Thursday, November 6, 2025

Alternative, Inclusive Financing for Asia MSMEs, Report Urges

By
Gino Baltazar, MS Finance
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Alternative Finance Emphasizing Inclusive Financing. Source: AVPN

A new report by Asia Venture Philanthropy Network (AVPN) finds that access to much-needed financing by micro, small medium sized social enterprises (MSMEs) in Asia remain constrained by the status quo and that more innovative funding models are needed.

Highlights

Report Highlights

Among the recommendations AVPN’s report urges include:

  • Experimental and more innovative funding instruments like state-sponsored crowdfunding.
  • Regulatory reform to allow newer funding channels like state-funded social investment funds.
  • Incubators and accelerators that are dedicated to social enterprises.
  • Subsidized training and consultations to better equip social enterprises with the right mix of business and techical skills.
Source: AVPN

Inclusion 

Among other notable findings:

  • Women entrepreneurs face more formidable challenges than male counterparts.
  • Micro, small and medium enterprises face what the report calls the “missing middle” phenomenon, or early-growth-stage3 access to funding.
Missing middle phenomenon. Source: AVPN

Read the full report -> AVPN MSME 2017 report

Change Finance Launches CHGX ESG ETF

By
Gino Baltazar, MS Finance
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The women-led CHGX team. Source: Change Finance

Change Finance has rolled out a new ETF called the Change Finance Diversified Impact U.S Large Cap Fossil Fuel Free ETF (NYSE Arca: CHGX) that intends to screen a basket of 100 largest U.S. – listed common stocks against environmental, social and governance standards or ESG.

The firm’s managers are mostly women.  Its CEO Donna Morton was formerly the CEO of a clean energy company and built a think tank which helped pass the first carbon tax in North America.

More Details

More Details on the ETF

ETFs are the fastest growing asset class in impact investing, according to a May note from Impact Alpha sourced from Morningstar.

Of the 20 sustainable ETFs on the market in May, 17 had launched in the past few years. Together, they represent $4.2 billion in assets.

Change Finance’s CHGX is its first ETF strategy that aims to open a “new chapter in investing,” Morton said in an announcement.

“Our investors want alignment with what they care about, without sacrificing performance. Fossil fuel-free is essential, but CHGX then goes further, divesting not only from companies who dig up, refine, burn and service fossil fuels, but also from companies that are serious polluters, that have significant human or labor rights violations, and that fail to meet a variety of other social and environmental standards. No other ETF does this,” Morton added.

In other words, Morton plans to look at multiple impact areas simultaneously, not just fossil-free, like a firm’s carbon footprint and board diversity.

Methodology

CHGX aims to reflect the performance of the Change Finance Diversified Impact U.S. Large Cap Fossil Fuel Free Index, and follow a prescribed process to measure the performance of the large-cap U.S. companies in that portfolio while meeting ESG standards.

CHGX has a 0.75% expense ratio, and as of this writing was trading at just over $18 in MarketWatch.

The Pragmatic Dutch

By
Gino Baltazar, MS Finance
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Walter Roelofs of Innovation Attache were among the delegates from the Netherlands. Source: Social Enterprise NL

There’s a reason SOCAP was chosen as the venue for the first Dutch trade mission for social entrepreneurs. The social enterprise sector in the tiny EU nation-state is booming, growing business revenues by 75 percent in the last five years to 3.5 billion euro.

The Dutch Way

Collaborating Like the Dutch

Collaboration was the main takeaway – specifically among entrepreneurs, which was key to building connections, and among universities, government, financial institutions and market-makers. The Dutch emphasized that local governments and cities often face the same social problems as its entrepreneurs do.

Nearly a dozen Dutch social entrepreneurs were in San Francisco Bay Area from October 8-14. Click on the image to watch the video. Source: SocialEnterpriseNL

Dutch pragmatism was the other takeaway – specifically the ability to translate ideas and visions into concrete actions, keeping the focus on measurable social impact while doing away with often unnecessary ideology and politics.

One Example – Stemming Floods the Dutch Way

Few people outside of the European continent may be aware that the Netherlands is, geographically, Europe’s gutter. Waters from the continent’s various rivers, streams and snow peaks like the Alps find their way to the canals of Amsterdam and the Netherlands.

Consequently, the topic of climate change and seas rising is not far from Dutch minds, but they see it not as a threat but as an opportunity. While the Trump administration is, for example, withdrawing from the Paris accord and witnessing hurricane disasters in Houston, Puerto Rico and Florida this year really because of its decades-old and unresilient infrastructure, the Dutch have learned to live with water, rather than struggling to win against it.

The Dutch have built dikes of course, but they now also have the Maeslantkering, a giant flood gate, against possible storm surges from the North Sea. They have dammed waterways, fortified towns, streets and parks against floods. Knowing how to swim has been made mandatory in schools.

The Maeslantkering. Source: New York Times

“We are an example of what you can do if you connect storm-water management with social welfare and neighborhood improvements,” Paul van Roosmalen, who oversees rooftop development in the Netherlands, has said. “It’s what we mean here in Rotterdam by ‘resilience planning.’”

Read Some More

Lessons from the Dutch Social Impact Boom, SOCAP October 2017

The Dutch Have Solutions to Rising Seas, New York Times, June 2017

The Dutch Have Up to 5,000 Social Enterprises, Dutch News, July 2017

PAYGo Pioneer SolarHome in Asia Lands Series A

By
Gino Baltazar, MS Finance
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SolarHome's installations are not unlike the equivalent of bringing electricity to 4,900 people. Credit: SolarHome via PVTech.

SolarHome, a Singapore-based energy startup with presence in Myanmar, has raised a pre-Series A round that has now helped it secure a total of $1.1 million in funding.

Why This Matters

Rural areas in Southeast Asia and Africa have remained the most challenging to distribute electricity to.

More than 600 million people in Africa and an estimated 65 million people in Southeast Asia remain without electricity.

And of the 575 million in Southeast Asia that do have access to electricity, 250 million remain reliant on solid biomass (like dried wood) as their main cooking fuel.

Read More

The deal’s support of the Pay-As-You-Go (PAYG) payment model enables low-income customers in Southeast Asia to subscribe to SolarHomes’ “rent to own” energy plans for as low as $3-15 per month, increasing chances for the poor to access electricity.

The startup is operating in Myanmar as its maiden market, and plans the funds it has raised to increase its installations to over 10,000 units in 2018. SolarHome claims to be the first player in this area.

“We see the same tailwinds in Southeast Asia,” commented Nicolas de Boisgrollier, managing partner at Uberis Capital, the impact investment firm who facilitated the pre-Series A. “PAYGO is very scalable and operates profitably without subsidies, which makes this business model very attractive,” he added.

How SolarHome’s PayGo Works

Under a conventional PAYGo model, a low-income household can take home a solar home system by paying a downpayment or deposit – about 10% to 20% of a system’s cost of ownership – and committing to a certain number of ongoing payments by signing a solar lease with a PAYGo operator.

SolarHome’s PAYGo plan will allow its customers to purchase energy tokens for daily, weekly or monthly top-up credits, either through scratch cards or mobile money. The ownership of these systems will be automatically unlocked and transferred to the customer after two years.

Not Without Challenges

As with PayGo solutions being implemented in Africa and other regions, challenges remain, among which, scale is the main issue. A briefing note, PAYGo Solar: Lighting the way for flexible financing and services, examines this and four key industry challenges in more detail from a financial inclusion perspective.

Read Some More

“PayGo is Emerging as a New Payments Solution for OffGrid,” Invest Impactly, July 2017

“Uberis leads SolarHome Pre-series A,” Deal Street Asia, September 2017

“SolarHome lands in Myanmar with $25MM,” Deal Street Asia, April 2017

“SolarHome installs 1,000 PAYG systems in Myanmar,” PVTech, Q4 2017

Southeast Asia Energy Outlook through 2040

SXSW Winner CNote Launches

By
Gino Baltazar, MS Finance
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SXSW pitch accelerator winner CNote, with CEO Catherine Berman, third from right, holding the trophy. Source: SXSW.

Catherine Berman, a former managing director at Schwab and Yuliya Tarasava, have put together their decades of experience creating financial products to launch an innovative new impact savings product called CNote.

CNote’s target, its founders say, will be women and Millenials, who disproportionately have higher liquidity in assets like portfolios holding stocks than in say, real estate equity.  Or Hispanics, another example, who are fearful of conventional banks and lenders, according to non-partisan research authored by Susana Restrepo.

What CNote Is

What CNote Is 

CNote’s 2.5% APY return, compared to average 0.06% APY in most banks. Source: CNote

CNote is an alternative savings product that combines the longer horizon of an investment security like a bond and the liquidity of a conventional savings account.

CNote promises to pay a 2.5% return to account holders annually, compared to the measly 0.06% that most banks, on average, offer.

Nerdwallet actually recently compiled a list of which banks offered savings account at which APY% – a sampling below:

  • Chase – 0.01% APY
  • Bank of Americaa – 0.01% APY
  • Wells Fargo – 0.01% APY
  • Alliant – 1.12% APY
  • Capital One – 1.20% APY
  • Discover – 1.20% APY
  • Barclays – 1.30% APY
  • Goldman GS – 1.30% APY

Impact – Funnel to CDFI

CNnote then invests 100% of your money in highly vetted Community Development Financial Institutions (or CDFIs) – financial entities across the U.S. that have a primary mission of promoting community development among their target markets, and that are certified by the US Treasury’s CDFI Fund.

There are over 1,000 certified CDFIs in all 50 U.S. states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. CDFIs lend to minorities, women, low income or otherwise under-served entrepreneurs that may, say, suffer lending bias by big banks.

Impact Investly advocated for the permanence of the New Market Tax Credit last year largely because of the demonstrated impact it has made to CDFIs in the U.S.

The Product’s Catch

As its FAQ clearly states – CNote is not an ATM, and funds will not be as immediately liquid as those that sit in a conventional banking savings account.

CNote does allow account holders to withdraw funds once a quarter (or once every 3 months) and with a 30-day notice. Entire balances may be withdrawn at the end of every quarter, but in amounts not exceeding, on average, US$20,000. Larger withdrawals are possible, depending on account balance levels, but are subject to a 10% withdrawal cap per quarter.

The withdrawal cap rules allow CNote to maximize interest returns to account holders and the impact of funds to CDFIs as they are put to work in communities.

SXSW Winner

CNote won last March’s SXSW accelerator pitch contest in Austin, Texas. The annual event, its 9th this year, won CNote $4,000, various SXSW sponsor gifts and perhaps, most importantly, exposure to SXSW attendees and potential investors who are always looking for the latest opportunities in cutting-edge technology and innovation.

Read Some More

ESG Analysis Should Not Be Easy

By
Gino Baltazar, MS Finance
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Maria Egan, Portfolio Manger at Reynders-McVeigh asserts that ESG analysis is more than just analyzing numbers or ESG scores. Source: Reynders-Mcveigh Capital Management.

Solely relying on ESG data and ratings to assess a firm’s sustainability practices can introduce risk and bias into fundamental analysis and may limit ESG to just yet another “quantitative and exclusionary” tool, contends Maria Egan, a portfolio manager at Reynders-McVeigh Capital Management.

This comes as ESG tools and ratings are gaining momentum and becoming more mainstream, and as board interest in sustainability reporting is rising.

Risky Business

The Risk Exactly

Without quantifying the exact risk, Egan suggests dramatic oversimplification of ESG analysis can fail to identify companies that deliver on both sustainable earnings growth and positive impact.  Many recent adopters, she also suggests, are using a check-the-box approach when evaluating ESG scores for candidate firms.

“ESG analysis should not be this easy,” she asserts. “It is a discipline rooted in the fact that making an investment decision is about more than analyzing numbers; it is about understanding how non-financial factors hinder or help company performance.”

Three Reasons

ESG analysis is in its infancy in other words, and to treat it as such.  Egan cites three contributing factors:

  • Regulation and standardization of ESG disclosure is lacking – ESG analytics isn’t and shouldn’t be the only set of measures to assess a firm’s ESG rating. A fuller picture of what could materially impact a company going forward should accompany an analysis.
  • Materiality is missing – As firms get more sophisticated in how to report ESG, other material data, positive or negative, may sometimes be omitted.
  • Backward looking data – Investors often analyze performance data in the past when they often should analyze future performance data.

Dig Deeper

Reported data by firms and their analysis is often far from perfect and deeper scrutiny should always accompany analyses. Egan suggests asking more probing questions, in addition to just checking off boxes, such as:

  • Is there ongoing dialogue among company managers on their approaches to ESG risks?
  • Does a firm have a short-term or long-term horizon and does it consider its environmental footprint as well as its social impact throughout its business operations?
  • Has feedback and analytics from industry peers and external stakeholder organizations been considered? How comparable is a firm’s ESG practices to its peers?
  • Is there a sound process for obtaining outside perspectives relative to employee satisfaction, employee pay, and how a company treats and values employees, customers and other stakeholders throughout the supply chain? How comparable are those to its industry peers or other organizations?

Bottom line

“There will always be an element of [human] personal analysis and research needed to determine what information is available and whether to invest [in a firm].

Read More

“ESG Incomplete Investors Perspective,” GreenBiz, September 2017.

“Board Interest in Sustainability Doubles,” CFO, September 2017.

“Closing the Confidence Gap in Sustainability Data,” CFO, September 2017.

“Pain as Green Reporting Takes Root,” CFO, June 2017.

Interest in ESG May Be Plateauing, CFA Institute reports

By
Gino Baltazar, MS Finance
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Investor sentiment in ESG has remained nearly the same YoY. Source: CFA Institute

The number of investment professionals taking account of ESG factors has remained the same (73% at least consider environmental, social, or governance) year-over-year, according to the CFA Institute, in its latest ESG survey.

The survey’s results indicate that while interest in each component has increased around the globe, interest in integration (into investment decisions and analyses) may be plateauing, or maturing in a way where growing adoption may be slowing.

A Passing Fad?

Why This Matters

“While it is clear that the integration of ESG into the investment process is not a passing fad,” Matt Orsagh, CFA, says, “increased demand from clients, better quantity and quality of ESG data, and increased practitioner training could enhance the ability of financial investors to incorporate ESG data into the investment process, and thus increase adoption.”

“ESG-related disclosures can improve the transparency of the global capital markets through more thorough reporting of the long-term issues facing publicly traded companies.”

Three Big Limitations

CFA Institute’s 2017 ESG Survey respondents confirmed that the three factors that most limit their organization’s ability to use non-financial information in investment decisions are: a lack of appropriate quantitative ESG information, a lack of comparability across firms and questionable data quality.

“There’s a gap between the quality of information that’s provided by companies and the suitability of this information to what investors need. There’s an information gap,” Vincent Papa, director, financial reporting policy for CFA Institute says, “and the need for initiatives that increase the quality of ESG information.”

Read More

“CFA Institute ESG Survey 2017,” CFA Institute, July 2017.

“Use of ESG Data in Investing is Maturing,” Seeking Alpha contributor Matt Orsagh, October 2017.

“Improving the Quality of ESG Data,” Financial Advisor, November 2017.

“ESG Investing Grows in All Regions, Pensions and Investments,” October 2017.

“How Much Do Investment Professionals Care About ESG,” City AM, October 2017.

10 High-Performing Funds with a Conscience, Bloomberg

By
Gino Baltazar, MS Finance
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Parnassus and Calvert ESG funds led the pack. Source: Bloomberg, U.S. SIF

The jury is out. Bloomberg and U.S. SIF have compiled a ten mutual funds that have taken environmental, social and corporate governance (ESG) into account and are also performing well above the S&P 500 benchmark.

The Winners

ESG Funds With The Highest Score

Parnassus Endeavour funds PARWX and PARNX, and Calvert Small Cap CCVAX and US Large Cap Responsible Index CSXAX led the top 4, totaling nearly $6 billion AUM.

Neuberger Berman’s NRAAX, another Parnassus fund PARMX and another fund Calvert CSIEX, all also in the top 10, notably held more than $2 billion each under management.

Investors have taken notice, Bloomberg says. Investments in these types of ESG funds are up 33 percent in the U.S. since 2014, to $8.7 trillion, or 22 percent of all professionally managed U.S. assets.

Source: Bloomberg; The Forum for Sustainable & Responsible Investment (USSIF)

Read More

“Ten Funds With A Conscience,” Bloomberg, July 2017.

“Ten Vanguard Funds That Are Socially Responsible,” Kiplinger, April 2017.

Find Powerful Relationships in ESG Data, Studies Say

By
Gino Baltazar, MS Finance
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Roughly 90% of studies find a nonnegative ESG–CFP (corporate financial performance) relation. Source: Friede, Busch, and Bassen.

Solely relying on ESG data to assess a firm’s sustainability practices can introduce bias and produce an incomplete picture.

It can also miscalculate risk and misprice investments, suggests TruValue Labs, a provider of environmental-social-governance, or ESG data, sustainability metrics and real-time analytics based in San Francisco, California.

Why This Matters

Why This Matters

Cognitive biases and persistent myths weigh on the performance of conventional investing versus sustainable investing and is one major reason asset managers have not yet risen to meet client demand, says Morgan Stanley.

Different circumstances demand different analyses techniques, TruValue asserts, as it shared three where ESG-related investing works the best, across different asset classes such as stocks and bonds in its August report.

  • Momentum, or positive and negative changes in ESG score, requires an ESG solution with timely data.
  • Materiality, or a company’s ESG performance in the context of its financial performance, and individualized E, S, and G scores, will require granular category performance data and analyses.
  • Intangibles, like comparisons between employee satisfaction and equity prices, will require tracking of the latest events and reactions by consumers. It’s not uncommon to find firms with above-average employee satisfaction and abnormal positive returns and earnings in the same firm, TruValue asserts.

This comes as ESG tools and ratings are gaining momentum and becoming more mainstream, and as board interest in sustainability reporting is rising.

What Risk?

Simplifying ESG analysis to a single score can fail to surface companies that can deliver both sustainable earnings growth and positive impact.

Heads-down analyses can protect investors from unexpected or unforeseen bankruptcies, volatility, price declines, and earnings risk.

In other words, there are no shortcuts to ESG analyses.

Source: Thomson Reuters

Read Some More

“10 studies that show how and why ESG investing works.” Thomson Reuters, July 2017.

“Pain as Green Reporting Takes Root,” CFO, June 2017.

Friede, Busch, and Bassen’s study (chart above) identified positive relations for E, S, and G and corporate finance in 644 samples. According to their report, “the highest proportion is found in G with 62.3% of all cases. If the share of negative findings is deducted from positive ones, environmental studies offer the most favorable relation (58.7–4.3%). Studies with a social focus show 55.1% (5.1%) positive (negative) outcomes, hence the weakest relation.” Journal of Sustainable Finance and Investment, Taylor and Francis, December 2015.

PayGo Is Emerging as a New Payments Solution for Off-Grid

By
Gino Baltazar, MS Finance
-
The PayGo payment model allows subscribers to pay as low as $3 per month. Source: Fibr

Pay-as-you-go (or PAYGo) is emerging as a solution that offers low-income households and operators in developing regions like Africa to scale off-grid renewable energy solutions and get access to electricity.

The solution is being offered by FIBR, a project by global consulting firm BFA, in partnership with Mastercard Foundation.

Payment Game Changer?

Why This Matters

Rural areas in regions like Africa have remained the most challenging to distribute electricity to. More than 600 million people in Africa alone do not have access to electricity – that is nearly twice the population of the United States.

Climate change has also compounded the negative effects of no access to electricity. Children in the rural regions of Pakistan often cannot go to school due to extreme heat.

What PAYGo Is

Under a PAYGo model, a low-income household can take home a solar home system by paying a downpayment or deposit – about 10% to 20% of a system’s cost of ownership – and committing to a certain number of ongoing payments by signing a solar lease with a PAYGo operator.

A customer makes daily, weekly or monthly payments drawn from a mobile money account that is set up to pay down a portion of the principal, not unlike a monthly mortgage against a home in the U.S.

Not Without Challenges

A briefing note, PAYGo Solar: Lighting the way for flexible financing and services, examines four key industry challenges from a financial inclusion perspective that serve as the foundation for PAYGo’s solar mission.

Among the main challenges is scale – determining the right economic models that will maximize agent engagement and compensation, drive sustainable growth, maintain customer satisfaction, and lower network churn and management costs.

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