The Brief | June 23, 2022

The Brief: Alt-corporate structures, overheard at GSG, future of work fund, Brookfield’s big haul, impact real estate

Roodgally Senatus
ImpactAlpha Editor

Roodgally Senatus

Greetings, Agents of Impact!

Featured: Frontiers in Social Innovation

New corporate forms to protect your investment in impact. Mission-driven entrepreneurs and impact investors have struggled with the false binary of a “1” (a for-profit) or a “0” (a charitable organization), says attorney and entrepreneur R. Todd JohnsonThe over-simplistic thinking: If you want to do good, set up a charitable enterprise and take donations. If your model can make money, take investment and grow as quickly as possible. In the latest post in ImpactAlpha’s series, “Frontiers in Social Innovation,” Johnson outlines new structures that can align business models with impact models. With Stanford’s Sarah Soule, Johnson has assembled resources that entrepreneurs and impact investors can use beforebringing in the lawyers. A sampling: 

  • Tandem approach. Some teams have established a non-profit to own a for-profit company, or establish two loosely affiliated entities to be able to accept philanthropic capital (particularly at the earliest stage) and provide tax deductions to donors. Tandem structures also enable investment capital and value appreciation in the stock, an important consideration in attracting talent. Johnson advised, the activist petition platform, in last year’s transaction in which investors donated nearly 85% of their shares to a charitable organization, which now owns the company, a public-benefit corporation.
  • Founders preferred. Many entrepreneurs like super-voting stock, used by the founders of Google, Facebook and other tech companies. Investors, not so much. When nonprofit Network for Good spun out its software company into a public-benefit corporation, Johnson helped structure Founders’ Preferred Shares that preserved voting rights only around issues that could negatively affect the mission. “The company recently sold in a transaction that both aligned with the mission and produced a better return for stockholders,” he says.
  • Impact performance bonuses. Traditional stock options rarely are aligned with the long-term mission of a mission-driven enterprise, Johnson says. Monetary impact performance bonuses can supplement options to reward individual contributions towards outputs and outcomes aimed at impact. To implement such a bonus program, he says, “an enterprise must have a robust impact measurement and management, or IMM, process.”
  • Keep reading, “New corporate forms to protect your investment in impact,” by R. Todd Johnson on ImpactAlpha (Disclosure: Johnson is a member of ImpactAlpha’s board of directors).
  • Catch up with all the posts in ImpactAlpha’s series, Frontiers in Social Innovation, produced in partnership with the Center for Social Innovation at Stanford’s Graduate School of Business. 

Overheard at GSG’s Global Impact Series

Regulators, CEOs, and investors want enhanced disclosures. That was the message at the The Global Steering Group for Impact Investment’s Global Impact Series kickoff last week. The event, Financing a Better World Through Impact Transparency, delved into the creation of impact accounting measures aimed at increasing transparency and managing externalities, and drew a high level crowd. GSG’s Cliff Prior recaps the event for ImpactAlpha in a guest post.  

  • Convergence. Participants voiced strong support for standards being developed by the International Sustainability Standards Board, which board chair Emmanuel Faber said would be ready by year end. Converged standards are needed, especially as environmental, social & governance investing has come under attack. “If concerns about sustainability are not addressed, then sustainability is not sustainable – it will be discredited,” warned Ashley Alderof the International Organization of Securities Commissions. The standards pave the way for mandatory requirements and legal standards, said Enel chief Francesco Starace. But regulation “needs to be adaptable and changing. It is upon the industry to try and explain to regulators what is going to happen next, without fear, so that they understand,” he said.
  • Impact-weighted accounts. The capture, measurement and analysis of impact data is critical to impact accounting. Such data can show “what is actually happening in companies, not just what they say they are doing,” said Harvard’s George Serafeim, who co-chairs the Impact-Weighted Accounts Project (see, “Weighting accounts for impact). Former Federal reserve vice chair Roger Ferguson said he expects to see exciting new tools that leverage big data and create a holistic view of impact. Germany’s BASF has created large CO2 data sets to prepare for impact-weighted accounting. But small and medium-sized businesses who don’t have the same resources should not be left behind, cautioned BASF’s Saori Dubourg. “We need a pragmatic approach or else we will lose them.”
  • Get the scoop.

Dealflow: Education Financing

Ceniarth backs Future of Work Fund for income share agreement financing in Rwanda. Income share agreements, or ISAs, allow students to pay for school with little to no upfront tuition in exchange for a fixed percentage of their future income. Some models have been called out for predatory practices, pushing investors to call for more data and greater accountability (see, “Accountability for outcomes can spur impact investments in educational income share agreements). “Our vision is to provide a fair and ethical financial product to allow students to access high-quality education,” said Batya Blankers of Chancen International, the Rwandan nonprofit that will manage the new fund.

  • Education access. The Future of Work Fund is looking to raise $21 million to provide financing for 10,000 young students, primarily women and others from traditionally excluded groups. An anchor investment from the UBS Optimus Foundation last year helped Chancen launch the fund, which has since attracted commitments from the U.S. Development Finance Corp.Klett GroupKaizenvest and Cassiopeia. Grants from Vitol Foundation and other philanthropic donors made it possible for the students to hold an equity stake in the fund, creating student representation at the board level. The fund plans to expand to other countries in Africa, with Kenya up next.
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Brookfield hauls in $15 billion for energy transition fund. Not bad as first-time funds go. Toronto-based Brookfield closed out an institutional fundraising campaign for its inaugural Global Transition Fund with $15 billion, in what it says is the largest private fund ever raised supporting the transition to net zero. More than 100 investors from around the world, including pension funds, sovereign wealth funds, endowments and foundations, financial institutions, and family offices joined founding investment partners Ontario Teachers’ Pension Plan Board and Temasek. Brookfield is the largest investor. 

  • Scaling up. The fund “provides significant scale of capital with catalytic long-term investment the world needs to help put our planet on a sustainable net-zero pathway,” Mark Carney, who co-leads the fund with Brookfield Renewable’s Connor Teskeysaid in a statement. The Global Transition Fund has already invested $2.5 billion in developers of solar power, batteries and carbon capture and storage.
  • Evergreen climate tech. Separately, U.K.-based investment firm IP Group launched Kiko Ventures, a $450 million “evergreen” climate tech fund. Drawing on the resources of FTSE-listed IP Group, the fund is designed to be flexible without the typical 10-year time horizon. Kiko Ventures is run by veteran climate tech investors who have backed startups including Ceres PowerFirst Light Fusion, and mobility software company Oxbotica.
  • Dig in

Ebiara secures $10 million to help Black and Brown developers scale in Detroit. The fund, a partnership between nonprofit lender Invest Detroit and URGE Imprint, aims to create access to early-stage financing and technical assistance for emerging Black and Brown development firms. “Detroit’s minority-led developers need better access to capital on their balance sheets to compete and bid on public projects and community development work in the Detroit neighborhoods where they live and work,” said Tosha Tabron of Kresge Foundation, which provided the program-related investment. The PRI will enable Ebiara to support about 10 developers and up to $200 million in new development projects.

Dealflow overflow. Other investment news crossing our desks:

  • Ghanain fintech venture Fido snagged $30 million to expand its financial services to customers in Uganda, most of whom are small entrepreneurs who don’t have access to traditional banking systems.
  • India’s Waycool scored $25 million in a round led by 57 Stars’ Direct Impact Fund to help smallholder farmers boost incomes while improving food chain efficiency.
  • Dunas Capital raised nearly €10 million ($10.6 million) to invest in sustainable agriculture and clean energy in the disadvantaged rural regions of Spain.
  • Bayan Infrastructure secured $8.2 million in a Series A round to digitize sustainable infrastructure projects for project owners, banks and other lenders. 

Agents of Impact: Follow the Talent

Milestones: The Impact Task Force convened a year ago by the G7 releases a progress report (see, “Impact brain trust delivers proposals for mobilizing capital for a just transition)… CNotenears the $300 million mark for its community investment platform… TheJapan Social Innovation and Investment Foundationpublishes an English language version of its impact investing survey report (see, “Reports from the UK and India to Japan and Ghana show strong growth in impact investing).

Jobs: The Global Impact Investing Networkseeks an associate director of global events in New York… Emerson Collective is recruiting an associate director of venture investing in San Francisco… BlueOrchard Finance is lookingfor an associate impact manager for its blended finance and impact management team in Zurich… Veris Wealth Partnersseeks a wealth manager for impact investing in New York… Freedom Equity seeks a director of lending in Columbus, Ohio… Purpose Venture Groupis hiring a managing director in New York… Palladiumis looking for an investment lead to work on its USAID-backed $250 million CATALYZE program in Washington, D.C.

Thank you for your impact!

– June 23, 2022