Category: Small Business

Charting COP-26 — I know you are disappointed

“I know you are disappointed”. That was UN Secretary General Gutteres’ message to “young people, indigenous communities, women leaders, and all those leading the charge on climate action” as COP-26 adjourned in Glasgow. From the perspective of those four groups, representing rather a large percentage of the planet’s population, “disappointed” might be the diplomatic understatement of this century as they cling to the edge of an existential cliff. Can an institution that by design is meant to move (extremely) slowly and deliberately and with total consensus actually address something with this much urgency?

Perhaps the issue is one of framing. From the UN’s perspective, if they were presented with an international conflict where food systems were to collapse, millions of lives were to be at risk, millions were to become refugees, hundreds of billions of dollars of infrastructure were to be destroyed, and this catastrophe would know no borders and respect no nation, law, or military might, what would it do? Guns pointed at each other is actually one of many societal byproducts of climate change, but for this thought experiment we should focus on the magnitude of devastation and hardship that is happening without a shot being fired. If slowing things down is the UN’s true nature, what can it slow down to forestall the full impact of this emerging catastrophe while it finds a permanent fix? What resources would it mobilize?

197 nations are signing the “Glasgow Climate Pact”, but the two most populous countries insisted on a language change from “phase out” to “phase down” coal. That fundamentally changes the coal question from one of “when” to one of “if”. Again, looking at other activities that pose imminent threat to life and land that bring UN involvement, say, nuclear weapons development or massing troops on a national border, the distinction between “phase out” and “phase down” would be of monumental import. We are mired in process over outcome.

On the UN’s news feed for November 3rd, they reported “It’s ‘Finance Day’ at COP26, and the spotlight is on a big announcement: nearly 500 global financial services firms agreed on Wednesday to align $130 trillion – some 40 per cent of the world’s financial assets – with the climate goals set out in the Paris Agreement, including limiting global warming to 1.5 degrees Celsius.” At the UN above all other institutions, words mean something. What does “align” mean? Is this another “phase down” vs. “phase out” situation? For what we do on a regular basis as allocators of capital within that ecosystem of global financial services firms, we are forced to ask if this is a commitment to the largest greenwashing campaign in history. As we have written and spoken about repeatedly, we are looking to see whether this is the first step of many along a path to more sustainable capital allocation, or window dressing to manage optics. Intentionality is everything.

As noted previously, it is going to take the mobilization of private and not government capital to reach the intensity and scale of development necessary to forestall the worst effects of the climate crisis. Governments, who already failed to live up to their prior pledges to deploy $100 billion annually, should instead pivot to facilitating marketplaces and lowering barriers and allow the free market to do its work. Shifting capital to a regenerative model for food, energy, water, and infrastructure could unlock an economic boom and broaden participation in a way which would be historic in defining the 21st century.

WCM Chart of the Week for November 10, 2021

There were several positive aspects of last week’s BLS report on labor market conditions. Unemployment fell to 4.6% showing steady progress towards the multi-decade lows experienced prior to the pandemic. However, the overall labor market participation rate, at 61.6%, may be stagnating. Segmenting key age group participation rates (shown in this chart) unmasks a troubling trend — younger workers in the 18-24 year age bracket and prime aged workers in the 25-54 year old demographic are steadily returning to the workforce while older workers are not. Furthermore, participation in this older segment of the labor pool has receded to pandemic lows. There are several reasons for this, ranging from the natural consequence of an aging population to credible fears of viral and variant infections compounded by a booming stock market that has inflated retirement accounts potentially advancing planned retirement dates. Fewer people working, whether by choice or not, leads to lower tax receipts at a time when the US has persistent fiscal deficits. [chart courtesy of BLS, Bloomberg LP © 2021]

Charting COP-26 and The Global (In)Action Agenda for Innovation in Agriculture, November 9, 2021

On November 6th, we got a clever hashtag mention — #climateshot – and a “Global Action Agenda”: Increase investment in agricultural research and innovation to create more climate-resilient, low-emission technologies and practices; Focus at least a third of agricultural research and innovation investments deliver demand-driven solutions across food systems, to protect nature and limit climate change; Showcase successful business models and promote public-private partnerships that deploy these innovations on the scale needed to meet the climate and food security challenge; Forge consensus on the evidence of what works, and facilitate inclusive dialogue among food and climate champions around the world. A lot of the right stakeholders (160 institutions, NGOs, countries and companies) are at the table, and there are four key initiatives: “The 100 Million Farmers Multi-Stakeholder Platform, led by the World Economic Forum. The Global Research Alliance on Agricultural Greenhouse Gases (GRA) initiative, which brings countries together to find ways to grow more food without growing greenhouse gas emissions. The new CGIAR organisational structure, research and innovation strategy and portfolio of initiatives. ClimateShot allies from the impact investment community comprise over 20 investors, funders and initiatives, including innovative funds aiming to mobilise over US$5 billion in financing to transform agriculture for people, nature and the climate.” And that is where it all falls down. 20 investors, funders and initiatives and $5 billion in capital is not going to transform anything. (Re)Learning from our world indigenous communities how to shift, or shift back, to regenerative agricultural practices has the potential to address a major carbon problem while also making significant strides in stewardship of water systems, all the while feeding the planet and providing economic opportunity to individuals, families, communities, companies and countries. It starts at the grassroots. This graphic, courtesy of Marc Barasch and Green World Ventures, is a hand illustration of a regenerative approach to smallholder farming already employed in Nigeria which at scale addresses a myriad of economic, nutritional and climatological challenges. What is old is very much new again, and requires activation of those 100 million farmers as well as activation of sufficient capital, from far more than 20 stakeholders, to catalyze a global change.

WCM ESG Week — Theme 2: Banking the Un(der)banked

Deposits in the United States are insured by one of two federal agencies: the Federal Deposit Insurance Corporation or the National Credit Union Administration. In the first quarter of 2021, the Federal Deposit Insurance Corporation reported 4,978 current FDIC-insured commercial banking and savings institutions in the United States providing banking and credit services. In addition, the FDIC acts as the federal supervisor to another 3,209 state-chartered banks and savings institutions in the United States that are not members of the Federal Reserve system. These FDIC-insured and supervised institutions serviced in total over $22 trillion in assets as of quarter one 2021 (FDIC, 2021). In the same time frame, the NCUA reported a total of 5,068 federally insured credit unions servicing $1.95 trillion in assets to over 125 million customers (NCUA, 2021). So, what does it mean to be underbanked or unbanked in one of the richest and most prosperous countries in the world?

Every two years since 2009, the FDIC conducts a household survey in cooperation with the U.S. Census Bureau on the use of banking and financial services in the United States. The survey collects responses from approximately 33,000 households to analyze trends in the financial services industry by geographical, demographic, and economic factors.  The last survey, conducted in 2019, estimated 5.4% of U.S. households were unbanked, meaning that no household member had a checking or savings account at a bank or credit union. This percentage represents approximately 7.1 million households.  Unbanked rates were higher amongst lower-income, less-educated, and Black, Hispanic, and American Indian or Alaska Native households. Among households reported as unbanked, 48.9% cited the reason for not having an account as, “don’t have enough money to meet the minimum balance requirements” (FDIC, 2019). Furthermore, according to a survey conducted in 2019 by the Federal Reserve, an additional 16% of adults are underbanked in the United States, meaning they have a bank account but still use other alternative financial service products such as money orders or pawn shop loans due to lack of affordability or access to traditional and more secure products (Federal Reserve, 2017).

On a global scale, 1.7 billion adults are reported as unbanked in 2017, with China and India accounting for almost 325 million unbanked individuals alone. Women disproportionally represent 56 percent of all unbanked individuals globally (Findex, 2017). Lack of access to traditional banking services hinders individuals’ ability to build emergency funding, execute financial transactions such as paying bills or cashing checks, and results in a lack of access to credit.

Tune into our Wilde Capital Management ESG Week podcast Day 2: Banking the Un(der)banked where we explore financial services trends with Justin Conway, Vice President of Investment Partnerships at Calvert Impact Capital.

https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-banking-and-credit.htm

https://globalfindex.worldbank.org/sites/globalfindex/files/chapters/2017%20Findex%20full%20report_chapter2.pdf

https://www.ncua.gov/files/publications/analysis/industry-at-a-glance-march-2021.pdf

https://www.ncua.gov/files/publications/analysis/industry-at-a-glance-march-2021.pdf

https://www.fdic.gov/analysis/quarterly-banking-profile/statistics-at-a-glance/2021mar/industry.pdf

WCM Chart of the Week for December 7, 2020

This week we are in the midst of examining the likelihood of a pandemic-induced housing crisis and its effects on families, the economy, and markets.  As we learned during the Financial Crisis, it is a very slow process to foreclose on a mortgagee and remove them from a home, particularly when there is a massive backlog of borrowers in similar circumstances. Renters, on the other hand, are more immediately vulnerable to eviction and subsequent homelessness. This week’s chart from econofact.org illustrates the percentage of households suffering a moderate or extreme cost-burden of rent (30% to 50% of income) by household income tier. These observations are pre-COVID, so we can reasonably expect this picture to be much worse in 2020. Government-issued moratoria on evictions kept people in their homes but also shifted the economic burden to the literal doorstep of landlords, many of whom are small businesses. As those edicts roll off but the pandemic still rages in the coming months, landlords will of necessity pursue their economic and business interests and housing insecurity will jump. Whether it is on the backs of the landlords or the renters, the social and economic consequences of this income and housing crisis will play out in our communities, in the real economy and in the investment markets for some time to come.

WCM Chart of the Week for July 20, 2020

On Thursday, July 16th, the US Census Bureau released Retail Sales figures and month-over-month growth registered a nice surprise — 7.5%, well above the consensus estimate of 5.5%. The prior month’s figures were also revised upward.  We see this as an obvious reflection of the reopening of the US economy and pent up demand.  But, we don’t read much into the positive monthly gain versus the consensus estimate because economists have never had to forecast under conditions that can be considered “lock-down uncertainty”. What we do find encouraging and more interesting is that the reported annual growth rate was 1.1%.  At this time last year the US economy was on firm footing, and yet Retail Sales are modestly above those levels today. While the trajectory of sales growth is a relief, we would not be surprised to see some sluggishness emerge as we collectively digest the flurry of initial purchasing pre-quarantine and new virus spikes elicit further lockdown measures. [chart courtesy US Census Bureau, Bloomberg LP (c) 2020]

WCM appointed lead advisor for two new impact-oriented donor advised funds

We are very proud to announce that we are joining forces with HealRWorld, Angels.Inc., and the SDG Impact Fund as the lead advisor for two new donor advised funds (DAF). Each DAF is driven by a specific mission to direct capital in pursuit of the United Nations Sustainable Development Goals. The first DAF, the HealRWorld SDG Impact Fund, is focused on improving access to financial resources to fuel business and capital formation and catalyze growth for women- and minority-led small businesses. According to MPAC Solutions, a scant 1.3% of $70 Trillion of institutional capital is allocated to women and diverse management teams. The HealRWorld fund is raising capital through the charitable structure to make mission- and program-related investments in these small businesses that demonstrate strong ESG attributes and an orientation toward attaining one or more of the SDG targets. HealRWorld’s proprietary data and analysis has demonstrated that small businesses with strong ESG attributes are up to 3X more credit worthy than the typical small business, making them both good businesses and good risks.

The fund will also make strategic investments in community- and small business-oriented targets, both through lending and taking equity stakes, in order to further align investment with mission and amplify the potential outcomes from capital raised in the DAF, as well as bring coinvestment capital to the table to multiply the available resources for these businesses.

Equally exciting is the Angels.Inc SDG Impact Fund. The Angels.Inc fund is focused on funding media projects and ventures that are contributing vastly to innovation for the betterment of society and our future as well as contributing to our well-being, mental health and amplifying the positive messages and goals of the United Nations Sustainable Development Goals (SDGs). The investment mandate for the Angels.Inc. fund is more expansive than the HealRWorld fund, committing to investing in the same small businesses, but will also invest in and fund media-related targets consistent with Angels.Inc’s “Media For Good” mandate.

For more information or to make a commitment to these amazing charitable efforts geared at empowering and ennobling business and media to lift up and serve everyone equally and inclusively, please visit our Philanthropic Services page, email the Funds at funds@healrworld.com, email us at contact@wildecapitalmgmt.com, or call us at 866-894-5332.