The Brief: Big Oil smackdown, preventing policy capture, Black innovation fund, Egypt’s early-stage startups, bridge loans, last-mile distributors

The team at

ImpactAlpha

Greetings, Agents of Impact! 

Signals: Climate Wins

Victory for insurgents stuns Exxon as shareholders vote for a low-carbon future. In a single day, separate developments at ExxonMobil, Chevron and Shell sent an unmistakable signal to oil companies and investors: get on board the low-carbon transition, and fast. In a matter of hours, Exxon shareholders voted two dissident directors – at least – onto the oil giant’s board. Investors told Chevron to cut its emissions. And a Dutch court ordered Shell to slash its emissions by 45% by 2030. “This is one of those days that will be seen in retrospect as a day when everything changed,” said Ceres’ Andrew Logan. “If you win at Exxon, you can win anywhere.”

  • High drama. Exxon shareholders delivered a stinging rebuke to management with the election of Gregory Goff and Kaisa Hietala, part of a slate put forth by the activist hedge fund Engine No. 1. The stakes were so high that the company paused the meeting to allow more time for investors to vote, a highly unusual move that suggested a scramble to stem the investor revolt. Exxon spent the hour-long break, and much of the Q&A period that followed, working the phones to sway votes and limit Engine No. 1’s victory, according to people close to the proxy fight.
  • Stewardship shift. The votes by BlackRock, the world’s largest asset manager, were particularly closely watched. “We continue to be concerned about Exxon’s strategic direction and the anticipated impact on its long-term financial performance and competitiveness,” BlackRock said in explaining its vote for three of the four insurgent directors. Just last week the International Energy Agency declared that new fossil fuel investment is incompatible with a net-zero future.
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Short takes. Research and data points crossing our desks:

  • First time funds. Evidence suggests that smaller funds and diverse-led funds and companies outperform their larger and homogeneous counterparts. To overcome lingering biases and crowd in capital, MassMutual is anchoring first-time funds and matching other limited partners’ commitments, according to “A Guide to Investing in First-Time Women and Diverse Fund Managers,” from GenderSmart.
  • Preventing policy capture. Pervasive and systemic corporate lobbying challenges democratic institutions, according to a report from Preventable Surprises that documents such “policy capture.” The 50 largest asset managers have committed to transparency, but internal and external controls are lacking.
  • Nature loss risk. Biodiversity loss remains a top risk in the World Economic Forum’s “Global Risk Report.” A new tool from the U.N.-backed Natural Capital Finance Alliance helps banks and investors assess how their financial portfolios contribute to extinction risk and undermine ecological integrity.
  • Social justice investing. The Adasina Social Justice All Cap Global ETF, which launched in December on the New York Stock Exchange, passed $50 million in assets under management.

Dealflow: Black Founders

Collab Capital closes $50 million Black innovation fund. The Atlanta-based firm is looking to make 50 investments in early-stage, Black-led businesses building generational wealth (see, “Collab Capital launches fund for Black founders”). Companies in its portfolio include Atlanta-based Hairbrella, which makes rain hats; Jax Rideshare, which rents ride-hailing vehicles; and music licensing company Music Tech Works. Washington, D.C.-based Please Assist Me provides resident services for real estate operators. A 2017 report warned that median Black household wealth is on a path to reach zero by 2053. 

  • Network effect. Collab deploys its network to accelerate its portfolio companies; the hip-hop artist Lecrae, for example, is a Collab venture partner and seeded the fund with the Kauffman Foundation. Corporate investors in the firm’s first fund include Apple, Goldman Sachs, Google, Paypal and Mailchimp. Also investing: Andrew W. Mellon Foundation, Libra Foundation and the Mary Reynolds Babcock Foundation, with support from Candide Group.
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Blackstone’s ClearGen commits $500 million to build minigrids for commercial users. Many building owners and operators want to take control of their energy supply, but on-site microgrids require significant capital outlays. Blackstone’s portfolio company, ClearGen, will back Schneider Electric and impact investment firm Huck Capital to launch GreenStruxure to help commercial and industrial users transition to clean energy by covering the upfront costs (see, and hear, “Shutdown accelerates shift to digitized, decentralized, decarbonized electricity”). Schneider previously teamed up with Carlyle Group to launch AlphaStruxure, which builds microgrids for airports, ports and other large facilities. Dive in.

Dealflow overflow. Other investment news crossing our desks:

  • Climate tech venture NCX (formerly SilviaTerra) raises $20 million from Microsoft, South Pole and Shell Environmental Products to create a 1.2 million-acre forest carbon project in the U.S.
  • KKR invests $55 million in eSSENTIAL Accessibility to make online platforms and services accessible to people with disabilities.
  • Nigeria’s CribMD clinches $2.6 million for its subscription-based digital health services.
  • Healthcare Georgia Foundation makes a $250,000 program-related investment to the ANDP Loan Fund to expand healthy and affordable housing in Atlanta and across Georgia.
  • Flat6Labs raises $13.5 million from the International Finance Corp., the MSME Development Agency, the Egyptian American Enterprise Fund and Egypt Ventures to invest in early-stage startups in Egypt. Swari Ventures previously backed the fund.

Impact Voices: Returns on Resilience

Tallying the enterprises – and impact – that survived COVID with loans from Open Road Alliance. Maya Winkelstein knew there would be strong demand for emergency bridge loans even before Open Road closed on the first $11 million for its fund last March because, well, stuff happens. And indeed, COVID-related shutdowns left social enterprises serving vulnerable communities suddenly vulnerable (see, “Short-term loans are a safety net as social enterprises face an ‘unexpected OMG moment’”). The fund “could not have come at a better time,” Winkelstein told ImpactAlpha. 

A year later, Open Road’s impact fund has deployed $11 million in loans to 30 social enterprises in food and agriculture, energy, education and other vital sectors. About two-thirds of the loans have been made in Africa. One example: Mr. Green Africa, a circular economy startup in Nairobi, processes plastic waste sourced from waste pickers working in Nairobi’s informal recycling sector. A $350,000 loan from Open Road enabled the company to keep operating – and ink a deal with Unilever – when a planned capital raise was delayed by the pandemic.

  • Returns on resilience. Open Road’s bridge loans helped mission-driven enterprises maintain operations, preserving roughly $100 million of impact through the pandemic that would have otherwise been jeopardized. Delayed funding rounds, additional expenses and supply-chain disruptions are ongoing challenges. But rather than needing six months of cash flow to simply survive, many social enterprises are now thriving and on the path to scale. Share this post.
  • Impact-first. Open Road’s investors include family offices, private foundations, and government donors such as Blue Haven Initiative, Swiss Development Corp., and Silicon Valley Community Foundation. Their 2-4% returns enable Open Road to keep borrower interest rates below 10%. Don’t call it concessionary. That return “isn’t concessionary when it comes to capital preservation – it’s market-rate,” writes Winkelstein in a guest post.
  • Read “Everything is ‘market-rate,’ but not everything is ‘impact-first’,” by Maya Winkelstein. 

These distributors deliver impact to customers and communities at the last mile. Low-cost solar energy. Clean water. Farming inputs. Basic financial services. Companies reaching so-called “last mile” consumers with essential products need impact capital more than ever to accelerate sustainable economic development in the neediest and most remote communities. The Global Distributors Collective is a community of more than 200 last-mile distributors that collectively reach 35 million people. “While the importance of last-mile distribution is increasingly recognized, funding is still not flowing into this space,” GDC’s Emma Colenbrander write in a guest post on ImpactAlpha.

  • Debt gap. Lack of debt financing leaves international and high-growth distributors dependent on expensive equity capital to cover working capital and inventory costs. Zimbabwe-based Zonful Energy, for instance, was unable to fulfill 300,000 outstanding orders for solar products because of insufficient working capital. Smaller and more local last-mile distributors lack access to equity and debt, says Colenbrander, but “achieve more sales per dollar of capital raised, suggesting that while they may be slower to deliver impact, they may be more ‘efficient’ at doing so.”
  • Last-mile journeys. Tune into GDC’s webinar, “Growth and fundraising journeys of last mile distributors,” Thursday, June 17, for a discussion of its new research and takeaways from its recent Last-mile Distribution Investor Forum, hosted with Acumen.
  • Read, “These distributors deliver impact to customers and communities at the last mile,” by Emma Colenbrander.

Agents of Impact: Follow the Talent

Carole Ferguson, ex- of CDP, will head up Industry Tracker, a research outfit being launched by Investor Watch Group that will report on carbon-intensive sectors … Ejido Verde is named best private sector Latin American landscape restoration project in 2020 by World Resource Institute’s Initiative 20×20… Arctaris Impact Investors seeks a chief compliance officer in the Boston area… Climate Policy Initiative is looking for a U.K. associate director/director of climate finance… CNote is recruiting a director of impact evaluation… Pacific Community Ventures has an opening for a lending portfolio director in Oakland.

Greentown Labs is looking for an investor program manager in Somerville, Mass. or Houston… Good Jobs First is hiring a research analyst for its Covid Stimulus Watch project in Washington, D.C…  Morgan Stanley Investment Management seeks a portfolio specialist/impact strategies vice president… Candide Group is looking for an operations and client services associate in the San Francisco Bay Area… The Global Steering Group for Impact Investment is hiring a knowledge and impact associate in London. 

The Global Impact Investing Network is hosting its second “Next Normal Now” convening on climate action, Wednesday, June 16… The virtual OnRamp Impact Conference is scheduled for July 27-28. ImpactAlpha subscribers get free access with code IMPACTALPHA… Hamburg, Germany-based nonprofit Impacc is accepting applications for a new equity investing initiative for companies delivering products and services to low-income and rural Africans.

Thank you for your impact.

– May 27, 2021