Impact can be added to mainstream financial products, as well as the other way around. This week’s #Dealflow includes asset-backed securities and other such “plain vanilla” financial products. “Investing is very habitual,” says Jennifer Kenning of wealth manager Align Impact. “The more we can make [impact investing] look like what we have always done, the more successful we will be.”
“Impact” asset-backed securities. Community Capital Management is putting $25 million towards impact-focused asset-backed securities, bonds or notes backed by loans or other assets. As part of the $25 million commitment, CCM invested in Toyota Motor Credit Corporation’s third green bond, for example. The bonds are being used to finance retail leases and purchases of the company’s vehicles that meet powertrain, fuel efficiency, and emissions threshold. CCM’s David Sand, chief investment strategist and impact officer, says there’s been “a substantial increase in deal flow for (asset-backed securities) with a focus on sustainability and community development.”
Finding the exit. Accion’s seed fund Venture Lab has sold its stake in Varthana, an Indian company that provides loans to low-cost private schools. The sale marks the fund’s first exit. Financial details of the transaction were not publicly disclosed. Venture Lab, a $10 million financial inclusion-focused fund launched by Accion in 2012, invested in Varthana in 2013. Details of the initial deal were also not disclosed, but the fund typically invests $100,000 to $300,000 at a time via convertible loans or direct equity. Varthana has disbursed $35 million in loans to over 2,000 schools, which collectively teach one million low- and middle-income students. The firm raised a $14 million Series B round earlier this year.
Emerging energy. India is seeding a $2 billion renewable energy equity fund with $600 million to encourage overseas investment in its green energy efforts. The prime minister’s goal of 175 gigawatts of renewable energy by 2022 will require up to $100 billion, according to Bloomberg New Energy Finance. The government backing is intended to allay concerns about the risk of Indian infrastructure investments. Half of the fund’s total target has been raised so far, with three state-run companies investing $400 million alongside the $600 million from India’s National Investment and Infrastructure Fund. The funds will be available next year to public and private companies.
Government-championed impact. The state of Pennsylvania is launching a $100 million impact investment portfolio to support affordable housing, health, education, infrastructure and small businesses across the state. RBC Global Asset Management will design the portfolio via its Access Capital Community Investment Strategy. In Pennsylvania, RBC will focus on securitized, fixed-income investments, such as Pennsylvania Housing Finance Agency mortgage loans.
Press freedom. Media Development Investment Fund has launched a $6 million loan fund for independent media companies in emerging markets. MDIF Media Finance I will offer loans to cover working capital, equipment and cash-flow needs of small- and medium-sized organizations in free press-restricted countries like Malawi, Ukraine and Myanmar. Target investment size and terms were not disclosed. MDIF’s new fund is backed by the Swedish International Development Cooperation Agency, which is guaranteeing up to 55 percent of the fund’s investment capital as a protection to other investors. MDIF’s new fund also offers investors a 4 percent coupon — a fixed return — paid annually. So far, no other investors have been announced.
Non-profit capacity. Web services start-up Classy has raised $30 million in a Series C round, The venture supports 2,500 non-profit organizations fundraise via crowdfunding, mobile and web campaigns, and also to design websites and apps. It has raised $53 million in investor capital since its launch in 2006. The new round, led by JMI Equity with participation from Bullpen Capital, Galileo Partners, Mithril Capital Management and Salesforce Ventures, will be used to add staff, develop new products, invest in process automation and artificial intelligence, and expand in the U.S. and internationally. Classy aims to raise $1 billion in donations by 2018. According to its website, it has currently helped raise “hundreds of millions” of dollars.
Investing in investors. Capria has reached a $5.2 million final close for its Capria Accelerator Fund, to support emerging market impact fund managers. Capria launched the fund last September to get fund managers ready for capital from its planned $100 million Emerging Manager Fund. The Accelerator Fund is backed by Bill Gates, Ceniarth, Sorenson Impact Foundation, Aarin Capital Partners, and the International Finance Corporation. Capria is recruiting fund managers for its third cohort.
DealFlow is ImpactAlpha’s weekly roundup of what, where, how and why impact capital flowed each week… See more impact deals in ImpactAlpha’s DealFlow section. And send your deal news to [email protected].
Photo credit: TheBetterIndia.com.