The Brief | June 16, 2020

The Brief: Building community wealth, alt-home-financing, curbing construction carbon, employee financial health, BP’s stranded assets

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Greetings, Agents of Impact, including our many new subscribers!

RSVP for The Call No. 19: 10x’ing investments in green infrastructure. The pandemic-induced pause in greenhouse gas emissions has provided a glimpse of a low-carbon future. And long-term, steady yields have rarely looked so attractive. ImpactAlpha’s next Agents of Impact call will explore how to ramp up investments in clean energy and green infrastructure. Join Greenbacker Capital’s David Sher, Equilibrium Capital’s Dave Chen, Caprock Group’s Matthew Weatherley-White and other Agents of Impact, Thursday, June 18 at 10am PT / 1pm ET / 6pm London. RSVP today.

  • Join the round-the-clock conversation on ImpactAlpha’s Slack channel.
  • Catch up quickly on ImpactAlpha’s 10x Challenge.

Featured: Impact Voices

Democratizing business financing and ownership to build community wealth. Building community wealth means reframing how communities participate in local business through financing, due diligence, governance and ownership. “If we don’t address inequity in decision-making and wealth accumulation, we will perpetuate unequal systems,” Intelligent Impact’s Aunnie Patton Power writes in a guest post on ImpactAlpha. Impact investing may treat populations at the base of the economic pyramid as consumers and producers, rather than beneficiaries, but they have only rarely facilitated wealth accumulation through capital ownership. “For the most part, the winners of successful impact investments remain a select few: the current owners of capital, often from Western economies, who receive a return on their investment,” along with founders, she writes.

Patton Power, who recently wrote about redesigning venture finance, collected community wealth-building strategies from more than a half-dozen other Agents of Impact. Pittsburgh-based Honeycomb Credit’s “Loyalty Bonds” encourage consumers to front local businesses the cash they need by giving them 30% more purchasing power over two years. Steward, based in Portland and London, is building a community-driven regenerative agriculture financing platform to give small farms access to capital for land, equipment, and operations. Project Equity supports businesses transitioning to broad-based employee ownership. Turning Basin Labs in Oakland, Calif., is a freelancers co-op that connects workers to “high road” employers committed to inclusion, equity, diversity and minimum pay of $18 per hour. Even organizations that don’t identify as “impact businesses,” Patton Power writes, can make “choices around their legal structures, capital sources and decision-making practices that can elevate the well-being of the humans and ecologies they depend on.”

Keep reading, “Democratizing business financing and ownership to build community wealth,” by Aunnie Patton Power on ImpactAlpha.

Dealflow: Follow the Money

Home financing startup Haus raises $15.8 million for housing “co-investment.” California-based Haus helps homeowners restructure their mortgages, rather than refinance. The company “co-invests in the home,” taking a portion of the equity, giving homeowners liquidity and helping them lower monthly mortgage payments. Owners retain the home title and can repurchase equity or sell at any time, the company says. Its Series A round was led by BlueRun Ventures.

  • Alt-home-ownership. The team behind Haus, including Uber co-founder Garrett Camp, designed the concept with professional millennials in mind; the company is looking to build options for low-ownership groups like single mothers and members of the military, or others who need liquidity, like seniors wanting to pay for their grandchildren’s education. To target higher-needs groups, Haus CEO Jonathan McNulty told ImpactAlpha that the company would look to impact investors to enable Haus to lower its fees.
  • By the numbers. Like paying a mortgage, Haus users make monthly payments to build equity. They also pay a fee to Haus, which the company says is lower than mortgage interest rates. Monthly payments remain constant, but the amount of equity a payment buys is based on the home’s monthly valuation. McNulty acknowledged that Haus might not be the right option for “the less than 1% of homeowners” who pay off a 30-year fixed-rate mortgage. “But 80% percent of people sell their home within 10 years.”
  • Debt-free financing. Patch Homes, which also has a model for debt-free home refinancing, raised $5 million last September.
  • More.

Vizcab raises seed funding to cut carbon in construction. The Lyon, France-based company raised €1.6 million ($1.8 million) to help project developers minimize their carbon footprints and validate results. Banque des Territoires, A/O Proptech and Unibail-Rodamco-Westfield group backed the startup.

Impact fund of funds Zamo backs social housing investor SSC. The U.K.-based firm invested an undisclosed amount in Social and Sustainable Capital to accelerate access to housing for 10,000 homeless and at-risk individuals in the U.K. “The pandemic creates more need than ever for social housing,” said Zamo’s Jim Roth. SSC is the first investment for Zamo, which launched in November with backing from Big Society Capital.

Origin secures $12 million to build employees’ financial health. The San Francisco-based fintech partners with companies to help employees set financial goals, track progress, build savings or pay off student debt. Felicis Ventures, General Catalyst and Founders Fund backed the round.

Signals: Ahead of the Curve

Writedowns of stranded fossil fuel assets are here – and getting bigger. Oil major BP lowered its price assumptions for oil and gas by almost one-third, and hiked its estimate for the price it will have to pay for carbon dioxide emissions in 2030 to $100 a ton, from $40. The result: The company will write off assets of up to $17 billion in the second quarter – its largest write-off since the $32 billion hit it took for the Deepwater Horizon disaster in 2010. It’s the latest in a string of write-downs by Chevron, Repsol and others. Driving the changes: the COVID pandemic’s “enduring impact” on energy demand and an accelerating transition to a lower carbon economy. The write-downs, said BP chief Bernard Looney, who in February charted a low-carbon strategy, “will better enable us to compete through the energy transition.”

  • Cascade of woes. In the relentless math of oil economics, falling price scenarios spell trouble for high-cost companies. Oil companies have tried to attract investors with lofty dividends that sometimes exceed earnings. Shell and Equinor have slashed dividends by two-thirds. BP and others may be forced to follow. BP is cutting 14% of its workforce and Chevron up to 15%. More than three dozen U.S. oil and gas companies have cut capital expenditures by $41 billion, or 36%, in 2020, according to S&P Global. Oil and gas companies will have to shrink production by more than a third to meet the goals of the Paris climate agreement, according to Carbon Tracker.
  • Transition or bust. Banks continue to fund oil companies despite the efforts of climate activists to “stop the money pipeline.” For oil companies that fail to plan for a transition, “their banks will lose faith in them and they will have no future,” wrote CarbonTacker in its recent “Decline and Fall” report (see chart above).
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Agents of Impact: Follow the Talent

Imperative21 launches network “that believes the imperative of the 21st century is to reimagine and redesign our economic system so its purpose is to create value for all stakeholders.” Founding partners include executives from B Lab, B Team, Chief Executives for Corporate Purpose, Coalition for Inclusive Capitalism, Conscious Capitalism and JUST Capital… Cairo’s angel investing network Cairo Angels launches a consulting service for early-stage ventures that are fundraising… Qontigo is recruiting a head of ESG in New York… OpenInvest seeks an ESG analyst in San Francisco… Roots of Impact is looking for an operations manager… The Cartier Women’s Initiative wants funding proposals from women impact entrepreneurs.

Thank you for reading. 

–June 16, 2020