The Brief | April 1, 2019

Sustainable disruption of food, Equilibrium’s greenhouse fund, inclusive future of jobs, a half-trillion dollars in impact assets under management

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Investor rush to alternative meats and healthy eating accelerates the disruption of food systems. One thing missing from the new “Questlove cheesesteak” served at the Phillies’ Citizens Bank Park in Philadelphia: steak, at least the kind that comes from animals. Hip-hop artist and a Philly native, Questlove turned to Impossible Meat 2.0 for his signature Philadelphia sandwich. Impossible Foods, which has offered plant-engineered hamburgers, is rolling out its first steak-like product. As the huge carbon footprint of modern beef production becomes clear, a roster of companies with credible, sustainable alternatives have raised large rounds of venture capital. Impossible Foods alone has raised about $400 million since 2016 from investors including Singapore-based Temasek, Bill Gates and yes, Questlove. What signals the mainstream arrival of food innovation more than concession-stand food on baseball’s opening day?

Health-conscious consumers have made local, organically-grown, and natural the fastest growing categories in the U.S. Big food and ag companies, initially slow to the market shift, are moving to catch up. “Capital markets have woken up to the food and agriculture opportunity,” says Walter Robb, who left as co-CEO of Whole Foods two years ago after Amazon’s acquisition. “This is nothing short of a revolution in the food industry.” Robb shifted from sustainable food distributor to sustainable food investor and has backed a handful of young companies tackling waste, and local, healthy food markets with both time and capital. Last year he became an executive-in-residence S2G Ventures (for seed-to-growth), one of last year’s most active food and agtech investors. “We’re at an Inflection point for shaping what the next generation of food and food options will be,” Robb told ImpactAlpha.

Keep reading, “Investor rush to alternative meats and healthy eating accelerates the disruption of food systems,” by Dennis Price on ImpactAlpha.

  • Join the conversation. ImpactAlpha’s Dennis Price will interview former Whole Foods co-CEO Walter Robb at the Social Innovation Initiative at the McCombs School of Business at the University of Texas at Austin this Wednesday evening, April 3. Register now.

Dealflow: Follow the Money

Equilibrium closes greenhouse food fund at $336 million. Equilibrium Capital closed its Controlled Environment Foods Fund I at $336 million and already has deployed nearly all the capital to finance high-tech greenhouses for year-round food production. “We’re fully committed to expanding in the sector,” Equilibrium’s Dave Chen told ImpactAlpha. The real estate fund owns greenhouse assets of operators such as Houweling’s, Revol and Fresh Farms, enabling the producers to expand operations to meet demand for tomatoes, peppers and cucumbers as well as lettuce and other greens. “For the first time, agriculture is now seeing the impact of tech-based disruption and business-model innovation,” said Chen, who is speaking at this week’s Global AgInvesting conference in New York. (Disclosure: Equilibrium Capital has been a financial sponsor of ImpactAlpha. Dave Chen is co-host of the “Institutional Shift” series on ImpactAlpha’s Returns on Investment podcast.)

  • Food factories. The expansive, $50 million to $100 million facilities are high-production food factories. Houweling’s Utah greenhouse, for example, uses waste heat and carbon dioxide from a nearby natural-gas power plant.
  • Institutional interest. Australia’s LGIASuper pension manager committed $112 million to the fund; other investors included an unnamed Middle East sovereign-wealth fund and three family offices. “Some of these pensions and sovereigns are looking at agriculture as a long-term hold, for capital preservation,” Chen said. “Others are looking at ag as one of the last remaining sectors that hasn’t been disrupted by technical advances.”
  • Greenhouse effect.

Aqua-Spark backs aquaculture startups BioFishency and Molofeed. The Dutch sustainable aquaculture investor led a $2.4 million funding round for Israel-based water treatment startup BioFishency. Aqua-Spark also invested an undisclosed amount in Norway-based fish feed company Molofeed. BioFishency makes biofilters to help farm managers keep water oxygenated, prevent excessive toxins from building up in tanks and cut down on water usage. Molofeed is among a growing number of insect-based fish and animal feed producers. What makes the company unique is its feed capsules that provide a slow release of nutrients and help fish farmers cut down on expensive and potentially disease-afflicted live feed. The two investments bring Aqua-Spark’s total portfolio to 16 companies and €72.5 million ($81.4 million) in assets under management. Dive in.

Unreasonable FUTURE to accelerate companies advancing inclusivity in jobs of the future. Seventy-five million jobs will be displaced by technology and automation by 2022, according to the World Economic Forum. In the same period, as many as 133 million jobs will be created. Social startup accelerator Unreasonable is partnering with education publishing company Pearson, management consultancy Accenture and Fossil Foundation to “proactively address the unintended consequences of AI, machine learning, up-skilling and the entire digital transformation that is emerging,” said Unreasonable founder Daniel Epstein. Unreasonable FUTURE’s cohort includes emerging markets talent recruitment platform Shortlist, which just raised a $2 million, and AI-based aquaculture tech company XpertSea (which, by the way, is also part of Aqua-Spark’s portfolio). Learn more.

Signals: Ahead of the Curve

Impact investing assets reach $502 billion, plus or minus $50 billion. The new headline number for the scale of impact investing assets comes with a few asterisks. The Global Impact Investing Network estimates that 1,340 organizations managed just over a half-trillion dollars by the end of last year, with more than half managing less than $29 million and a few managing more than $1 billion. In “Sizing the Impact Investing Market,” the GIIN departs from the methodology of its annual survey (which last year found $228 billion in assets under management) to estimate the market’s total size.

  • New measure. The GIIN extrapolated from data on about 750 organizations to estimate assets for another 600 firms. Researchers applied average annual growth rates to square up the data, as well as reductions to account for double counting (for example, a family office that invests with a fund manager that invests in an enterprise). Statistically, the assumptions introduce a margin of error of less than 10%.
  • Behind the numbers. The GIIN didn’t make its own determinations about which investments should “count” as impact investments, instead relying on firms’ self-reported data. Whatever the real number, it remains small compared to the estimated $13 trillion in professionally managed assets screened for at least one “sustainability” principle. “There is great potential for these investors who have already aligned their capital with their values to more intentionally use their investments to fuel progress through impact investments,” the report concludes.
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Agents of Impact: Follow the Talent

Mastercard’s Center for Inclusive Growth is hiring a vice president for social impact in North America… The IDB Lab of the Inter-American Development Bank is recruiting a senior consultant for its Green Climate Fund facility in Mexico… Omidyar Network is looking for a summer associate on its impact investing team… Impact consultancy Stone Soup seeks a marketing and communication intern.

— April 1, 2019.