Moving Assets Into the Future: A closer look at Impact Investing Funds Pt. 2
Part 1 of this two-part series explored the activities of three specific impact investing funds, whose attention is geared towards Sub-Saharan Africa. For further illustration of the operations that have particular impact on investment funds, three further examples have been selected that have a particular in the North American Region.
Impact America Fund
Impact America Fund, founded in 2014, functions as a Venture Capital company for Tech-Enabled business solutions with a positive social impact. The fund uses their “inherited impact” approach to select for potential entrepreneurs, seeking a $250K-3M investment. These are some noteworthy examples
‘High growth, early-stage companies (either post initial seed or pre-initial seed)’
1. ‘Savvy, scale-obsessed, and socially conscious founders’
2. Tech-enabled business models where socioeconomic impact and revenue grow together
3. Demonstrated traction and cultural competence in a $1B+ market
Publicly, Impact America Fund highlights specific lessons they have learned in the field of impact investing:
1. ’Tremendous opportunity exists in communities and sectors that have been traditionally overlooked and undervalued.’
2. ’Businesses can be designed to create shared value for consumers, workers, suppliers, investors, and other stakeholders. When done right, this “inherent impact” drives a lasting competitive advantage and the enduring health of the community.’
One specific investment made by Impact America Fund is in Schoolzilla. A company that simply put; allows schools to outsource their student data management. This is a significant benefit for schools who lack the finances necessary for complicated data managing. The specific services offered by this company include gathering, processing, and presenting data, secure protection of said data, and analyzing school/student data against other schools. In an age where better data processing facilitates improved decision making, Schoolzilla closes the technological gap between schools with different levels of funding.
A further investment made was nto HandUp San Francisco, CA. This company uses its online expertise in cooperation with non-profits to generate online charity campaigns. Currently, HandUp has partnered with 113 non-profits and successfully donated $2.83M to various causes. The majority of campaigns are directed at tackling homelessness in local communities. The following are a selection of campaigns currently active to which donations goals have yet to be met:
- Shine your light for the holidays: Shelter and long-term housing solutions to individuals and families struggling with homelessness
- Ferndale Fire Relief Fund: Financial aid to families affected by the Ferndale Housing Commission fire
- Warning Room Community Fund: Financing goals towards the Milwaukee's Warming Room Shelters for the Homeless
Alphamundi is a Swiss-based impact exclusive fund, meaning their entire portfolio is focused on social based investments (instead of a combination between social and financial returns). Aside from the social returns through investing activities, Alphamundi donates 20% of profits to it’s sister company, the non-profit Alphamundi foundation. Through both debt and equity Alphamundi invests in a wide range of industries, including but not limited to education, agriculture, and renewable energy.
A stand out component of the organization is its ‘Gender Lens’ investing process. Investments and company management operate based on gender equality criteria. On a management level, Alphamundi mandates female members as they believe it results in more effective teams. With regards to specific investments, Alphamundi requires that companies generate products and services aimed towards the benefit of woman, whilst advocating for and facilitating increased capital in female-run businesses.
One specific investment of Alphamundi has been in education in Mexico. The undisclosed company provides loans to university students from low- and middle-income families who lack the resources to pay for high quality higher education. The company gains a competitive advantage over others in their department through ‘formal university partnerships’, ‘financial risk mitigation through a guarantee fund financed by the universities’, and faster processing of loan applications. For the second quarter of 2018, the company has been securing loans for Mexican prospective students of $10M. Thus far the particular company has secured financing for over 12,000 students of higher education, and from its 7,470 current portfolio students, 65% are accessing higher education as the first in their families.
Deutsche Bank Americas Foundation
Though this major financial institution is not the first association one makes when thinking about impact investing, it's a relevant indication of the widespread appeal of this investment model. Many of the largest financial companies have devoted portions of their business into social impact investments, both for favourable PR and financial returns.
One specific example of Deutsche Bank’s involvement in community improvement took place in New York, in January 2017. The America Foundation closed a transaction of $37M towards affordable housing in New York City.
$7M were directed towards NeighborWorks Capital Corporation (NCC), a real estate financier who's goals are the preservation and production of affordable housing. NCC offers various flexible and affordable loan structures for customers who either undertake new projects or improve upon an existing one by implementing ‘green’ components.
A further $5M was directed towards the HANAC Corona Senior Residence, a 67-unit real estate project in Queens. The project aims to house low-income and formerly homeless seniors, as well as offering an early childhood development center and further community amenities.
A $10M loan was provided to the New York Acquisition Fund. This fund provides financing towards the purchasing and predevelopment of land in New York, given the condition that said land would be used to provide affordable housing.
Finally, a $15M line of credit was provided towards the Local Initiatives Support Corporation (LISC). LISC works through a network of over 30 local offices to provide grants, financing and technical assistance to corporations involved in community development of distressed areas. Through this, they intend to address housing, economic development, community-building, and general neighbourhood revitalization concerns.
Throughout these six examples of these investment funds, it becomes inevitably clear that the potential of Impact Investing is far greater than its current level of utilization. The scope of impact investing is neither limited to industry or geography. As a growing industry, new and creative solutions will result out of business ventures aimed at both social and financial returns. By harnessing the entrepreneurial spirit of the Free-Market, Impact investing can become one of the means with which we address both current problems and problems not yet identified.