Transform Finance has created an ongoing monthly webinar series as an additional resource for Investor Network members. A ninety minute webinar is held each month on a variety of topics that we think investors should be considering, ranging from policy discussions to deal structures to aligning with social justice movements. Each webinar is joined by experts and practitioners in the topic of discussion, and presents current projects, explains business models and shares best practices. This curated webinar series grants members the opportunity to learn more about our community-centered and social justice approach, potential investment opportunities, and how to contribute to growing the field.
Below you will find a sampling of recent webinars that Transform Finance held for the Investor Network. For more information on these topics or if you are interested in joining the Network, please contact Andrea Armeni at firstname.lastname@example.org or reach out through our membership page.
Recent Trends in Impact Investing: A Conversation with ImpactAlpha
The year has been filled with interesting developments in the capital markets and the impact investing space. Some are continuations of prior trends, some are "I told you so!" moments, and others are downright surprises.
Few have a better finger on the pulse than our friends at ImpactAlpha, so we thought of bringing them in for a frank and thought-provoking discussion. What are they seeing? What is really a trend versus a blip? And most importantly, what are the implications - positive and negatives - for those who seek to advance an approach to capital along the lines of the Transform Finance Investor Network community?
In this conversation, David Bank and Dennis Price from ImpactAlpha break down for us anything from the Business Roundtable announcement this summer, to the rush of Private Equity players into the impact space, to the growing activity around Opportunity Zones.
This webinar was held on Thursday, September 26, 2019 at 10:00 AM Pacific, 1:00 PM Eastern via Zoom.
Promoting Worker Voice Through a Democratically Managed Holding Company: The Staffing Cooperative
Providing agency to workers – particularly those from marginalized backgrounds – is a central tenet for financial vehicles and enterprises seeking to promote economic and racial justice. As such, we’ve explored several models of employee and multi-stakeholder owned businesses.
But limitations of the available models often hamper the goals of founders. For example, a traditional worker cooperative structure does not allow multiple businesses to join together to leverage scale like purchasing cooperatives are able to achieve. To challenge these issues directly, The Staffing Cooperative was created as a cooperatively managed holding company in which the workers of subsidiary companies own the majority of the holding company's shares, allowing control of major decisions at both the fund and subsidiary level as well as the ability to acquire or convert businesses underneath the model.
In this webinar, Joseph Cureton of the Staffing Cooperative details their model and describes how it provides voice and agency to its workers throughout the holding company, which currently includes a subsidiary portfolio of two firms; one focussed on returning citizen laborers and another focussed on technology professionals.
Pooling Loan Guarantees: The MCE Social Capital Model
Catalytic capital – philanthropic and risk-bearing investments aiming to attract more mainstream investors – can take a variety of forms, generally aiming to reduce risk while a market or strategy is proven. Such capital tends to be scarce. So we have been intrigued by a fund model where philanthropic guarantees outstrip traditional investment capital 2:1. In this model, guarantees are pooled at the portfolio level with no assets transferred unless a portfolio loan defaults, at which point losses are shared pro rata across the guarantee holders (most of which treat the loss as a charitable contribution).
MCE Social Capital (MCE), an international nonprofit impact investing firm, has developed and deployed such a model. Since 2005, MCE has lent almost $200 million to over 120 institutions in 45+ countries with a 2% default rate.
In this webinar, we examine MCE's model and discuss the successes and challenges they have faced in working with risk-tolerant capital and how they have balanced risk and returns among their capital holders and portfolio companies. Catherine Covington of MCE describes this unique funding model and Aner Ben-Ami of Candide Group reflects on why they have supported a client to become both an investor and guarantor in MCE.
Capital to Create Shared Wealth: A Look at Our Work on Private Equity and Employee Ownership
Employee ownership models – and in particular, worker cooperatives and ESOPs – are a demonstrated way for workers to participate in the value they create, building economic assets along with their power and agency. Conversions to employee ownership can also provide a viable exit for retiring owners while keeping the legacy of the business in the community.
Yet we don’t see that many, and investors and business owners cite a variety of obstacles. What is needed to increase the number of conversions? An answer may lie in an instrument that makes capital available, on non-extractive terms, to ease the pain points for selling owners. We set forth such an option, based on a private-equity buyout combined with an ESOP structure and centering the needs of low-income workers and workers of color, in our forthcoming report: “Investing in Employee Ownership: A Fund-Level Model for Conversions.”
The report's authors, Andrea Armeni and Camille Kerr, will present the model and discuss its implications, especially around impact guardrails and ensuring that benefits accrue first and foremost to low income workers and workers of color. We will also hear from Scott Abrams of Open Society Foundations' Economic Justice Program on how this work fits within a broader context of fostering a just society.
Empowering Stakeholders to Verify Impact with New Technology: Learnings from Sela
Community accountability mechanisms are one of the key components of transformative investments, as explored in previous TFIN presentations on how to bake accountability and stakeholder governance into the investment process.
In this webinar, we examine a new tool for impact input and verification via feedback channels being implemented in Africa. Nigeria-based Sela is a distributed technology platform that connects stakeholders to increase transparency and trust in an impact process.
While we are generally skeptical of technology-based solutions, Sela’s origins are deeply rooted in specific communities in the Niger Delta region that have been devastated by reckless oil development in recent decades, and members of these communities continue to be critical collaborators with Sela is building out and testing the technological tools. Jess Rimington and Joanna Cea speak to Sela’s collaborative approach with its stakeholders in the context of their research on how co-creation can lead to transformative impact. Watch a short video with more information on Sela.
We then hear from Sela’s founder and CEO Chi Nnadi on how the platform can support the practice of private investors committed to transformative finance principles, with remarks from investors Delilah Rothenberg and Cynthia Jaggi who are part of a “Co-Learning Team” engaging with Sela to define the company’s next steps.
In this webinar we explore the practices around involving program officers in helping inform a foundation’s investment portfolio – from sharing knowledge gathered from grantees, to lifting up concerns that may not always reach the investment officers.
Laura Campos, Director, Corporate and Political Accountability at the Nathan Cummings Foundation, and Elizabeth McGeveran, Director of Investments at the McKnight Foundation, are leaders in the effort to integrate the two sides. They are in conversation with Meredith Benton of Whistle Stop Capital, longstanding collaborator of Transform Finance, to explore emerging best practices.
Fast Response Financing Need: A Live Conversion of a Manufactured Home Park to Resident Ownership
John Hamilton of the New Hampshire Community Loan Fund, who presented to the TFIN previously, has been continuing to do amazing work with conversions of parks to resident ownership - particularly important now that there is a big private equity push to buy up parks that has been detrimental to residents.
There is now a live opportunity to support a fast-moving transaction. Hynes, an owner of manufactured housing parks, planned to sell four manufactured housing parks in NH with 1,012 units of housing to a large private equity buyer; the residents have stepped up to acquire the parks and gain the security and pride of ownership. We thought you might be interested to hear about it directly from John and some of the investors who have worked with NHCLF on resident ownership conversions.
How Community Feedback and Accountability Mechanisms Can Advance the Field of Impact Investing
Impact investments by private actors aim to provide positive social and environmental benefits. As the field matures, a few questions have become central: what is the accountability for the impacts of these investments, to whom, and how is it established? The field can learn from the prior experience of development finance institutions, which have developed mechanisms for community feedback and grievance assessment.
Accountability Counsel has gathered significant expertise around the benefits of community feedback mechanisms for investors through years of advocacy and direct work with communities affected by DFI investments. In 2018, Accountability Counsel partnered with the Stanford Law School to focus on accountability for negative consequences of impact investments and how to address them in a proactive and community-oriented manner. This work has led to the development of a fit-for-purpose mechanism for impact investors. In this webinar, we will examine the workings and value of community feedback mechanisms via case studies, followed by a conversation on how the field can develop these mechanisms with Kindra Mohr and Sarah Singh of Accountability Counsel. They will be joined by Joanna Levitt Cea, and advocate and facilitator for investments that honor environmental and human rights and former Executive Director of the International Accountability Project.
How do we address the fact that a transition to renewable energy could leave further behind the very communities that have already been harmed?
The Just Transition framework, which we have explored previously in the TFIN, looks to center the voices of marginalized communities that are currently reliant on fossil fuel industry. Investors can play a meaningful role in ensuring in particular that these communities are given access to wealth-building opportunities within new energy infrastructure.
In this webinar, Dan Rosen and Brett Isaac of Navajo Power, a Public Benefit Company, will describe the company's model for developing renewable energy infrastructure on Native American tribal lands so as to maximize the economic benefits to the communities where the infrastructure is located.
Deep Democratization of Capital with The Boston Ujima Project
A core principle of Transform Finance's work is placing communities at the center of design, governance, and ownership of finance decisions that affect them.
The Boston Ujima Project is pioneering this principle on several fronts. As the first democratic investment fund in the country, Ujima represents a multi-stakeholder initiative of community members, community organizers, investors, business owners, and entrepreneurs that takes a bottom-up approach to private capital allocations. Read Morgan Simon's interview with the founders here.
In this webinar, Nia Evans of the Boston Ujima Project and Aaron Tanaka of the Center for Economic Democracy discuss the genesis of the Ujima Project and the rationale for their multi-stakeholder, economic democracy approach to capital, and share details on their new fund. Afterwards, Jed Emerson of Blended Value helps us frame the Ujima Project in the context of the broader purpose of capital.
A Case Study in Steward Ownership: The Conversion of The Organically Grown Company
The shortcomings of traditional ownership have expressed themselves in a surge of alternative ownership models that seek to tackle several problems: threats of mission drift vis a vis pressure to exit, concentration of enterprise value to founders and shareholders, and lack of worker and community engagement, to name a few.
Both historic and emerging models combat that narrative, as featured in Transform Finance's recent Alternative Ownership track at SOCAP18. Steward Ownership in particular has garnered attention of late, as it seeks to put purpose maximization at the center of companies, protect independence, and benefit/balance multiple stakeholders interests.
In this webinar, we will dig into a Steward Ownership transaction in practice: the recapitalization of the Organically Grown Company into a Purpose Driven Perpetual Trust. Natalie Reitman-White of OGC and Derek Razo of Purpose will discuss this instance, followed by a conversation on how investors can think about the applicability of the model to other enterprises.
Putting the “Activist” in Shareholder Activism
Shareholders rely on corporate engagement as a core tool to drive change in company practices. However promising, this strategy, along with divestment, has limitations when used by itself. Transform Finance is exploring more holistic approaches that harness new tools and financial innovations to drive capital for social change in the public markets.
One such approach is being pioneered by Majority Action. They create a bridge and partner with both investors and advocacy organizations, weaving together investigative research, digital strategies, and investor activism into comprehensive campaigns to tackle inequality, climate change, and human rights abuses.
In this webinar, Eli Kasargod-Staub of Majority Action will provide an overview of their unique take on shareholder activism and reclaiming the power of the ordinary investor, sharing the details of the organization's inaugural campaigns at gun manufacturers Sturm Ruger and Smith & Wesson.
Beyond Certification: Fair Trade as Impact-Driven Business Structures
We think of Fair Trade mainly as a certification, but it has also emerged as an approach to the structures of impactful enterprises. In fact, the pioneers of Fair Trade were mission-led businesses that gave power and priority to farmers and workers. The 330 Fair Trade enterprises across 70 countries, with turnover ranging from under $100k to over $100m, and in sectors ranging from chocolate to jewelry, have in common a structure that has been audited to confirm that its priority is the workers and farmers who make the products.
Recognizing the importance of structural elements, the World Fair Trade Organization has compiled a taxonomy of business structures that appear throughout its network of businesses, with diverse products, size and location. From this analysis emerges an interesting triangulation of mission, human rights conditions, and trading practices.
In this webinar, Erinch Sahan, Chief Executive of the WFTO, provides an overview of the features of Fair Trade enterprises, talks through examples, and suggests implications for investors interested in supporting impactful businesses (pre-reading available here).
Johny Joseph, CEO of Creative Handicrafts, then provides an example the structure for the women worker-owned Fair Trade Enterprise he runs in Mumbai. In doing so, we explore concretely how the interface of finance and social enterprise plays out in some tricky conditions.
The Role of Investors in Fostering a Just Transition
Investors addressing climate change and prioritizing renewable energy investments are more and more grappling with how a transition away from a fossil fuel economy can benefit all. Who is being left behind, especially among the most vulnerable and in already impacted communities?
The Just Transition Framework embodies the notion that we cannot get a pass on the social side when addressing the environmental side. In this webinar, we explore opportunities for investor action to build an equitable future as we move away from fossil fuels. Vonda Brunsting, formerly of the SEIU Capital Stewardship and now Program Manager for the Just Transition project at Harvard's Initiative for Responsible Investment, explains the underpinnings of the framework as well as the guidance that she and her co-authors, David Wood and Nick Robins, are currently finalizing.
Investing in Food Systems from an Agroecology Perspective
Agriculture has always been a mainstay of impact investing. But what would a more transformative approach to financing a fair future for agriculture look like?
Jen Astone, Executive Director of the Swift Foundation, set out to answer that question as she reviewed Swift’s holdings in agriculture and considered the role of philanthropy, impact investing, and traditional capital in supporting the food system.
On this TFIN webinar, Jen helps us understand the frame of agroecology and the relevance and role of foundations' patient capital in financing a transformative approach, comparing different investments and investable opportunities through this lens.
Community Capital Funds as Vehicles for Wealth and Power Building
In the face of exclusion from financial decision-making, marginalized communities (and in particular, communities of color) are taking matters into their own hands by creating community capital funds. Such vehicles, with sufficient community voice in their structure and investment decisions, have the ability to fill capital gaps, capturing the need for financing vetted community businesses. Equally importantly, they can be vehicles for power building.
In this webinar, Nwamaka Agbo of Nwamaka Agbo Consulting details her work at the intersection of power building, community governance, and capital. She then turns to the creation and structure of Democratizing Capital East Bay (DCEB), an Oakland-based community capital fund. Jeff Rosen of the Solidago Foundation then explains the financial mechanism of DCEB and how it compares an earlier iteration, the PVGrows Investment Fund, and other similar vehicles. The discussion focuses on how an integrated capital strategy that catalyzes investors of different risk profiles intersects with the deep mission of the fund.
2018 Mid-Year Review: Updates in Transformative Finance
The first half of 2018 has been quite active at the intersection of finance and social change. From a renewed attention to racial justice and capital, to major asset owners speaking a different language, to new policies initiatives that could cut either way, there hasn't been much of a dull moment.
In this special midyear webinar conversation, the Transform Finance Investor Network details trends and movements we have picked up on, gives an overview of what Transform Finance is working on, and showcases what some of our members are excited about at the moment.
Exploring Impact-Return Intersections in Underserved Communities in the Global South
Building on our prior explorations around the intersection of returns and impact, Aner Ben Ami of Candide and Greg Neichin of Ceniarth lead a conversation picking up on our earlier webinar on their approach to impact-led investments versus "responsible asset management" and looking at it in practice with Global Partnerships and One Acre Fund.
Both operating at impressive scale, they have deployed hundreds of millions of dollars in loans. Global Partnerships is now in its 6th debt fund, and has distributed over $280m in loans to about 120 partners in 19 countries. One Acre Fund anticipates working with about 900,000 farmers this year, increasing yields by offering inputs on credit. While they are proving that their beneficiaries are indeed very credit-worthy, they are also adamant that their work should be de-coupled from the idea of a 'market rate' of return. In fact, for One Acre Fund and Global Partnerships, there is an unequivocal trade-off - the higher the return their investors seek, the more limited they are in achieving their impact objectives.
In this webinar, Brian Heese of One Acre Fund and Rick Beckett of Global Partnerships share their strategies and discuss the specific opportunity (or cost) they see by offering a lower (or higher) return to their investors.
Opportunity Zones Under the New Tax Bill
Within the massive 2017 tax bill, impact investors are taking notice of a comparatively small new provision. Opportunity Zones provide a new tax benefit for investors in low income communities, but will it also benefit residents of those communities? The provision has raised hopes for some but has others remaining cautious over the new law. Click here to read about Opportunity Zones through a collection of resources.
In this webinar, Fran Seegull and John Cochrane of the U.S. Impact Investing Alliance discuss how the new benefit looks to incentivize capital, the types of business and projects it might promote, and how impact investors can shape this new market for community investment.
Filling the Solar Gap in Low Income Communities: A Look at PosiGen's Model
The residential solar market has seen impressive growth in recent years, with annual growth rates of over 50% between 2011-2016.
However, this growth has not been as inclusive as it should be -- most of the solar units are being sold to relatively affluent communities in a small number of states. Low income communities, who spend a disproportionate share of their household income on utility bills, are not getting access to the economic benefits that come with a solar roof and a more efficient home.
PosiGen is a residential solar and energy efficiency provider based in Louisiana that has seen impressive success selling to low- and moderate-income households, with over 11,000 systems to date. They have done this by re-designing the residential model from the ground up, rethinking credit underwriting (no FICO scores), sales strategies, and even system design to fit the needs of these underserved customers. In this webinar, we hear from PosiGen's CEO Tom Neyhart, and get an investor perspective from Aner Ben-Ami (Candide Group) on PosiGen and other efforts to democratize access to clean energy.
Responsible Exits and Beyond with the GIIN
The issue of how to exit an impact investment responsibly encapsulates many of the structuring issues we have been discussing through other TFIN webinars and a Transform Finance/Inter-American Development Bank report on alternative financing structures.
In this joint webinar with the Global Impact Investing Network (GIIN), we discuss the issue of responsible exits from a variety of angles. Hannah Schiff and Hannah Dithrich of the GIIN's Research Team discuss their recent report on the topic: Lasting Impact: The Need for Responsible Exits. This is followed by a discussion with expert practitioners Anna Kanze of Grassroots Capital Management and Chuck Holt of InvestEco, who discuss their approach to managing investments for continued impact.
A Fair Chance at Work – Employment Pathways for Excluded Individuals
A staggering 70 million Americans have a criminal record. Despite a tightening labor market, this forecloses for them - by rule or by discrimination - most employment opportunities, even though stable work is crucial to avoiding recidivism. Research from NELP suggests that removing barriers to employment for people with criminal records has been successful in numerous ways.To address this, several fair chance hiring initiatives have emerged, such as ban-the-box.
And previously incarcerated individuals are but one group that is traditionally excluded from employment opportunities: think of people experiencing homelessness or with language barriers.
An especially interesting model to counter exclusion is Open Hiring: the practice of filling jobs without judging applicants or asking any questions. Open Hiring creates mainstream work opportunities and supports individuals in succeeding at those jobs.
Exclusion from employment opportunities touches racial justice, criminal justice reform issues, and human capital management, and investors can play a role.
On this webinar we present the Open Hiring model pioneered by Greyston (famous for supplying brownies to Unilever's Ben & Jerry's) over the last 35 years. We will hear from Jonathan Halperin, Head of External Affairs; and Mike Brady, Greyston CEO. Greyston is now looking to fund a new initiative to make Open Hiring a universal practice and support other companies in its adoption.
Open Book Management as a Transformative Business Practice
As part of our inquiry into multi-stakeholder approaches, this webinar explores how Open Book Management can empower workers and increase their well being. Can Open Book Management be one of the cases of "alignment advantage," where the impact case and the business case go hand in hand?
Our guest presenters on this webinar are two certified Open Book Management coaches, Tom Strong, formerly senior program officer at the Hitachi Foundation, which focused on making the business case for investing in front-line, lower-wage workers, and Anne Claire Broughton, an expert in the field of employee engagement who co-founded and led the SJF Institute and authored the Human Capital Advantage curriculum.
Supercharging Place-Based Impact Investing
We recently examined how a family office can approach the risk / return / impact continuum across its entire portfolio. Building on that conversation, we explore how a foundation's renewed effort at understanding and driving its impact led it to focus on place-based innovation.
In this webinar, we hear how Gary Community Investments (GCI) uses its newly minted tool, the Transformative Impact Grid (TIGR) to supercharge its allocations. Matt Barry and Luis Duarte from CGI will discuss the genesis of TIGR, how it supports more deep-impact investments, how it spawned an in-house innovation hub and led to a revamped innovation strategy with three components aimed singly at supporting the well-being of Colorado's low-income children and their families.
Unpacking Finance-First and Impact-First Strategies
The conversation on the trade-off between financial returns and impact seems tired as much as it remains underexplored. How do some in the Transform Finance community think through it?
In this webinar, Greg Neichin of Ceniarth joins the Transform Finance Investor Network to explore their approach to the risk/return/impact continuum. Greg reviews the strategies ranging from responsible asset management to impact-driven capital preservation and programmatic investing. Aner Ben Ami of Candide Group provides a context for this approach vis a vis that of other family offices and impact investors.
Investing in Activists as For-Profit and Non-Profit Entrepreneurs
There is an inspiring trend in the current political environment: more activists are turning to entrepreneurship, and more investors are willing to support efforts to create a stronger civic environment through enterprise. This trend has important implications for who gets funded, how power gets built in communities, and how enterprises can be a tool for transformative social change.
Joining the Transform Finance Investor Network in this webinar are Julie Menter of New Media Ventures, the first seed fund and national network of angel investors supporting media and tech startups that disrupt politics and catalyze progressive change, and Sarah Williams of Propel Capital, an investor in New Media Ventures.
Democratized Tech and Distributed Ownership as an Exit Strategy
In this webinar, the Transform Finance Investor Network discusses real-world examples of technology platforms that are ripe for a transition to cooperative ownership — from young startups to the "Buy Twitter" initiative. We also discuss examples of platform cooperative investment term sheets, describing how investors can begin to think about supporting platform cooperativism and how existing investments can get liquidity for portfolio companies that may not be ideal candidates for future financings or big liquidity exits. Leading this discussion are Jason Wiener, a lawyer focusing on mission-driven business models and co-founder of Colorado Cooperative Developers, and Nathan Schneider, Scholar-in-Residence of Media Studies at the University of Colorado, Boulder, and leader in the platform cooperativism movement.
The Movement for Black Lives Economic Platform: The Role of Investors
The lack of racial justice in the United States is one of the most crucial issues for social justice investors to tackle. The Movement for Black Lives released last year a comprehensive platform that includes an economic plank that discusses various opportunities for the economic development of black communities. This webinar is led by Cathy Albisa, Director of the National Economic and Social Rights Initiative, and Rashad Jamal Buni of the Black Youth Project.
Affordable Housing Without Government Subsidies
In the current political climate, even less support can be expected from the government to drive the agenda of social change through investments. Affordable housing is one area that has historically relied on governmental support via tax advantages, and it is poised to worsen. The affordable housing crisis is not going away, even if the federal government decides to ignore it. Is there room between government-subsidized and market rate housing for impact investments to provide solutions? In this webinar, Sibley Simon, President of New Way Homes, presents a compelling model for addressing these challenges.
Muni Bonds and Social Justice Part II: What Can Investors Do?
We explored recently with Activest the intersection of racial justice and municipal bond finance, looking specifically at how to marshal progressive capital to incentivize and fund policy reforms at the municipal level. In this follow-on webinar, we will explore further how investors can engage with municipal bond finance from a social justice perspective. HIP Investor explains how they use impact metrics can form a basis for further accountability and impact management for the expected results of muni bonds. After which Neighborly will show how local investors can use municipal bonds to fund and support various improvements in local governments and nonprofits, spurring more civic engagement as well as recapitalizing communities.
Tech Platform Cooperatives, Food, and the Sharing Economy
Home cooks – largely immigrants and at-home parents from communities of color – are generally cut off from the food industry, or exploited by it. Tech platforms can offer an alternative entry point.
With this webinar we explore the topic of platform cooperativism, or the shared ownership of tech platforms so far dominated by VC investors, by looking at Josephine, a food and labor justice organization that empowers home cooks to sell meals to their neighbors and communities. The company offers software tools, an online marketplace, training and education, as well as other cook benefits, with a focus on cooks excluded or marginalized from professional opportunities.
Municipal Bonds and Racial Justice
Municipal bonds are largely overlooked as a high impact investment strategy. Yet there can be no doubt of the interplay between the way US cities are financed and the social justice outcomes that get driven. As a $3.7 trillion market, it is hardly one that ought to be overlooked, in particular in light of the precarious state of municipal finance for many cities.
Activest is a new project looking at marshalling progressive capital to incentivize and fund policy reforms at the municipal level. Founders, Ryan Bowers and Micah Gilmer, spoke about the group's insight into how cities' social policies and practices are predictive of financial risk and social outcomes.
Loan Guarantees as a Tool for Economic Transformation
After Apartheid officially ended in South Africa, economic justice, especially along racial lines, remained a major issue. Even to this day, 72% of adults in Southern Africa are excluded from financial services. Shared Interest identified the use of loan guarantees as a way of facilitating the provision of loans to previously excluded segments of the population. Since 1994, they have issued over $24 million in guarantees, leading to $113 million in loans issued.
Donna Katzin and Casey Cline joined us to speak about the use and the structuring of loan guarantees and shed some light on the specific context of Southern Africa, highlighting how guarantees can be a powerful tool in other regions as well.
Alternative Deal Structures to Maximize Impact: The Fund Perspective
The mismatch between traditional investment structures and what works for many impactful enterprises is fairly clear by now, as Aner Ben Ami documented in his TF blog post last year. This webinar dives deeper into the LP reasons to favor structured exits with a presentation by Aner Ben Ami of Pi Investments. Rodrigo Villar Esquivel of Adobe Capital also present how that fund has focused on alternative deal structures, the lessons learned, and how it plans to incorporate them in the next fund. Adobe Capital is a Latin American impact fund focused on the growth of impactful enterprises with novel, scalable, and profitable business models.
Growing Worker-Owned Coops Through Outside Financing
Among the factors that has held back the growth and proliferation of worker ownership stands out the lack of available financing structures. Dan Fireside, Equal Exchange's Capital Coordinator and a veteran of the industry, guided us through models of outside financing for coops that include outside non-voting shares, worker voting shares, and a combination of debt and retained earnings. With that context, Blake Jones, the celebrated founder of Namaste Solar, presented the company's current private placement of preferred stock to grow this tremendously successful worker-owned coop without losing its commitment to worker ownership and governance .
What is the issue with excessive share buybacks?
We all are aware of the perils of short-termism as an investment approach, and one of its nefarious manifestations is the rising issue of excessive share buybacks.
What are share buybacks and why are they inconsistent with an impact portfolio? And most relevantly - what can asset owners do to counter the public equity trend toward share buybacks?
Over the last few years, share buybacks have increased dramatically as a use of extra cash that could instead be used for capital expenditures and, in particular, for investments in the workforce in the form of training or wage increases. Given rising income inequality, excessive share buybacks looks a lot like part of the problem.
It is not often that Transform Finance and BlackRock are well aligned on an issue. Last year Larry Fink issued a strong call against share buybacks for institutional investors. We reviewed the issue and some potential engagement strategies for our community. The webinar was led by Eli Staub, Deputy Director for Research at the SEIU, who has thought about the relationship between share buybacks and inequality more than pretty much anyone else. If you are interested in joining a nascent initiative around share buybacks, please send an email to email@example.com.
Tying Fund Manager Returns to Impact
How can one ensure a focus on mission for an impact fund? How about tying fund manager compensation to impact metrics?
In a mainstream private equity fund, a general partner's (GP) financial compensation is linked to the fund's financial performance, aligning the GP's own financial incentive with maximizing profits for their limited partners. On the impact investing side, this traditional compensation structure leaves out the incentives to comply with the impact mission. Funds have been experimenting with tying GP compensation to social impact performance, yet these practices are by no means mainstream. So how can one tie fund manager returns to the impact created?
We looked at this issue through the lens of news media companies, which have historically dealt with the tension between mission and market. To mitigate the pressure, principled media companies have developed a number of creative ownership structures that protect editorial independence (i.e., mission) from political and market forces while allowing commercial growth - think of the New York Times's dual-share structure.
But what about the incentives to the investors? An innovator in this area is TFIN member Media Development Investment Fund (MDIF), an impact fund that finances independent media companies around the world. MDIF's new equity fund ties the GP's financial compensation to the fund's mission performance, as well as the financial performance. Harlan Mandel (CEO) and Evan Tachovsky (Impact Officer) discussed how MDIF embedded social impact performance in the equity fund's design and how the framework was adapted from MDIF's general portfolio impact assessment strategy.
Engaging Investors around quality job creation
Will the creation of minimum wage jobs with no benefits really help U.S. workers out of a cycle of poverty? Domestic impact investment is growing fast, with a number of funds focusing on job creation. There is a great case to be made for maximizing impact by investing in quality jobs and helping portfolio companies manage toward better jobs over time. Last year, Transform Finance supported Pi Investments and Huntington Capital (now HCAP Partners) in an effort to develop job quality standards for implementation around sustainable livelihoods, benefits, opportunities for advancement, and opportunities for ownership with a "floor-and-ladder" approach. This work turned into a major initiative to help asset owners and fund managers contribute to the creation of good jobs - not just by investing in best-in-class employers, but focusing on the potential for improvement in job quality that a committed investor can support. In this webinar we reviewed the work that brought together Transform Finance, TFIN founding member Pi Investments, and HCAP Partners, a $90+ million fund focused on job creation. We also reviewed the broader efforts in the job quality standards arena that Transform Finance is involved in as well as other sector-wide initiatives. For background information on this topic you may want to read Morgan Simon's SSIR piece on managing versus measuring impact: http://www.ssireview.org/blog/entry/managing_vs_measuring_impact_investment