The Brief: At Stake in 2024: Returns on inclusion and the ownership economy

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Greetings, Agents of Impact! 

Plugged In: Investing in inclusion-focused entrepreneurs. Earlier guests on Plugged In with ImpactAlpha contributing editor Sherrell Dorsey include VertueLab’s Aina Abiodun and Black Farmer Fund’s Olivia Watkins. Next up in the series featuring inclusive economy innovators is Lenore Champagne Beirne of Bright Ventures, which has backed a dozen diverse-led ventures in digital health, fintech and the future of work. Join us on LinkedIn Live, Thursday, Dec. 21, at 9am PT / 12pm ET / 5pm London. RSVP today.

Featured: At Stake in 2024

Expanded ownership and access to capital to build wealth and bridge divides. If the redistribution of wealth pits the haves and have-nots against each other, the predistribution of ownership may put them on the same side. Instead of redressing unfair market outcomes through taxes and transfers, predistribution engineers markets to create fairer outcomes from the get-go, says Yale’s Jacob Hacker, who coined the term more than a decade ago. Ownership of homes, businesses and commercial properties along with the increasingly common ownership by employees of the companies they work for, buys broader swaths of society into the wealth generated by such assets. As Dorian Burton and Napoleon Wallace of the Southern Reconstruction Fund write, “Ownership confers the ability to generate wealth that allows you to invest in things that matter, build things that last, and transfer assets across generations.”

ImpactAlpha has complemented this year’s coverage of the “ownership economy” with practical guidance for investors seeking returns on inclusion, especially in the challenging legal and political environment following the Supreme Court’s rejection of affirmative action in college admissions. In the first of this week’s series of look-aheads, we highlight some of the themes to watch in 2024:

  • Incentivizing conversions to employee ownership. Countries are making pathways for worker ownership a component of strategies to foster economic growth, preserve jobs and mitigate income inequality. “From a conservative standpoint, this is not redistribution. This is a voluntary market exchange that is preserving capital, often in rural areas that might otherwise lose it,” Lafayette Square Foundation’s Jack Moriarty told ImpactAlpha. “And on the more progressive side of the house, this is an opportunity to broadly economically enfranchise workers and to close wealth gaps, and really be a source of agency, opportunity and mobility for low and moderate-income workers, including workers of color.”
  • Expanding equitable homeownership to build intergenerational wealth.  In Denver, the Dearfield Fund for Black Wealth is providing down-payment assistance for first-time Black homebuyers. The Blackstar Stability Distressed Debt Fund, based in Washington DC, is deploying a $100 million fund to purchase single-family homes encumbered by predatory loans, such as contracts for deeds. LocalCode Kansas City buys old and blighted buildings for building mixed-use commercial real estate projects that offer majority ownership to local residents.
  • Capitalizing Indigenous lenders to fund Indigenous businesses. Native-led fund managers, entrepreneurship incubators and technical assistance providers are working to reverse a decades-long decline in funding for Indigenous communities. Native Women Lead, part of a growing ecosystem of Indigenous-led community lenders and nonprofits, is addressing lack of access to growth capital and resources for Native women-led businesses, which generate roughly $12 billion in revenue and employ 65,000 people.
  • Investing for equity and inclusion in a post-affirmative action economy. “Diversity, equity and inclusion programs were legal both before and after the Supreme Court’s decision striking down affirmative action in higher education,” said civil rights attorney Farhana Khera in a Q&A with CapEQ’s Tynesia Boyea-Robinson. She urges investors to make clear that racial equity investing “is necessary for the growth and strength of our nation’s economy, and that you don’t want roadblocks placed in the way.”
  • Creating quality jobs to give companies and funds a market edge. Employers that offer respect and advancement opportunities, along with smarter benefits, wellness support, and yes, higher pay, have discovered a competitive edge in recruiting and retaining talent key to business success. The workplace disruption has given rise to private-equity and private-debt strategies that aim to deliver “worker solutions” and “workforce impact.” Some investors are betting that rising expectations among workers will require employers to continue trying to woo and retain them with what are variously called “good,” “quality” or gainful jobs.
  • Finding mispriced risk and hidden impact in municipal bonds. In the muni markets, some real risks are left unpriced (climate), while others are given disproportionate weight (race). Mispriced risk also presents an opportunity for impact – and alpha – for investors able to spot it. “Investors that are smart, that really want to beat the market, that want to see opportunities and not be beholden to past thoughts on race, are beginning to see the opportunity,” said Activest’s Homero Radway.
  • Read the full roundup,At stake in 2024: Expanded ownership and access to capital to build wealth and bridge divides,” by David Bank, Roodgally Senatus and Dennis Price.

Dealflow: Financial Inclusion

  • British International Investment provided a $14.4 million loan to Sitara, which provides mortgage financing to enable women in India to buy their own homes. The UK development finance agency also led a $37.3 million equity round for Indian small business lender Aye Finance. (BII)
  • KKR will acquire Scotland-based Smart Metering Systems, a data infrastructure provider for renewable energy systems, for $1.8 billion. (ESGtoday)
  • Estonia-based Arbonics secured €5.5 million ($6 million) to plan and monitor reforestation projects in Europe and calculate their carbon credits. (Arbonics)
  • Maryland-based X-Energy Reactor Co., which makes small nuclear reactors, raised $235 million for its Series C equity round after calling off plans to go public. (DCInno)
  • Tanzania’s NMB Bank raised 400 billion shillings ($159 million) in a green bond issuance, tripling the amount it set out to raise for investments in sustainable infrastructure, clean water and energy, and projects that support climate resilience. (Daily News)
  • Germany’s Ecoworks clinched €40 million ($43.6 million) to retrofit apartment buildings with prefabricated facades that improve properties’ energy efficiency. (EU-Startups)
  • Fast food chain Chipotle backed Greenfield Robotics, a farm robotics manufacturer, and “clean fertilizer” company Nitricity via its $50 million Cultivate Next venture fund. (Fast Company)

Impact Voices: Diversity in VC

Embrace the rainbow: The investment case for LGBTQ+ fund managers and startups. Adaptability and innovation are a recipe for success in the dynamic world of entrepreneurship. “These success drivers make investments in enterprises that can draw talent from the LGBTQ+ community attractive targets for investment,” says Patrick Driscoll of Chasing Rainbows, an LGBTQ-led venture firm that invests in LGBTQ-led startups. “And the growing cohort of LGBTQ+ fund managers are best positioned to identify, support, and grow such startups.” In a guest post on ImpactAlpha, Driscoll writes that such managers continue to face challenges raising funds “due to perceived biases and outright bigotry towards them and their portfolio companies.”

  • In and out of the closet. UK-based Proud Ventures found that three out of four founders actively conceal their sexual identity. “Founders often scrub their social media before raising a round,” Driscoll writes. The landscape is changing. A recent Morgan Stanley study found 45% of investors are interested in investable products and strategies that advance LGBTQ+ equity and inclusion. StartOut’s State of LGBTQ Entrepreneurship found that LGBTQ+ founders create 36% more jobs and have 44% more exits than their peers. Wells Fargo and US News found that higher proportions of LGBTQ+ citizens are associated with higher economic growth in US states.
  • Different angle. In an interview with Colorful Capital’s William Burckart and Megan Kashner, David Bank tells ImpactAlpha’s origin story and his own tale of coming out publicly – in The New York Times. His takeaway: “Having a view on things that comes from a slightly different angle is an absolute strength and asset,” he says. “Yes, there may be biases and challenges, but I say lean into the way you can see stuff that other people can’t.” The full interview.
  • Keep reading,Embrace the Rainbow: The investment case for LGBTQ+ fund managers and startups,” by Patrick Driscoll on ImpactAlpha. 

Agents of Impact: Follow the Talent

Jessica Golden, ex- of the National Trust for Historic Preservation, joins Ownership Works as a senior director of business engagement… LISC appoints Gustavo Quiroga, ex- of real estate advisory firm Graffito, as executive director of its Boston office… The Employee Ownership Expansion Network adds Adria Scharf, of Rutger University’s Institute for the Study of Employee Ownership and Profit Sharing, to its board.

Roy Swan of the Ford Foundation and Michael Barry of Georgetown University join the McKnight Foundation’s investment committee. The foundation is looking for a senior program officer in Minneapolis… Trust Neighborhoods has an opening for a senior project manager and a finance director The Center for Climate and Energy Solutions is recruiting an industrial decarbonization director. 

The UC Berkeley Office of Sustainability is hiring a sustainability data and program manager… The Rockefeller Foundation is recruiting a New York-based summer associate… UN Global Compact Network seeks a project coordinator of ESG reporting and regulations for Switzerland and Liechtenstein… First Australians Capital is looking for a corporate operations director in Melbourne… The Impact Facility is on the hunt for a new CEO in London. 

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

Thank you for your impact!

– Dec. 18, 2023