The Brief: Abundance as an antidote to inflation

Greetings Agents of Impact! In today’s Brief:

• Climate inflation and falling profits
• Low-carbon lithium extraction 
• Closing the homeownership gap

Featured: Macro Impact

To tame inflation, promote abundance. “Let’s not get too flipped out,” Austan Goolsbee, president of the Chicago Federal Reserve Bank, counseled this week after news of higher-than-expected consumer prices. Something that is worth flipping: Conventional wisdom about fighting inflation. Instead of dampening demand, an alternative school of thought would push abundance instead. Increasing the supply of healthy food, green energy, affordable housing and other goods in short supply and high demand, advocates argue, can promote growth and improve living standards while holding down price increases. “The conventional approach to monetary policy and macroeconomic stabilization will have to be increasingly reconsidered in a world of climate change, environmental degradation, and energy-driven supply shocks,” argues the UK-based think tank Positive Money. “Interest rates are ill-suited to providing stability in such a context.”

• Climate inflation. Positive Money’s report, “Inflation as an Ecological Phenomenon,” explores the impact of “fossilflation” and “climeflation.” More frequent droughts and storms are raising food prices (the price of chocolate, for example, hit an all-time Valentine’s Day high as droughts and extreme weather in cocoa-producing nations crimped harvests). “Rising energy and food prices inevitably lead to broader-based inflation, as they filter through to other sectors,” the authors write. “Yet the source of the problem remains on the supply side.” Higher rates have made it harder to finance wind and solar power and other green infrastructure that could bring energy prices down and reduce volatility. “Central banks should return to playing a greater role in ensuring debt sustainability and facilitating fiscal authorities’ capacity to scale-up green public investment,” argues Positive Money. Keep reading.
  
• Softer profits. Look past this week’s wobbles: Growth remains stable, even if it is moderating. Inflation rates are clearly coming down, even as they remain elevated. And labor is resilient, even as it becomes increasingly expensive, ImpactAlpha contributing editor Robert Brown reports in his latest Macro Impact column. But market watchers have noticed a signal of weakness – profits are shrinking. Analysts are expecting net income for S&P 500 companies to fall by 2.6% this year. Without the so-called “Magnificent Seven” tech companies, the expected decline in net income is even greater – 6% (see “Rising risks as the S&P 500 is outsourced to the Magnificent Seven”). “Impact investors would be wise to favor caution at the moment,” Brown says. “Slowing top-line revenue in the context of weaker economic growth, combined with lower margins pressured by high input costs and rising wage pressures is a challenging dynamic for early stage companies.” Read his full take. 

Sponsored by J&J Impact Ventures

How investors are forging new roadmaps for health impact. Expanded internet access and a suite of digital tools are revolutionizing how healthcare is delivered in emerging and frontier markets. Investors have an opportunity to overcome long standing inequities in the global health system with committed impact capital, sophisticated financing and smarter partnerships. New financing models and cross-sector partnerships “can act as a roadmap for other investors seeking risk mitigation and performance accountability while providing company founders new access and flexibility for their financing needs,” James Bair and Carolina Batista of Baraka Impact Finance write in a guest post on ImpactAlpha. 

• Keep reading, “How investors are forging new roadmaps for health impact,” by Baraka’s James Bair and Carolina Batista. J&J Impact Ventures supports ImpactAlpha’s Investing in Health coverage.

Dealflow: The Transition

Lilac Solutions raises $145 million for green lithium production. Lithium prices have fallen steeply as US electric-vehicle adoption has wobbled. But green, efficient and economical lithium extraction to support EV battery demand remains one of climate tech’s “holy grails.” Lilac Solutions clinched $145 million in Series C financing for its low-carbon process of extracting lithium from salt water. The Oakland, Calif.-based company extracts lithium directly from brine with ion-exchange technology, a process it says uses 10 times less freshwater than traditional open pit mining or evaporation. Lilac’s funding follows a demonstration project in Argentina with Australian lithium producer Lake Resources that produced 2,500 kilograms “with high-purity and minimal environmental impact,” Lilac says. Next up: Lilac is eyeing the Great Salt Lake in Utah.

• Commercialization capital. Lilac’s financing was led by energy commodity group Mercuria and existing investors Lowercarbon Capital and Breakthrough Energy Ventures. Other key shareholders also reupped, and The Nature Conservancy and Mitsubishi joined as new investors. Prime Coalition was among the company’s earliest backers. EnergyX in Austin is also working on a brine-based lithium extraction process using membranes (for background, see, “EnergyX and its rivals raise resources for the race for sustainable lithium”).
  
• Dive in.

Hippo Harvest scores $21 million for greenhouse-grown produce. San Francisco-based Hippo Harvest is still standing after the shakeout of other controlled-environment produce producers. The company’s leafy greens can be found on the shelf at local grocery stores and online on Amazon Fresh. Energy Impact Partners, Amazon’s Climate Pledge Fund, Congruent Ventures and other existing investors re-upped in Hippo Harvest’s Series B round to scale up production. “Our team’s work over the past twelve months demonstrates our ability to create modular, cost-effective growing systems that can be deployed across the country,” said Hippo Harvest’s Eitan Marder-Eppstein. 

• Agrifood tech. Hippo Harvest’s modular greenhouse systems use machine learning and AI to manage water, energy and fertilizer usage. Products are packaged in post-consumer recycled plastic. Like other indoor growers, Hippo Harvest promises increased food safety, lower costs and longer shelf life compared to traditionally-grown fresh produce. The company says its farming method also has a lower carbon and methane footprint.
  
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Dealflow overflow. Investment news crossing our desks:

• Kenyan electric motorcycle and bus maker Roam raised $34 million in equity and debt from climate tech VC Equator, Renew Capital, the International Finance Corp. and other investors. (TechCrunch)
  
• Ascend Capital raised 500 million rupees ($6 million) to provide financing to buyers of commercial electric vehicles in India (see also, “India’s growing appetite for electric vehicles”).
  
• Omidyar Network India, which will wind down next year, is still inking deals. It led a $2 million seed round for affordable remote health diagnostics company Neodocs. (Startup Story)
  
• United Arab Emirates-based Zero Carbon Ventures is developing a facility with Egypt’s Green Planet to convert organic waste into graphene, hydrogen and fertilizer from Cairo’s waste streams. (Afrik21)
  
• Germany’s Earlybird Health raised €173 million ($185.6 million) for an Article 8 sustainability fund that invests in digital health, diagnostics, and medical devices and research in Europe. (EU-Startups)

Impact Voices: Muni Impact

Scaling mortgage assistance with community-benefit bonds. Many creditworthy low-income individuals struggle to become homeowners because of down payment requirements and limited credit access. Mortgage assistance programs can provide grants, forgivable loans, deferred payments loans or matching savings plans. Community-benefit bonds could provide consistent funding at scale, argue Matt Posner of Court Street Group and Oswaldo Acosta of City First Enterprises. In the Community Finance Brief, Posner and Acosta propose a new impact-oriented financial product that could be issued by public finance agencies. Community-benefit bonds would securitize pools of mortgages originated through mortgage assistance programs, offering returns to investors as well as measurable benefits to low-income homebuyers. 

• Impact asset class. Securitization, or the pooling of assets into interest-bearing securities, could help catapult experiments in mortgage assistance programs “from the margins to the mainstream of the real estate industry and potentially into millions of homes,” write Posner and Acosta. “Evidence suggests that combining an underserved segment of the consumer finance realm with the increasing demand for impact asset classes could yield transformative outcomes.”

• Mortgage bonds. Last year, 60% of all housing muni bonds issued were labeled impactful in one way or another. Housing finance agencies in New York, Massachusetts, Texas and Florida have issued muni bonds to fund second mortgages or down payment assistance programs. “Municipal bonds are novel as a scalable solution,” say Posner and Acosta, but are not the only possible structure. “A taxable mortgage bond solution could be more palatable given the current rate environment.” 

• Keep reading, “How ‘community-benefit bonds’ can help scale mortgage assistance programs,” by Matt Posner and Oswaldo Acosta. View of all of ImpactAlpha’s Muni Impact coverage, made possible with support from the Robert Wood Johnson Foundation.

Agents of Impact: Follow the Talent

Working Capital Fund promotes Evan Okun to principal… Gratitude Railroad promotes Emma Leavy to principal… Greystone’s Low-Income Housing Tax Credit syndication group adds Sarah Laubinger, previously with Boston Financial, as chief operating officer and Todd Jones, also previously with Boston Financial, as chief investment officer… Sorenson Impact Institute’s Geoff Davis joins the executive board of Common Ground Kaua’i (see, “In community with food, champions of regenerative agriculture gather in Kaua’i”). 

Clay Cove Capital’s Amachie Ackah joins Surdna Foundation’s board of directors… The World Resources Institute is hiring a climate finance associate in Germany… Albert Cliff seeks an impact investment officer in Nairobi… Acre has an opening for a legal senior director in London… Quona Capital seeks a growth partner… Climate-KIC is looking for a remote climate impact advisor… The Bank of Cyprus is on the hunt for an ESG analyst. 

Women of Renewable Industries and Sustainable Energy is recruiting a senior manager of programs and events… Runway has an opening for a Chicago-based fund manager… Trillium Asset Management is accepting nominations from investment and nonprofit professionals for the 2024 Joan Bavaria Award… The Global Impact Investing Network has extended the deadline for participating in its annual impact investors survey to Friday, Mar. 1.

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Feb. 15, 2024