Greetings, Agents of Impact!
ImpactAlpha Podcast: Institutional Shift
Calling the inflection point, and other trends to watch in 2020 (podcast). The keyword of the year in climate action: scale. Pension funds and other large asset owners are putting pressure on their asset and fund managers to get on board the low-carbon economy in a big way. “What’s materially different from the past is that almost everybody is realizing we have now hit inflection,” says Equilibrium Capital’s Dave Chen in the latest installment of ImpactAlpha’s podcast series, Institutional Shift. “The key word is scaling, and the key asset class or strategy for making that move is through infrastructure.” Think electric charging, grid load balancing, distributed storage, water, even food and agriculture. “You’re going to see the demand from asset owners for big, blocky chunks of infrastructure that, by definition, are long-term assets and can move the needle and scale.”
The theme of change at institutional scale runs through the podcast, which explores nine trends to watch this year. A sampling: Corporate strategy shift (“The low-carbon economy will become less of an aspiration and become a product category,” Chen told ImpactAlpha’s David Bank). Share the wealth (“Institutional asset owners are going to define the S in ESG as social equality, equal access and social mobility”). Mergers and acquisitions (“You will see very active acquisitions taking place in large asset managers that give these large platforms substantive positions in the low-carbon economy or sustainable infrastructure”). Such trend-spotting doesn’t require a crystal ball, just paying attention. Indeed, a McKinsey report way back in 2008 laid out the declining cost curves of a range of sustainable technologies. “Everyone should take a look at it and say, ‘If I had been smart enough, I would have used that as an investment guide and I’d be worth a lot today,’” Chen says. “Many of the things on that chart have come down their cost curves and are what people are talking about in terms of investable opportunities to move the needle.”
Keep reading, and listen in to, “Calling the inflection point, and other trends to watch in 2020 (podcast),” on ImpactAlpha. Catch up on all of ImpactAlpha’s podcasts on iTunes, Spotify, SoundCloud or Stitcher.
Dealflow: Follow the Money
Turner Impact Capital invests in workforce housing in Seattle. The Seattle metro area offers an object lesson in how tech wealth has fueled the U.S. housing affordability crisis. L.A.-based Turner Impact Capital, which buys, preserves and upgrades middle- and low-income rental properties, made its first investment in the area, buying the Sunset View complex in Renton, Wash. The deal adds 240 units to Turner Impact Capital’s goal of acquiring and preserving 20,000 U.S. workforce and affordable housing units.
- Vocabulary check. What’s affordable? That depends. “Workforce housing” generally refers to units that are priced for households earning 80% to 120% of the area median income. (“The term “workforce” housing is not only imprecise, it is controversial,” says the Brookings Institute.) “Affordable housing” refers specifically to housing that qualifies for Low-Income Housing Tax Credits and is aimed at families earning up to 80% of area median income. Families earning 50% or less of area median income may be eligible for subsidized housing.
- Housing deals. Tech giants like Microsoft and Facebook have pledged billions to build and preserve middle- and low-income housing on their home turfs. Other recent investments include Catalyst Opportunity Fund’s housing deals in Los Angeles and Montana, Fifth Third Bank’s $100 million commitment to affordable and workforce housing in 10 states, and the Community Foundation for Greater Atlanta’s small checks to acquire and convert single-family homes into affordable and workforce housing in Atlanta.
- Read on.
Los Angeles Cleantech Incubator raises $5 million impact fund. The incubator raised a $5 million impact fund as a follow-on vehicle for the more than 100 early-stage startups in its portfolio. The fund’s first two investments are in Monrovia-based Seatrec, which harvests energy from temperature differences in ocean water; and San Leandro-based Freewire, a mobile and off-grid charging and power supplier. The investors in the fund were undisclosed. Emerson Collective, Laurene Powell Jobs’ philanthropic investment firm, will serve on the investment committee. “We’ve seen recognition from the clean tech investing space that these are needed investments,” says Matt Petersen of LACI, which was founded in 2012 as a partnership between the City of Los Angeles and its Department of Water and Power.
- Regional ecosystem. LACI is feeder of entrepreneurs starting up in Southern California in electric cars and flight, electric infrastructure and municipal mobility, says Andrew Beebe of Obvious Ventures, which shares portfolio companies with LACI. Both firms, for example, invested in Mountain View-based Amply Power, an autonomous power charging-as-a-service company. “LACI is playing a critical role,” says Beebe.
- Equity earn-back. Rather than up-front cash, LACI provides sweat equity for startups in its incubator program in the form of curriculum and advisory services. Startups are also eligible for $20,000 to run small-scale pilots. Companies can earn back back the equity by hitting impact milestones around diversity, environmental and community benefits. The new fund will consider the impact milestones when making investments.
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Blueprint Local makes Opportunity Zone investment in Baltimore’s Penn Station. Village Capital founder Ross Baird’s new venture is investing in the upgrade of Baltimore’s Penn Station, which will introduce office, restaurant and retail space to the train station. “This project has the potential to anchor a transformation in a historic neighborhood of a great city,” Baird said. Last year, Prudential Financialbacked Yard 56, another of Baltimore’s qualified Opportunity Zone investments.
- The envelope, please. The Sorenson Impact Foundation and Forbes announced the winners of their Opportunity Zone Catalyst competition at Sorenson’s Winter Innovation Summit. The contest aims to showcase the best community-focused Opportunity Zone work around the country. The City of Erie and Opportunity Alabama were named top community organizations, while SoLa Impact Fund and Four Points Funding snagged top fund honors.
- ICYMI: “Catalyst seeks to demonstrate positive impact with initial Opportunity Zone investments.”
U.K. pension scheme Nest signs onto Blackrock’s ‘sustainable cash’ product. BlackRock offers a liquid money market fund screened for environmental, social and governance factors. It is one of a raft of emerging “impact cash” solutions (see, “An impact option for directing idle cash to community banks”). The £9 billion non-profit National Employment Savings Trust, or Nest, is investing cash in the product to boost its portfolio’s sustainability alignment. “It is important that fund managers step up and show their commitment to responsible investment,” said Nest’s Mark Fawcett.
Agents of Impact: Follow the Talent
Thane Kreiner is stepping down as executive director of Miller Center for Social Entrepreneurship later this spring to help found an as-yet-undisclosed impact enterprise… Kelly Goldstein joins Harlem Capital Partners as a senior associate… Blue Shield of California is looking for a director of social impact in Oakland… Credit Karma seeks an executive director for its new charitable foundation in San Francisco… The Wonderful Company is hiring a director of philanthropy and programs in Los Angeles… Rise of the Rest is recruiting an investment associate in Washington D.C.
Thank you for reading.
–Feb. 6, 2020