Sustainable investing climbed to $23 trillion worldwide based on a global March GCIA survey-based report, buoyed by the Paris Climate accord last year and evolving fiduciary via changing demographic demand, e.g. millenials requiring SRI in their investments.
Social enterprises like ProducePay, a California-based financing platform for farmers, which raised $77 million in funding via CoVenture, 410Medical, maker of “LifeFlow,” a hand-powered rapid infuser of fluids for critically ill patients to combat sepsis and Sens Food maker of the cricket flour based Sens Bar, made by a chef who has 13 years of experience in cooking with insects, hold much promise to improve and positively impact lives in the future.
Clouds Ahead
Positive news aside, notably in March was the proposed US budget threat to eliminate climate change funding, the EPA, the CDFI and NMTC programs. All programs are crucial to sustainability and support of low-income communities through, in NMTC’s case for example, a tax credit for private lenders if they invest in underserved areas.
Invest Impactly advocated for the permanence of NMTC in December last year, arguing the clear impact it has demonstrated to ordinary working Americans and communities, such as those showcased by US Representative Pat Tiberi in Ohio.
Other investors are responding. President Trump’s executive orders and proposed budget cuts are increasing demand for impact and ESG investments.
Green Bonds
Cities and enterprises may increasingly turn to using green bonds as a financing vehicle. Other regions like New Zealand and Australia have been experimenting with social and green bonds, and some are finding success in those programs. Green crowdfunding, already popular via platforms like KickStarter and which grew substantially since Obama’s Jobs Act passage may also be considered an alternative, unless the administration also chooses to reverse its trend.
Or they may turn to progressive leaders like the same US Representative Pat Tiberi who has been championing NMTC has been working with his colleagues on Capitol Hill on a bipartisan bill called the Opportunity Act (IIOA). The new bill aims to tap into the estimated $2 trillion in unrealized capital gains in stocks and mutual funds and “defer their inclusion in gross income for capital gains reinvested in opportunity zones.” In other words, IIOA’s goal is to help direct gains from successful private investments to new economic revitalization efforts in places that have been left behind since the Great Recession.
Pacific Community Ventures has also shared a good roundup of the past month. Impact investing momentum continues with new green investment vehicles and seeds for new interesting products being introduced each week, and announcements by funds adopting ESG or incorporating SRI into their portfolios, also covered in January in surveys by Callan and MSCI.
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“CDFIs are the original impact investors, turning small amounts of capital into billions of dollars of economic activity, and hundreds of thousands of jobs. The growth of CDFIs over the past 20 years has come in large part thanks to the CDFI Fund at the U.S. Treasury. Last year, Congress appropriated just $233 million to the CDFI Fund. That led to $2.1 billion loans and investments that created 28,000 jobs in poor communities.
Now, all of that good work is in danger. In his so-called “Skinny Budget” the President eliminates the CDFI fund in its entirety. It also eliminates the New Markets Tax Credit program, which spurs revitalization in low-income communities through offering private lenders a tax credit if they invest in underserved areas.
In calling for the elimination of programs like the CDFI Fund, the President’s budget said that in contrast to 20 years ago, “private institutions [now] have ready access to the capital needed to extend credit and provide financial services to underserved communities.” This is “true” only in the most cynical sense.
Small businesses certainly have “access” to capital, but if these programs are eliminated those sources of capital will dramatically pull back from investing in all but bigger businesses and the richest communities. The fastest growing segments of small business owners are Africa-American women and Latino women, the U.S. Small Business Administration says they’re three-times as likely to be turned down for loans by a bank. The Association for Enterprise Opportunity notes that 2.2 million small businesses in “low-wealth communities” seek credit in a typical year – and 8,000 small business loan requests are declined every business day.”
Sources: Pacific Community Ventures, TechCrunch, Wall Street Journal, Crunchbase, ImpactAlpha
