In the early days of the spread of the coronavirus in the U.S., Kenneth Chenault , the former chief executive of American Express, and Rachel Romer Carlson , the CEO of Guild Education, wrote an opinion piece calling on the nation’s business leaders to directly address the widespread, critical needs raised by the crisis.
In a March 18 New York Times opinion piece, Chenault and Carlson laid the groundwork for an organization they founded called Stop the Spread, a group that today has more than 1,300 CEO and corporate executive volunteers—from companies large and small—who have focused on creating partnerships to produce critical supplies, and to devise innovative solutions for personal protective equipment (PPE), testing, and tracing related to the Covid-19 crisis.
On Tuesday, ImpactAssets, a $1.1 billion non-profit impact investment firm, and Stop the Spread announced they were joining forces in a partnership that will provide Stop the Spread with organizational capabilities as well as access to capital for financing a pipeline that today numbers about 400 projects.
“These are opportunities cultivated by leaders across the country who have ideas about how to further activate Covid relief and Covid response,” says Christian Peele , director of Stop the Spread operations.
GM and Ventec
The most visible example of Stop the Spread’s efforts was a partnership fused between Ventec Life Systems, a Washington state maker of respiratory care products, and General Motors. Their alliance began with a phone call between executives of these companies in mid-March, as the coronavirus began to grip the nation, and by March 25, a GM plant in Kokomo, Ind., was being repurposed to produce about 10,000 ventilators a month.
“The early core team of Stop the Spread volunteers were able to be in touch with leadership from both companies,” Peele recalls. GM and Ventec “were able to fully take the reins from there, acquire the funding, and produce 30,000 ventilators.”
There are other examples. In April, Honda began to make portable ventilator diaphragm compressors for Dynaflo, a small company in Reading, Pa., that makes vacuum and compressor equipment for a variety of industries. And American Airlines partnered with Adaptive Energy in Ann Arbor, Mich., to make face shields.
What the Partnership Means
In this same time period, ImpactAssets had formed a Covid response program, and launched a response fund, which the firm describes as a hybrid vehicle to funnel charitable gifts as well as impact investments.
“We were approaching the same problems from different but complementary angles,” says Margret Trilli , CEO, ImpactAssets. Not only could the firm provide needed capital, Trilli notes that its role as a catalyst and facilitator for the adoption of impact investing was useful for Stop the Spread’s mission.
Under the partnership, Stop the Spread will become part of the ImpactAssets Covid Response Program, supporting its activities, including developing innovative corporate responses to the continuing crisis.
“It allows us to raise funding for the activities and in many ways it up-levels ImpactAssets’ response and Stop the Spread’s response to the pandemic,” Trilli says.
While many needs have been met, PPE continues to be in short supply, and the landscape is constantly changing. For example, most of the raw material needed to make barrier gowns for frontline workers is sourced in China, and “there are major supply chain issues with that,” Trilli says. Stop the Spread is in a position to use its contacts to source idle corporate assets, and corporate expertise, to figure out how to solve the problem.
Currently, Stop the Spread is also looking to address the racial and economic disparities exacerbated by the pandemic, through areas such as food security. Many disadvantaged communities hit by Covid have been struggling with hunger and food access at the same time farmers are forced to dispose of food they can’t sell through their normal channels.
“We are expanding the understanding of frontline to include those vulnerable communities that were hardest hit,” Peele says. “We’re facilitating partnerships, conducting research, and building investment opportunities for our pipeline, related not only to ventilators and PPE, but also related to return-to-work practices, and keeping vulnerable communities safe in returning to work.”
Opportunities for Impact Investing
Working with ImpactAssets, Stop the Spread has created a model around due diligence that allows them to review investment opportunities and rank them in terms of impact and speed. So far they’ve identified a pipeline of 400. Of those, there are 20, Peele says, “which represent the leading edge in Covid relief.”
The due diligence on these 20 is complete, and “we are fundraising for capital to deploy to those specific projects with as much urgency as possible,” she says.
Examples include projects related to home testing applications, the development of non-medical grade PPE in support of returning to work, and food security. “Bringing that pipeline to our partnership with ImpactAssets, is one of the most exciting parts of the work for both us,” Peele says.
An ImpactAssets fund launched in April called Frontline Heroes has been renamed the Stop the Spread Fund, although the premise is the same: it’s focused on investing in PPE, testing, tracing, treatments, vaccinations, sanitation—“anything related to directly addressing the pandemic,” Trilli says.
The fund hasn’t done a first close, and is just beginning large funding conversations, although it has identified $500 million in capacity, she says.
The structure of the fund is novel, in that it’s not an investment vehicle that seeks to get to a maximum dollar level, and promises certain rate-of-return characteristics. Investments in the fund could range from those that achieve below-market-returns, and are in essence charitable donations, to those that produce venture-capital-like returns.
“We might make a placement in the company with the solution for treatments or testing or tracing, or something, and we could have outsized returns,” Trilli says. “But if we were going to target those returns, we’d have to only invest in companies that could yield that kind of return.”
Also, ImpactAssets wants the flexibility to invest in a range of assets, including project finance and debt.
“We felt the more important design principle was speed,” Trilli says. “And we want to deploy capital where it’s needed and not be constrained by having a specific type of investment we would fund in order to return capital.”