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Featured: Impact Voices

Impact drives alpha, and other lessons from ‘100% impact’ donor-advised funds. In the same way that some big foundations are beginning to use their endowments to advance their missions, some holders of tax-advantaged “donor-advised funds” are directing their principal toward impact investments. Over more than a decade, San Francisco-based RSF Social Finance has moved its roughly $70 million in DAF assets into impact investments. The portfolio includes funds managed by Elevar Equity, Root Capital, Self-Help Federal Credit Union and Al Gore’s Generation Investment Management. In a guest post on ImpactAlpha, RSF’s Shu Dar Yao shares the lessons of its “100% impact” fund. Among them: “Impact can drive alpha,” says Yao. “Investment funds in our portfolio with top-quartile impact strategies and robust governance to back them up had stronger impact outcomes; they usually also landed in the top quartile of investment returns.”

Donor-advised funds at almost 1,000 community foundations, public charities and financial services giants like Fidelity, Schwab and Vanguard now hold more than $121 billion in assets. DAF providers are increasingly offering impact investment options. San Francisco-based ImpactAssets’ Giving Fund doubled its DAF assets to more than $1 billion last year (boosted by returns on an early investment in Beyond Meat). Capshift, which acquired impact investing platform ImpactUS in 2018, offers providers such as Fidelity and National Philanthropic Trust a menu of impact investment opportunities. Community foundations, with their place-based focus, stand to become a growing source of DAF-based impact investments. Not every impact investment is a win-win, of course. “How can we account for the complications of assessing meaningful impact at scale?” Yao asks. More fundamentally: “Will we continue to see impact driving alpha in long-term investments when we have a bigger data set?”

Keep reading, “Impact drives alpha, and other lessons from ‘100% impact’ donor-advised funds,” by RSF’s Shu Dar Yao on ImpactAlpha.

Dealflow: Follow the Money

Jeff Bezos pledges $10 billion to fight climate change. Amazon’s founder will make grants to scientists, activists, nongovernmental organizations and “any effort that offers a real possibility to help preserve and protect the natural world.” His pledge follows a letter from Bill and Melinda Gates that their foundation is putting climate change at the top of the agenda (see, “Gates Foundation to focus on climate change and gender equality”).

Inclusiv makes first credit union investment from Southern Equity Fund. Nonprofit Inclusiv made a $5 million loan to Roanoke, Va.-based Freedom First Federal Credit Union. The investment is Inclusiv’s first from its $45 million Southern Equity Fund to capitalize credit unions in underserved parts of the southeastern U.S., particularly those serving communities of color. The fund, launched last September with backing from Kresge Foundation, closed in January. Investors include Bank of America, MetLife, National Cooperative Bank and Prudential Financial.

India’s Clover raises $5.5 million for greenhouse-grown produce. Resource-efficient and climate-resilient greenhouses are scoring big-ticket investments in the U.S. and Europe. Bangalore-based Clover takes a small farmer-centric approach to indoor farming, working with farmers already using greenhouses to help them streamline their operations and build stronger channels to market. The company secured Series A funding from impact agtech firm Omnivore, Accel and Mayfield.

Calvert Impact Capital and Urban Advisors clinch $19.5 million to back entrepreneurs of color. Calvert and Urban Advisors launched the UP Community Fund in 2018 to provide financial and technical assistance to under-represented entrepreneurs in the U.S. Southeast. The fund has raised $19.5 million and invested $7 million in 14 entrepreneurs, including six women.

New York pension shifts $800 million into responsible fixed-income funds. The New York State Common Retirement Fund, the third-largest pension fund in the U.S. with more than $200 billion in assets, invested in Avenue Capital’s private-credit Sustainable Solutions Fund; Nuveen Core Impact Bond Strategy; and the green-bond and affordable housing-focused Calvert Social Investment Fund, Bloomberg reports. The fixed-income investments are part of the climate-aware pension’s plan to shift $20 billion to sustainable and impact investments. New fixed-income and cash-based options are helping investors put more of their portfolios to work for social impact.

Signals: Ahead of the Curve

Off-grid energy improves lives, but not always for the most vulnerable customers. The impact measurement firm 60 Decibels interviewed 35,000 off-grid energy customers of 49 companies in 17 countries to determine why off-grid matters. The report paints a comprehensive picture of the on-the-ground impact of solar lanterns, solar home systems, mini-grids, solar-powered appliances and clean cookstoves in developing markets. Globally, 860 million people lack access to electricity and 2.6 billion to clean cooking facilities. Eighty-eight percent of customers interviewed said that energy access improved the quality of their lives; about the same number feel safer in their homes. Access to modern lighting reduces the use of dirty kerosene and boosts the amount of time that children study by nearly 20 minutes each day. Simple, low-cost solar lanterns are often a family’s first off-grid energy product and offer “the most bang-for-your-buck,” write the authors. Clean cookstoves do the best at reaching women, yet lag in penetrating low-income households. The report, sponsored by CDC Group, Acumen, Efficiency for Access Coalition, and Shell New Energies, was launched at the Global Off-Grid Solar Forum & Expo in Nairobi this week.

• Upmarket moves. As off-grid energy providers grow, they appear to focus less on the poor. Among those surveyed, 37% live on less than $3.20 a day, compared to 60% for the population as a whole in these markets. “Responsible investors, and governments looking to utilize subsidy, should be attentive to this trend,” write the authors. Mini-grids effectively provide energy to low-income communities but are held back by high capital costs and slow roll-outs. Blended or patient capital, as well as subsidies, could speed adoption.
• Powering livelihoods. Only about one-fifth of customers use their new energy to generate income by, for example, powering bars, restaurants, shops and kiosks. Two-thirds of farmers using solar water pumps increased their yields; 10% increased their income.
• Financial burdens. More than two-thirds of pay-as-you-go energy customers are accessing credit for the first time. A third of families report that energy payments are a burden. Among solar refrigerator customers, 65% took out another loan to make payments on the fridge (see, “Investors called to account for fintech lending practices as debt-traps emerge”). A third of customers also report challenges using their product, suggesting improvements in product quality and support are needed.
• Impact first. In a guest post on ImpactAlpha, Ceniarth’s Greg Neichin and Harry Davies detail the family office’s investments in CrossBoundary Energy Access, SunFunder, Angaza and Jaza, as well as in agricultural enterprises like One Acre Fund and myAgro that help farmers gain access to clean energy. “Our investments in the off-grid sector have been specifically targeted at models that address some of the gaps highlighted by this Lean Data work: enterprises targeting lower-income population segments, those supporting leaner, more sustainable local distributors, and those seeking to stimulate income generating activities,” they write. Read, “Listen to customers, not hypesters, about the impact of energy access,” by Greg Neichin and Harry Davies on ImpactAlpha.
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Agents of Impact: Follow the Talent

Jyotika Virmani, ex- of XPRIZE, was named executive director at the Schmidt Ocean Institute… Shuen Chan, who previously co-founded Sustineri, joins Legal & General as head of ESG of its real assets business… Michelle Dunstan was appointed global head of responsible investing and Sharon Fay assumes the role of chief responsibility officer at AllianceBernstein.

S2G Ventures seeks a managing director to lead its oceans and seafood venture investment team in San Francisco or Chicago… Sonen Capital is hiring a head of business development and an investment analyst in San Francisco… Veris Wealth Partners is recruiting a wealth manager in San Francisco… Iroquois Valley Farmland REIT seeks an investment coordinator in Evanston, Ill… Encore Renewable Energy is hiring a project developer/manager in Burlington, Vt.

CNote’s Catherine Berman, Lohas Advisors’ Rick Davis and LIIF’s Tyler Jackson are joining “Cash for Impact,” a Confluence Philanthropy webinar this Wednesday, Feb. 19 (see, “Investors find new options to put deposits to work for community development”)… The Global Impact Investing Network seeks contributions to its upcoming annual survey (the tenth edition). To participate, email [email protected] before Feb. 28.

Thank you for reading. 

–Feb. 18, 2020

Photo credit: 60 Decibels