Greetings, Agents of Impact!
👋 The Call: Year of the ‘S.’ Social factors have often taken a backseat to environmental and governance issues when it comes to ESG investing. This year, human capital, worker ownership and community resiliency are at the top of the impact policy agenda. Special guests Cambria Allen Ratzlaff of JUST Capital, Jesse Van Tol of the National Community Reinvestment Coalition, and Jack Moriarty of Ownership America join Fran Seegull and David Bank to explore policy strategies and actionable opportunities, Wednesday, Feb. 22 at 10am PT / 1pm ET / 6pm London. RSVP today.
- 🎧 Podcast preview. Fran joined David on the most recent Impact Briefing podcast to talk about industrial policy, entrepreneurship and worker power.
Featured: Building Wealth
Why corporate buyers bet $1.5 billion with Ariel Alternatives to diversify supply chains and close racial wealth gaps (Q&A). Building up Black-led firms to become suppliers to America’s largest corporations is a long-term project. With Project Black, Ariel Alternatives is taking a quicker route: Buy up mid-sized companies that aren’t minority-led, overhaul management, and connect them to corporate buyers. “We’re not ‘Black-washing,’” says Ariel Alternatives’ Leslie Brun, who co-founded the new private equity strategy with Ariel Investments’ Mellody Hobson. “We are applying traditional private equity elements – acquire a company, assess the adequacy and competency of management, and look for where you can make operational improvements. We’re just doing those things and employing Black and Brown talent that we know exists within corporate America that’s often overlooked.” Brun and Aarti Kotak, the fund’s head of impact, spoke with ImpactAlpha about Project Black’s $1.5 billion raise from J.P. Morgan, Lowe’s, Walmart and other corporations – a huge fundraising haul for a debut fund. Since 2020, America’s largest corporations have promised to boost purchases from minority-owned businesses from 2% of corporate spending today to 15% – a $1 trillion opportunity. Yet most Black-led firms are too small to meet their needs. “There is a terrific mismatch,” Brun tells ImpactAlpha in a wide-ranging Q&A.
- Deal pipeline. “We’ve created what we think of as a virtuous circle,” Brun says. He expects Project Black’s partners and other corporations to bring investment opportunities to Ariel. “We’re getting deals from the great diaspora of Black and Brown executives who have skills and experiences and want to demonstrate their management and execution chops,” Brun says. Ariel will also source deals from other private-equity firms looking for “inclusion alpha.”
- Time horizon. Project Black is Ariel’s first foray into private equity. The firm reported $16.2 billion in assets under management at the end of last year. Project Black has a seven-year investment period and 25-year life, longer than the typical 10-year fund. “We don’t want to be in a position to have to prematurely sell or monetize an asset in order to show a return to our limited partners,” says Brun. “If we establish minority-owned firms that are integral to the supply chain of larger corporates, those corporates want to know that those firms are going to be there.”
- Corporate transformation. Ariel last April acquired 51% of Sorenson Communications from the private-equity firm Blackstone. The Utah-based company (originally founded by Jim Sorenson) makes communication tools for the deaf and hard of hearing. Ariel increased diversity of the company’s C-suite from 4% to more than 40%. “We’ve been able to dispel that theory of ‘we can’t find people,’” Brun says. “We have those connections, we understand that community.”
- Read the full Q&A with Ariel Alternatives’ Brun and Aarti Kotak, “Why corporate buyers bet $1.5 billion with Ariel Alternatives to diversify supply chains and close racial wealth gaps,” on ImpactAlpha.
Dealflow: Inclusive Communities
Community Preservation Corp. invests $5 million in SHIFT Catalyst Fund to back diverse developers. The equity investment will focus on real estate developers creating and preserving affordable housing in Pennsylvania, New York, California, New Jersey and Washington, D.C. SHIFT Capital started in Philadelphia to invest in real estate projects with the potential for job creation and community revitalization. The investment “will enable us to create positive generational change for communities, for minority real estate entrepreneurs, and for the entire industry,” said SHIFT Capital’s Nancy Gephart.
- Project developers. SHIFT Catalyst Fund aims to break down barriers for minority real estate developers that are delivering community-based impact in underserved neighborhoods (see, “How a collective of Black developers is raising equity for inclusive real estate in Philadelphia”). In many Black neighborhoods, decades of failed policies and extractive investments have left undervalued housing, underfunded services and a lack of access to financing.
- Impact real estate. Community Preservation, a nonprofit housing finance company created in 1974, has provided more than $14 billion in financing for 225,000 affordable and green housing units in the U.S. The community development financial institution is financing ESG-linked loans for sustainable buildings through a $100 million partnership with Valley National Bank. Two years ago, Community Preservation raised $150 million for affordable housing via sustainability bonds.
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Egypt’s Yodawy raises $16 million to digitize prescriptions. Giza-based Yodawy is trying to make it easier for doctors, pharmacies and insurers to communicate with each other to fulfill prescriptions for needed medications. Egypt offers public health insurance to its 110 million citizens, but gaps in service and care quality drive many to private insurance and healthcare providers. Yodawy’s online portal helps doctors to issue prescriptions digitally, patients to find pharmacies to fill them, and insurance companies to approve payments. The company works with thousands of pharmacies and hundreds of doctors across Egypt.
- Regional expansion. Yodawy’s service mostly focuses on patients with chronic illnesses that need regular prescription refills. Its Series B funding round was co-led by U.A.E.-based Global Ventures and food delivery company Delivery Hero’s venture arm. Capital will support Yodawy’s expansion into other countries in the Middle East and North Africa.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- California-based mini-grid developer BoxPower raised $5 million from Swell Energy and Aligned Climate Capital.
- Turno, which is helping India’s commercial fleet operators switch to electric vehicles, raised $13.8 million from B Capital, Quona Capital, Avaana Capital and others (for context, see, “Deal spotlight: Investors rally behind India’s EV startups”).
- Denham Capital, which invests in companies supporting the clean energy transition, acquired Solops, a commercial and industrial solar financier and owner in the U.S.
- Agricover Credit issued a $9 million bond with help from Symbiotics to help Romania’s smallholder farmers secure financing and new technologies.
- Milestone: Commonwealth Fusion Systems opened its campus and manufacturing facility in Devens, Mass. (for background, see “Long coming but slow to arrive, fusion energy approaches a milestone on path to commercial deployment”).
Impact Voices: Labor Lens
EV supply chains are riddled with human rights abuses. Tech can help eliminate them. More electric vehicles were sold each week last year than in all of 2011. Powering this thrust into a sustainable future: the lithium-ion battery. The batteries blend metals sourced from nearly every continent on earth. “Mine sites unearthing these metals flagrantly violate human and environmental rights, tainting the pristine veneer around climate tech,” writes Evan Okun of Working Capital Fund. The fund backs tech companies addressing inequity for marginalized workers across global supply chains. The rap sheet is long – child labor at cobalt mines in the Democratic Republic of the Congo, worker safety violations at graphite mines in China, indigenous rights violations at lithium and nickel mines in South America and New Caledonia. “Equipped with the proper technology, businesses can eliminate these egregious risks from their extended supply chains,” writes Okun. In a guest post on ImpactAlpha, he shares five innovations that could improve human rights for producers. Among them:
- Alt-mining tech. Fields of potato-sized rocks containing nickel, cobalt, manganese and copper lie on the ocean floor between Mexico and Hawaii, up to 20,000 feet beneath sea level. Early movers such as Impossible Metals and the Metal Company are racing to deploy underwater mining devices without decimating biodiversity on the ocean floor (scientists remain skeptical). Others are pursuing more eco-friendly lithium extraction from geothermal brine. In Southern California’s Salton Sea, Berkshire Hathaway and others have invested billions in geothermal lithium extraction that, if successful, could generate over $25 billion in annual revenue.
- Labor organizing. Successful employee organizing requires trust and coalition-building. Emerging tools can help employees organize (eg. Organise) and report grievances (eg. Ulula, a Working Capital Fund portfolio company). Successful worker movements in Chile suggest that the spiking price for battery metals can increase worker leverage when negotiating benefits.
- Keep reading, “EV supply chains are riddled with human rights abuses. Tech can help eliminate them,” by Working Capital’s Evan Okun on ImpactAlpha.
Agents of Impact: Follow the Talent
Valerie Red-Horse Mohl, ex- of East Bay Community Foundation, is named president of Known Holdings… The Vistria Group’s Mona Sutphen joins Novata’s board of directors… The Office of Special Presidential Envoy for Climate John Kerry is hiring a forest senior advisor (U.S. citizens only)… Mission Driven Finance has an opening for a remote director of real estate asset management… Nike seeks a global sustainability planning director in Oregon.
The U.N.’s Economic and Social Commission for Asia and the Pacific is looking for a temporary sustainable development officer in Thailand… Forum for the Future is recruiting a private sector development manager in New York or London… PwC is hiring a responsible business manager in Australia… Voyager Ventures has an opening for a remote senior associate… The Rockefeller Foundation is looking for a regenerative agriculture manager in New York.
BlueOrchard is hiring a technical assistance expert for the InsuResilience Investment Fund in Switzerland… Sarona Asset Management is looking for an investment analyst in Singapore… IDB Lab is recruiting a consultant for startup equity investments in Washington, D.C… Bain Capital has an opening for an ESG manager for impact measurement and reporting in Boston… The SCAN Foundation seeks a remote program manager in Long Beach, Calif.
Stanford University is looking for an assistant director for diversity, equity and inclusion… The Global Impact Investing Network has an opening for a sustainable finance program manager in New York… GreenBiz Group is recruiting a remote nature analyst… The Church of England is launching an impact investment fund to address historic links to the slave trade via grants, research and advocacy.
Thank you for your impact.
– Feb. 13, 2023