A Rising Tide Lifts All Boats

Despite everyone getting sick of hearing about COVID-19 and all the people that suddenly became part-time epidemiologists and economists, we felt it was important to share some of our thoughts. First and foremost, we hope you and your families have managed to stay healthy. Second, we have a huge amount of empathy for business owners, leaders and employees that have been so harshly impacted financially. And of course, our fund and our portfolio of amazing founders and the companies they lead will not be immune to the trickle down effects: one out of every three people on the planet is now in some form of quarantine.

But, here we switch to a message of pride, hope and optimism. We have never been so proud of our portfolio companies. These small teams with small budgets that are already challenged under normal conditions of growth, had to find it within themselves to reinvent their businesses on the fly while cutting costs. I can say that without exception, every single company in our portfolio planned, innovated and executed on a new plan that increased their odds of surviving this crisis and resuming growth as soon as possible. The level of compassion shown by these leaders will surely be remembered by their teams and customers, leading to further loyalty in the future.

It has been our assertion for several years that impact driven businesses will outperform in a downturn so now is our time to shine. For Active Impact's part, we put the "Active" in our name to the test and increased our support and involvement from weekly to daily. This is not the first economic downturn that I've been through. I was the one managing my own team and P&L last time so I can empathize with what they are going through and I hope I learned a few things that can be passed on. In addition, portfolios provide diversification and we have come to appreciate this even more after seeing some of our portfolio companies negatively impacted, some not impacted and one very positively impacted.

No doubt this will be a tough year for most but long term, we are bullish. We are 100% equipped to work from home at full capacity and we are still looking for great companies to invest in. One final silver lining to this horrible virus that relates to our mission - GHG emissions and pollution went way down last month! Satellite images from space have shown the air clearing over China and some rivers in Europe are running clear for the first time in decades. Now it's time to find ways to continue doing this without having to shut down our entire economy.

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Positive Momentum in a Fractured System?

Last month KKR announced the launch of a new $1.3B VC fund to invest in for-profits tackling climate change and Jeff Bezos committed $10B to a philanthropic fund to reduce climate change. That's a lot of money going to the right place! Our first reaction was excitement that the momentum continues to build. Then selfishly we contemplate how these big funds might create future financing opportunities for the companies that we have invested in early. Then we are reminded of our insignificance and wonder if we can really make a difference with our fund which is dwarfed in comparison. We take a big breath and remind ourselves that we can and will grow larger over time. We are proud to be doing our part, and hope we are inspiring more people to engage in impact investing whether together with us or elsewhere. In the midst of all this reflection I finally finish reading "Winners Take All" (a must-read for those that truly care about impact) and get other important reminders. First, we will not be able to effect the level of change we seek simply through impact investing. It's an exciting category and creates a path for many more to participate because there is no sacrifice required. But for some issues, we can't rely on capitalism alone, we require government and philanthropy which is funny because we have been quoted saying that sentence in exactly the opposite order which is also true. For as much flack as our governments take for their inefficiencies, they play a key role in providing a platform for our companies to succeed. For example, we trust our currency to hold value and be worth earning and saving, we enjoy access to critical infrastructure and we depend on the maintenance of peace and order. We look for increased change to facilitate protection of planet and people alongside profit. The second key takeaway from the book for me was to hold people and companies accountable for how they make their money, not just how they give it away. Jeff Bezos and Amazon could be an example of this because the richest man in the world was minted by shipping items all across the world in an obscene amount of packaging. If he were to simply ignore these factors and then donate $10B to climate change then that wouldn't be enough. In his defense, we have seen a few announcements of late where Amazon is also changing their business practices to reduce impact such as electrification of their fleet and we hope to see more. To sum it all up, the best case scenario is that we coordinate all of the forces of change and stop trying to do this in a silo of just investing or philanthropy or government and that corporations become more accountable for their negative externalities in addition to investing and donating to create the changes they seek. For our part, we will continue to fund companies that create profits together with positive environmental or social impact, while doing what we can to to coordinate, support and leverage impact through philanthropy and government.

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A Year in Review

Happy New Year! With 2019 coming to an end, we immediately set our sights on 2020 but first we wanted to take a moment to reflect on a number of significant milestones over the last year. The following list contains a number of items that would be non-events for many funds but for us they were firsts and felt worthy of celebration. These highlights are also accompanied by feelings of gratitude for all the help and support we received along the way. 

Jan - Investment number four in Inkblot
Feb - First annual report created for our LP's
Mar - Final close for the fund at our $10M cap
Apr - Closed legals, capital call for new LP's and first LPAC meeting
May - Investment number five in Clir
Jun - Launched volunteer program to support founders
Jul - Investment number six in ChopValue
Aug - GoJava follow-on investment, support Greta and climate action movement
Sep - Investment number seven in Sametrica, capital call, Clir investment converts on Series A 
Oct - Attend SFF conference and speak at CAIA conference about impact, capital call
Nov - Investment number eight in Social Nature, official Jaza close, Keela follow-on investment
Dec - Inkblot follow-on investment, Trish Nixon joins as advisor

We already have some lofty goals for 2020 and we're excited about what this year will bring. We hope it's a prosperous and high impact year for all of you!

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Big Banks Commit Big Money to Climate

At Active Impact, our mission is to help facilitate the flow of capital to environmental and social good. We are encouraged to see signs that big financial institutions may be looking to also become more aligned with that mission. A recent article by Bill McKibben of 360.org published in the New Yorker highlighted the fact that the money provided by big banks to finance fossil fuel projects was the "the oxygen on which the fire of global warming burns". The point was that GHG emission reduction requires a commitment from the banks to stop financing big projects that pollute. In September, the Global Alliance on Banking Values announced that over 50 participating financial institutions representing $2.9 trillion in assets had committed to measure and disclose carbon emissions associated with their loans and investments. This is a positive first step to reducing such lending activity. Canadian banks are also promising to commit to environmental sustainability initiatives. For example, CIBC recently promised $150B for environmental and sustainable financing activities by 2027 and BMO committed $400B to sustainable financing activities by 2025, including the intention to create a $250M impact investment fund to find and scale solutions to sustainability problems. Capital diverted from negative to positive use will be a massive catalyst for change!

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