The Brief | September 6, 2023

The Brief: Challenging wealth supremacy, Omnivore’s agtech exit, climate-adaptation Catalyst Fund, sustainable aviation fuel

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Greetings, Agents of Impact!

Featured: Ownership Economy

Challenging wealth supremacy to realize the dream of systemic change. Shallow tweaks may not be enough to deliver deep change. Even many responsible, ESG and impact investors themselves argue that ethical investing and business strategies amount to nibbling around the edges. “We’ve been thinking small – trying to get along with capitalism, to make it a bit less bad,” writes Democracy Collaborative’s Marjorie Kelly, a veteran journalist, theorist, consultant and one-time champion of “the business case” for sustainable investing. Kelly’s forthcoming book, “Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises,” is the latest to position the the new models as part of the problem, not the solution (cf. Anand Giridharadas, Tariq Fancy, Edgar Villanueva and others). It’s not enough to build “the positive” – impact funds, B Corps, CDFIs, public banks and more – Kelly argues in an exclusive essay for ImpactAlpha. Without challenging capital extraction and wealth supremacy itself, she says, “the failure of our work is inevitable.”

  • Finance first. At the heart of Kelly’s critique is what economists call financialization: the ascendance in recent decades of financial wealth and financiers. “The damages inflicted by financial extraction include the crisis of families trapped by predatory lending and unsustainable debt, the stifling of small and medium-size businesses that create jobs, dark money’s attack on democracy, and our addiction to limitless growth,” Kelly writes. Impact investors are part of the problem, with two-thirds saying they seek “market rate” returns. “We’re saying the status quo must not change; financial income must never suffer.”
  • Challenging assumptions. “The system has forced those of us working for change to keep our discourse inside the paradigm – to speak its language rather than challenging its assumptions,” Kelly says. Ecosystems matter because life matters, for example, not just because corporate consultants can show that sustainability practices mitigate risks, reduce costs, enhance brands and improve the bottom line. “This enforced submission to capital bias has entrapped and enfeebled all the fields of corporate whispering,” she says, “even as they’ve flourished as career paths.”
  • The next system. In a follow-up essay, Kelly will suggest pathways to a truly new system, including broad-based forms of democratic ownership. How do we make capital in service to, rather than in charge of, the public good? How do we move investing beyond the portfolio and toward broader, deeper, truly radical change, including in policy and culture. “Those of us seeking change have yet to coherently, collectively dream of a next system,” Kelly admits. “We’re not dreaming at the scale of the problem.”

Dealflow: Impact Exits

Omnivore sells its stake in Barrix to Sumitomo to notch another exit. Omnivore, one of the first dedicated agtech investors in India, co-led Barrix Agro’s first institutional investment round in 2013. The company is now one of India’s largest providers of eco-friendly crop protection and nutrition products to smallholder farmers in India. The sale of Omnivore’s stake in Barrix to Japan’s Sumitomo Chemical gives Omnivore its third exit in the past 12 months. Omnivore in June raised $150 million for its third fund.

  • Ten-year fund. Omnivore earlier this year sold its investment in farm equipment manufacturer Mitra to Indian conglomerate Mahindra. Last year it exited aquaculture software firm Eruveka to Dutch animal feed producer Nutreco. If not for the wind-down of its first fund, Omnivore would have stayed invested in all three companies for several more years, Omnivore’s Mark Kahn told ImpactAlpha. “They’re all profitable and at interesting inflection points. But we’re exiting to great buyers.”
  • Profitability preference. Many companies are struggling to raise fresh venture capital, often at lower valuations. Investors that once prized growth are showing a preference for companies that are profitable or on a path to profitability. The companies Omnivore exited “are being valued based on their profitability and aren’t affected by venture capital valuation trends,” said Kahn. 

Catalyst Fund raises $8.6 million for climate adaptation in Africa. BFA Global’s venture capital fund will invest in up to 20 startups this year; it has backed 10 so far including in Egypt, Senegal, Morocco. Catalyst Fund is targeting a $40 million final close to invest in high-impact tech startups working to improve the resilience of underserved, climate-vulnerable communities in Africa. “Despite climate change being a global reality, Africa is the most vulnerable continent to its adverse effects, even though the region contributes a mere 3% to global CO2 emissions,” said Catalyst Fund’s Maxime Bayen. Investors in the first close include FSD Africa, Cisco Foundation, USAID’s Prosper Africa and tech investor Andrew Bredenkamp.

  • Climate finance. Catalyst Fund is looking to cut checks of $200,000 in 40 pre-seed impact tech startups and make follow-on investments of up to $1.5 million. “We are coming in super early to be the early catalyzer for other investors to come in,” said Catalyst Fund’s Maelis Carraro. Target sectors include climate-smart agtech, fintech and insurtech, and fisher, waste and water management.
  • Portfolio building. Catalyst Fund, launched in 2015, last year transitioned from an accelerator to a venture capital fund to support founders long term. Graduates from the accelerator have gone on to raise over $650 million in follow-on funding, according to Catalyst Fund.
  • Check it out.

Lydian secures $15 million to produce zero-carbon aviation fuel. The Cambridge, Mass.-based company runs captured carbon dioxide and water through a high-temperature electric reactor. The process produces cheaper and more energy-efficient aviation fuel than its competitors, Lydian’s Joe Rodden told ImpactAlpha. “We try to minimize the amount of energy input by making the process as efficient as possible,” he said. “And obviously, if you want to create climate-friendly products, that energy needs to be renewable, so it needs to come from electricity.” A pilot plant is expected to produce at least 5,000 gallons per year of carbon-neutral aviation fuel.

  • Advance purchases. A raft of green aviation startups are racing to decarbonize air travel (see, “Zero-carbon air travel takes flight with a wave of new investments”). Global airlines have pre-purchased over 10 billion gallons of sustainable aviation fuel. United Airlines, through a $100 million sustainable flight venture fund, backed the UK’s OXCCU in June. Lydian, launched 2021, is in conversation with several US airlines to secure advance offtake agreements. Congruent Ventures and Galvanize Climate Solutions co-led its seed round, which includes $3 million in previously unannounced funding.
  • Dive in

Dealflow overflow. Other news crossing our desks:

  • Peru’s ELSA secured a revenue-based loan from IMPAQTO Capital to help prevent sexual harassment in the workplace. (IMPAQTO)
  • Women-led Unconventional Ventures crossed the half-way point to its target of €30 million ($32.9 million) for a fund to back diverse-led impact tech companies in the Nordics. (TechCrunch)
  • Israel-based ViAqua Therapeutics snagged more than $8 million, led by S2G Ventures, to develop an oral feed for disease prevention in aquaculture. (ViAqua)
  • Chicago-based eco-friendly packaging manufacturer Cirkla snagged $3 million in pre-seed funding, led by Matrix Partners India and Stellaris Venture Partners. (YourStory)

Agents of Impact: Follow the Talent

Kanarys appoints Google’s chief diversity officer Melonie Parker to its board of directors… The Nature Conservancy is on the hunt for a business innovation manager to focus on ocean and climate… Social Finance is looking for an associate in Boston… KKR Global Impact seeks a senior manager in New York… Also in New York, Next Street has an opening for a capital advisory manager… Matrix Renewables is hiring an accounting analyst in Madrid… Low Carbon is recruiting an onshore wind investment manager in London.

Tideline is hosting a webinar, “Navigating impact lenses,” with Criterion Institute’s Joy Anderson, Rhia Ventures’ Erika Seth Davies, Calvert Impact’s Caitlin Rosser, Tim Docking of the Refugee Investment Network, and Cristina Shapiro of UNICEF USA, Tuesday, Sept. 19… At SOCAP23 in October, Dream.Org will select three winners for its Justice Innovation Prizes for ideas to disrupt the criminal justice system. Register for free here.

👉 Visit ImpactAlpha’s Career Hub for more jobs in impact, ESG and sustainable investing.

Thank you for your impact!

– Sept. 6, 2023