The Brief | June 6, 2023

The Brief: Catalytic capital on The Liist, corporate solar in India, better benefits, sustainable cosmetics, plant-based leather, inclusion alpha in private equity

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Greetings, Agents of Impact!

👋 Join The Call. The next call in ImpactAlpha’s “Muni Impact” series, “How asset allocators are driving racial equity in municipal bonds,” features Harvard’s David Wood, Renaye Manley of the Service Employees International Union, and other Agents of Impact, Wednesday, June 14, at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: The Liist

Fund managers get creative with catalytic capital for energy, nature and financial inclusion (The Liist, June 2023)Energy Peace Partners and impact fund manager Cameo are out to prove that even in conflict zones there are investable opportunities in basic services. They can’t test their hunch with commercial capital – such financing doesn’t exist for the renewable energy projects the partners are supporting in Sudan, Somalia and the Democratic Republic of the Congo. An energy credit mechanism the pair developed will allow project developers to get funding upfront for energy they produce in the future. The goal: to use $10 million in grants and concessional capital to catalyze $90 million in renewable energy investment in vulnerable parts of Africa. Their $10 million pilot fund is one of several catalytic capital vehicles on this month’s Liist of actively raising impact funds (check out dozens of funds featured on earlier lists). Such funds leverage $4 of commercial financing for every $1 of concessional capital. 

  • De-risking. Lendable is in the market with its second fund to invest in emerging market fintech ventures that are driving financial inclusion. The fund has four tranches to encourage a mix of investors to back its approach, which will use impact incentives to get fintechs to strengthen their commitments to women (for background, see, “How Lendable parses risks and returns to mobilize capital for inclusive fintech in emerging markets”). A group of community investors led by Next Street is raising a revenue-based financing fund for diverse-owned small businesses in underserved communities. The five partners are contributing first-loss capital and plan to secure a 10% guarantee to further cushion investors.
  • Also on The Liist: Netherlands-based 4impact’s second fund will invest in impact-focused software ventures in northern Europe. Women-led Nithio uses an alternative data and AI-based underwriting system to lend to local businesses in Africa supporting the clean energy transition. Overlay Capital in Atlanta, Georgia, is in the market with a $70 million Innovation Fund to invest in climate-focused fund managers and early-stage startups.
  • Keep reading, “Fund managers get creative with catalytic capital for energy, nature and financial inclusion,” by Jessica Pothering and Roodgally Senatus on ImpactAlpha. Know an impact fund manager currently raising capital? Drop us an email or complete this short form.

Dealflow: Workforce Tech

Brookfield Renewable takes $360 million stake in Mumbai-based CleanMax. CleanMax is a leading supplier of renewable energy to corporate consumers in India, managing 1.6 gigawatts of wind and solar projects. Brookfield’s equity investment will help the company increase its installed capacity to 5 gigawatts. Indian corporations are “actively working towards supporting the government’s net zero goals,” said Brookfield’s Nawal Saini. Brookfield made the investment through its $15 billion energy transition fund. 

  • India’s energy transition. The world’s most populous country aims to generate half of its power from non-fossil fuel sources on the way to net-zero carbon emissions by 2070 (see, “India poised to lead – and test – the just energy transition”). CleanMax is Brookfield’s second clean energy deal in India this year. In April, the firm invested $1 billion in Mumbai-based Avaada Group to finance green hydrogen and ammonia projects. Last year, KKR’s $3.9 billion Asia Pacific Infrastructure fund invested nearly $1 billion in New Delhi-based clean energy producers Serentica Renewables and Hero Future EnergiesTPG Rise Climate co-led a $1 billion investment in an electric vehicle unit of Tata Motors in 2021.
  • Investor demand. Asia and the Middle East have taken on greater importance in Brookfield’s fundraising, as commitments from US-based investors have slowed. The firm last month cited strong demand for its second energy transition fund, which is targeting up to $25 billion.
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MoCaFi raises $23.5 million to help deliver financial aid to underserved communities. Billions of dollars in government funding are left unspent each year. Digital payment provider MoCaFi (short for Mobility Capital Finance) helps government agencies and other organizations distribute aid to families in need. The Harlem-based company has helped disburse some $100 million to families in 15 US cities. In majority-Black Birmingham, Alabama, MoCaFi worked with the city to deploy $20 million in emergency rental assistance for thousands of residents in the aftermath of the pandemic. MoCaFi also works with the city of Los Angeles to deliver financial assistance to the homeless. 

  • Inclusive fintechWole Coaxum, a Black former JPMorgan executive, launched MoCaFi in 2016 to help close the wealth gap by connecting underserved communities to financial services. The company offers no-fee banking, prepaid cards and credit building tools and apps as part of its “financial services as infrastructure” strategy. The Series B financing, led by Commerce Ventures,” allows MoCaFi to scale quickly and innovate to bring our products and services to more municipalities, government entities and community partners — ultimately helping more people,” said Coaxum.
  • Check it out.

Dealflow overflow. Other news crossing our desks:

  • Debut, a San Diego-based maker of sustainable ingredients for cosmetics, clinched $34 million in Series B funding from L’OrĂ©al, Material Impact and other investors. (Women’s Wear Daily)
  • Lendistry, a Black-owned community development financial institution, secured a $20 million line of credit from KeyBank to provide credit and other financial services to underserved small businesses. (Accesswire)
  • Mate Fertility raised $5.2 million in Series A financing backed by Revolution’s Rise of the Rest Seed Fund to provide affordable fertility care to non-heterosexual couples and others in US “fertility care deserts.” (USA Today)
  • New York-based Uncaged Innovations snagged $2 million in pre-seed financing to make a plant-based leather alternative. (Business Leader)

Impact Voices: Returns on Inclusion

Three steps private equity can take to capture alpha through diversity and inclusion. Employing diversity, equity and inclusion strategies is not performative wokeness – it’s a value driver. More private equity firms and their limited partners are requiring the reporting of sustainability metrics, including diversity data, as NYU’s Tensie Whalen outlined in ImpactAlpha last month. In a new guest post, Khalida Ali of Vista Equity Partners argues that firms can create financial outperformance as well as meaningful change by going beyond the hiring process to integrate diversity, equity and inclusion as “a core part of a PE firm’s business and the businesses they invest in, with defined strategy, measurable goals and buy-in from the top.” 

  • Multiplier effect. There are nearly 16,000 private equity-backed companies in the US. That scale gives firms implementing DEI initiatives the ability to “reach millions of people, across employees, boards and communities, all while adding value to their investments,” writes Ali. “Bringing a wide range of backgrounds and perspectives to the table sends ripples throughout an organization – dialogues are deeper, creativity is celebrated and innovation is unlocked.” 
  • Board diversity. As of 2022, 32% of all S&P 500 board directors were women and 22% were from underrepresented racial groups. “An immediate action that PE firms can take is to analyze the makeup of their corporate boards and prioritize diversity,” writes Ali.
  • Executive accountability. The C-suite should be held accountable for progress on diversity and inclusion goals. Ali suggests “tying performance reviews and compensation to executives’ achievements against long-term objectives, which should ladder up to business-wide goals.”
  • Keep reading, “Three steps private equity can take to capture alpha through diversity and inclusion,” by Khalida Ali on ImpactAlpha.

Agents of Impact: Follow the Talent

Ajay Banga, the former Mastercard chief, formally takes over the World Bank leadership from Trump pick David Malpass. The World Bank “must pursue both climate adaptation and mitigation,” Banga told the bank’s employees on his first day. “It must embrace risk but do so prudently.”… Former HUD Secretary Shaun Donovan is named CEO of Enterprise Community Partners… Former Education Secretary Margaret Spellings is named CEO of the Bipartisan Policy Center.

Rodney Foxworth is stepping down from Common Future to launch Worthmore, an impact investing and venture development firm. Common Future’s Sandhya NakhasiJennifer Njuguna, and Jessica Feingold will share co-CEO duties starting June 15… Maycomb Capital appointedMiljana Vujosevic, ex- of Prudential Financial, as partner and head of custom strategies… Lloyd Kurtz, ex- of Wells Fargo Wealth Management, joins Montecito Bank & Trust as senior portfolio manager.

Manarine’s Sara Minardreturns to Columbia/SIPA as an adjunct professor and The Brandmeyer Fellow for Impact and Sustainable Investing… Kilara Capital is hiring an investment analyst  for its impact investment fund in Melbourne, Australia… Inuka Partners in Singapore seeks a senior investment manager for its energy transition and natural capital fund… Beneficial Returns is hiring a Latin America credit analyst.

Coalition for Green Capitalseeks partnership proposals from clean energy businesses and community lenders for a national green bank network under the EPA’s Greenhouse Gas Reduction Fund… Sorenson Impact Center is hosting a virtual convening on community-engaged impact measurement, Tuesday, June 20 at 4pm ET.

Thank you for your impact.

– June 6, 2023