Featured: Returns on Investment podcast
Climate signals blinking red, a test for global leadership at COP24 (podcast). Optimism may or may not be self-fulfilling; pessimism surely is. That’s why the pessimism that opened the “COP 24” global climate talks now underway in Katowice, Poland is so alarming. The Paris climate accord was reached only three short years ago (at COP 21). This was to be the time for countries to double-down on their goals, not to fail to meet them. Instead, carbon is up, and climate finance is not, or at least not enough. Will global leaders emerge? Will capital markets shift course? Can a popular mobilization take hold?
As the climate hangs in the balance, policy momentum, investor sentiment and most of all global leadership will be crucial to sustain the global energy transition. “What we want to see, and we’re already seeing it, is a split in the establishment,” ImpactAlpha’s David Bank says in the latest Returns on Investment podcast. Oil companies, utilities, banks – in every sector there are leaders and laggards. The question is: Will leaders be rewarded for their leadership, and the laggards punished? “It’s not clear the leaders will be rewarded,” says Imogen Rose-Smith, an investment fellow with the University of California. “We have to transition to a new form of economy and most of our ways of modeling are backward-looking.”
- Listen to the podcast. “Climate signals blinking red, a test for global leadership at COP24.” Refresh this post all week for updated signals from global climate talks in Poland.
- Kick it off. The U.S., Saudi Arabia, Russia and Kuwait objected to the COP “welcoming” the October U.N. report on the impact of a temperature rise of more than 1.5C. They want only to “take note”… Institutional investors managing $32 trillion in assets called out governments to drive the low-carbon transition. The “investor agenda” aims to accelerate investment, drive climate-risk and financial reporting, “put a price on carbon” and “phase out fossil fuel subsidies.”
- Weigh in on the case for optimism on ImpactAlpha’s subscriber-only Slack channel or on LinkedIn. Subscribe to Returns on Investment on iTunes, SoundCloud, Stitcher or wherever you get your podcasts.
Dealflow: Follow the Money
Incofin helps launch climate resilience insurance for Nicaragua’s farmers. The Belgian impact investor is backing Nicaraguan microfinance organizations Fundenuse and Micrédito in rolling out “event-based” insurance policies to 6,000 small farmers. Such policies make automatic payouts to policyholders when certain events happen—like rainfall falls below a certain level—rather than processing and paying individual claims. The intent for this policy is to protect farmers’ income against increasingly destructive weather events.
New Jersey’s Cross River raises $100 million to drive fintech mainstream. The community bank helps financial tech ventures behave more like banks without securing a banking license. Cross River offers access to loan structures and money transfers otherwise only available to Federal Deposit Insurance Corp.-licensed banks. The 10-year-old bank works with online-lending company Affirm and money-transfer company Transferwise, and recently partnered with MasterCard to launch cardless ATM services. Cross River $100 million raise was led by KKR, with Andreessen Horowitz, Battery Ventures and Ribbit Capital and others.
CUNA Mutual Group acquires digital small-business lender Mirador. There are more than 5,400 credit unions, or member-owned financial cooperatives, in the U.S., serving 110 million members—nearly half of the country’s economically active population. These credit unions and co-ops have issued $69 billion in business loans. Portland, Ore.-based Mirador’s loan-approval platform helps banks speed lending for small businesses. The company has been acquired by CUNA Mutual Group for an undisclosed sum to expand CUNA’s products and services to its credit union customers.
Impact Voices: Pass the Mic
Heads up, investors: It’s not all about you. A new ownership model is making room for employees, customers and other stakeholders alongside investors. Organically Grown Co., a 40-year old produce distributor in Eugene, Oregon is an example of this model for more equitably distributing power and financial gains among a company’s stakeholders. The company recently created a “perpetual purpose-driven trust” to preserve the firm’s mission to promote a sustainable and healthy food system and its own independence. The investor-backed permanent trust, the single shareholder of the company, is governed by the company’s stakeholders, including investors, workers, growers, customers and community allies, who will share in the economic upside of the firm. “Unlike both the shareholder primacy model and the employee ownership model, in this model no one is on the outside ,” writes Aner Ben-Ami of Candide Group, one of the investors in the trust, in a guest post on ImpactAlpha. “We are all equal stakeholders, and we all benefit together when the company does well.”
- The financing. The transaction was financed through debt from RSF Social Finance and preferred equity from the Candide Group, on behalf of The Libra Foundation and Purpose Capital. The preferred equity investors receive the first dividend, with excess profits distributed to the five stakeholder groups. Read, “Heads up, investors: It’s not all about you,” by Candide Group’s Aner Ben-Ami.
- The signal: Models for alternative financing and ownership are flourishing as a new wave business owners and investors seek to preserve mission and independence (see, “New trustbusters aren’t waiting for government to democratize the economy).
- Go deeper: Tune in to Transform Finance’s webinar on “The conversion of The Organically Grown Company” tomorrow Dec. 11 at 1pm ET.
Agents of Impact: Follow the Talent
Catherine Isabelle Cax is the new director of investments at Soros Economic Development Fund… Former OPIC president Elizabeth Littlefield is the new board chair of pay-as-you-go solar firm M-KOPA… New Forests is hiring a manager of investment analytics… Ashoka U is looking for a manager for its Exchange conference… Social Impact Investments Initiative in Israel requests proposals from Israeli enterprises focused on education, employment or community development.
