakeholders should have a field day asking why the funds have opted out of such “responsible” investment practices. How do they see long-term risks? What is fiduciary duty? What level of urgency is appropriate? The question for large asset holders, says New America, is not whether they can afford to make investments in social impact, but whether they can afford to miss the opportunity. When you own the universe, there are no externalities.
Read, “Universal Ownership: The supertankers of global finance are shifting course,” by David Bank on ImpactAlpha:
#Dealflow: Follow the Money
Mented Cosmetics raises $1 million for vegan makeup for women of color. The investment makes Mented’s co-founders Amanda Johnson and KJ Miller the 15th and 16th black women in the U.S. to raise $1 million in venture capital. Johnson and Miller launched their vegan, non-toxic makeup line in March. “Women of color were used to being treated as an afterthought,” Miller says. “Our end goal is that women of color feel prioritized in the world of beauty.” Black women receive only 0.2% of venture funding and on average raise only $36,000 per startup, compared with $1.3 million on average raised by failed white male-run startups, Forbes reports. (A crop of venture funds aretrying to shift more money to women-focused startups as a growing number of VC funds add women as partners and decision makers.) Mented’s financing was led by iSeed Ventures, with Built By Girls Ventures, and Outbound Ventures.
Rhode Island Foundation earmarks 5% of endowment for impact investing. The Providence, R.I.-based community foundation is the latest to venture into impact investing to boost its strategic objectives — educational success, healthy lives and economic security for Rhode Islanders. Its first two investments include a $1 million bridge loan to Rhode Island Public Radio and a $300,000 purchase of preferred stock in the Urban Greens Food Co-op. The foundation has a total endowment of about $730 million. Its impact strategywill primarily focus on debt investments of $200,000 to $1 million with repayment terms of up to 10 years.
Oregon’s BVC Social Impact Fund seeds Green Theme International. The company has developed a water-free chemical process for adding finishes to textiles, such as anti-odor or antimicrobial coatings for athletic wear. The Bend Venture Competition in Bend, Ore. awarded Green Theme $110,000 as the winner of its social-impact category. Last year’s impact winners were OpConnect, a startup making electric-vehicle charging stations, and Hemex Health, which just raised $1.7 million for its rapid diagnostic tests for malaria and sickle cell anemia. Hemex Health. At this year’s conference, 10 companies secured $1.7 million in funding. Handful, a women-led startup, received $250,000 for its line of bras for breast cancer survivors.
#Signals: Ahead of the Curve
Can businesses profitably serve the poorest of the poor? A new study, “Reaching Deep in Low-income Markets,” suggests yes. The study dug into the experience of 20 enterprises delivering basic services such as power, sanitation, health care, housing and education to customers at the bottom of the economic pyramid (those living on less than $2.50 a day). Globally roughly 2.7 billion people, or 35% of the world’s population, live at or below that threshold. Researchers at Deloitte (backed by the Omidyar Network and the Rockefeller and MacArthur foundations) found that most of the companies were able to viably reach the BOP and that “some are able to reach surprisingly deep.” How? Successful companies used “asset light” business-model strategies with low up-front capital costs and low marginal costs (think mobile apps). They focused on products, such as food and water, with a ready demand. And they served customers across a broad range of incomes. Selling simultaneously to low-income markets, as well as low-middle and middle-income markets, the authors write, “may be critical to financial viability and growth.” About half of the 18 million customers of BIMA, the Leapfrog-backed mobile microinsurance firm, for example, live on $2.50 a day or less. About 70% of pay-as-you go solar firm M-KOPA’s 500,000 customers live on less than $2 a day. The caveat: Most of the companies in the study received some sort of subsidy, at least in the early stages. Subsidized capital was then replaced by more market-rate funding, say the authors, “suggesting subsidy does not preclude businesses from eventually becoming self-sustaining.”
A clean dozen cities aim to be fossil fuel-free by 2030. Cities produce 75 percent of global greenhouse-gas emissions. “The transition to a sustainable economy will be won or lost in our cities,” states the Carbon Disclosure Project. This week, 12 cities signed a Fossil-Fuel-Free Streets Declaration prepared by the C40 Climate Cities Leadership Group, pledging to achieve zero emissions by 2030. Get ready, residents of London, Paris, Los Angeles, Copenhagen, Barcelona, Quito, Vancouver, Mexico City, Milan, Seattle, Auckland, and Cape Town.
Some of the cities, including Los Angeles, Mexico City, and Paris, are among the top ozone-producing megacities in the world. Most of the fossil-fuel-free efforts will focus on transportation. Objectives include increasing rates of walking, biking and public transit use, reducing the number of polluting vehicles on the streets and adding more zero-emissions vehicles to city fleets. “The largest sources of air pollution are also the largest sources of carbon emissions — and in many cities, transportation is the biggest culprit,” says former New York Mayor Michael Bloomberg, president of C40’s board. There are more than a dirty dozen of cities that haven’t yet taken the pledge. Cities in China, India, and Saudi Arabia comprise 17 of the top 20 for worst air quality.
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