Welcome to the weekend. Hello from Cambridge. If you’re at the Harvard Social Enterprise Conference, shoot me an email. Let’s connect! Also, you may noticed I changed up the format a bit this week – instead of breaking out the content by categories, I just lumped it all in together. Let me know what you think. Thanks!
JUST. According to the recently released JUST Capital Index, over the past year, the 100 “just” companies delivered an average return on equity 24% over the past five years, compared to 16% for other companies in the Russell 1000. The report indicates that investors can achieve even higher returns, and at lower risk, by investing in “just” companies that prioritize worker pay and treatment, product quality, customer respect and other issues Americans care about most. These JUST companies 1) Pay their median U.S. worker 33% more than other companies in the Russell 1000. 2) Are more than 10 times likelier to have conducted gender pay equity analyses. 3) Use 74% less electricity, 80% less fuel, 87% less water and emit 72% fewer GHGs per dollar of revenue. 4) Employ on average 38% more workers in the U.S. TheStreet (7 minutes)
Social Enterprise in Coal Country. Coalfield Development Corp. has built a family of social enterprises prototyping a diverse West Virginian economy. Coalfield Corp. offers steady work, training and education, mentorship and a pathway to ownership in a company that is building homes, installing solar, and growing and selling food. They hire unemployed, low-income people and developed this 33–6–3 model to organize their work week. That’s 33 hours of paid work; six hours in the classroom in community college, where people work towards an associate’s degree; and three hours of personal and professional development. We developed and refined that to address all that “life stuff”. There are a lot of different opportunities here, so Coalfield is purposely scattered across several of them: green-collar construction, agriculture, solar, arts, and environmental rehabilitation. We want to show the possibility of diversity by being diverse ourselves. “Ultimately, we want our crew members to own different business lines within each of these sectors,” says CEO Brandon Dennison. “We’ve come up with something that is chipping away at generational poverty.” Impact Alpha (6 minutes)
Humanity United. Humanity United, part of the Omidyar Group, has raised $23 million to invest in early-stage technology companies fighting human trafficking and other abusive practices in corporate supply chains around the world. Humanity United’s fund, called Working Capital, is backed by Walt Disney Company, Walmart Foundation, C&A Foundation, and several impact investors, including the Soros Economic Development Foundation. The fund is looking to invest between $500,000 and $2 million in 12 to 15 companies using a mix of equity, convertible debt and other alternative deal structures. The fund is meant to address the use of slave labor, poor working conditions and other worker abuse that plagues the networks that companies use to assemble products before they are shipped to consumers. Impact Alpha (5 minutes)
Lasting Impact. More than 80 percent of impact investors believe that they have a responsibility to try to ensure continuity of impact after exit. The new report from GIIN, Lasting Impact: The Need for Responsible Exits, helps investors fulfill that responsibility by detailing various practical strategies for ensuring long-term impact. Practices include: 1) Prior to investing: Impact investors seek to understand whether impact is deeply embedded in company business models or operational practices and the likely growth trajectory of the business that is consistent with maintaining these practices. 2) At the time of investment: Impact investors seek alignment with co-investors and factor lasting impact into the structure of their deals; aspects such as time horizons and repayment conditions often influence investee strategy and growth expectations in ways that may affect sustainability. 3) During investment: Impact investors work with investee company management to instill policies and practices that ensure positive impact continues over the long-term. 4) At the time of exit: Many decisions affect impact, including timing of exit, retaining investee management, and selecting buyers aligned with the investee’s mission. GIIN (25 minutes)
Employee Ownership. Kim, the owner of New Belgium Brewing Company, noticed that the co-workers who owned the company contributed more value, and she set a goal for New Belgium to become 100 percent employee-owned. In 2012, Kim and the other owners in New Belgium realized that dream: instead of selling their company to a major multinational company like AB-InBev or SAB Miller Coors (and the ultra-wealthy investors that own them), they decided to sell to their coworkers. As New Belgium continues to grow, every manager and janitor, every brewer and receptionist at the company have the chance to become owners. And the company’s success can create security for their families and a healthy retirement. In a world where the average CEO makes over seventy times the median employee salary, this kind of financial security for all employees is rare. Village Capital (5 minutes)
Impact at Mintz Levin. A good friend and lawyer, turned social entrepreneur, turned impact investor, turned lawyer, Ben Stone recently brought his talents to Mintz Levin in Boston. I like the way he’s thinking about serving the sector. He notes that they take a collaborative, empathetic approach, which includes (a) spending time in the target community and/or with the company’s customers and partners to understand their motivations and viewpoints; (b) spending time with a company’s leaders to understand how they plan to balance social and financial objectives; (c) leaning into the firm’s nimble, entrepreneurial culture to develop tailored, straight-forward strategies and solutions; and (4) simply being inspired by the grit, determination, and impact of our remarkable clients. Social Innovation Journal (8 minutes)
Impact Esq is a monthly email summarizing the best articles on social enterprise and impact investing law edited by Kyle Westaway – Managing Partner of Westaway, Lecturer on Law at Harvard Law School and author of Profit & Purpose. If you like what you’re reading please share it with other social impact attorneys. Have a restful and thoughtful weekend.