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Impact holding companies: Breaking the chains of the 10-year fund is harder than it looks. Do impact investors really want long-term ownership? A few years ago, the impact investment community homed in on a problem that needed fixing: to reach full potential, some investments could use a little patience. The traditional private equity fund—with its 10-year, closed-end structure—often doesn’t give fledgling portfolio companies time to generate sustained social or environmental results, or financial value. The alternative: impact holding companies, or “holdcos” that can hold on to well-operating companies.
The results to date: Some promising impact holding companies have had difficulty raising capital. Investors are concerned about liquidity – they want to know when they’re going to get their money back. Take Pescador Holdings, developed by Encourage Capital for investment in sustainable seafood and fisheries. Investor research found strong interest in the holding company structure, but Pescador has yet to reach a first close. It has an anchor investor in Ben and Lucy Walton’s Zoma Capital as well as commitments from other families and advisors, and has made investments in two companies. “It has been disappointing how few people actually have flexibility in terms of liquidity and taking a long-term approach to holding assets,” says Encourage Capital’s Jason Scott, “and surprising how many people we thought had that flexibility just don’t.”
Read, “Impact holding companies: Breaking the chains of the 10-year fund is harder than it looks,” by Carol J. Clouse, on ImpactAlpha.
Signals: Ahead of the Curve
Al Gore’s Generation Investment Management builds the investment case for sustainability. The $19 billion public and private equity investment firm co-founded by the former vice president isn’t just calling the ‘Sustainability Revolution.” It’s building the business case for sustainable investing, starting with its own returns. The Financial Times reports the firm’s global equities fund has produced annual returns of 13.5% (vs. 7.3% for the benchmark MSCI World index). The sustainability revolution “has the magnitude of the industrial revolution but the speed of the digital revolution,” Gore told the FT.
In the firm’s sustainability trends report – think Mary Meeker’s internet trends report for the sustainability disruption – Generation documents (with more than 100 charts and graphs) commercial progress in mobility, energy, the built environment, food systems and wellbeing. The London-based firm moved its New York office to San Francisco last year. Gore and Generation co-founder, David Blood, highlighted three themes in Wired UK:
- Better products, more sustainably… Electric vehicles, with 2 million now on the road, are getting cheaper and boosting ranges. Global wind capacity is growing at double-digit rates, as costs fall. Installed capacity of solar has grown at a 50% compound annual growth rate over the last eight years. Cost is no longer the major barrier to growth.
- Sustainable consumption… The proliferation of car and bike-sharing schemes means more efficient resource use and greater access to affordable transportation. “Alternative milks,” like pea and soya, make up 13% of the U.S. milk market. Material consumption is declining across many developed markets.
- New categories… Meat substitutes are growing faster than processed meats. Drones and ag-tech are boosting farm efficiencies. Health-monitoring is driving a growing market for wearables and other tech-enabled healthcare services.
Stakeholder Reports: Follow the Impact
Closing race- and gender-based wage gaps. Through shareholder advocacy, “we frequently address gaps between regulation and corporate practice,” Zevin Asset Management reports in its quarterly advocacy update. Zevin withdrew a shareholder resolution in March when Marriott International agreed to publish information on systems and policies it is using to tackle pay equity in hotel worker positions. The Trump administration recently overturned an Obama-era regulation requiring firms to report on race- and gender wage gaps.
Agents of Impact: Follow the Talent
Susan Chambers, a former Walmart executive, and Miriam Rivera, a managing director at Ulu Ventures, which invests in diverse early-stage entrepreneurs, have joined the board of the Kauffman Foundation… SOCAP is accepting proposals through June 15 for panels at its October conference.
Dealflow: Follow the Money
Pollinate Energy and Empower Generation merge to scale energy access. The deal offers a model for other hybrid or non-profit energy businesses focused on ultra-poor customers. Learn more.
Nutreco takes stake in IoT company Eruvaka to boost sustainable seafood. Eruvaka has developed sensors that help shrimp farmers manage their stock and ponds. Dive deeper.
Unitus Ventures back Indian chatbot learning startup. EdMobile’s Utter app uses chatbots to teach English and job-related skills to India’s growing population of blue-collar workers who use digital tools. Read more.
Nigeria’s Easyshop Easycook secures seed funds to boost food safety. Easyshop Easycook is seeking to make the food supply chain safer through online ordering and delivery to its customers. Get the details.
— May 2, 2018