The Brief: Glimmers of hope for impact fund managers

Greetings Agents of Impact!

In today’s Brief:

• The Liist: Signals for impact fundraising in 2025
• Commercial and industrial solar in Vietnam
• Digital revolution in Africa
• Next front in climate and diversity wars: Major corporations

Featured: LP / GP

The Liist: Glimmers of hope for impact fund managers shine through the fundraising fog. Despite a bleak fundraising environment – Andy Kuper of LeapFrog Investments called it “one of the most challenging fundraising cycles for private equity this century” – impact fund managers see reasons for optimism. To get a sense of what lies ahead, we sifted through the funds and trends featured on last year’s Liists. Among the promising signals: the expected return of M&A activity to free up capital, and “overwhelming” interest among limited partners in backing new private fund managers. “The fundraising environment has been drier than expected across the board for many funds,” says Bryony Parker of Savia Ventures, a first-time fund manager investing in early stage climate tech startups in Latin America. “Our view is that it has begun to improve and this will continue in the first quarter.” Savia was one of 67 funds – and one of 29 first-time fund managers – featured on ImpactAlpha’s Liist of actively raising impact funds last year.

• Emerging managers. Mega funds grab the headlines, but some of the most impactful work is being done by smaller, and often first-time funds and diverse managers. Most of the funds coming across ImpactAlpha’s desk are raising $100 million or less. The median fund size on the Liist last year was $50 million. Just five of the funds have target sizes of more than $500 million (two are led by first-time fund managers). That tracks with the broader impact investing industry. Of the roughly $1.6 trillion today invested for impact by nearly 4,000 organizations, the median portfolio size is just $42 million, according to the GIIN.
  
• Think different. Funds featured on the Liist, which we curate via reporting and solicitations, tend to be diverse, niche and focused on under-invested opportunities. More than 40% are led by first-time fund managers. More than half have at least one female general partner. The same proportion also have at least one GP of color. Half are investing in emerging markets. New managers seem to be exactly what investors are looking for. “An overwhelming 86% of LPs plan on making a first commitment to a new manager relationship” in private equity or debt over the next one to two years, in order to diversify portfolios and find new investment opportunities, Coller Capital reported in a survey late last year.
  
• Meeting the market. The 67 funds featured on the Liist in 2024 have collectively disclosed about $1.1 billion in commitments against a combined target of $6.6 billion. Many managers aren’t waiting around for fundraising to power back up. Savia Ventures and climate tech investor Pangea Ventures (and also LeapFrog, which wasn’t part of last year’s Liist) cut their fundraising targets. Mission Driven Finance launched a fund to help new fund managers soldier on with bridge financing, deal warehousing and working capital. At least 40% of the Liist’s fund managers are leveraging blended and catalytic capital to prove their theses and bring investors on board. That’s a bright spot for the field, says Sarah Kelley of Fibers Fund, which invests in small, diverse-led textile businesses. “We’re seeing increasing awareness of the importance of aligning these tools within and across funders to support the needs of underrepresented founders and business owners.”
  
• Keep reading, “Glimmers of hope for impact fund managers shine through the fundraising fog,” by Jessica Pothering on ImpactAlpha.

Dealflow: Clean Energy

Emerging Africa and Asia Infrastructure Fund backs commercial and industrial solar in Vietnam. The EAAIF provides long-term debt for “transformative” infrastructure projects. The blended finance fund has invested $20 million in Vietnamese solar provider CME Solar to build a pipeline of commercial and industrial rooftop solar projects in the country. The investment is EAAIF’s second investment in Asia since it expanded its mandate to the region in October (for background on C&I solar, see, “Commercial lenders wake up to Africa’s fastest-growing solar sector”). The funding is expected to help CME Solar double its portfolio of projects to 260 megawatts. Earlier, EAAIF invested in one of Asia’s first sustainable aviation fuel production plants by making a $20 million loan for Pakistan’s Safco Ventures. 

• Just transition. The Vietnamese government last year gave the go-ahead for local companies to directly purchase energy from private renewable energy producers. “The transition of Vietnam’s manufacturing sector to solar energy will significantly reduce carbon emissions in the country while continuing to support the sector’s green growth and economic dynamism,” said Esther Chan of Ninety One, which manages EAAIF. Vietnam’s rise as a global manufacturing hub for everything from Nike sneakers to Apple iPhones has caused a surge in the country’s use of coal, which makes up 40% of its electricity supply. Vietnam has pledged to increase renewable energy to 39% of its energy mix by 2030, but a US-backed Just Energy Transition Partnership to phase out coal has lagged.
  
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Cassava Technologies secures $90 million for digital infrastructure in Africa. The London-based technology company was launched in 2021 by Zimbabwean billionaire Strive Masiyiwa, who amassed his wealth as a global telecom and tech entrepreneur and investor. Masiyiwa, said to be Zimbabwe’s wealthiest person, also founded Econet Group in 1998 to expand mobile access in Africa. With Cassava Technologies, he aims “to spark new opportunities, transform lives, and create truly inclusive prosperity across Africa, and the world,” he wrote in a LinkedIn post. Through its five subsidiaries, Cassava provides broadband connectivity, renewable energy, data centers and digital payment services to companies and “hyperscalers” in more than 30 African countries. 

• Digital upgrade. “Africa is in the middle of a digital revolution. Internet usage is growing fast, and it is important that the digital infrastructure is able to meet the growing demand,” said Niklas Simola of Finnfund, which led Cassava’s equity round with Google and the US International Development Finance Corp. Google has been investing in power providers to supply clean energy for its multiplying data centers (see, “TPG Rise and Google plug $800 million into Intersect Power for green data centers”). The tech giant has committed $1 billion to Africa’s digital transformation and last year opened its first cloud computing center on the continent. Other Cassava backers include British International Investment, the International Finance Corp. and the Fund for Export Development in Africa.
  
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Dealflow overflow. Investment news crossing our desks:

• Paris-based 360 Capital secured €140 million ($145 million) in a first close for its second European climate tech fund, with backing from Italian utility A2A, Bpifrance, CDP Ventures and other investors. (Startupbusiness)
  
• Mojave Energy Systems, which has developed a liquid coolant to increase energy efficiency in air conditioning systems, scored $9.5 million from Fifth Wall, At One Ventures and other backers. (Mojave Energy Systems)

• Egypt’s ReNile raised $450,000 from a group of undisclosed investors to provide farmers with technology to improving energy efficiency and farming productivity. (CairoScene)

• Ethiopia-based private equity firm Renew Capital backed Talaty, an AI-powered fintech company that provides working capital to small and mid-sized businesses in Morocco. (Renew Capital)

Signals: Corporate Impact

Public companies respond to the backlash against climate and diversity initiatives with surrender or defiance. Now, it’s large, publicly traded companies with thousands of investors and millions of customers that are in the bullseye of attacks on proactive investing in climate and diversity. Major corporations are jockeying to avoid growing reputational and legal risks. Some are defending the business case for investing in inclusion and managing climate risks. With the incoming Trump administration hostile to such initiatives, and continued legal attacks from conservative activists, it’s no longer just small organizations like Fearless Fund that are on the defensive. McDonald’s on Monday became the latest corporation to backtrack on diversity commitments, including its pledge to diversify its supply chain. At the same time, the fast food giant made the case for inclusion. “Our system leverages inclusion to operate successfully and grow our businesses.” Elsewhere:

• Costco is bucking the anti-DEI movement. The retailer’s board of directors offered a “stern rebuke” of a shareholder proposal brought by the National Center for Public Policy Research that challenged the company’s diversity efforts. In its proxy proposal taking aim at Costco’s diversity practices, the conservative think tank warned, “It’s clear that DEI holds litigation, reputational and financial risks to the company, and therefore financial risks to shareholders.” In a proxy statement to investors, Costco countered that diversity brings “originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value.” A shareholder vote on the proposal is set for Jan. 23.
  
• Venture fund founder sues PayPal over diversity investing. Andav Capital’s Nisha Desai is suing PayPal, alleging that the payment giant’s 2020 commitment of $530 million to support more Black and minority-led businesses, including a $100 million effort to invest in Black and Latino fund managers, discriminates against other races and ethnicities, including Asian Americans, reports TechCrunch. The suit claims firms like Andav “suffered from the adverse and inaccurate perception that PayPal had made a decision based on the merits of their business, rather than the race of the fund’s ownership.” Bill Spruill of the Global Data Consortium responded, “Meritocracy is great, but it must first start from a place of equal access.” Last year, Fearless Fund and Founders First both settled similar lawsuits to protect against broader court battles that could have led to legal precedents.
  
• Wall Street is quitting the Net-Zero Banking Alliance. Major banks including Morgan Stanley, Citigroup, Bank of America, Goldman Sachs and Wells Fargo in recent weeks have exited the Net-Zero Banking Alliance, a UN-backed alliance that aims to reduce to zero the carbon emissions from its members’ lending and investment portfolios. JPMorgan Chase is the only big American bank that remains, for now. The Glasgow Finance Alliance for Net Zero, or GFANZ, an umbrella group for the banking and other financial sector alliances, said it will transition to an independent group focused on mobilizing capital to help countries transition to low-carbon economies.

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Agents of Impact: Follow the Talent

Coalition for Green Capital names Richard Kauffman, a CGC board member and Generate Capital chair, as its next CEO. Kauffman takes over from Reed Hundt, who has held the role since 2009 (see, “Reed Hundt on the Coalition For Green Capital’s first deals and big plans”)… Pete Stavros’s Expanding ESOPs taps Daniel Massey, previously with BerlinRosen, as head of strategy and communications… Crosscut Ventures welcomes Jon Ylvisaker, previously with Yield Capital Partners, as partner of its new energy transition investment business… Ninety One recruits Alper Kilic from Standard Chartered Bank as head of alternative credit.

Ownify promotes Allie O’Shea to product and marketing vice president… Rob Tashima is promoted to managing director of pipeline and partnerships at Draper Richards Kaplan Foundation… The Colorado Employee Ownership Office is hiring a program manager in Denver… Mastercard’s Center for Inclusive Growth seeks a vice president of inclusive innovation in New York… Village Capital is looking for a fund manager… Acumen has an opening for a chief of ventures… Accion Venture Lab is on the hunt for an investment officer… GAWA Capital is recruiting a senior investment officer in Madrid. 

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Jan. 7, 2024