The Brief: Email subject: Exxon’s climate reckoning, Harlem II, Root Capital’s lending, Nigerian insurance tech, Europe’s green growth, impact-first community investors

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ImpactAlpha

Greetings, Agents of Impact! 

Featured: ImpactAlpha Original

Stewardship challenge at ExxonMobil: How long to wait for fundamental change? Some climate-focused investors say they have dumped shares of ExxonMobil as they purge fossil fuel companies from their portfolios. Others are staying with Exxon, hoping to change the oil giant from a laggard to a leader in the transition to a low-carbon economy. And then there’s the University of California, where the chief investment officer last year made an explicit claim to being fossil-fuel free. A recent SEC filing shows the university’s endowment and pension funds still hold a small stake in ExxonMobil of 34,000 shares worth about $1.4 million. The range of sometimes contradictory stewardship strategies will converge at ExxonMobil’s annual general meeting next month. A group of investors, led by Engine No. 1, is pressing for the replacement of at least four members of Exxon’s board with energy transition experts. Inclusive Capital’s Jeffrey Ubben, another environmentally-minded fund manager, has opted to join Exxon’s board to press for change from within. “The ESG world screens carbon out. I go find carbon, because I think I can find a new investment opportunity around reducing it,” Ubben said in February before he joined Exxon’s board. 

Exxon has fended off restive investors in the past, but this year may be different. “Any one who is concerned about Exxon’s lack of leadership will have some sympathy for Engine No. 1,” Timothy Smith of Boston Trust Walden told ImpactAlpha. Activist investors and environmentalists may find common cause in a strategy to wind down Exxon’s oil exploration activities – and milk it as a cash cow. Exxon this year has cut its budget for capital expense, in part to sustain shareholder dividends. Such a managed decline, however, is different from trying to take leadership in the carbon transition, as European oil majors such as BP, Shell, Total and Equinor appear to be doing. At its investor day last month, Exxon CEO Darren Woods boasted of its carbon capture and storage investments. UC San Diego’s David Victor dismisses the projects as “optical.” “In a world where the strategy is not known, you have to work multiple fronts to learn what’s feasible. You can’t just wait,” Victor told ImpactAlpha. “And that is the core failing of Exxon.”

Keep reading, “Stewardship challenge at ExxonMobil: How long to wait for fundamental change?” by Amy Cortese and David Bank on ImpactAlpha. 

Dealflow: Follow the Money

Harlem Capital closes $134 million fund to back diverse entrepreneurs. The New York-based venture capital firm’s second fund will invest in 45 companies, on the way to Harlem’s goal of investing in 1,000 companies led by women and minority founders. “We are focused on building an institution and platform to support diverse founders for many generations,” the firm said. Harlem’s $40 million first fund backed more than two dozen companies, of which 61% are Black or Latino-led and 43% are women-only led companies (see, “Harlem Capital raises $40 million to ‘change the face of entrepreneurship’”). 

  • Anchor capital. It took Harlem Capital just five months to raise its second fund, according to Forbes. Anchor partners in the fund include Apple, PayPal and return investor TPG Capital. The fund attracted more than a dozen institutions and six family offices. More than 40% of the fund’s individual LPs are women or people of color.
  • Culture carry. Founders in both funds’ portfolios will share 1% of each fund’s profits, or carried interest, an approach the firm calls ‘culture carry.’ “The decision ensures all founders will benefit directly from each other’s success,” the firm said. Share this post.

Root Capital secures $35 million from DFC for lending to rural agribusinesses. The U.S. International Development Corp., the successor to OPIC, is investing $35 million in Root Capital to finance smallholder farmers in Latin America, Africa and Southeast Asia. The Cambridge, Mass.-based social lender makes at least half of its loans to women-led agribusinesses. The new financing will “help thousands of smallholder farmers across the globe, many of whom are women, to improve their livelihoods, tackle food insecurity in their communities and advance climate resilient agricultural practices,” said DFC’s Algene Sajery.

Nigerian insurance tech venture Curacel scores $450,000 for geographic expansion. The Lagos-based tech startup uses AI and cloud-based tools to help health, travel and auto insurance companies in Africa to process claims and curb fraud. Curacel’s clients include Old Mutual Limited, AXA Mansard Insurance and Liberty Health. The company says more than 800 hospitals in Nigeria, Ghana and Uganda use its platform.

  • Pan-Africa. Curacel will use the pre-seed investment to expand its business to 10 other African countries this year. Atlantica Ventures, an impact venture firm investing in early-stage tech companies in Africa, led the round alongside Consonance Investment Managers. Dive in

Dealflow overflow. Other investment news crossing our desks:

  • Edge Pathways raised $8 million from First Round Capital, Emerge Education, Rethink Education and others to help students from diverse backgrounds attain engineering degrees.
  • Bangalore-based HealthPlix raised $13 million in a round led by Lightspeed Venture Partners to help doctors treat patients more efficiently.

Fund news. Headlines on who raised and who’s raising:

  • Rio De Janeiro-based Vinci Partners closed $1 billion reais ($177 million) for impact funds targeting small and medium-sized Brazilian enterprises with impact goals.
  • U.S. International Development Finance Corporation doubled its commitment to MicroVest’s levered fund from $48 million to $96 million.
  • The Change Company closed $150 million in debt to finance homeownership for Black, Latino and low-income borrowers and communities.
  • IMPACT Community Capital attracted $130 million from Pacific Life Insurance, Farmers Insurance, Nuveen and others to preserve affordable multifamily properties.

Signals: Ahead of the Curve

Overheard at Phenix Capital: Blurring the line between social and environmental impact. European Commission President Ursula von der Leyen calls the the E.U.’s ambitious plan to become carbon neutral by 2050 “our new growth strategy.” At Phenix Capital’s (virtual) Impact Summit this week, representatives of Europe’s pension funds, impact investors and investment advisors hashed out exactly who and what will benefit from that strategy. “We’re seeing companies in some specific sectors—renewables, insulation, energy efficiency—with large inflation of valuations [because of] a massive increase in possible upside in the addressable market,” said Luc Olivier of French asset management firm La Financière de l’Echiquier. “That will flow more capital to impactful companies.” The highlights: 

  • Supply and demand. The green-bond premium has some investors taking a pass. “We’re seeing such a huge demand for green bonds that it’s really pushing the limit on pricing. We’re opting out a lot these days, because they’re just too expensive,” said Peter Lööw of Alecta, which manages about $125 billion on behalf of Swedish pension funds. “But it shows the demand from the investor side. I’m hoping for the supply to solve the problem.”
  • Fueled by data. Green policy signals have tuned investors into sustainability disclosures that align with the European reporting requirements and the proposed Taxonomy Regulation for sustainable investments, which will affect any firm operating in Europe as well. “I think we’re at the beginning of a transformation where there will be more transparency coming from companies themselves,” said EY’s Arno Scheepens. The European Commission’s Life Cycle Assessments framework for analyzing the environmental impacts of products aims to facilitate a “single green market” by making results comparable across companies, products and markets, he said.
  • Year of the ‘S.’ Measurement of social impact trails environmental reporting. “I can find the average profile for the environmental impact of a kilogram of steel,” Scheepens said. “What I cannot access right now is a database which tells me how many worker hours have been put into that product.” The Nature Conservancy’s Jennifer Morris emphasized the social impacts of advancing the green economy. “The health of our families, our communities and our economies are inextricably linked to the health of our environment,” she said. “Biodiversity is the underpinning of human and planetary health.” Share this post.

Impact Voices: Pass the Mic

Sacrificing returns? These community investors ask if they’re sacrificing impact. To build towards an equitable society, we need to center equitable terms, power structures, and rules of the game in community investment, write Community Credit Lab’s Sandhya Nakhasi and Ryan Glasgo with Common Future’s Eric Horvath in a guest post on ImpactAlpha. The authors say they rarely hear impact investors ask, “Am I sacrificing impact in favor of an increased financial return?” This “leaves power and privilege embedded in capital allocation decisions unchallenged and unchanged.” Community Credit Lab and Common Future are interrogating traditional approaches and terminology like ‘market rate’ and ‘concessionary’ “that too often segment evaluation of impact investments in the first place,” the author’s write.

  • Impact-first. Other funds and family offices with impact-first strategies include Kataly Foundation with its Restorative Economies Fund, Candide Group with its Olamina Fund, Ceniarth, Mission Driven Finance, Native Women Lead, Social Impact Strategies Group, Mortar and Denkyem Coop. Read the full post.

Agents of Impact: Follow the Talent

Charmaine Jackson Mercer is named chief of equity and culture at Hewlett Foundation… Thane Kreiner, ex- of the Miller Center for Social Entrepreneurship at Santa Clara University, joins the Marin Agricultural Land Trust as CEO… Kate Faraday is promoted to head of corporate responsibility at PineBridge Investments… Robert Eccles joins the advisory board of climate tech startup Persefoni.

Sarah Ladislaw, formerly with the Center for Strategic and International Studies, is the new managing director of the U.S. program of RMI, formerly the Rocky Mountain Institute… Dale Freudenberger, ex- of FLS Energy, joins North Sky Capital as operating partner on its sustainable infrastructure team… Root Capital is hiring a senior financial analyst, a deputy chief of staff, a senior marketing associate and a director of individual giving.

Thank you for your impact.

– Apr. 1, 2021