The Brief | October 24, 2018

Closing racial wealth gaps, energy-efficiency financing, scaling Village Capital, Bloomberg climate cities

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Greetings, ImpactAlpha readers!

Featured: ImpactAlpha Series

Asking the right questions to guide investments in closing racial wealth gaps. Here’s one thing Living Cities has learned about investing to improve the economic lives of the poor: Poverty and racism are inextricably linked. Investing in economic justice means investing in racial justice. In the latest article in ImpactAlpha’s Investing in Racial Equity series, Living Cities’ Ellen Ward and Brinda Ganguly chart how Living Cities’ $37 million Blended Catalyst Fund is putting this lesson into practice. Most bankers and fund managers are white, for example, while people of color are denied access to credit at twice the rate of white applicants. “We are changing who writes checks,” Ward and Ganguly say. “To overcome implicit (and explicit) biases perpetuating this reality, the Blended Catalyst Fund backs fund managers of color.”

Living Cities is also testing alternative ways of underwriting by investing in organizations that change how risk is assessed, “with an eye towards expanding access to credit for people of color.” The five C’s of credit – capacity, capital, conditions, character and collateral – tie creditworthiness to income and wealth, they say, systematically disadvantaging communities of color. Ward and Ganguly share seven questions they now ask of every transaction. Chief among them: Will this investment create more access to capital for organizations that have people of color in positions of power, as owners, management or on the board?

Read, “Asking the right questions to guide investments in closing racial wealth gaps,” by Living Cities’ Ellen Ward and Brinda Ganguly in ImpactAlpha’s Investing in Racial Equity series.

  • Racial equity at SOCAP18: Living Cities’ Demetric Duckett joins Kellogg Foundation’s Nadia Brigham, Ford Foundation’s Christine Looney and Marcos Gonzales of Vamos Venture to talk racial equity lens investing today at SOCAP in San Francisco. Here’s a preview of SOCAP’s racial equity track.

Dealflow: Follow the Money

Carbon Lighthouse and Generate Capital close $65 million energy-efficiency fund. Carbon Lighthouse, a clean energy services company, and Generate Capital, the green project-finance firm cofounded by SunEdison founder Jigar Shah, have closed a $65 million fund to help building owners green their properties. Buildings account for 30% of global carbon emissions and up to 70% of urban energy use. The fund will front capital for property owners working with Carbon Lighthouse to map, monitor, and upgrade their buildings’ energy consumption. Read on.

Munich-based Ananda raises €50 million to back European impact startups. The new capital will go towards Ananda Impact Ventures’ third fund, which makes equity investments in European startups focused on health, education, sustainable consumption, and aging populations. The European Investment Fund and Big Society Capital backed Ananda, which has already made five investments from the fund and 20 through all three funds. Ananda has already made five investments from the fund and 20 through all three funds. Here’s more.

Flutterwave raises Series A to connect African businesses to global economy. Flutterwave makes online and digital payments software that allows banks and companies to integrate all of their payment processing tools. The company, based in San Francisco with offices across Africa, wants to “inspire a new wave of success across Africa by building payments infrastructure to connect Africa to the global economy.” Flutterwave, which raised $10 million last year, has now raised an undisclosed amount of additional Series A capital from Mastercard, CRE Ventures, Fintech Collective, 4DX Ventures, and Raba Capital. Check it out.

Signals: Ahead of the Curve

After 100 early-stage investments, Village Capital takes aim at later and larger investments. Village Capital set out nearly a decade ago to make entrepreneurship available to all types of founders. The firm put a few twists on the traditional venture capital model: It would invest earlier, in startups solving big economic and environmental problems and those mostly outside of the traditional startup hubs of California, New York and Massachusetts. Perhaps most distinctly, it would let the entrepreneurs in its accelerator program, rather than investors, select which firms would receive an investment. Now, the venture firm is aiming to take its model up on the capital continuum. Victoria Fram, managing director of Village Capital’s $17.7 million VilCap Investments seed fund, told ImpactAlpha the venture firm is planning to raise a later-stage fund, likely with a U.S. focus. “We think Village Capital can play the same type of leadership role we’ve played in the early stage market,” Fram says.

  • Democratizing entrepreneurship. The firm has backed more than 100 early-stage firms in sustainable agriculture, health, education, financial services, education and energy around the world. A quarter of the companies are led by a founder of color. Almost half are female-led. And more than eight in 10 of them are located outside of the main startup hubs. The companies have raised more $240 million in additional capital, while serving nearly 13 million people and creating 11,700 jobs. The firm has written off 10 investments and exited 14; nearly 80 of the companies are still active.

Steve Case’s billionaire-backed Rise of the Rest fund, and multi-city bus tour, has helped gin up enthusiasm for startup investing ‘between the coasts.’ New ‘opportunity zone’ tax incentives have spurred interest in investments in low-income neighborhoods. Fram says the level of enthusiasm hasn’t been matched by the flow of capital. “The problem isn’t solved.” Read, “Village Capital takes aim at later and larger investments,” by Dennis Price on ImpactAlpha.

Agents of Impact: Follow the Talent

National nonprofit Green America is inviting letters of inquiry from investment management firms experienced in socially and environmentally responsible investing to manage its $10 million endowment… Pittsburgh, Philadelphia, Boston, and Washington D.C. were selected for the Bloomberg American Cities Climate Challenge… responsAbility is recruiting a senior investment officer in its Lima office.

October 24, 2018.