Impact Cords: This Week's Moves (No. 11) March 22, 2025
As March comes to a close, the sustainable finance landscape continues evolving through an intricate dance of political shifts, market forces, and innovative solutions. This week brings pivotal developments that illustrate both the challenges and remarkable resilience of impact investing. Here's what's hitting-a-cord:
CDFI Sector Mobilizes Against Existential Threat
Community development lenders have launched a coordinated defense following President Trump's executive order threatening the Treasury Department's CDFI Fund. The sector's rapid response highlights surprising bipartisan support for these local economic engines.
"We can't have America First without putting our communities first," said Harold Pettigrew, head of Opportunity Finance Network. The defense strategy cleverly emphasizes the fund's statutory basis, bipartisan backing, and alignment with economic mobility goals central to Trump's campaign promises. (ImpactAlpha)
Republican Senator Mike Crapo and Democratic Senator Mark Warner, leaders of the Senate's Community Development Finance Caucus, highlighted CDFIs' ability to leverage public funding to attract eight times the amount in private capital - a powerful multiplier effect that transcends political divides.
Climate Funding Battles Score Legal Win
"Green bank" awardees secured a significant victory when U.S. District Court Judge Tanya Chutkan blocked the EPA's attempt to recoup $20 billion in Greenhouse Gas Reduction Funds. The ruling requires the EPA to provide legal justification for cancelling previously awarded grants, citing "serious due process concerns." (ImpactAlpha)
This follows Climate United's earlier lawsuit to unblock approximately $7 billion in stranded climate funding at Citibank. The frozen accounts have already prevented over $400 million in approved loans for critical projects like electric port trucks and university solar installations.
Meanwhile, the Department of Energy deployed a final $1.2 billion for utility-scale solar and battery storage in Puerto Rico before the administration shift, including $584.5 million to Convergent Energy and Power.
Asset Managers Retreat from Climate Commitments
Aviva Investors has abandoned its landmark 2021 plan to divest from companies failing to sufficiently reduce carbon emissions. The £238 billion investment house had pledged "full divestment" from companies failing to become "1.5C-aligned" within three years, but has now revamped this approach, citing a "different macro backdrop" where "concerns over energy security and economic recovery have come to the fore." (Financial Times)
This rollback reflects a broader trend - Aviva has fallen from the top 10 in climate-focused shareholder voting to 30th place this year according to ShareAction. UK Divest's Robert Noyes called it "sorely disappointing news from a supposed leader in the climate space."
Meanwhile, the Science Based Targets initiative (SBTi) is taking the opposite approach, announcing it will continue requiring 1.5C alignment for validated net-zero claims despite global warming projections of up to 3.1C. SBTi maintains that "as the window to stabilize global temperatures below 1.5C narrows... the case for strengthening climate ambition becomes stronger." (Bloomberg Green)
Pension Giants Take Divergent Climate Approaches
California's two largest pension funds are showcasing contrasting approaches to climate investing. CalSTRS has anchored a $175 million raise for Just Climate's Natural Climate Solutions fund alongside Microsoft, supporting Eduardo Mufarej's vision that "a rapid land transition, with the potential to be as profound as the energy transition, is coming." (ImpactAlpha)
Meanwhile, CalPERS is defending its inclusion of traditional energy companies in its climate solutions portfolio. "A green asset is a green asset, regardless of corporate ownership," CEO Marcie Frost stated, emphasizing that her fund's "pro-investing" approach "means more than just betting on today's green companies" while balancing climate action with fiduciary duty. (Pensions & Investments)
Private Equity's Fundamental Market Shifts
Private equity faces "tectonic shifts" according to Hugh MacArthur of Bain & Company, as the industry adapts to intensified competition for deals, talent, and capital. Having tripled to $4.7 trillion in assets over a decade, PE now operates in "a little bit more of a zero-sum game," creating opportunities for impact investors to differentiate with specialized strategies.
Limited partner distributions have slowed dramatically, reaching just 11% of net asset value last year versus typical expectations of 20-30%. This liquidity squeeze has emboldened LPs to demand fee concessions, with management fees falling by half over 15 years. Now, thirty cents of every dollar committed to private equity comes without fees attached.
Future growth is expected from retail investors and sovereign wealth funds, with the latter projected to be "the single largest source of dollars" entering the industry in the coming decade.
Africa's Female Fund Managers Bridge Financing Gaps
As U.S. government funding for overseas development faces cuts, female fund managers in Africa are deploying innovative financing strategies to bridge capital gaps.
"As a woman, I was struggling to access capital, despite being [one of the] best performing funds in the market," noted Jenni Chamberlain of Altree Capital, whose flexible financing has helped portfolio companies increase revenues by 50-250%.
In Ghana, Hamdiya Ismaila's Savannah Impact Advisory directs capital to local fund managers with a gender lens. Kenya's HEVA Fund launched credit programs providing $5 million to 7,000 creative entrepreneurs, mostly women, while Nigeria's Evelyn Castle built eha Impact Ventures for women-owned healthcare and food businesses.
A potential lifeline emerged when a U.S. federal judge ruled that Elon Musk and the Department of Government Efficiency likely acted unconstitutionally in dismantling USAID, halting its premature shutdown as litigation proceeds.(ImpactAlpha)
New SEC Guidance Could Transform Fund Raising
The venture capital world may experience a dramatic shift following the SEC's updated general solicitation guidance, potentially transforming how funds raise capital. For over two decades, fund managers have avoided publicly discussing fundraising efforts due to securities regulations, but new SEC guidance makes the process significantly less onerous.
The change addresses verification requirements for accredited investors, with the SEC now agreeing that "a high minimum investment amount is a relevant factor in verifying accredited investor status." This could lead to more public fundraising discussions and potentially even advertising, though likely not "Times Square billboards" or "30-second Super Bowl spots." (Axios)
One caveat is for firms raising from investors outside the U.S., as other countries have their own securities rules that could impose additional restrictions. Nevertheless, this regulatory shift could fundamentally change how private capital is raised and marketed.
Looking Ahead
As we enter April, several key trends bear watching: Federal Reserve interest rate decisions will impact investment flows across both traditional and impact sectors; congressional budget reconciliation could reshape federal sustainability programs; and local elections will influence the regulatory environment for community finance, affordable housing, and renewable energy development.
The sustainable finance landscape continues demonstrating remarkable resilience amid political and regulatory headwinds. While terminology and approaches shift, the fundamental drivers - climate adaptation needs, resource constraints, technological innovation, and changing consumer preferences - continue pushing markets toward more sustainable, inclusive models regardless of the political climate.
About the Cordes Foundation
The Cordes Foundation was founded in 2006 by Ron Cordes and Marty Cordes. Following the sale of Ron’s investment management business, the couple blended Ron’s experience in financial services with Marty’s work on issues that affect women and girls to create a family foundation focused on social entrepreneurship, impact investing and the economic advancement of women. In 2014, when they were joined by their daughter, Steph Stephenson, and son-in-law, Eric Stephenson, CAIA, CFP®, the Foundation expanded its strategic focus to include ethical fashion brands, sustainable supply chains and engaging millennials in impact investing. Its mission is to connect social entrepreneurs with the resources they need, convene events to strengthen the ecosystems of impact investing and social entrepreneurship and catalyze 100% of its balance sheet for impact.