Why SPACs will be key to the sustainability revolution

February 18, 2021 by  
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Why SPACs will be key to the sustainability revolution Andrew Shapiro Thu, 02/18/2021 – 02:11 Technology and finance have complementary histories of innovation, from the royal charters that launched the first global explorers to the early stock markets that fueled the industrial era. Today, the rise of SPACs is a capital markets innovation that matches the urgency and scope of our global sustainability challenges. For the uninitiated, SPACs — special purpose acquisition companies — are publicly listed entities that raise capital and then merge with a private growth company, providing that target company with the raised capital for further growth. After 21 years as a sustainability investor and strategist, I’ve enlisted a diverse team of veterans in our field to launch a SPAC . Although SPACs are not new, they have recently evolved and surged in number and account for about 60 percent of all new stock listings in the United States. In just the first six weeks of 2021, SPACs raised $33 billion, more than was raised by all SPACs before 2020. Electric vehicles have been one of the hottest categories for SPACs, as more than 24 EV-related companies agreed to go public via SPAC mergers over the last nine months. SPACs are pursuing a broad range of growth companies offering what we at Broadscale call “disruption for good” — transformative solutions that are cleaner, healthier, and more equitable. Some warn that this budding love affair could end badly, with the same kinds of disappointments we saw in the first cleantech boom during the 2000s. But we believe SPACs will be critical to meeting sustainability goals — and driving a long boom for investors — for a number of reasons. First, SPACs can quickly provide a fast-growing company with a large amount of capital at a certain valuation. Unlike a traditional IPO, in which companies must market their listings based solely on current financials, a SPAC merger can rely on future projections of revenue and profit, crucial for disruptors in change-resistant industries such as transportation, energy and food. A growing amount of venture capital backs world-positive breakthroughs , although not nearly enough private capital dedicated to scaling technologies that are already proven. SPACs can fill this gap — and thus justify more early-stage investment. Second, the growing number of sustainability SPACs offers investors more opportunities to back companies that match their values. ESG-minded institutional investors are allocating a record amount of capital to sustainable investments and SPACs enable the broadening of the investor base to consumers who want to invest in sustainability leaders. Mission-driven investors are more likely to embrace long-term value creation rather than the prevailing short-termism of quarterly earnings. They can provide patient capital more readily than VCs. And the results so far have been promising: ESG-oriented SPACs have been far outperforming traditional SPACs following their respective merger announcements with targets. As of Feb. 12, the median return for ESG SPACs from announcement (June 8) is 59.5 percent while the median return for other SPACs is 7.7 percent. Third, as public companies, SPAC targets will be more transparent and accountable, and better governed, than their private counterparts. Their boards will be more diverse due to new standards set by the Nasdaq and NYSE markets and states including California . They will have less tolerance for the practices of a founder such as Adam Neumann, who got the board of his private company WeWork to give him payouts that were criticized by governance experts when they finally came to light during the company’s failed IPO. Nikola Motors has been cited as an example of the dangers of SPACs because the company’s founding chairman was forced to resign when fraud allegations came to light just three months after it went public via a SPAC merger. Yet this is precisely the advantage of the public market: had Nikola continued to raise capital privately like so many other unicorns, the founder’s actions likely would have remained undisclosed for longer. Fourth, SPACs reward entrepreneurs in long-term alignment with investors. Until recently, most cleantech companies “exited” via sales to larger incumbents. A common problem with these buyouts is that the acquired company’s leaders stay for their earn-out and then depart as soon as they can, leaving behind unrealized impact and diminished value. To counter this, more incumbents are keeping acquisitions as stand-alone businesses so they can grow faster without bureaucracy — and their equity can continue to appreciate, benefiting both the acquirer and the startup team. Now, some incumbents are using SPAC mergers to go further: Engie, for example, just used a SPAC to spin-out EV Box, a charging business it acquired in 2017, which should incentivize the EV Box team to continue creating value for shareholders including Engie. SPACs are not a panacea for every growth company or the only form of innovative finance driving sustainability, and they will need to evolve with the market. But as we radically reorder how our society moves, lives, builds, eats and more, we will need to deploy unprecedented amounts of capital to scale sustainable technologies. We’ll want investment structures that offer opportunities for all investors, good corporate governance and strong incentives for successful entrepreneurs. SPACs are a timely innovation to achieve these goals. Topics Finance & Investing Innovation Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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Why SPACs will be key to the sustainability revolution

From the boardroom to Wall Street, ESG is crucial for financial resilience

February 18, 2021 by  
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From the boardroom to Wall Street, ESG is crucial for financial resilience Julia Travers Thu, 02/18/2021 – 00:45 The ongoing shift to center ESG is driven by multiple forces. Chief among them are a rising demand from the public for transparency and purpose in business and a growing awareness among corporations that sustainability is integral to financial health, according to participants at GreenBiz 21.  As diverse business stakeholders adjust to the climate crisis, social justice movements and a global pandemic, sustainable investing tactics are increasingly proven to benefit companies’ stability and profitability. In the first, COVID-stricken quarter of 2020, 89 percent of Morningstar’s ESG-screened indexes outperformed their broad market equivalents. And ESG-focused investment funds took in a record $347 billion in 2020. Among the many timely conversations during GreenBiz 21 were sessions that explored how boards can govern amid disruptive risks and the view of ESG from Wall Street. Both conversations framed ESG as crucial for financial survival and success. How boards can manage disruptive risk Two key takeaways from a discussion about board-level responsibility for ESG issues were that ESG fluency is an essential component of successful contemporary risk management for boards, and that, while boards have made some progress toward embracing sustainability principles within their purview, they still have a way to go. The speakers agreed more boards must recognize that ESG metrics and financial concerns are not disparate.  Veena Ramani, senior program director of capital market systems for Ceres, said “companies, particularly large companies, are really, really, really good risk managers. But the problem is, data out is only as good as data in — environmental and social issues are not being processed through the enterprise risk management systems, through scenario analysis. So obviously, the board is not going to get the analytics to make smart decisions. I hope people realize that they need to have a broader approach to risk management and broaden the scope of what goes up the board.”  I think the partnership with the CFO is incredibly important, the partnership with investor relations because sustainability goes to the heart of performance. To emerge from the pandemic and survive long term, ESG needs to be integrated into everything that a company is doing from a strategic and operational perspective, noted Douglas Chia, former executive director of The Conference Board ESG Center and now president of Soundboard Governance. Are boards ready to take on this task? Kathrin Winkler, a former CSO, CW Partners consultant and GreenBiz editor at large, asked, “Are boards ESG-literate?” “Largely, probably not,” responded D’Anne Hurd, independent trustee with Pax World Funds and former senior financial management executive at GTE and PepsiCo.  While Hurd has seen some progress in this regard, the first question she often receives from board members is, “What is ESG?” She said, “They better wake up,” mentioning that consumers, suppliers, employees and investors are pushing for greater ESG fluency and action.  Ramani said the Biden administration’s priorities will push ESG even further into the foreground. Both Hurd and Ramani pointed to a class offered by Ceres and Berkeley Law, “ESG: Navigating the Board’s Role,” as a relevant resource.  The view from Wall Street The importance of embracing the confluence of the ESG and financial realms is a trend Martina Cheung, president of S&P Global Market Intelligence and S&P Global, increasingly sees in her work. She noted in a GreenBiz 21 keynote interview: “Whether it’s climate risk, social equity governance and stronger representation from government … as we see that play out; the real effects of that on the markets, on companies’ performance, on sectors … our clients are turning to us and saying, ‘What information do you have that can help us as we have to make decisions, as we have to comply with regulations, as we look to raise capital?’” One important factor is the movement to standardize ESG reporting, according to Cheung. She thinks achieving a single set of standards is still a few years away but pointed to some promising convergences. Among them, the International Financial Reporting Standards (IFRS) Foundation’s proposal to develop ESG standards is “critical,” Cheung said.  One way sustainability professionals inside big companies can help investors traverse the ESG path is by spending more time collaborating with their peers in the corporate finance function, she said. “I think the partnership with the CFO is incredibly important, the partnership with investor relations because sustainability goes to the heart of performance.”  Pull Quote I think the partnership with the CFO is incredibly important, the partnership with investor relations because sustainability goes to the heart of performance. Topics Finance & Investing Corporate Strategy ESG GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Collage based on Unsplash images

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From the boardroom to Wall Street, ESG is crucial for financial resilience

Joe Biden can be the president for a sustainable private sector

February 15, 2021 by  
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Joe Biden can be the president for a sustainable private sector Lisa Woll Mon, 02/15/2021 – 01:00 Like no president in recent times, Joe Biden assumed office facing multiple interlocking crises. His ability to achieve his agenda will require action from key sectors across the country, including the investment and business community. Biden already has rejoined the Paris Agreement, committed to advocating for environmental justice and rolled out a government-wide focus on racial justice. He is advocating for a higher minimum wage, among other policies to address economic inequality. To accomplish this ambitious agenda, we believe the time is right for the president to establish a White House Office of Sustainable Finance and Business. It would create a focal point to engage the private sector to contribute to current and future priorities and to further accelerate the private sector’s focus on sustainability. The Office of Sustainable Finance and Business would develop a national strategy for U.S. leadership in sustainable finance and business. Here’s how it could work: The Office of Sustainable Finance and Business would develop a national strategy for U.S. leadership in sustainable finance and business through collaboration with the fast-growing network of businesses and organizations promoting such goals. Here’s why it can’t wait: The magnitude of the challenges facing the United States requires that the new administration leverage all sectors of society. Biden needs the private sector to help move this important work forward. This new office would significantly strengthen the administration’s government-wide approach to tackling urgent social and environmental issues. The sustainable investment community already is engaged in this effort, channeling dollars to companies with better environmental, social and governance (ESG) practices. One in every three professionally managed dollars in the United States — $17 trillion — is invested with an ESG focus. Sustainable investors were among the early voices urging companies to take action on climate change. They engage with companies to improve policies on issues ranging from human rights to diversity and water use. They also have been long-term investors in community banks and credit unions that are addressing economic and racial inequality in urban, rural and Indigenous communities. In parallel, more companies are embracing the shift to sustainable business practices that deliver important societal benefits as well as a strategic advantage. This includes committing to net-zero climate targets and changing their business models, products and services to accelerate the transition to a clean energy economy. In the last year, leading companies have made new commitments to diversity, equity and inclusion. Today, 90 percent of S&P 500 companies publish sustainability reports, up from 20 percent in 2011. Companies are being urged to transition from a shareholder primacy model to one focused on multiple stakeholders, including employees, customers, communities, the environment and shareholders. This is often referred to as stakeholder capitalism. In a July speech, Biden noted that “it’s way past time to put an end to shareholder capitalism.” We agree that this shift is overdue. A new White House Office of Sustainable Finance and Business would accelerate the growth of sustainable investment and catalyze the shift to stakeholder capitalism, both of which are critical contributions to Biden’s pledge to “build back better.” Advancing policies that support the growth of a sustainable American economy also supports U.S. economic competitiveness and our broader national interest. The office, in fact, could serve as an important tool for the restoration of American “soft power,” decimated by the past administration. Such an office also would reflect the priorities of an increasing number of Americans, particularly millennials and members of Gen Z, who expect that the places at which they shop and invest will be focused on positive outcomes for society and the environment. A White House office also will allow sustainable investors and companies to partner with the administration to achieve a more sustainable and equitable economy. By highlighting the critical role of the private sector, Biden can further drive alignment of investment capital and corporate actions with his administration’s policy priorities. Pull Quote The Office of Sustainable Finance and Business would develop a national strategy for U.S. leadership in sustainable finance and business. Contributors Aron Cramer Topics Policy & Politics Collective Insight BSR Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off GreenBiz photocollage

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Joe Biden can be the president for a sustainable private sector

Paul Polman: How responsible businesses can step forward to fight coronavirus

March 24, 2020 by  
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As the limits on our go-to crisis-management tools become clear, it is increasingly apparent that we need the private sector to join the COVID-19 front line.

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Paul Polman: How responsible businesses can step forward to fight coronavirus

Why human health must be at the center of climate action

December 11, 2019 by  
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Companies can exacerbate the challenges, but the private sector also positively contribute to solving these challenges.

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Why human health must be at the center of climate action

How an impact investment firm co-founder sees the future of capitalism

September 9, 2019 by  
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A Q&A with Caprock’s Matthew Weatherly-White on the social responsibilities and visibilities of the private sector.

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How an impact investment firm co-founder sees the future of capitalism

How business can affect human rights: 4 lessons from peacebuilding and development

September 3, 2019 by  
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We can do more to proactively protect the well-being of people in communities where businesses operate — with the power of the private sector.

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How business can affect human rights: 4 lessons from peacebuilding and development

Opportunity zones could provide major boost for clean energy, sustainable development

August 14, 2019 by  
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Predictions of $200 to $300 billion investments in the nation’s 8,700+ OZones show the massive opportunity for the private sector.

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Opportunity zones could provide major boost for clean energy, sustainable development

Innovator BanQu builds blockchain and bridges for traceability, small farmers’ livelihoods

August 14, 2019 by  
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Companies such as Anheuser-Busch InBev and Mars have allied with the company to help customers better understand their product origins and sustainability.

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Innovator BanQu builds blockchain and bridges for traceability, small farmers’ livelihoods

Companies are already decarbonizing shipping without electric fleets — here’s how

August 14, 2019 by  
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For fleet managers, the key is in the logistics. These three tactics can cut costs and emissions.

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Companies are already decarbonizing shipping without electric fleets — here’s how

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