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Greetings from San Francisco, where I have spent the past few days — and, to my surprise, heard lively chatter about Brussels. The reason is that a new EU directive on corporate sustainability due diligence looks set to raise the pressure on companies and financiers to track their sustainability footprint. And while Brussels is far from California, the fact that it could affect almost anyone doing business in Europe is creating ripples on the west coast — at least in the sustainability innovation and tech space.
And that illustrates a striking twist in the 21st century world: rules made in one market are raising the regulatory bar in other jurisdictions in sometimes unexpected ways. We saw this with auto emissions (where California’s rules two decades ago forced German car companies to clean up their act), and then with digital privacy (where Europe’s GDPR prompted California’s tech sector to change.) So, too, with green regulation.
Meanwhile, in today’s newsletter we look at another unexpected twist in the global green saga: slutty veganism. And check out our note below about the Global Innovation Fund — a tale that is particularly timely as France prepares to host the Bridgetown Initiative later this month to channel more money to poor countries. As ever, tell us what you think. (Gillian Tett)
It’s just one week to go until the FT’s Hydrogen Summit, with top-level speakers discussing one of the hottest areas of the emerging green economy. Sign up here to attend in London or online.
Veganism isn’t all ‘kale and quinoa salads’
The Texan metropolis of Dallas has hitherto been (in)famous for its Big Oil and Big Beef. Now a new wrinkle has emerged: Slutty Vegan, a black-owned US chain selling plant-based hamburgers, is opening its first franchise in the city, generating an intense local buzz.
The company is a tiddler compared with the chains that sell beef-based patties in the area. After launching in Atlanta in 2018, founder Pinky Cole now has 10 restaurants in Georgia, New York, and Alabama, funded by the $25mn she raised in a series-A round.
Nevertheless, Cole claims she will build “a billion-dollar brand”, and has already attracted a welter of publicity by seeking to blend black culture with vegan cooking in a bid to target a new demographic. The idea, as a New Yorker profile of Cole recently explained, is to stop presenting vegan food as earnestly “do-gooding” — and to “break free from kale and quinoa salads” — by giving it an irreverent, fun-loving spin instead, and making it seem less “white”, “elitist” and “middle-aged”. Case in point: the chain just grabbed even more attention by announcing that today it would start selling so-called “hooker fries” in its outlets, as part of a revamped menu, centred on its “slutty sauce”.
A cynic might carp that this is just clever marketing. Fair enough. They might also note that other plant-based food groups have created indigestion for investors recently, after being overhyped early in the ESG boom — and then watching their share price fall when the buzz fell away. The share price of Beyond Meat, say, was trading at almost $40 dollars last summer; today it is nearer to $10, below its initial public offering price, and recent results have been poor. That is partly because plant-based products are more expensive than meat, but also because there are very low barriers to entry; at last count some 60-odd start-ups were vying for a piece of this market.
But while Beyond Meat’s tale shows how fickle consumer fashions can be, the story of Slutty Vegan is an intriguing one for the sustainability space. For one thing it shows the power of tapping into different cultural “tribes”; it also shows the importance of trying to sell “green” with a sense of humour, irreverence and surprise. That is something that all ESG advocates could learn from in any field — however Texans themselves react to the idea of shunning their beloved beef. (Gillian Tett)
The “in” crowd comes to sustainable finance
In 2013, then-prime minister David Cameron announced the UK government had partnered with the US and some private investors to help fight poverty with a well-established financing trick: leverage.
The Global Innovation Fund that Cameron touted would use leverage — not by borrowing from banks, but by taking on riskier loans at concessional rates of return. This strategy would unlock further investment capital from private funds, other countries and multilateral development banks such as the World Bank.
Ten years on GIF is still going, having raised a total of $170mn. I heard GIF’s executive director Alix Peterson Zwane talk about “stretch financing” at a conference in April and followed up with her to discuss the future of so-called catalytic capital. GIF’s goal is to invest in businesses in parts of the world where people make less than $5 a day. Its typical investment size is $2mn to $5mn.
There are countless projects of that size that can have a meaningful impact on poor people’s lives, Zwane told me. “But they may never get done,” she said, because development financiers and multilateral development banks see them as too risky. “If the development finance community won’t underwrite such projects, then commercial banks and private sector investors certainly won’t.”
Grants are important but not enough, she said. Private equity funds, which can throw around a lot of cash, are looking for more tested deal flow with proven rates of return.
Stretch funding was less lending and more mobilising or “crowding in” investments, Zwane said. GIF was not going to deploy lots of money “but will take on risk so that other pots of money will come in”, she said.
“We are going to de-risk this so other capital can support these firms,” she said.
If GIF can keep growing in its second decade, it may help to burnish the mixed legacy of Cameron, whose referendum gamble led to Brexit. GIF is now raising a $100mn fund for a new for-profit subsidiary, GIF Growth, which will deploy its investment returns to preserve GIF’s grant capital. Zwane said she hoped GIF Growth could raise up to $100mn and close later this year.
“We as a community have been a bit hesitant to talk about trade-offs and say concessionality is appropriate in some situations,” Zwane said. (Patrick Temple-West)
The destruction of the Kakhovka Dam in Ukraine this week has been depressing and shocking — not least because it threatens to create an environmental disaster and remove a major source of hydroelectric power. But if you want a tiny flash of cheer — and a sign of Ukrainian resilience — look at this tale of how wind farms are helping Ukraine withstand Russian missile attacks. It is humbling and inspiring given the horrors of Moscow’s aggression.
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