Category: Investment

Sustainable, Responsible Impact Investing

December 15, 2022 Impact Investing

Jeff Bartel

Chairman and Managing Director

With a quick look at today’s headlines, it is unsurprising that some investors want their money going to the exact causes driving news stories on social and environmental value creation. These investors seek profits from their investments, but they also want to know that they play a role in making positive changes globally or in communities.

From climate change to social justice issues, sustainable, responsible impact investment options are plentiful and warrant a closer look at their rise and growth.

The Rise of Sustainable, Responsible Impact Investing

Sustainable, responsible impact investing supports investment in stocks, bonds, securities, and other projects from organizations that focus on social, environmental, and governance issues. Some of the most popular options involve companies expressing interest and concern on climate change, social justice, poverty eradication, end to geopolitical conflicts, and sustainable natural resources.

Funding in sustainable, responsible impact investing has increased significantly from around $3T in 2010 to $16.6T in 2020. This growth is expected to continue, with experts predicting this sector will grow to $50T by 2025.

One of the biggest trends in sustainable, responsible impact investing is that it is now attracting the attention of all investors, even those without a particular interest in these issues. Unfortunately, this has resulted in greenwashing, with increased investment options falsely claiming to invest in these issues. Therefore, it is vital for investors to thoroughly vet all sustainable, responsible impact investing opportunities before investing.

Demographics Demanding Sustainable, Responsible Impact Investing

Millennial investors have been the driving force behind sustainable, responsible impact investing for years. Today, this has all changed. Not only are younger generations also interested in investments that work towards making a difference in the world, but there has also been an increase in investments from both Gen X and baby boomer generations.

Perhaps most surprising is that Millennial and Gen Z investors are occasionally willing to absorb some loss in their returns if these investments propel worldwide changes in diversity, income equality, climate change, renewable energy, and carbon emissions reduction. For example, one study shows that investors under 41 years old are willing to lose as much as 10% of their investments to bring improvements to society and the planet.

Climate Change Is Driving Sustainable Impact Investing

Climate change is one of the top issues for sustainable, responsible impact investors. Due to this popularity and multiple climate change concerns, there is a vast diversity of investment opportunities available, such as green bonds, green real estate, alternative energy, emissions reductions, and advanced technology, such as water technology.

With the increase in climate change investment opportunities and the rise in greenwashing, today’s investors are taking the time to research and track companies before investing; these investors seek transparency and results.

Responsible Impact Investing in Agriculture

Agriculture is another popular sector for sustainable, responsible impact investing. For example, food insecurities are a growing concern for global leaders and investors interested in sustainable, responsible impact investing. In addition, as climate change continues to impact some of the poorest nations in the world, there is a strong likelihood that investments in responsible agriculture will continue to grow.

Impact investing in sustainable agriculture focuses on investments involving sustainable farming practices, land conservation, and organic farming practices free from chemicals and dangerous pesticides. Social equality issues affecting agriculture, such as gender diversity and child labor laws, are other standard options within the agriculture sector.

Reducing Global Conflict with Sustainable, Responsible Impact

The Ukraine-Russian conflict has certainly heightened investors’ interest in responsible impact investment involving geopolitical conflicts. In 2020 alone, over 80 million people were displaced worldwide due to various issues. In many countries, such as the United States, where investors have limited options to help in these conflicts making responsible impact investments is an ideal alternative.

However, these investments should not be made in haste. Instead, investors should take the time to research each fund or company they are considering investing in to precisely see what it uses the funds for, such as political activities or refugee support. This extra step ensures your investment is going towards the causes you care about most.

While sustainable, responsible impact investing was primarily in the hands of Millennials not long ago, that has all changed. Investors from all generations, walks of life, and investment goals are starting to make this type of investment a part of their overall portfolios. Sustainable, responsible impact investing provides a way to diversify your investment portfolio. First, however, it is essential to research and ensure you are investing in the right organizations.

Real Estate Finance and Funding Innovations

November 14, 2022 Real Estate

Jeff Bartel

Chairman and Managing Director

Real Estate Finance and the Rise of Fintech for Funding

As inflation concerns continue to trouble some investors and interest rates keep rising, it is not surprising that real estate investors are looking for alternative funding and real estate finance options. While fintech has played a role in the real estate industry for decades, today’s economic conditions have catapulted it to the forefront.

The reality is that fintech is changing how we handle real estate finance, track property ownership, and even purchase real property. These changes are generating new real estate opportunities, with fintech assisting investors with growing investment portfolios.

Crowdfunding Real Estate Investments

One major shift in real estate investments is the popularity of crowdfunding. This type of real estate finance strategy is often a win-win for developers and investors. It allows developers to bypass the traditional lending options that are usually time-consuming and limited in real estate funding opportunities and will enable investors to diversify their investment portfolios to include real estate without the hefty upfront down payment.

In many cases, crowdfunding real estate investments can provide a higher dividend than traditional real estate transactions. Most importantly, crowdfunding in the real estate market can help minimize your risk level because you do not have to use any personal assets for collateral.

While crowdfunding can provide an alternative way to invest in real estate, there are some downsides to using this strategy. First and most importantly, since there are multiple owners, you will not have direct control over the decisions regarding the property, and you typically cannot use the property as collateral for other loans. Additionally, some crowdfunding platforms that offer real estate investments only work with accredited investors. Finally, since this is a relatively new investment opportunity, it is sometimes difficult to determine which platform is best.

It is crucial to weigh the pros and cons of this investment option before deciding whether crowdfunding real estate investments are suitable for you.

Fintech innovation, including blockchain, changes the speed of transactions while decentralizing the investing process

Blockchain Transactions in Real Estate Finance

At first glance, it may seem like something other than blockchain and real estate should be partnered. However, the reality is that blockchain may help to revolutionize the real estate industry. There are several ways this is happening.

First, blockchain provides a safe and secure way of storing and managing real estate records and transactions. Second, it helps to eliminate the middleman by decentralizing the process, which is prone to fraud and errors. Finally, blockchain can speed up the transfer of ownership process and cut costs for buyers.

Those interested in investing in blockchain real estate transactions can do so in several ways, including:

Purchase Property With Cryptocurrency

The most direct way to invest in real estate through blockchain is by purchasing real estate using cryptocurrency. Since this is a new investment opportunity, investment options using this payment method are possibly limited. However, there are several platforms that investors can use to purchase property both nationally and internationally using cryptocurrency.

Buy Real Estate Tokens

You can also purchase specialized real estate tokens representing ownership of a specific property. In many cases, tokenized real estate opportunities are broken into fractions, which means that one token represents a portion of the property. You can also sell or trade these tokens through numerous platforms.

Invest in Real Estate Finance Related Cryptocurrencies

If you are not ready to purchase real estate with blockchain technologies, you can invest in buying cryptocurrencies that involve real estate finance. For example, you can invest in a cryptocurrency that is working towards creating a decentralized storage system for property transfers and ownership.

Cloud-Based Commercial Lending

Cloud-based technology is already helping simplify the real estate industry. For example, cloud-based loan origination software helps streamline the loan process for both the lender and the investor. It allows most of the lending process, if not the entire process, to complete online while creating safe, more secure document management capabilities.

This technology is such a big part of the lending process, especially for commercial real estate transactions, that it has gained the government’s attention. The Biden administration recently announced its plans to expand its SMB 7(a) program, making it more assessable to a diverse set of small business owners.

While no agreement regarding accomplishing this goal is set in stone, many in the cloud-based lending sector are hoping for good news for the industry. Because fintech lending opportunities tend to attract many minorities, as well as low-income, business owners could play a role in helping the government reach its goals. In addition, with or without the government’s approval for cloud-based commercial lending to participate in the SMB 7(a) program, this type of lending will likely continue to increase as technology advances.

When investing in fintech real estate, it is essential to do your research and understand what opportunities are available. Since this is a relatively new investment market, many fraudulent platforms often offer great rewards for your investment. This factor makes it critical to only work with fintech companies and platforms featuring a solid reputation for success.

The Biotech Venture Capital Market in 2023

October 28, 2022 Biotech

Jeff Bartel

Chairman and Managing Director

Venture capital investments in the biotech industry have steadily increased since 2015, with a significant spike in Q1 2021. Although these investments dropped slightly in the following quarters, investors should not be too concerned. We will discuss the causes behind this drop in VC investments and explain why biotech is still a valuable investment.

Biotech Venture Capital Trends

Over the last three years, we have seen a significant spike in venture capital investments in the biotech industry. In 2019, VC biotech investments stood at $1.5B in Q1 and continued to rise, peaking at $9.1B in Q1 2021. However, since then, there has been a slight decrease in VC funding going to the biotech sector.

Despite the recent decrease in VC funding, billions of VC dollars still impact the biotech industry. Investors seem particularly interested in the therapeutic-based biotech sector. This biotech research and development area is so popular that VC companies worldwide invested more than $52B into this field from 2019 to 2021.

Some of the most popular therapeutic-based biotech research areas for investors include:

  • Cell Therapy: $7.7B investment from 2019-2021
  • Next Generation Gene Therapy: $7.6B investment from 2019-2021
  • Precision Medicine: $4.5B investment from 2019-2021
  • Machine-Learning Drug Discovery: $4.4B investment from 2019-2021
  • New Drug Delivery Methods: $4.0B investment from 2019-2021

VC investors in biotech also trend more toward startup biotech companies. In fact, from 2019-2021, nearly two-thirds of all VC funding in biotech went to startup companies.

The Drop in Biotech Venture Capital and the Rebound Potential

While VC investments in biotech have dropped since its big spike in Q1 2021 ($9.1B), Q1 2022 ($7.6B) investment levels are still 58% higher than investments in Q4 2020 ($4.8B). This drop in VC funding is partly due to uncontrollable global events, including inflation concerns and unstable markets.

One thing is sure; VC investors are becoming more selective regarding their investment choices. While investments in biotech can provide rapid growth once the product makes it to market, investors may be looking for more movement in the development phase.

There are currently over a thousand biotech trials underway, but out of the 50 drugs approved by the FDA in 2021, only 2 of these drugs were in the biotech field. While this may seem like a small number, it is a significant advancement for the biotech industry and could signify what is to come.

Test tubes representing an biotech venture capital investment

Investment in Cell and Gene Therapies

Biotech is a booming industry with plenty of room for growth. More than 3,000 biotech firms were formed in 2021 alone. Studies show that the industry is set to grow by 30% by 2025. In addition, 21 cell therapy and 31 gene therapy launches are on track for 2024.

There has been a shift in the type of biotech investments that interest VC investors. In early 2020, many VC investors still leaned towards traditional biotech areas, such as microbial. In 2021, however, there was a significant shift in VC investors to next-generation cell and gene therapy investment opportunities. Considering recent advancements in this field and a few successful launches, venture capitalists will likely continue to invest in this emerging technology.

Funding for Machine Learning in Drug Research

Biotech advancements can be a costly endeavor. Estimates show that the research and development phase alone can cost up to $2.3B and close to another $1M to get the product to market. Fortunately, investments in machine learning and artificial intelligence by the biotech industry are helping to cut these costs, which results in higher rewards for venture capitalists choosing to invest in this biotech sector. Studies show that machine learning can help reduce preclinical costs by up to 40%.

Cost-savings are just some of the benefits machine learning offers. It also can help biotech companies speed up the research and development phase. This advanced technology can help take some guesswork out of the development phase by transforming big data into analytical results. Moreover, machine learning is so impactful that experts anticipate biotech companies investing in machine learning may bring as many as 50 novel therapies to market over ten years.

Biotech companies investing in machine learning technology are already grabbing the attention of VC investors. In combination with small molecule drug discovery, machine learning has overwhelmingly received most of the VC funding.

Despite the recent drop in VC funding, the value of the biotech sector is far from over. With machine learning and artificial intelligence helping to save costs, speed up the research and development phase and simplify the launch phase, a surge in biotech products coming to market is likely on the horizon. As a result, this could be the perfect time for VC investors to invest in biotech before the market is saturated.

High-Commitment, High-Performance Management

August 31, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

High-commitment, high-performance management organizations (HCHP) sustain performance over long periods by concentrating on three organizational pillars. These pillars are crucial to creating a long-term vision that looks at big-picture growth and longevity rather than the bottom-line needs of this year or quarter. HCHP organizations are characterized in part by:

  • A sustained commitment from all levels, including investors and customers, to organizational excellence and shared missions
  • Long periods of achievement that exceed expectations and can be described as excellent
  • Clear goals that are tied to big-picture organizational success and can be dropped down to support relevant team and individual goals at every layer
  • An emphasis on continuous learning and improvement throughout the organization, including skills development, process improvement, and growth

The pillars of high-commitment, high-performance management are performance alignment, psychological alignment, and learning and change.

Performance Alignment

At the most basic, performance alignment is about getting the ducks in a row within an organization so everyone can focus well on a shared winning strategy. That being said, this pillar does not look to dictate single-minded paths from the top down. Instead, leaders and those on their teams work together to create a business strategy that supports success.

That strategy becomes the beacon for all paths to support the big-picture strategy. The business goal must be communicated to stakeholders at all levels. Stakeholders must have goals that serve them individually while supporting the business’s goals. When performance is aligned across the organization, success for the business means success for everyone, and success for one means the support of business success.

High-Performance Management in the Organizational Chain

To achieve high performance as a business, every link in the organizational chain must also be high-performance. That requires alignment across overall strategy and goals, specific, well-documented roles and responsibilities, and rules for decision-making.

Some common challenges for creating a high-performance culture include:

  • Putting the right leaders in place
  • Getting (and keeping) commitment from teams and people at all levels of the organization
  • Managing the communication and collaboration required for seamless performance alignment
  • Building and supporting the processes and tools required for this intense alignment

Psychology Alignment

It is not enough to set shared goals and align performance across all levels of an organization. If performance alignment is the structure by which high-commitment, high-performance firms are built, psychological alignment is the glue that helps hold it all together.

High-performance management practices require leadership to empower employees and trust them to make decisions. Ensuring everyone is aligned to a higher purpose can help build that trust because everyone is working toward the same common goal — and that goal is greater than the company’s bottom line.

While many employees certainly will understand that driving revenue or profit margins can be suitable for everyone, the ability to make a difference often pushes teams to do more than they would if business performance were the only drivers on the table. Under this pillar of high-commitment, and high-performance management, leaders provide a sense of higher purpose and a shared cause that can rally all stakeholders to action.

Common Goals in High-Performance Management Organizations

Building a better world and pride in performance are two common goals that work well for psychological alignment.

The first involves finding a mission the business and its employees can get behind. Environmental actions, such as reducing carbon footprints, or philanthropy, such as giving back to the local community, are two examples of building a better world.

Pride in performance ties psychological alignment to the business’s brand reputation or the quality of its products. It makes people proud to call themselves an employee and creates a culture where team members strive for excellence so they can be part of that legacy.

Some common barriers leaders can face with psychological alignment include:

  • Finding the right shared values to motivate employees and stakeholders while supporting business goals
  • Balancing profits and other business needs with action on visions and values
  • Maintaining a brand reputation in keeping with the shared values used for psychological alignment, as deviation from the path could mean public relations and employer branding challenges
Trust is an essential element of high commitment, high performance management

Learning and Change

Trust is a critical commodity in any high-performance management model, and one-way leadership can court the trust of team members is by ensuring opportunities for learning and change. In an HCHP organization, learning and growth are organic components of all processes, and everyone works to ensure access to knowledge and opportunity for growth across all levels.

In a high-performance culture, leaders have collective, public conversations with key lower-level stakeholders about what stands in the way of success — for individuals, teams, and the company. As a result, the business is transparent about clear goals and fair performance evaluations for individuals, and it is clear that importance is placed on providing growth opportunities. This emphasis on learning and change can help reduce burnout, support employee retention, and loyalty, and create growth patterns for individuals, teams, and the business.

Some common challenges businesses can face related to this pillar include:

  • Finding the time and resources to support learning and skills development
  • Creating transparent and fair practices for selecting high performers for opportunities
  • Driving the type of overall growth that makes room for team and individual growth

The Impact of Social Venture Capital on Society

August 18, 2022 Risk Management

Jeff Bartel

Chairman and Managing Director

Venture Capital as a Force for Societal Change

While traditional venture capital investment continues to provide investors with opportunities for financial reward, impact investing and social venture capital are beginning to take center stage in the investment arena. Venture capital projects with a potentially positive impact on society provide investors with an opportunity to return profits while supporting the most critical, necessary societal changes. Often supported by both the public and the public sector, there are many advantages to social venture capital. 

Trends in Social Venture Capital in 2022

Venture capital grew throughout 2021 and into 2022 after exiting the disruptions of 2020. It was up $332 billion in the first three quarters of 2021 compared to the same period in 2020, and early-stage funding was up by more than 100%. Despite that growth, venture capital did not see the types of growth in ESG considerations that other investment areas did. That creates a significant opportunity for growth in social venture capital in 2022 and beyond.

Over the past year, movement in social venture capital indicates many firms and sectors are poised for that growth. Venture capital collaborations are moving to improve practices across the industry to support diversity and other critical missions, and many firms are hiring directors of sustainability and other professionals meant to steer investments and initiatives in ESG directions.

What Are the Main Advantages of Social Venture Capital?

Social venture capital offers many benefits for firms, businesses, entrepreneurs, and the community or society. Some of the benefits of social impact investing and social ventures include:

  • Better access to funding sources. Governments and other agencies offer incentives for social impact investment, making investors of all types more likely to enter the pool. In addition, channels such as crowdfunding and angel investments are typically easier to access when a mission backs the venture.
  • Increased service to the community. Services developed in social impact finance tend to be more relevant to community needs and more likely to solve known social or environmental problems.
  • Easier buy-in. ESG venture capital firms act on agreed-upon environmental, social, and governance missions. Because of that, it is easier to get buy-in from all stakeholders because the mission is clear, and most people can stand behind it.
  • Greater diversity. Consumers increasingly buy from brands they believe support important missions and social responsibility. Social venture capital tends to lead to increased diversity naturally.

Does Social Venture Capital Have Any Disadvantages?

Social venture capital is not without disadvantages. For example, social entrepreneurs relying on social venture capital may give up control to get funding. In addition, a lack of historical case studies may make it difficult for social entrepreneurs to convince potential investors. This may be challenging until social venture capital becomes a long-term trend.

The Dual Nature of Social Impact Investing

One of the challenges leading to investor hesitance for social impact investing is its dual nature. Investors and venture capitalists historically were concerned with the return on their investments. The bottom line can not be ignored, as investors that pour money into ventures that do not perform go out of business quickly. But social investors are also concerned with how the venture performs with regard to social or environmental factors, including diversity, sustainability, reduced emissions, or policies that provide for the community.

A business woman investor examines solar panels while holding her notebook with social venture capital impacts listed.

Social Impact Investing To Cool the Planet

One growing area of social impact ventures has to do with the environment. Social entrepreneurs are leveraging innovation, sustainability, and other processes to create products or provide services in a way that safeguards the planet. Climate impact investors are putting money behind those efforts, funding businesses and efforts that keep the planet central to all missions.

Venture Capital to Reduce Poverty

In the same way, for-profit and nonprofit venture capital investors seek to improve the quality of life of people across all borders. For example, many are looking at ways venture capital can reach the poor in developing countries. Funds from private and public sources are being used to educate and train people in these nations to help them develop businesses, local economies, and even entire infrastructures that might lead to longer-term profits or prosperity. Again, the efforts come up against significant challenges, including currency risk, cultural barriers, and long-term poverty that can be difficult to change.

Removing Barriers for Minority Entrepreneurs

Women, Black, LGBTQ, and other minority entrepreneurs have historically found it challenging to get funding for several reasons. First, historically, not many partners in venture capital and investment firms match these demographics. People often invest in ventures that make them feel comfortable, which can mean a trend of investors funding ventures for and about people that look and act as they do.

Cultural and societal barriers, including systemic racism, also play a role in reduced funding opportunities for minority entrepreneurs. However, as more investors seek social impact ventures and awareness about diversity needs continues to rise, those trends are changing. As a result, venture funding to minority businesses has been up in recent years, though there is still a lot of ground to cover, as it remains small compared to the entire funding pie.

How Do You Measure the Impact of Social Venture Capital?

The first step in measuring the impact of social venture capital is to define why it matters and what success looks like for all involved. The second step is finding a numeric measurement that can help indicate performance.

If someone is trying to create more diversity, a good metric of success might be how many of their venture investments are run by or related to minorities. Investors interested in climate impact investing might want to measure the emissions associated with their portfolios.

Going beyond measurement, social venture capitalists might rely on case studies to demonstrate success in a more narrative format. Case studies can raise additional awareness and funds and illustrate the impact on investors and other stakeholders.

Examples of the Effects of Social Virtual Capital on Society

Social virtual capital has plenty of positive effects on society. For example, a venture capital fund that seeds startups helps businesses get off the ground. But a social venture capital fund that specifically seeds startups with a community mission does more than that: It helps a business help others. Likewise, a social impact investor that puts money behind ideas that introduce sustainability into sectors that do not tend toward eco-friendly processes helps those businesses grow and protect the environment.

Ultimately, social venture capital can change the world. Investors must do so, however, with one eye focused on change while the other eye remains trained on the bottom line. It can be a problematic duality to walk, but it is critical to the future success of communities, nations, and even the planet.

Artificial Intelligence Venture Capital Shaping the Future

August 6, 2022 Investment

Jeff Bartel

Chairman and Managing Director

Artificial intelligence and venture capital have become incredibly intertwined. Whether it is the benefits of artificial intelligence in vetting investments or funds driven by AI technology, it is hard to separate the two. 

Growth of VC Investments in AI

The venture capital sector is investing more in AI technology, a growing driver in almost every industry.

Artificial Intelligence and Machine Learning

Machine learning and artificial intelligence are not interchangeable terms. AI refers to computer systems that appear intelligent or demonstrate human traits and understanding of the world. You can have AI that cannot, on its own, learn. Instead, it is programmed to respond to queries or stimuli in intelligent ways.

Machine learning is a type of AI. It refers to computers that are so advanced they learn, taking in copious amounts of data and coming to conclusions that would be difficult for humans to determine. In short, machine learning makes AI capable of going beyond human abilities and is driving the sector’s growth.

Artificial Intelligence Growth by Industry

Venture capitalists are pouring increasing amounts of money into AI across various sectors due in part to the promises that machine learning and the subsequent evolutions in AI can make. From 2012 through 2019, there were more than 20,000 venture capital investments involving AI. More than half of those occurred in three sectors:

  • IT infrastructure and hosting
  • Media, social media, and marketing
  • Business processes and support services

Other industry sectors with strong growth (more than 1,000 deals from 2012 through 2019) in AI investments include healthcare and biotechnology, robots and sensors, finance and insurance, and digital security.

Returns for Artificial Intelligence Venture Capital Investments

The relationship between venture capital and AI is not a one-way street. While investors are banking on AI wins across all industries, firms also turn to AI to increase investment returns.

Machine learning capabilities support AI-based algorithms that outperform human “gut reaction” and knowledge when choosing worthwhile investments. A University of St. Gallen team created an algorithm to select investment opportunities. It compared the machine’s performance against 255 angel investors, and the machine outperformed the average human by 184%.

How AI and Venture Capital Work Together

By 2025 AI will be involved in 75% of investment decisions. However, that does not mean people are set to become obsolete in venture capital processes; instead, it points to a growing collaboration between human knowledge and computational power.

Use of Artificial Intelligence in Finance

Artificial intelligence in finance and investment management is no longer a fringe idea. Most investors and finance organizations utilize some level of machine learning to understand the viability of funds and investments or drive workflows to get things done.

Artificial Intelligence in Business

Some ways AI and venture capital already work together — and some trends that will only increase in the future — include:

  • Evaluating investments. AI can take in and consider so much more data than a human mind can. That leads to a deeper understanding of potential investments, ensuring investors can make more informed decisions.
  • Creating more efficient workflows. Firms are already using AI to drive automated workflows, reducing the time it takes to act on a potential investment.
  • Forecasting performance of portfolios. Machine learning capabilities will continue to help firms create ever-more accurate forecasts, driving more innovative investments and increasing wealth-building capabilities.
Machine learning algorithms and artificial intelligence venture capital

Artificial Intelligence Stocks and Startups

While many companies and funds are investing in AI initiatives, pure AI stocks are still rare in the market. Instead, investors must look for opportunities for companies using AI to drive growth and innovation. Amazon, Google, Microsoft, and IBM are obvious choices, but others exist, including Toyota, Baidu, and Nvidia.

As with any disruptive growth concept, AI investments are perhaps even more exciting at the startup level. In 2018, more than $9 billion was invested in these types of companies. Some leaders include:

  • Softbank Group, which has a dedicated tech development fund called Softbank Vision Fund
  • Intel Capital, which is part of Intel Corporation and invests in thousands of tech companies
  • Lightspeed Ventures, which provides funding for tech startups in the early stages
  • Andreessen Horowitz, which has raised more than $7 billion for tech-driven funds

Artificial Intelligence Venture Capital Investments in Autonomous Vehicles

In 2021, billions of venture capital dollars were funneled into the mobility tech sector, primarily in the niche related to autonomous vehicles. Rapid growth in machine learning and AI is making driverless vehicle opportunities a reality, as evidenced by tests Walmart has done that include autonomous box trucks making deliveries to customers.

Autonomous vehicles could bring huge monetary and supply chain wins in the transportation sector alone. Driverless delivery or transport vehicles would help keep many of the supply chain problems that occurred during the COVID-19 pandemic from happening in the future, for example, so it is not surprising that venture capitalists are flocking to these opportunities.

Artificial Intelligence Venture Capital in Media and Social Media

Media and social media play enormous roles in society. They shape world views, sway voters, and inform the policy of governments and agencies. Disruptive models put publishing power in the hands of every person, the need for accountability across media types, and the increasing use of AI to manage publishing, marketing, and content creation. As a result, venture capitalists are looking for up-and-comers with the technology to make a splash in the niche.

Reacting to Recent Trends in Shareholder Activism

July 18, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

Shareholder activism was robust from 2017 through 2020. Though it saw some decline in 2020, partly due to economic and business disruptions related to COVID-19, activism is bouncing back. Large-cap companies in the United States saw a 30% increase in activist campaigns in early 2021 compared to the same period in 2020. The expectation is that shareholder activism will continue to rise. Understanding shareholder trends and reacting proactively to them is essential for businesses, investors, and governments.

Shareholder Activism in 2022

M&A and shareholder activism trends in 2022 continue to follow paths set in 2021 and even earlier. However, the evolution of societal, economic, and political factors continues to play a role in how these paths develop. Some types of shareholder activism investors and businesses can expect through the rest of the year and the immediate future include:

  • ESG as a continued focus. Record numbers of ESG-related proposals were presented and successfully won shareholder support in 2021. That trend is expected to continue, especially given that governments and other agencies are pushing these agendas alongside private equity and activists.
  • M&A activities leveraged as change mechanisms. M&A activity continues to be a driving force in shareholder activism, with hostile takeovers and board member removal used as change mechanisms to drive desired future states. For example, when Senator Investment Group failed to secure CoreLogic due to the CoreLogic board voting down the proposal, it teamed up with activist shareholders to vote out members of the board and replace them with people willing to vote in the acquisition.
  • More shareholder support for social and environmental activities. Board takeovers and other changes managed through shareholders and voting are likely to increase with growing support from shareholders in certain areas. In addition, shareholders are increasingly stepping up to champion environmental and social proposals—a fact that boards, other investors, and businesses must take note of to continue with success in 2022 and beyond.
  • More activist efforts are succeeding. Historically, boards and businesses could count on activist efforts to fail in most cases. But the David and Goliath dynamic has slipped, and shareholder activism holds more power than existing structures. As a result, business leaders and others should not act on the assumption that activist efforts are likely to fail.

Growth of ESG Shareholder Activism

Investors’ desires to back personal and societal missions with money have increased, creating a significant force in the changing balance of power that ensures more activist efforts succeed. These factors have, perhaps, the most current momentum in two areas: climate change and social justice.

Activist investors and activist shareholders are putting pressure on firms of all types to go green to reduce emissions and carbon footprints, reach toward Net Zero futures, and reduce risks associated with climate change. Tactics used by these investors range from creating awareness for their missions to negotiating with firm management to make change happen. For example, they may put proposals in front of boards or other shareholders for votes. They can even go so far as hostile takeover activities such as voting out board members or arranging proxy votes to orchestrate change.

One interesting note in 2022 is that this type of environmental-economic activism is taking a top-down journey. The greenest companies have become too expensive for some investors, and shareholder activists may find they have done all they can with such firms. The dollars, then, are trickling down to investments where ESG is fledgling and shareholder activists can make more significant changes.

Social justice is another rallying point for shareholder activists, who look to embed missions related to economic and social equality into firm activities and growth. In many cases, shareholders support these proposals because failure to engage in social justice is seen as a risk for modern businesses, especially as business partners and consumers become increasingly aware of such activities.

M&A Shareholder Activists: Firms Should Remain Vigilant

It is increasingly important for firms to be aware of shareholder activism and its potential impact on M&A activity. Activist investors are increasingly driving M&A activity, selling, or breaking up companies to achieve desired results for social or environmental concerns. 

Firms should always remain aware of potential shareholder activism and how it might impact mergers, acquisitions, or overall business growth. However, before launching any effort, firms should take time to analyze weaknesses, particularly concerning ESG, and understand shareholder desires and makeup. Looking for shareholder positions of strength that can leverage to force M&A activity to move in a specific direction can help firms understand where weaknesses are and what potential paths shareholders might try to push the business down.

Sustainable Banking to Address Climate Change

June 17, 2022 Sustainability

Jeff Bartel

Chairman and Managing Director

Modern finance and banking must integrate a new green — one that has nothing to do with the color of the American dollar bill. Organizations within the industry are being called upon to address climate change through policies, investment practices, and sustainable banking.

These burdens come when the nation — and the world — is looking to change. The disruption of the COVID-19 pandemic created new normals in all sectors, and leaders and citizens wonder if returning to old ways following the global health crisis would be a wise or sustainable move.

One of the drivers behind a desire for ongoing change is the climate crisis. According to the National Oceanic and Atmospheric Administration July 2021 was the hottest month on record at that time for planet Earth. Wildfires, record-breaking rainfall in many areas, and rising sea levels lead to growing concerns, and those concerns are turning into action.

Governments are initiating regulations, pushing banks and other financial organizations to enact sustainable practices. Discover more about these practices and the current transition in financial sectors below.

How Financial Institutions Enact Sustainable Banking Practices

Supporting Partnerships With Regulatory Organizations

One essential strategy for sustainable banking is collection action between regulators and others within the industry. Banks and other financial organizations get a say in those policies by partnering with regulatory agencies and demonstrating a sincere desire to enhance sustainable policies. They can bring expertise and background to the table to help regulators understand changes’ business and economic ramifications and find the right compromise between sustainability and support for financial concerns.

Helping to Direct Private Sector Financing with Sustainable Banking

Sustainable investing, such as socially responsible real estate investing, can amplify positive policies enacted by governments, bringing practical change to financial sectors. But environmental integrity is a top-down asset. So financial institutions must model it and encourage private investors to do the same.

Moving Toward Green Agendas With Financing

Banks can help push forward green agendas by choosing to finance efforts with those goals. Ultimately, corporate responsibility for sustainability is shared across industry sectors, and banks can support partners by backing the appropriate measures.

Windmills financed with sustainable banking.

Impact of Low-Carbon Transition on Asset Values

The move to reduce carbon footprints across all sectors around the globe is changing asset valuation for banks. During this period, financial organizations may be looking for sustainable banking opportunities such as alternative energy investments, but they must also be mindful of assets in transition that may become stranded.

Examples of Investment Needs During the Transition to Sustainable Banking

Investment needs during the transition range from supporting new infrastructure to backing products and projects that drive positive outcomes for the environment. Some examples include:

  • Sustainable energy, including infrastructure such as wind farms and solar panels as well as R&D on innovative solutions
  • Upgrading existing infrastructure, particularly in fields such as manufacturing, to support ongoing functionality with a reduced carbon footprint
  • Products and services that move communities and nations away from reliance on fossil fuels, such as electric vehicles

Financial Factors Impacted by the Transition

The evolution during this transition has an impact on financial factors, including:

  • Operating expenses are likely to increase — at least in the short term — for organizations that work to enact change. Research and development, implementation, and training are just some efforts that could drive up operating costs and impact asset cash flow during the transition.
  • Depreciation and amortization of equipment and assets that don’t align with sustainable practices. The value of these assets may drop faster than initially planned, creating monetary stress that ripples up through financial organizations.
  • Costs of financing can create burdens for investors and other businesses as they seek to generate sustainability while maintaining current cash flow and other financial goals. As a result, investment financing may be an option that more partners turn to during this period.

Stranded Assets

Going increasingly green means abandoning long-term infrastructure and processes, stranding once valuable assets. As a result, transportation, oil and gas, and manufacturing are all at risk, and assets in these sectors may quickly become liabilities soon.

Climate-Focused Credit Risk Assessments

Banks are working to embed climate risk into lending practices to reduce the potential for losses in the future. Some techniques in this effort include:

  • Considering climate risk assessments at the origination of investments or loans. Businesses and even individuals seeking financing may need to demonstrate a plan for sustainability on top of traditional factors such as creditworthiness.
  • Banks are using practices such as ESG scoring to include climate concerns in underwriting practices to mitigate risks further.

Sustainable Banking Stress Testing

Traditional risk forecasting does not work well in assessing climate risks because traditional models were never built with sustainability in mind. So instead, governments, central banks, and other institutions are implementing climate stress testing.

At its highest level, sustainable banking stress testing looks at whether an institution or process is taking the right actions and has a good mix of suitable investments to make it through the climate transition. However, stress testing should also occur at lower levels concerning each customer, investor, and investment.