2030 Finance | April 27, 2017

Rise Fund’s debut deal, Builders bridges growth-stage gap, clean energy’s human rights risks

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#Featured: ImpactAlpha Original

TPG’s Rise Fund comes out of the gates with a big edtech investment in EverFi. Where it will put the $2 billion it has said it is raising has been one of the big questions around the Rise Fund, the new impact investing fund from private equity firm TPG Growth. The firm provided a partial answer today with its first investment, leading a $190 million financing of EverFi, an educational technology startup in Washington D.C.

The EverFi investment, and all of TPG’s deals, will come under special scrutiny after U2 lead singer Bono, a founder of the fund, ruffled feathers with his repeated criticism that impact investing to date has been an excuse “for good people to do bad deals.”

Read more about Rise Fund’s first investment from Dennis Price:

TPG’s Rise Fund comes out of the gates with a big edtech investment in EverFi

#Dealflow: Follow the Money

The Builders Fund takes minority stake in tea company Traditional Medicinals. The investment is the first by a non-friends and family investor in Traditional Medicinals’s 40-year history. It is the third investment by Builders Fund, a New York growth-stage private equity fund. Builders, which focuses on North American impact investing, counts Gratitude Railroad as a founding investor and is managed by Tripp Baird, Mike Dutton and Eric Jacobsen. The fund has $30 million in commitments and expects to close later this year. Builders sees ”an enormous opportunity within small-cap buyout and growth stage private equity investing,” Baird says. Traditional Medicinals, based in Sebastopol, Calif., was among the first wave of organic food brands and has “been thinking systemically about environmental, social and governance factors (ESG), and shared value creation long before those terms were even coined,” Baird says. The investment will support the company’s growth and provide liquidity to employee shareholders. Big Path Capital helped arrange the financing.

Openimpact.ca profiles more than 150 Canadian impact investing products. The public database provides a detailed look into Canada’s C$9 billion ($6.6 billion) market for impact investing. Built by Purpose Capital, a Toronto-based impact-investing advisory firm, and University of Toronto’s Lee-Chin Institute for Corporate Citizenship, the database includes searchable information on products across asset classes, including 31 that are open for investment. Most of the more than 50 funds included in the set were launched in the last 10 years, and 15 have more than C$50 million ($37 million) in assets. Five funds, including the Access Community Capital Fund, which lends to entrepreneurs with little or no credit history, can be accessed by retail investors with as little as $250. “The old model would have said, ‘keep this information proprietary’,” said Norm Tasevski, co-founder of Purpose Capital. “But now more than ever we must lead by example if we expect to engage investors and markets.”

Kauffman Foundation puts up $7 million to support disadvantaged would-be entrepreneurs. In the U.S., small businesses have created seven out of 10 new jobs since the 1970s. Yet despite some recent progress, bias, multi-generational poverty, poor infrastructure, social isolation and demographic shifts still stifle small-business development, particularly among minorities and women. That costs the U.S. economy roughly 9.5 million jobs, according to the Kauffman Foundation. The foundation’s “Inclusion Open” program will fund non-profit and for-profit organizations that provide training, capital and mentorship to underrepresented business owners. “These could be entrepreneurs who have faced barriers related to their gender, race, age, geography, disability or sexual orientation or their status as veterans or displaced workers,” said Philip Gaskin, director of Entrepreneurial Communities at the foundation. Organizations can apply for between $50,000 and $500,000 in grant funds through May 2.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

Renewable energy investments face human rights scrutiny. How solar, wind and other renewable energy projects are implemented matters to local communities — and to investors, says a new report from Transform Finance, the Business & Human Rights Resource Centre and Sonen Capital. As investments in renewable-energy projects have grown five-fold in 12 years, to $287 billion, so too have complaints of land grabs, displacement of indigenous peoples, violence and killings related to such projects. Infractions like these not only violate basic rights, they can also cause project delays, increase legal costs, and harm reputations — increasing operational and capital expenditures and reducing financial returns for investors. Only five out of 50 wind and hydropower companies surveyed prior to the report recognized international standards for informed consent (and three of those five faced allegations of violating them). Engagement with companies and communities before and during investments can mitigate risks, say the report’s authors. Such efforts will ensure “the transition to renewable energy truly benefits communities and does not create undue risk for investors,” said Anne Simpson, an investment director at CalPERS, the California public employee pension fund with $300 billion in assets.

Drop in global remittances hits families in poor countries. “A weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” says the World Bank’s Rita Ramalho. To blame, says the bank: low oil prices and weak economic growth in energy-rich Gulf countries, Europe and Russia, which took a toll on flows to South Asia, Central Asia and sub-Saharan Africa. Bangladesh saw a drop of 11.1 percent, while flows to India fell 8.9 percent. Overall, global remittances fell 1.2 percent to $575 billion in 2016, following a 1.7 percent drop in 2015. When transactions between high-income countries are excluded, money flows from foreign workers in rich nations to their poorer home countries saw an even sharper decline. One bright spot: Latin America, which saw a 6.9 percent spike over 2015; senders took advantage of a strong U.S. labor market and beneficial exchange rate. Digital currencies and mobile financial services are taking aim at high remittance fees, which average 7.45 percent.

#2030: Long-Termism

Can “mobility-as-a-service” end traffic jams by 2030? A convergence of automation, digitization and the shared economy could make traffic jams a thing of the past…er…present. Poor mobility isn’t just agonizing. It affects health (emissions and accidents), stunts economic growth (lost time for workers and products) and contributes to inequality. “Does everyone have the opportunity to move around, or only those who can drive themselves?” asks Cathis Elmsäter-Svärd, chair of Drive Sweden, in an interview with the World Economic Forum.

Elmsäter-Svärd envisions a fully automated, multi-form transport system, where “self-driving cars, trains and buses, cycling, walking — are seamlessly integrated by technology.” A Boston Consulting Group report suggests that a quarter of miles driven in the US in 2030 will come from cars that are autonomous, shared and electric (see, “Seven of every 10 new cars could be hybrid or electric by 2030”).

Such advance would bring less congestion, fewer deaths and cleaner air, says BCG, but “cities may also face financial hardship because of the impact on public transit.” Drive Sweden is working with cities to move towards more automated transport systems; Stockholm and Gothenburg will test digitalization and automation solutions. “We should identify the implications for every sector — environment, trade, health,” says Elmsäter-Svärd, “and look for the win-wins.”

Onward! Please send any news and comments to [email protected].