LP / GP

ImpactAlpha LP/GP: Can military technology be an impact investment?

ImpactAlpha · July 1, 2025

Greetings, Agents of Impact!

Welcome to this week’s ImpactAlpha LP/GP, where we take you inside the real business of impact investing and the dynamic relationships between owners, managers and intermediaries of impact capital.

🔌Get PluggedIn: Climate equity, and the next wave of impact investing. In July’s PluggedIn conversation, ImpactAlpha’s Sherrell Dorsey talks with Melissa Pegus of the Future Economy Fund at SecondMuse Capital about capital as a lever for both climate resilience and economic inclusion. From affordable housing solutions to AI-driven workforce tools and climate-adaptive businesses, Pegus identifies under-the-radar innovations driving structural shifts in health, commerce and climate. Broadening ownership and economic participation, she says, is good for communities – and returns. Get PluggedIn, Tuesday, July 8 at 10am PT / 1pm ET / 6pm London. RSVP now.

In this week’s newsletter:

Investors are hearing the siren song of defense spending
Investing in Europe’s ‘environmental champions’
New GPs on The Liist
Private debt in emerging markets

Featured: Defense Tech

Calling responsible investors in Europe to invest in… defense. Can military technology be an impact investment? European investors are confronting that question as shifting geopolitics and an unreliable US has pushed domestic security to the top of national agendas and spurred a frenzy of spending. Prodded by US President Donald Trump, European leaders have pledged to nearly double the bloc’s defense spending to 5%. The ReArm Europe/Readiness 2030 plan envisions €800 billion ($943 billion) in spending to ensure the continent’s military capabilities are “made in Europe.” Defense is now the fastest growing segment of venture capital investing in Europe. European pension funds, including Denmark’s PFA Pension and AkademikerPension, are considering dropping longstanding exclusions on defense investments. The Defence, Security and Resilience Bank, proposed by Rob Murray, NATO’s former head of innovation, is fundraising to become a new multilateral financial institution, modeled on the World Bank. “All that has sharpened the debate over whether investments supporting Europe’s rearmament are incompatible with principles of sustainable investing and ESG – or indispensable,” Venture ESG’s Susan Winterberg and Johannes Lenhard write in a guest post on ImpactAlpha. “Without security, the argument goes, there can be no sustainability.”

Dual use. Suddenly, everyone is buzzing about defense tech, especially “dual use” technologies that also have applications for civilian use. “European defense spending is a very important trend,” Generation Investment Management’s Colin le Duc told ImpactAlpha. Important climate tech innovations, such as solar panels, hybrid batteries, GPS, nuclear fusion and, of course, the Internet, have their roots in military research. “The increase in defense spending around the world,” le Duc predicts, “is actually going to help the cost curves for climate tech.” Singapore’s Temasek took part in last month’s $135 million Series B financing for PhysicsX, a London-based startup using AI to design industrial and defense systems. The EU’s economic resilience, defense and climate imperatives are merging into a shared mission. “Exactly the same technologies are applicable to Europe’s priorities – defense, competitiveness and climate,” Julian Popov of Brussels-based think tank Strategic Perspectives told Bloomberg. “The sooner we realize, the stronger we’ll be.”
Role of investors. “Impact investors will have to grapple with how far their capital can go in financing other companies and products that support, say, conflict prevention, counterterrorism and peacekeeping,” write Winterberg and Lenhard. Some impact initiatives already focus on security, including PeaceTech, Peace Finance, and Humanitarian and Resilience Investing. Risk management frameworks such as ESG and impact investment mandates “could introduce intentionality, evidence, outcomes measurement and public accountability into the defense tech space,” the authors say. In VentureESG’s Dual Use Working Group, which includes European and US venture capital GPs and LPs, investors have raised fundamental questions: What is a weapon? Many defense tech innovations enable warfighting capabilities even if they are not munitions themselves. What is war? Information, economic and cyber weapons are reshaping conflicts. Most of all, investors want to know how to manage risk, set policies, implement safeguards and conduct due diligence. “These are all big questions,” write Winterberg and Lenhard. “Responsible investors need to step up and take their seats at the table in answering them – the future of war, peace and technological progress depends on it.”
Keep reading, “Calling responsible investors in Europe to invest in… defense,” by Venture ESG’s Susan Winterberg and Johannes Lenhard.

Dealflow: Small Cap Impact

Ambienta raises €500 million to back Europe’s ‘environmental champions’. The Milan-based sustainable investment firm will invest in relatively small private businesses that improve resource efficiency or reduce pollution and emissions. “Europe is undergoing a quiet renaissance, with small-cap companies leading the charge and supporting domestic economies,” Ambienta’s Laurent Donin de Rosiere told ImpactAlpha. Such “environmental champions,” he says, offer global investors a unique window into the continent’s evolving economic vitality and sectoral transformation. Ambienta’s new fund raised €500 million ($590 million) from a mix of US and European endowments, pension funds, insurance companies, sovereign wealth funds, family offices and banks to invest in eight to 10 companies with revenues of up to €150 million and an enterprise value of €50 million to €100 million.

Trenchless water tech. The new fund is a return to its roots for Ambienta, a €4 billion asset manager that started out two decades ago backing sustainable family-owned businesses. The new fund will be able to invest in companies that are too small for Ambienta’s mid cap fund. Last week, the mid cap fund, which clinched €1.6 billion in 2022, acquired a majority stake in Stockholm-based water infrastructure firm No Dig Alliance from Equip Capital, a Norwegian private equity fund that helped launch the alliance in 2021. About a quarter of treated water in Europe is lost due to leaks in distribution systems.

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The West Yorkshire Pension Fund anchors Rebalance Earth’s fund for ecosystem services. London’s economy could suffer $500 million in daily losses from lack of sufficient water supply. The UK’s Rebalance Earth, an asset management firm for nature-based solutions, attracted £25 million ($34.2 million) from the West Yorkshire Pension Fund to anchor its nature-based infrastructure fund. The £19 billion pension fund owns a minority stake in Rebalance. Its new round of funding will enable Rebalance Earth to start building its portfolio. It is seeking £150 million ($205.8 million) from institutional investors, primarily pension funds.

Nature as infrastructure. Rebalance Earth invests in projects like wetland, reef and forest restoration that provide carbon sequestration, flood protection, air purification and improvement in soil fertility. “These services are monetized through long-term payments for ecosystem services,” said a representative of Rebalance Earth. “Companies and public bodies across sectors, including fast-moving consumer goods, transport, real estate and utilities, pay for the benefits ecosystems deliver.”

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Dealflow overflow. Investment news crossing our desks:

New GPs on The Liist. South African gender and climate fund Altree Capital and US-focused decarbonization tech investor Khasma Capital are newly featured GP profiles and additions to The Liist. Also check out the strategy update for the Vermont Sustainable Jobs Fund.
Women-led Chingona Ventures, in Chicago, has launched its third fund with a target of $50 million to invest in diverse founders, according to an SEC filing. (Chingona Ventures)
Infrastructure investment firms ArcLight and DigitalBridge invested $500 million in the Michigan-based provider Takanock, which provides digital and power infrastructure solutions for data centers and helps them integrate renewable energy sources. (DigitalBridge)

Impact Voices: Private Debt

Now is the time to be an emerging markets debt investor. Global investors often flee emerging markets at the first sign of market uncertainty. Beyond Capital Ventures is doubling down. “In many parts of the world, especially in emerging markets, the best timing doesn’t come with noise or headlines. It comes quietly – in the moments when attention fades and capital retreats,” writes Beyond Capital’s Eva Yazhari. The firm has raised three equity funds for early-stage companies in East Africa and India. It just this week closed Beyond Capital Ventures’ Debt Opportunities Fund, its first debt fund. Providing debt capital, argues Yazhari, is an attractive opportunity in the current funding environment, with growing demand from startups trying to extend runway, fund receivables, buy inventory and stabilize cash flow. “These are debt needs, not equity ones,” Yazhari says. “That’s the kind of practical growth capital many companies need and often can’t find.”

The risk myth. Private debt, particularly in emerging markets, is primed for growth. “If equity shaped the last decade of investing in emerging markets, debt may define the next,” says Yazhari. Debt funds make up just 15% of the impact fund universe, according to Phenix Capital’s latest research, but the number of debt funds has been on a steady climb over the past decade. Of the 423 private debt funds in the market, 65% focus on emerging markets. Investors often see debt as a safer strategy to equity – and indeed, there’s data to back that up. Yazhari argues that “early-stage debt offers a path forward not because it’s safer, but because it’s smarter. It’s about understanding when and where capital can make the most difference.”
Diversification through debt. Kenyan fintech venture Zanifu, an equity portfolio company, secured a loan from Beyond Capital Ventures to ramp up lending activities – a growth strategy better supported by debt than equity, says Yazhari. Lal10, which is helping informal artisans in India do business online, took a loan to stabilize cash flow and inventory cycles. “Now is a key moment to reposition portfolios through strategic diversification,” writes Yazhari, “and to embrace the long-term value found in emerging markets.”
Keep reading, “Now is the time to be an emerging markets debt investor,” by Beyond Capital Ventures’ Eva Yazhari.

Agents of Impact: Follow the Talent

Closed Loop Partners appoints Daniel Phan, former managing director of Aterian Investment Partners, as managing director and co-head of the firm’s private equity strategy… Arnold Ventures adds Christopher Chen, previously with the Gates Foundation, as executive vice president of mission-aligned investments, a newly-created role… Lissa Villani was promoted to senior associate at Recast Capital, a women-owned venture fund of funds that invests in diverse and emerging managers.

Energy Impact Partners welcomes Anisa Mechler, previously with Bain & Company, as senior vice president of research and innovation… Impacta VC recruits Victor Lau, previously with inDrive, as managing partner… Mission Driven Finance seeks a human resources director… South Pole is searching for a principal consultant of sustainable finance in New York… Also in New York, CREO is recruiting an investment analyst… Cypress Creek Renewables is looking for an investment analytics associate in California.

Liberty Mutual Investments has an opening for an energy and infrastructure associate in Boston… Geronimo Power seeks a project finance associate in Minnesota… Self-Help Credit Union is on the hunt for a director of business development and community engagement in Florida… Impactable Investment Group is hiring an India-focused investment associate… Incofin seeks a Colombia-based manager for sustainable food investments… Nonprofit Finance Fund is looking for an advocacy consultant in Washington, DC.