Impact Cords: This Week's Moves (No. 5) February 8, 2025
A seismic shift is reshaping the global impact landscape this week as the $43 billion freeze of USAID funding sends shockwaves through development projects worldwide. Meanwhile, Los Angeles battles its most destructive fires in history, with projected losses of $164 billion highlighting the mounting costs of climate inaction. Yet amid these challenges, global sustainable assets have reached a record $3.2 trillion, and a new generation of impact investors is emerging – from Fiat heirs launching mental health funds to asset managers crafting innovative climate finance solutions. Here are the stories hitting-a-cord in impact investing this week:
Global Development Ecosystem in Crisis
The sudden freeze of USAID's $43 billion in funding has created unprecedented disruption across the global development landscape. Major implementing organizations have been forced to furlough employees and reduce operations, including Chemonics, which received $4.5 billion in USAID funding between 2013-2022. The company had been selected to manage the USAID Climate Finance for Development Accelerator, a $250 million initiative designed to mobilize $2.5 billion in public and private climate investments by 2030.
The impact extends far beyond climate initiatives:
Community investment projects across 50 African countries have been suspended
Healthcare and humanitarian programs face immediate funding gaps
Small business development programs are scaling back operations
Organizations operating on a cost-reimbursable basis are struggling with cash flow
"There will be ripple effects," warns one financial advisor on global development projects. "When you shut it all down, it won't just restart." ImpactAlpha
Development Finance Disruption Spreads
The funding freeze has expanded beyond USAID to impact the U.S. International Development Finance Corporation (DFC), throwing numerous projects into uncertainty. Fund managers in Africa have been told their DFC commitments are on hold, while local small business lenders have had to drastically slow loan disbursements.
In South Africa, a fund for small businesses faces the potential collapse of local funding commitments that were contingent upon DFC investment. As one fund manager in Southern Africa told ImpactAlpha , "It's been a train smash for some of our investees."
Private, corporate, and philanthropic partners are attempting to keep some initiatives alive. One East African loan fund secured bridge financing from an investor, backed by another investor's guarantee. However, businesses that can't secure alternative funding face potential shutdown, with furloughed and laid-off workers forced to seek new employment.
ESG Investment Trends Show Resilience
Despite political headwinds, investor interest in ESG considerations remains surprisingly resilient (RIABiz.com):
Global sustainable fund assets reached an all-time high of $3.2 trillion at the end of 2024, up 8% from the previous year.
Among investors under 40, 66% still prefer "ESG-aware investing," though down from 72% in 2022
Overall investor preference for ESG fell slightly from 48% to 46% in 2023 (RIABiz)
"Interest in environmental, social, and governance-themed investment products has plateaued over the last two years," notes Cerulli Associates research, "However, a large advice opportunity for the broader tenets of responsible investing still exists."
Asset Managers Get Creative with Impact
In an intriguing development, asset managers are increasingly buying stakes in impact fund management firms themselves, rather than just investing in their funds. This "GP stakes" trend has seen major moves:
Schroders now owns most of microfinance-focused BlueOrchard Finance Ltd
M&G plc controls a majority stake in responsAbility Investments AG
Temasek took a minority stake in LeapFrog Investments
General Atlantic acquired infrastructure impact manager Actis
As Torbjorn Caesar of Actis told ImpactAlpha, "The whole is greater than the sum of its parts."
Innovation in Climate Finance
Several innovative climate finance initiatives are emerging:
BlueOrchard Finance Ltd has raised a $100 million climate insurance fund, with 40% from private investors benefiting from first-loss provisions
MacroCycle Technologies secured $6.5 million for energy-efficient plastic recycling technology developed at Massachusetts Institute of Technology.
Presto raised $15 million to streamline EV charging for Uber drivers and fleet operators.
The Next Generation of Impact Leaders
A fascinating profile of Azzi Agnelli, an heir to Italy's Fiat fortune, shows how the next generation is reshaping impact investing. Through TMV Lifecycles, a $25 million "proof of concept" fund, Agnelli is creating a model for young heirs looking to have more impact with their wealth. The fund focuses on mental health innovation and has already backed several promising startups, including AI psychology platform Slingshot.
Clean Energy Transition Faces New Hurdles
The BloombergNEF Summit in San Francisco highlighted both challenges and opportunities in the energy transition:
Global energy transition investment hit $2.1 trillion in 2024, though 93% went to mature technologies like renewables and EVs
China dominated clean tech factory investments with 81% of the global $112 billion total
EV sales growth is slowing but remains strong, with EVs accounting for 20% of new vehicle sales globally and 10% in the US
"People around the world are choosing new, better, cheaper technologies. Is that going to change? No," argued Galvanize Climate Solutions Tom Steyer, noting that over 90% of new electricity generation installed last year was renewables.
Critical Resource Challenges Emerge
The clean energy transition faces mounting pressure from resource constraints. An S&P Global report predicts that copper needed over the next 25 years will exceed all copper consumed in human history. The world must either:
Mine 115% more copper to meet business-as-usual trends
Open 194 new copper mines to stay on track with net-zero targets
Of 224 copper deposits discovered since 1990, only 16 were found in the past decade, despite investments in discovery tripling. (Flat World Partners)
Unexpected Climate Impact: Building Efficiency Race
In a surprising twist, U.S. office buildings have outpaced their European counterparts in reducing energy use. Over the past five years, energy-use intensity in US office buildings declined 20.2%, exceeding the EU's 18.3% drop. This challenges the conventional wisdom about Europe's leadership in real estate sustainability and suggests market forces can drive progress even without centralized regulations. (Bloomberg)
Los Angeles Fires Highlight Climate Risks
The devastating Los Angeles fires that destroyed over 16,000 structures are testing both emergency response and cleanup capabilities. The Federal Emergency Management Agency (FEMA)estimates debris removal costs at $3 billion, while UCLA economists project total property and capital losses could reach $164 billion.
The fires also drove nearly $10 billion in market capitalization losses for Pacific Gas and Electric Company — despite occurring outside its service area — highlighting how climate disasters can have unexpected financial ripple effects. (Bloomberg)
Looking Ahead
While the policy environment grows more challenging for impact investors, particularly in the US, market fundamentals continue to drive capital toward sustainability solutions. The mounting costs of climate disasters and resource constraints suggest these issues will remain critical considerations for investors, regardless of political headwinds.
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.