Greetings, Agents of Impact!
Featured: Financial Inclusion
How Balloon Ventures is (cost-effectively) banking the “missing middle” in East Africa. Big businesses can access credit from commercial banks. Micro- and informal businesses can get tiny loans from microfinance institutions or a growing number of fintech and enterprise tech startups (for context, see, “How technology is disrupting small-business financing in emerging markets – in a good way”). Across much of Africa, however, locally-owned small and mid-sized businesses – the kinds with five to 100 employees – “are massively ignored,” says Josh Bicknell of Balloon Ventures. The U.K.-based small business lender cuts checks of around $25,000 to Africa’s small businesses, a step above the $1,000 to $2,000 checks from most fintech companies. Balloon’s model: Bundle capital and business support services into a cost-effective loan product that can be replicated and scaled across business sectors and markets. “If we can make it work, then that unlocks a multi-billion dollar market, which people should be interested in,” Bicknell tells ImpactAlpha.
Balloon recently raised $4.7 million from Palladium’s Challenge Fund for Youth and others to test whether its model is truly scalable. The firm evolved from a nonprofit cultivating entrepreneurship in the U.K. and Africa. Bicknell and his partners launched the fund in 2017 to zero in on the small proportion of Africa’s informal businesses that succeed at growing to five or ten employees. “The way to move people out of poverty is through good jobs,” says Bicknell. “When people are paid fairly and have contract security, that’s when they invest in healthcare and education and other things.” One of Balloon’s portfolio companies, Ugandan coffee trader Ubora Specialty Crops, took a 40-million-shilling ($10,000) loan last year to buy equipment for a quality-control lab. Balloon supported the company in building out financial systems and establishing human resources and communications processes. In just over a year, Ubora has grown revenues five-fold and staff from three to 10. All staff now have formal contracts and are paid a living wage. Technical assistance can’t be separated from financing, Bicknell says. “You can only invest in these businesses if you make them less risky. To do that with commercial capital at scale, support and finance have to be one product.”
- Keep reading, “How Balloon Ventures is banking the “missing middle” in East Africa,” by Jessica Pothering on ImpactAlpha.
Dealflow: Food Waste
Afresh rakes in $115 million to help grocers reduce food waste. The San Francisco-based company developed an AI-based system to help grocery store owners manage fresh food inventory and sales to reduce waste. Afresh says more than 3,000 grocery stores in the U.S., including Albertsons, Cub Foods and Save Mart, use the product to cut waste by at least one-quarter. Afresh aims to reach 10% of all supermarkets in the country and plans to expand to Europe as well as other food categories. About 40% of all food produced in the U.S. is thrown away, and most ends up in landfills. Afresh says by year’s end, it will help its customers save 34 million pounds of food waste going into landfills.
- Agrifood investing. Afresh has raised $148 million to date. “Afresh is building a tool for the modern age that not only helps grocers manage fresh categories more effectively but also cuts down on food waste,” said Walter Robb, former co-CEO of Whole Foods who is now with S2G Ventures. Robb joined the round led by Spark Capital.
- Check it out.
Raincoat scores $4.5 million to scale disaster insurance in the Caribbean and Latin America. More than 150 million people in Latin America and the Caribbean have been impacted by hurricanes, earthquakes, floods and other disasters since the turn of the century. San Juan, Puerto Rico-based Raincoat launched in 2019 to help financial institutions, governments, insurers and reinsurers automate payouts to their clients. Most of Raincoat’s clients in Jamaica, Colombia and Mexico serve the agricultural sector. The company is expanding to the Dominican Republic and Chile. Anthemis led the round with SoftBank’s Opportunity Fund. Divergent Capital, 305 Ventures, Consorcio and Banco Popular de Puerto Rico also participated.
- Climate adaptation. Raincoat helps companies offer “parametric” disaster insurance, which provides payments to policyholders based on the magnitude of the disaster rather than losses incurred. Such automatic responses enable faster payouts than other insurance policies. Fully-automated insurance holds the key to insuring the most vulnerable against climate disasters, said Raincoat’s Jonathan Gonzales, cautioning, “The obstacles to fully implement these programs at scale are incredibly complex.”
Dealflow overflow. Other investment news crossing our desks:
- Mexico-based women’s health startup Daisies acquired Aplícate, a personalized mental health and nutrition app for employees.
- Ghanaian fintech venture Zeepay, which focuses on remittances, snagged $10 million in a Series A round from Symbiotics and an undisclosed investor.
- Orange EV raised $35 million in a round led by S2G Ventures to meet the growing demand for its heavy duty electric and zero-carbon trucks.
- Black woman-led Hive Wealth, a financial app addressing the racial, gender and generational wealth gaps, secured an undisclosed investment from SVB Financial Group.
Impact Voices: Net Zero
How four institutional investors use climate action plans to map their paths to net zero. Two years ago, the New York State Common Retirement Fund set a goal to zero-out greenhouse gas emissions across its portfolio by 2040. Helping it get there: a climate action plan created in 2019. New York Common is one of a small but growing number of pension funds and asset owners and managers adopting such plans to guide their net-zero journeys. “Investment, engagement, policy advocacy and disclosure are critical pillars of robust investor climate actions,” Ceres’ Kirsten Spalding writes in a guest post on ImpactAlpha. Ceres is a founding partner of The Investor Agenda, which also includes CDP, Institutional Investors Group on Climate Change, and Principles for Responsible Investment. The group’s Investor Climate Action Plans Expectations Ladder sets expectations for investors looking to implement comprehensive climate action plans.
- Stewardship. CalSTRS, which last year led an effort to mobilize investors to elect a dissident slate of board members at ExxonMobil nominated by the hedge fund Engine No. 1, stands out for its engagement with portfolio companies. London-based Impax Asset Management’s investor climate action plan is notable for its policy advocacy. With substantial operations in the U.S., Impax was an early advocate for climate-risk disclosure rules proposed by the U.S. Securities and Exchange Commission.
- Multi-asset. New York Common allocated $20 billion to opportunities in climate solutions across asset classes. Two years later, it is ahead of schedule with $15 billion in the fund, about 5% of its total $279 billion in assets. Investments include public equity strategies, green bonds, clean and green infrastructure funds, private equity funds, and green building real estate funds. More than 20 case studies, Spalding says, show that “investors are prepared to be transparent with their stakeholders on how they manage climate risks and align strategies with the goals of the Paris Agreement.”
- Read Spalding’s full post.
Agents of Impact: Follow the Talent
RMI’s Climate Intelligence Program is hiring a carbon markets manager in Boulder, Colo… New Story is looking for an impact investment senior manager in Mexico City… Chanel seeks a head of global sustainability transformation in London… Human Rights Watch is hiring a researcher of climate displacement in New York… The Estée Lauder Companies is recruiting a manager of sustainability and climate action in New York.
Climate tech investor and advisor Jamil Wyne and Coleap are launching an online bootcamp for 20 early-stage climate tech startups. Use the code IMPACTALPHA10 for a discount… A new fellowship program from UBS and The Fourth Floor is recruiting diverse-led, early-stage startups and board candidates… Climate Policy Initiative is hosting “India’s green finance landscape – increasing momentum and opportunity,” tomorrow, Aug. 10.
Thank you for your impact!
– Aug. 9, 2022