The Brief | March 7, 2018

Gender risk, precision watering, fighting fake news, labor lens investing

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Greetings, ImpactAlpha readers!

#Double Feature: Women Rising

Focusing your gender lens to reduce risk — and drive impact alpha. Shalaka Joshi is the South Asia “gender lead” of the International Finance Corp., the private-finance arm of the World Bank. So she can tick off the impact of the IFC’s Banking on Women initiative, which has mobilized more than $1.3 billion to help get 50 banks in 34 countries lending to women-owned small businesses. With a profitable new line of business, the banks are now lending on their own. Likewise, IFC technical support helped Ecom, the world’s third-largest coffee distributor, improve productivity by boosting the skills and status of women farmers. “It’s not about a nice-to-have, a do-this-to-make-yourself feel good,” Joshi said in a video interview with ImpactAlpha’s David Bank. “There’s a crucial business case for why you should embed gender into enterprises at all kinds of scale, in all kinds of ways.”

Such examples bear out not only the opportunities for women’s leadership (laid out in yesterday’s Brief) but also the risks of gender inequity. Only a small percentage of gender-lens investors have been convinced by the evidence of higher returns for businesses that are led by women,” writes Dalberg’s Rachna Saxena, in a guest post on ImpactAlpha. “Now, as more traditional private investors potentially become interested in gender-lens investing as part of their risk mitigation approach, there could be a large pool of funding available for gender-lens investment.” Saxena, who helps lead Dalberg’s Investing for Development and innovative finance design, shares some steps to turn gender-lens investing strategies into a reality.

Watch Shalaka Joshi in dialogue with David Bank on the sidelines of last fall’s SOCAP conference in San Francisco.

Shalaka Joshi: The case for embedding gender in business decisions (video)

Read, “From mandates to metrics: Making a gender lens investment strategy real,” by Dalberg’s Rachna Saxena, on ImpactAlpha.

From mandates to metrics: Making a gender lens investment strategy real

#Dealflow: Follow the Money

Precision irrigation startup Saturas raises $4 million from global investors. An Israeli farming collective, a Spanish winery and a Chinese fertilizer additives company were the investors in Israeli irrigation control company Saturas’s latest round. Saturas makes sensors for trees and crops that report when watering is needed, reducing unnecessary irrigation. The product, in development since 2013, is expected to launch this year. Renzong Wang of the Chinese fertilizer company Hubei Forbon Technology said the sensors would boost crop yields and help China save water in agriculture, giving it economic, environmental and social impact. As water scarcity puts pressure on agriculture and other sectors’ water consumption, the market for irrigation controllers is expected to reach $1.2 billion by 2022, more than doubling from 2017.

NewsGuard launches with $6 million in backing to fight fake news. Steven Brill, founder of The American Lawyer and Court TV, and Gordon Crovitz, former Wall Street Journal publisher, are launching a platform to review and rate 7,500 websites featuring news and articles in the US. “We will tell readers the Denver Post is a real newspaper and that the Denver Guardian exists only as a purveyor of fake news,” Crovitz says. NewsGuard’s launch is backed by 18 investors, including Publicis Groupe, the Knight Foundation and Blue Haven Initiative. NewsGuard plans to hire seasoned journalists to rate each site and write up a “nutrition label” that will describe its history, subject matter, ownership, financing, editorial leadership and other factors. The novel solution: “Using human beings who will operate under a transparent, accountable process to apply basic common sense to a growing scourge that clearly cannot be solved by algorithms,” says Brill. NewsGuard does not intend to flag political leanings or rate sources against one another.

JPMorgan fourth Financial Solutions Lab focuses on women and minority entrepreneurs. The Financial Solutions Lab — known as FinLab — is a $3 million annual competition for startups building tools to promote financial health and inclusion in the US. A majority of American adults have difficulty managing their finances. Of the 1,000 fintech companies JPMorgan has reviewed since launching the FinLab Challenge, lack of diversity among startup founders and leadership persists. “Diversity among leaders and teams also leads to more inclusive products and services with the potential to scale to millions of customers,” reads a FinLab Challenge statement. (JPMorgan is tackling this issue in communities too, through its Entrepreneurs of Color funds.) Applications are open until April 11th. Winners will be announced in Los Angeles in June.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to [email protected].

#Featured Event: Community Development Venture Capital Alliance conference

Risk-capital impact investing in American communities. Did somebody say “New Revivalist”? Check out the agenda for the annual conference of the Community Development Venture Capital Alliance, a network of community development venture funds: Diverse Ownership: Investing in minority- and women-owned businesses. The Opportunity Zones Program: Unlocking new sources of capital for distressed communities. Moving beyond Job Creation: A conversation on quality jobs & workforce development. Join CDVCA Mar. 22–23 in Washington, DC. Register here (and use code “IMPACTALPHA” for a $100 discount).

#Signals: Ahead of the Curve

“Labor-lens” investors are disrupting exploitive supply chains. Working to end forced labor and poor conditions in global supply chains in not new. What’s new are the growing number of “labor-lens” investors betting on strategies for ending exploitative working practices. Disturbing the $51 billion in profits reaped from goods made with forced labor, including about 25 million people in modern slavery conditions and 125 million youth through forced child labor, is an opportunity ripe for impact investment, according to “Labor Lens Investing,” an analysis of investment models that directly address labor exploitation and forced labor. Just as organic food booms with awareness of food risks, “social investment strategies are growing as investment risks from harmful labor practices become clear,” says Michele Demers of Boundless Impact, the research firm that put out the report.

For investors and global corporations, global supply chains marred by persistently poor and forced labor conditions present real and reputational risks. In January, Humanity United, the Omidyar Group anti-slavery organization (which sponsored the report along with the Freedom Fund), raised $23 million to invest in solutions to corporate demand for greater transparency in their supply chains. The fund has backed Provenance, a blockchain-based startup for product traceability and Ulula, a software firm that allows for worker engagement in their supply chains. Other early models of labor-lens investing include:

  • Stardust Equity, an impact fund launched by a family office in Houston, which worked with Seattle-based Parametric to build a Labor Lens portfolio of public companies that has attracted $635 million from more than 150 investors.
  • The IFC’s Global Trade Supplier Finance working-capital loan product, which provides cheaper capital to borrowers able to demonstrate compliance with international labor standards.
  • Trading platform Motif Investing, which developed a Fair Labor screen that allows individual investors to invest in publicly traded companiesthat promote fair wages, safe working conditions, and job security

Thank you for reading. Onward! Please send news and comments to [email protected]