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Aaron Yeo

Jan 23
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January 23, 2023 – Newsletter – What is a Green Bond?

By Green Investing, Purpose of Finance No Comments

January 23, 2023: What is a Green Bond?

In this edition of Purposeful Finance:

  • Internships in Impact
  • Topic Breakdown: Inflation Reduction Act, AKA The Climate Bill
  • World: Tour De Headlines
  • Market Updates: Deal Flow

Internships in Impact

Investment Banking

Interested in Sustainability and Renewable Energy? Have you ever heard of Clean Energy and Renewables Investment Banking? 

The Purposeful Finance team has collated different industry groups within Investment Banking where you can make a positive impact in your work. Click here to get the full list of resources! (We will be adding more soon and will release an article on this soon, do share it with friends that are recruiting!)

 

Join Our Network!

Here’s the quick spiel: We are currently reaching out to smaller impact funds that offer internship opportunities for freshmen/sophomores. While many firms are interested, we also need to show firms that there is interest from genuinely purpose-driven students that will apply. 

If you are a freshman/sophomore and you like the positions you see below, fill out this form to get direct access to passionate impact investors and companies: https://forms.gle/TEexYGphRYNeLXcz8

 

Open Positions 

 

Topic Breakdown: Sustainable Finance  

What is Sustainable Finance to begin with?

  • Sustainable finance is defined by the EU Directorate-General for Financial Stability, Financial Services and Capital Markets Union and Rebecca Bakken at the Harvard Extension School as investment decisions that take into account the environmental, social, and governance (ESG) factors of an economic activity or project, not just financial return. 
  • A common misconception is that sustainable finance is only targeted at climate related projects.  In fact, it’s a much broader term that focuses on building sustainable businesses and a sustainable economy, which covers social and governance factors as well.
  • This week, we will be focusing on different financial instruments tied to ESG goals, such as green bonds, social bonds, sustainable debt and ESG investing. 

 

Wow, that sounds like what finance should be! When did this actually become a thing? 

 

So what exactly are the applications of sustainable finance? Are there ESG Assets or ESG Investments? 

  • Yes, as Sustainable Finance is very broad in scope, it covers everything from Sustainable Debt, ESG ETFs, green bonds, sustainability-linked bonds, social bonds, blue bonds etc. 
  • ESG financial tools are broadly split into two categories, activity-based products and behavior-based products. Green bonds, sustainability bonds and social bonds are all activity-based instruments while Sustainability-Linked Bonds (SLBs) are behavior-based.

 

First up: activity-based or “Use of Proceed” products 

  •  These are products where the money raised is ring-fenced for a certain purpose or project, such as a renewable energy plant or affordable housing project. (Peep this: JP Morgan’s $1 billion social bond to support U.S. housing)

 

Next, behavior-based products:

  • Behavior-based products are different in that the money raised can be used by the company in any way, like setting up a factory. But the bond sets certain targets for the company that the company has to abide by, for instance, to lower emissions by 20% by 2025, hence it is behavior-based.
  • Sustainability-linked Bonds – such as key performance indicator (KPI)-linked or SDG-linked Bonds – are structurally linked to the issuer’s achievement of climate or broader SDG goals, such as through a covenant linking the coupon of a bond. 
  • Progress, or lack thereof, toward the SDGs or selected KPIs will cause a decrease or increase in the instrument’s coupon. 

 

OK, so what’s the difference between sustainable finance, socially responsible investing, and impact investing? 

  • In truth, there is a lot of gray area between these definitions and many different institutions or people can define them differently.
  • S&P Global and Investopedia explain socially responsible investing as a style of investing that excludes certain companies based on a specific ethical criteria, such as avoiding arms manufacturing companies or companies selling tobacco. Socially responsible ETFs like iShares ESG Aware MSCI USA ETF ESGU reflect this as well.
  • From articles by Investopedia and GIIN, which produces one of the most commonly used Impact Investing frameworks, impact investing has a stronger emphasis on positive impact results than with impact investing and socially responsible investing. Impact investing is a much broader term to cover not just sustainability-focused investment, but those in social impact as well.

 

What is the state of sustainable finance now?

  • ESG assets are projected to reach $53 trillion by 2025, a third of global AUM.
  • Europe accounts for half of global ESG assets and dominated the market until 2018. The U.S., however, is taking the lead with more than 40% growth in the past two years and is expected to exceed $20 trillion in 2022, even if its pace of growth halves this year.

 

 

World: Tour De Headlines

  • The PNC Financial Services Group, Inc. announced the expansion of its environmental finance commitment to $30 billion. The bank initially announced in August 2021 a commitment of $20 billion over five years in support of environmental finance. Since then, PNC has completed $9 billion in environmental financing for its customers. (ESGNews)
  • ADNOC Allocates $15 Billion to Low-Carbon Solutions. The announcement follows the guidance by ADNOC’s Board of Directors in November 2022 to accelerate the delivery of its low-carbon growth strategy and the approval of its Net Zero by 2050 ambition. This builds on ADNOC’s strong track record as a leading lower-carbon intensity energy producer, which includes its use of zero-carbon grid power, a commitment to zero flaring as part of routine operations, and deployment of the region’s first carbon capture project at scale. (ESGNews)
  • SK Hynix Issues Industry’s First Sustainability-Linked Bond at $1 Billion. SK Hynix Inc. announced that it successfully issued a Sustainability-Linked Bond (SLB) with a total amount of USD 1 billion. (ESGNews)
  • World Bank Prices the First Canadian Dollar Sustainable Development Bond of 2023 and Highlights the Importance of Biodiversity and Nature for Development. (ESGNews)


United States of America

  • The Department of Labor (DOL) announced the adoption of a final rule clarifying that 401(k) plan sponsors can consider climate and other ESG factors in investment decisions. This rule removes restrictions imposed during the previous administration that made it difficult for 401(k) and other retirement plan sponsors to include climate-aligned and other ESG funds in the list of options available to participants.
  • Oregon followed the lead of California & Washington, setting to phase out new gas car sales by 2035. This means the entire West Coast aims to ban gas car sales in a little over a decade. (Autoweek)
  • In a positive reversal of prior policy, the US Postal Service commits ~$10b to deploy over 66,000 electric vehicles by 2028. (CM)


Europe

  • Norway’s Blastr Green Steel is planning to build a low-carbon steel factory in Finland worth $4.3 billion, one of the country’s largest industrial projects yet. The factory is set to produce 2.5m tons of green steel annually starting 2026, and will include integrated hydrogen production. (Bloomberg)
  • Norway’s $1.3 trillion Government Pension Fund Global established a new climate board. The board will advise on managing climate-related financial risks and opportunities. (P&I)
  • Despite the ongoing energy crisis and countries’ turn back to coal, E.U. emissions fell again last year, dropping to a 30 year low. (Forbes)

 

Asia

  • Reserve Bank of India Launches First-Ever Sovereign Green Bonds Auction Worth $1.93 Billion. As announced in the Union Budget 2022-23, the Government of India, as part of its overall market borrowings, will be issuing Sovereign Green Bonds (SGrBs), for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy. (ESGNews)
  • Islamic Development Bank Group (IsDB) President and Group Chairman, H.E. Dr. Muhammad Al Jasser, announced a US $4.2 billion IsDB Group commitment to support Pakistan’s climate resilience efforts and development agenda and the country’s vision for 2025 over the next three years. He made the announcement at the International Conference on Climate Resilient Pakistan in Geneva, addressing the devastating effects of Pakistan’s recent floods. (ESGNews)

 

Market Updates: Deal Flow

 

M&A/Investments

  • Stellantis will invest $150M in Archer Aviation (based out of San Jose, CA) and partner with them on an electric air taxi design. (here)
  • Finance in Motion, a German asset manager focused on ESG investing, is exploring a sale. (BBG)

 

Funds Raised

  • General Atlantic closed $3.5B for its inaugural climate solutions fund, BeyondZetZero. (GA)
  • Linse Capital raised $700m to back industrial technology companies across transportation, energy, logistics, and real estate. (BW)
  • Goldman Sachs Asset Management raised $1.6B for its Horizon Environment & Climate Solutions I fund registered under EU’s strictest ESG rules. (BBG)
  • Andros Capital Partners, an energy-focused investment firm, raised a $750M second fund. (BW)
  • Silicon Ranch, based out of Nashville, TN, raised $375M in equity funding to develop and operate renewable energy and battery storage systems. Existing investors Manulife Investment Management, TD Asset Management, and Mountain Group Partners led. (BW) 
  • Cirba Solutions, a Wixom, MI-based battery recycling management company, raised $245m in Growth funding from EQT. (GNW)
  •  Vision Blue Resources, based out of the U.K., raised a $61M fund to invest in battery and other material innovation and supply chain companies. 
  • Virunga Power, based out of Nairobi, Kenya, raised $50M from Gridworks to develop run-of-river hydropower projects in Burundi, Malawi, Zambia, and Kenya. (here) 

 

Sustainability 

  • Mercedes Benz plans to build a branded EV charging network in the U.S. (NYTimes)
  • Hedonova, a U.S.-based alternative asset investment manager, invested $16M in a Chilean liquid-air energy storage plant. (PRNewswire)

 

Healthcare VC

  • HighTide, a clinical-stage biopharmaceutical company focused on metabolic and digestive diseases, raised a $107M Series C/C+ led by the TCM Healthcare Fund of Guangdong. (PRN)
  • Ensoma, a genomic medicines company developing one-time treatments for complex diseases, raised $85M in funding led by Arix Bioscience and 5AM Ventures. (BW)
  • Cardiac Dimensions, a developer of minimally invasive treatments for heart failure and related cardiovascular conditions, raised a $35M Series D led by Horizon 3 Healthcare and an undisclosed strategic investor. (BW)

 

Affordable Housing

  • Ares Management Corp raised ~$5B for an infrastructure debt fund. (RT)
  • UK-based investment manager M&G raised $622M for its new M&G European Living Property fund to invest in student, private rented sector and retirement housing. (IW)
  • Brick&Bolt, a Bengaluru, India-based home construction company, raised $10 million in funding co-led by Accel and Celesta Capital.

 

Catalytic Capital

  • Biden-Harris Announce $40 Million for Tribes and Intertribal Consortia To Improve Recycling Infrastructure (ESGNews)
Dec 22
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December 22, 2022 – Newsletter – ESG Alphabet Soup

By Green Investing, Purpose of Finance, Recruiting Help, Uncategorized No Comments

December 22, 2022: The ESG Alphabet Soup &  Impact Investing

In this edition of Purposeful Finance:

  • Summer Internships: Impact Investing, ESG, and Sustainable Finance 
  • Topic Breakdown: Impact Investing
  • World: Tour De Headlines
  • Market Updates: Deal Flow

Internships

GenZero is looking for an Intern – Strategy and Development

Ares Management Corp. is hiring an ESG associate and an ESG analyst in New York

PepsiCo is looking for a 2023 Summer Intern: Global Sustainability Intern

Con Edison Clean Energy Businesses is looking for a Corporate Finance Intern

Guidehouse is looking for an Intern – Energy, Sustainability, & Infrastructure Solutions – Mobility Solutions and an Intern – Commercial Sustainability – Guidehouse Resilience, ESG and Disaster Recovery

AIG is looking for a 2023 – Early Career – Strategy & ESG – Summer Intern 

ORIX Growth Capital is looking for an Investment Analyst Intern

FLIT Invest is looking for a Undergraduate Campus Ambassador

BlueMark is looking for a Business Development Analyst, Impact Investing and Verification

Atento Capital is looking for a 2023 Summer Intern

Kiva is looking for a Climate Smart Finance Intern and an Impact Intern

Opportunity Finance Network is looking for an Impacting Investing Intern

CIBC (Canadian Imperial Bank of Commerce) is looking for a 2023 Summer Intern – ESG Investment

UNICEF is looking for a Finance Intern for their Education Cannot Wait (ECW) Fund

 

Topic Breakdown: The ESG Alphabet Soup

You might have heard the term ESG getting thrown around lately and controversial things about it. Today, we will be explaining what ESG stands for, how to measure it, measurement standards, and some recent news about it. 

What is ESG to begin with? 

    1. ESG, an acronym for Environmental, Social, and Governance, is a framework that offers a holistic measurement of the impact a corporation generates beyond its materialistic goals to maximize profit.
    2. Environment measures a company’s interaction with the natural world through resource and energy consumption and waste discharge. Social measures a company’s relationships with people and institutions, particularly with employees. Governance measures a company’s internal system of practices, policies, and leadership.

When did ESG get “popular”?

    1. ESG has been in the know for the past decade and entered the mainstream around 2019, largely due to the push from retail and major institutional investors for companies to commit to ESG criteria. 
    2. It also got ‘popular’ as governments have been mandating companies incorporate ESG reporting through policy. The EU will be passing the Corporate Sustainability Reporting Directive in 2023, with the US, Canada and China following suit. Many countries like the UK, Singapore, Indonesia have already passed similar legislation to require large or publicly listed companies to report their climate-related financial disclosure. This global legislative push to normalize ESG will be the next step to transition us towards a more sustainable economy.

What is the difference between ESG Reporting and ESG Ratings? 

    1. ESG Reporting refers to individual companies that use standards from regulating bodies (GRI) to assess their compliance, often to report to investors or for disclosure mandated by government authorities.
    2. ESG Rating, on the other hand, is a metric given to companies based on the evaluation of their performance by independent third-parties. These rating platforms include the Institutional Shareholder Service (ISS), Carbon Disclosure Project (CDP) and Morgan Stanley Capital International (MSCI).

What regulating bodies are there? 

    1. United Nations Global Compact, Global Reporting Initiative (GRI) Standards and Sustainability Accounting Standards Board (SASB) Standards are the most common frameworks used to measure ESG within a company. 
    2. However, it is crucial to note that there is no one standard with ESG as it is difficult to have a single standardized framework to measure all 3 components across multiple different sectors and geographies. 

What is the whole controversy about ESG? 

    1. ESG has been faced with a multitude of challenges. Key amongst them is the issue of “greenwashing”, where companies present false or misleading information to market themselves under the name of ESG to boost business performance. 
    2.  The other main issue, particularly in the US, is that ESG has been facing political backlash from states like Florida and Texas, which have banned ESG Investing practices and want state funds to focus solely on pecuniary factors that maximize returns on investment. 
    3. Beyond that, there are the longstanding issues of data inconsistency, where inconsistency in ESG scores from ratings firms is ‘a stumbling block’ when incorporating research data into the investment decisions.

Where can I learn more? 

    1. This page breaks down ESG really well and this Forbes article talks about the history of ESG and where different organizations fit into the larger scope of history. 

Professional Spotlight

In this week’s spotlight, we have Joellen Nicholson, Vice President and Global Director of University Impact (UI). 

Why  Impact Investing?

Before entering impact investing, Joellen joined Nest, an NGO, as the program director where she supported over 100 global MSMEs (micro, small, and medium entrepreneurs) with business growth strategies and local compliance matters. 

“Most of the artisans that we helped were women who hired women employees nearby.  These entrepreneurs typically wouldn’t be qualified for loans from local financial institutions since their revenues were small and owners usually lacked credit histories. Although these small businesses could not grow like tech businesses, they were creating great livelihoods for themselves and their women employees. Such financing inequality made me think about the importance of working with underserved, small, non-traditional business owners and what that means in the context of management, and the impact that I could contribute to the social financing area. At that moment, I knew that the impact investing space was the space for me.”

Learn more about Joellen’s journey into Impact and how she sees nonprofits and the impact investing world intersect.

World: Tour De Headlines

  • Barclays updates Sustainable Financing Target to $1 Trillion by 2030. Following the announcement in February to capture opportunities from the transition to a low-carbon economy, Barclays has been investing its own capital and facilitating sustainable finance at pace, continuing to deliver against its climate strategy as endorsed by shareholders this year. (ESGNews)
  • The European Investment Bank (EIB), the bank of the European Union, will lend €790 million to the Czech energy utility company ČEZ. The loan will fund the expansion of the national electricity distribution network, including the installation of automation technology and remotely controlled energy supply systems. (ESGNews)
  • ExxonMobil announced its corporate plan for the next five years, with a sizable increase in investments aimed at emission reductions and accretive lower-emission initiatives, including its Low Carbon Solutions business. Their corporate plan includes growing lower-emissions investments to approximately $17 billion by 2027. (ESGNews)
  • Deloitte Report: 99% of Public Companies Expect to Invest in ESG Reporting and Tech by Next Year. (ESGNews)
  • UN Report: ‘Just Transition’ Policies Needed to Create 20 Million Green Jobs. New jobs and skills will be needed as we begin to see the shift we will see towards a net-zero economy. (ESGNews)


United States of America

  • The Biden administration wants to make more than $2B available to Puerto Rico to expand rooftop solar and distributed energy assets. (CM)
  • The Biden administration announced 5 winners for the California offshore wind auction, amounting to $757m in winning bids that will potentially power over 1.5m homes. Copenhagen Infrastructure Partners plans to build its first floating offshore wind farm with one of these permits. (DOI) (GNW)


Europe

  • France will ban short haul domestic flights less than 2.5 hours long, a measure which will be reassessed by the EU Commission in three years. The ban comes off the back of a pause started in 2020 when the French government granted Air France COVID relief in exchange for canceling some domestic flight routes to encourage train 2usage. (Forbes, FT)
  • Switzerland-based mining giant Glencore will close 12 of its 36 coal mines over the next 12 years to meet its emissions targets by 2035. The move comes as major miners including Rio Tinto and BHP pull away from carbon-emitting fossil fuels in favor of minerals necessary in the low-carbon energy transition, such as nickel, copper, lithium and cobalt. (FT)

 

Market Updates: Deal Flow

Launches

  • Another week, another major battery factory announcement. American Battery Factory announces a $1.2B investment to make lithium iron phosphate (LFP) batteries in what will be America’s first gigafactory in Tucson, Arizona. LFP batteries are gaining market share to reduce EVs’ need for cobalt (TR)

 

Funds Raised

  • PE firm Thoma Bravo raised $32.4B for three new tech-focused funds: $24.3B for Thoma Bravo Fund XV, $6.2B for Thoma Bravo Discover Fund IV, and $1.8B for Thoma Bravo Explore Fund II; their Fund XV is the largest tech-focused buyout fund ever raised (PRN)
  • Swedish autonomous and electric truck startup Einride raised a $500M Series C which consisted of $200M in equity led by Northzone, EQT Ventures, Temasek, and others, plus $300M in debt led by Barclays Europe (TwC)
  • HSBC-Backed Natural Capital Funds Raise $650 Million (ESGNews)
  • Chicago-based credit fintech startup Avant raised $250M in preferred equity & debt from Ares (BW)
  • Union Square Ventures, based out of New York, raised $200M for its second climate tech fund (The Information) 
  • Jenson Funding Partners, based out of London, raised €69.7M for its Aurora I Fund to invest in companies in the energy transition and sustainability (EUS)

 

Sustainability 

  • Microsoft, Nike, Common Energy Partner To Energize Community Solar in Oregon (ESGNews)
  • European climate tech VC World Fund received a $52.5M investment from EU’s European Investment Fund to invest in climate-related ventures (EUS)

 

Healthcare VC

  • Apogee Therapeutics, a biotech company developing therapies for immunological and inflammatory disorders, raised a $169M Series B led by Deep Track Capital and RTW Investments (PRN)
  • CardioSense, a digital health startup focused on cardiovascular disease, raised a $15.1M Series A led by Broadview Ventures and Hatteras Venture Partners (PRN)

 

Affordable Housing

  • Greystone Affiliate Provides $153.6 Million for Large California Development (AHF)
  • JPMorgan Chase Community Development Banking has hired Rochelle Dotzenrod as division manager. Read more about her role here. 

 

Development Finance

  • IMF has approved a $319 million loan for Rwanda to finance projects tackling climate change (Bloomberg)
  • UNFPA is appealing for $1.2 billion to support 66 million women, girls, and young people in 65 crisis-affected countries (UN News)

 

Catalytic Capital

  • U.K.’s British International Investment and Nairobi-based African Guarantee Fund established a $75 million partnership to guarantee loans from lenders to small businesses in Africa, especially women-led firms addressing climate impacts (ImpactAlpha)
Dec 08
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December 8, 2022 – Newsletter – What is COP27?

By Future of Finance, Green Investing No Comments

In this edition of the Purposeful Finance Newsletter:

  • Summer Internships: Impact Investing, ESG, and Sustainable Finance 
  • Topic Breakdown: COP27
  • World: Tour De Headlines
  • Market Updates: Deal Flow

Internships

Atento Capital is looking for a 2023 Summer Intern

Kiva is looking for a Climate Smart Finance Intern and an Impact Intern

Opportunity Finance Network is looking for an Impacting Investing Intern

CIBC (Canadian Imperial Bank of Commerce) is looking for a 2023 Summer Intern – ESG Investment

Thomson Reuters is looking for an ESG/Sustainability Intern for their global Social Impact Institute Team

Greystar Real Estate Partners is looking for a Sustainability Intern

UNICEF is looking for a Finance Intern for their Education Cannot Wait (ECW) Fund

 

Topic Breakdown: COP27

 

What is COP27? Is it the same as the UN Climate Change Convention or Conference?

  • Yes, they are all the same. COP27 stands for the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC). The Conference is an annual meeting where countries negotiate global goals for tackling climate change and present their individual countries’ plans and progress for contributing to those goals.
  • COP essentially refers to the supreme decision-making body of the Convention (think the Board of a company). COP is represented by all States that are Parties to the Convention, and the COP can adopt legal instruments to implement the climate goals set.

I’ve heard of the Paris Climate Agreement and Kyoto Protocol, are they related? 

  • The landmark Paris Climate Agreement was actually adopted in COP21. It was the first legally binding global treaty on climate change, committing 196 parties to keep global warming under 1.5 degrees Celsius above pre-industrial levels.
  • The other famous Kyoto Protocol was adopted in COP3; it operationalized the UNFCCC by committing industrialized countries to limit greenhouse gas (GHG) emissions in accordance with agreed individual targets.

So what is this year’s theme? 

  • Follow through! Last year’s meeting (named COP26, in case you couldn’t guess) produced the Glasgow Pact and some ambitious new goals. Now countries will plan out how to accomplish the goals. The major questions are who will pay and how will they pay for climate actions, which is is where finance comes in.

So who will pay? And what is ‘Loss and Damage’ or ‘Climate Reparations’?

  • Climate-driven disasters are disproportionately harming low- and middle-income countries that have contributed far fewer of the greenhouse gas emissions that cause climate change. 
  • The UN has proposed that wealthier countries should pay “loss and damage” funds to compensate developing countries. Developed countries promised at COP21 to provide developing countries with $100 billion (€90 billion) a year for climate mitigation and adaptation by 2020 – a target they are unlikely to reach until 2023 at the earliest.
  • Before COP27, only Denmark had formally committed any funds. United States President Joe Biden has pledged 11 billion dollars in international climate aid, which may inspire other countries to join in, making for one of the largest investments in aid flowing from developed to developing markets.

 What were the key wins this year other than the US rejoining COP after a 4 year hiatus? 

  •  A breakthrough agreement known as Sharm el-Sheikh Implementation Plan has highlighted that a global transformation to a low-carbon economy will require investments of at least USD 4-6 trillion a year. Delivering such funding will require a swift and comprehensive transformation of the financial system. 
  • COP27 saw the launch of a new five-year work program at COP27 to promote climate technology solutions in developing countries.
  • Countries launched a package of 25 new collaborative actions in five key areas: power, road transport, steel, hydrogen and agriculture.

 

World: Tour De Headlines

  • The Green Climate Fund (GCF) Board concluded its 34th meeting. 
    • This year, they approved nine new climate projects worth USD 544.1 million in GCF funding and USD 1.7 billion with co-financing. 
    •  GCF’s portfolio now comprises 209 projects worth USD 42.4 billion with co-financing.  (GCF)
  • World Bank Group Announces International Low-Carbon Hydrogen Partnership,  a new global initiative to boost the deployment of low-carbon hydrogen in developing countries. (World Bank)
  • The World Bank’s International Finance Corporation (IFC) will consider a $2 billion support fund for Ukraine that will focus on rebuilding the country’s private sector. (Reuters)

United States of America

  • California Boosts Electric Car Charging Investment by $1 Billion.(ESGNews)

Europe

  • EIB (European Investment Bank) Approves EUR 11 Billion for Climate Action, Clean Energy and Sustainable Transport Investment (ESGNews)
  • EIB and Development Bank of Southern Africa Launch €400 Million South Africa Renewable Energy Investment Initiative (ESGNews)
  • France, Spain Latest to Pledge Halt to Gasoline-Driven Vehicle Sales (ESGNews)
  • Vitol to Acquire Vortex and Deploy $1 Billion to the Development of Renewables in Poland (ESGNews)

Asia

  • U.S. Unveils Investments in Indonesia Led by $698 Million Climate-Conscious Compact (ESGNews)
  • Australia Proposes to Require Cleaner Gasoline by 2025 (ESGNews)
  • Indonesia to Set Up $2 Billion EV Fund with China’s CATL, CMB International (ESGNews)
  • India Publishes Long Term Emissions Strategy to Reach Net Zero in 2070 (ESGNews)

 

Market Updates: Deal Flow

Launches

  • Closed Loop launches a new recycling company, Circular Services, with $700M investment, which it says will be the largest privately owned recycling company in North America. Circular Services will be a consolidation of 12 facilities from portfolio companies across seven states. The U.S. recycling industry hasn’t seen a large company focused on residential and commercial recycling, without also owning landfill assets, and Circular Services will be the first to do that.  (Wastedive)
  • RBC Expands Sustainable Finance Product Suite for Businesses (ESGNews)
  • World Bank Group Announces International Low-Carbon Hydrogen Partnership (ESGNews)
  • Hunter Point Capital and ADQ agreed to buy a minority stake in social change-focused investment firm Vistria Group (BBG)

Funds Raised

  • Carlyle Launches Renewable Energy Development Platform Telis Energy in Europe. with a focus on solar, in the UK, France, Spain, and Germany, with a view to expand to other markets in Europe. (PV-Tech)
  • Stripe, the payments giant, announced a $925M fund for advanced market commitments for carbon removals from DAC & other high tech carbon removal and storage companies. That’s way more money than has been spent on carbon removals previously. The entire carbon offset market, of which removals are a small subset, crossed the $1B mark just late last year. (KEEP COOL)

Sustainability VC

  • Anode Labs , raised a $4.2M round led by Lerer Hippeau and Lattice. They aim to build The React Network: The First Community-Owned, Web3 Green Energy Grid that offers tokenized incentives for individuals and SMBs to connect their energy storage assets. (BW)
  • RoadRunner, a startup providing sustainable waste management solutions, raised a $20M Series D extension led by Fifth Wall. Nearly 40% of global carbon dioxide emissions come from the real estate sector, RoadRunner has been able to seamlessly increase a property’s recycling rates by 10x, and in turn, reduce the associated carbon footprint. (PRN)

Govtech

  • Beam, a startup helping citizens access government financial aid, raised a $6.4M Series A led by Potencia Ventures. Beam simplifies program administration and helps deliver funds more efficiently across a wide array of programs, like emergency cash assistance, rental relief and public utility benefits. (TC)

Healthcare VC

  • Maven, a pioneering the next generation of care for women and families, raised a $90M Series E at a $1.35B valuation led by General Catalyst. (TC)
  • Carlyle is in talks to offer to buy US urgent care group Heritage Care Network at an $8-$10B valuation. (RT) 
    • “Consolidation in the primary and urgent care sector…is on the rise, as healthcare operators race to provide alternatives of scale to hospital systems and capitalize on the backlog in treatments caused by the COVID-19 pandemic.” 

Affordable Housing

  • CVS Health Invests $14.3 Million in Affordable Housing in Seattle. An interesting investment that shows us how preventive health and social equity intersect. 
    • “When people have access to high-quality affordable housing, it allows them to focus on taking care of their mental and physical health,” said Dr. Rafael Gonzalez-Amezcua, chief medical officer of Aetna Better Health of California at Aetna, a CVS Health Company. (ESGNews)
  • The California Housing Accelerator program and Community Development Banking at JPMorgan Chase are working together to fund 57 projects to accelerate the construction of affordable housing in California to combat the housing crisis. 
Dec 01
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A Brief History of Impact Investing in The United States

By Finance, Green Investing, Purpose of Finance, Stewardship No Comments

Impact investing has a much longer history than what many of us expect.

The concept of impact investing is not new; the term was coined in the early 2000s, but the practice has been around for centuries. The central idea of impact investing is to use capital to create positive social or environmental change, while also generating attractive financial returns. 

This article explores Impact investing in the United States and how it has evolved, especially over the course of the last few decades.

What’s The Origin of Impact Investing? 

The 1800s: Religious Beginnings

In the United States, socially-conscious investing emerged in the 19th century. A group of historically-connected Protestant Christian denominations, known as Methodists, abhorred the slave trade, illegal immigration, and excessive consumerism. They decided to divest from companies involved in industries in these sectors. Methodists also opposed investing in businesses that produced alcohol, grew tobacco, or promoted gambling.

Another Protestant movement, the Quakers, played a part in shaping impact investing. Quakers forbade investments in the slave trade and slavery-related industries. They also avoided industries related to war, such as weapons manufacturing. They established the Pioneer Fund in 1928 in Boston, which invested only in sectors they deemed moral. 

These diverse groups’ early investment strategies aimed to get rid of the so-called “sin” industries. Today, sin stock industries typically include those involved in alcohol, tobacco, gambling, sex-related businesses, and weapons production.

These early tenets of socially-conscious investing evolved to stand for an investment philosophy aligned with investors’ social concerns and goals for social change. 

 

Modern Impact Investing

How Did Government Policy Shape Impact Investing? The 1950s – 2000

By the second half of the 20th century, policymakers and firms had implemented impact investing principles into the financial services industry. 

One landmark piece of legislation was The Community Reinvestment Act (CRA), passed by Congress in 1977, which outlawed discriminatory lending practices in low-income areas.

Additionally, the U.S. Sustainable Investment Forum (US SIF) was established in 1984 in response to climate and environmental concerns driven by tragedies like the Chernobyl disaster in the 1980s.

In addition to the government, firms and their executives took strides to incorporate impact investing principles into their business practices. The 1990s, for instance, brought the first screens for mutual funds aimed at avoiding investments in companies with poor records on social and environmental issues. Key among them was the Domini Social Index, which launched in 1990 and consisted of 400 large-capitalization US companies that were selected based on social and environmental criteria. 

In 1996, a group of business leaders, academics, and philanthropists launched the Social Investment Forum Foundation (SIFF) to promote best practices in sustainable and responsible investing (SRI). The decade also saw the launch of the Global Reporting Initiative (GRI), which provided guidelines for companies to voluntarily disclose their environmental and social performance; GRI is now a major governing body in the environmental, social, and governance (ESG) space.

How Did Impact Investing Go Global? The Early 2000s

The 2000s were a time of significant growth for sustainable and socially responsible investing (SRI). The Rockefeller Foundation laid much of the groundwork, coining “Impact Investing” as an umbrella term in an attempt to unite the fragmented industry into a collective network. 

The Rockefeller Foundation also launched the Global Impact Investing Network (GIIN), assembling impact investors to build a coalition focused on exchanging and organizing ideas. The GIIN has since grown into one of the largest international governing bodies for impact investors. 

Then in 2007, the United Nations Principles for Responsible Investment (UN PRI) were published with the aim of inspiring more investors to incorporate environmental, social, and governance (ESG) considerations into their asset allocation strategies. The UN PRI now includes over 2,000 signatories representing more than $70 trillion in assets under management (AUM).

The financial crisis of 2008-2009 led to a renewed focus on the role of finance in society and the need for sustainable investing. IRIS, a system for measuring, managing, and optimizing impact, was created in 2008 by the Rockefeller Foundation.  Since its inception, IRIS has given social entrepreneurs tools to measure and monitor process improvements and to better track business results. 

Other impact-related organizations arose such as Acumen Fund, and B-Lab, who drew on lessons learned in microfinance and other social and environmental sectors.


What is Impact Investing? Looking at The Present

2010s – Present

The Global Impact Investing Ratings System is the second system created to evaluate social and environmental impact (GIIRS). It was designed to offer guidelines and a rating system for businesses, investors, and intermediaries to make more data-driven decisions. 

In 2009, President Barack Obama created the Interagency Working Group on Social Impact Investing to explore how the government could use impact investing to achieve social objectives. The following year, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which included provisions for impact investing by banks and other financial institutions.

In 2014, the White House convened the first-ever Social Impact Investing Task Force, composed of over 30 leaders from the public and private sectors, to develop recommendations on how the federal government could best support the growth of impact investing. The task force called for a number of actions to support the industry, including better data and measurement, greater coordination among governmental agencies, and the establishment of an Impact Investment Working Group within the National Economic Council.

Looking Forward

Impact investing has come a long way in a relatively short period of time. What started as a niche movement focused on avoiding “sinful” investments has grown into a global industry with trillions of dollars in AUM.

As of 2022, the GIIN estimates the size of the worldwide impact investing market to be USD 1.1 trillion, the first time it has crossed the trillion dollar mark. Growth has been strong with total investments tripling from 2017 to 2019 and growing at double-digit rates since. However, challenges remain, as the UN in 2018 estimated a funding gap of USD 2.5 trillion to achieve 2030 Sustainable Development Goals. 

But there is cause for optimism. Collaborative international efforts to accelerate impact investments have proliferated, and with strong governmental support, we can expect impact investments to further enter the mainstream of finance going forward.

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