Greetings, Agents of Impact! Thanks to everyone who turned out for yesterday’s Call, “The disruption of small business finance in emerging markets.” We’ll have a recap and replay in Friday’s Brief.
Featured: Impact Voices
Higher risk, higher principles: A simple investment thesis for Christian impact investors. By bringing together investors with different risk-return profiles, blended financing structures can help mobilize capital to deliver on the U.N. Sustainable Development Goals. “Christian impact investors can help lead the way by taking on greater risk positions in blended deals,” writes Sara Minard of consulting firm Manarine and the Mockler Center for Faith and Ethics in the Public Square. In a guest post, Minard argues that as charities and philanthropic organizations with an “active ethic of love,” faith-based institutions are positioned to help bridge the $2.5 trillion funding gap for achieving the SDGs by 2030.
- Risk-taking. That ethic “enables the faith-based investment manager to take a higher risk approach and be willing to invest in enterprises that are more innovative and use technology to benefit low-income populations,” writes Minard, who has support from Roots of Impact and the Porticus Foundation. To deliver on this promise, she argues, the world needs a blended impact investment fund where the investment thesis is “in the service of all life.”
- Keep reading, “Higher risk, higher principles: A simple investment thesis for Christian impact,” by Sara Minard on ImpactAlpha.
How faith-based asset owners can advance sustainable banking as shareholders and customers. In “The State of Sustainable Banking,” U.K.-based FaithInvest explores how faith institutions are flexing their power as shareholders, and increasingly as customers, to press banks to live up to net-zero and other sustainability pledges (for background, see “How to find a socially-responsible bank”).
- Customer advocacy. Unlike shareholders, writes FaithInvest’s Mathew Jensen in a guest post, customers have no legal or formal say in the governance of a bank. Still, a critical mass of bank customers can press banks to achieve net-zero and other goals, or take their business to banks that are more responsive. “Faith-based organizations can multiply their advocacy efforts by encouraging business leaders within their congregations to make similar requests of their banks.”
- Keep reading, “How faith-based asset owners can advance sustainable banking as shareholders and customers,” by Mathew Jensen on ImpactAlpha.
Dealflow: Green Infrastructure
Climate Fund Managers raises $675 million for green blended finance fund. The Dutch fund manager reached a first close towards a $1 billion target for Climate Investor Two, its second blended-finance fund. The $850 million Climate Investor One was incubated by the Global Innovation Lab for Climate Finance in 2015 to streamline renewable energy projects in developing countries and entice institutional investors off the sidelines (for context, see, “Deploying catalytic capital to bridge financing gaps for climate action”). Climate Investor Two will also invest in adaptation projects, water infrastructure and ocean-related companies. “Everything that we do as climate fund managers is to put new funds into the market that have scale and the ability to absorb private sector funding,” Climate Fund Managers’ Georges Beukering told ImpactAlpha.
- Life cycle. Climate Fund Managers, a joint venture of Dutch development bank FMO and South Africa-based Sanlam InfraWorks, provides support at all stages of a project. To get projects started, a donor-backed development fund supports feasibility studies, legal contracts and due diligence. A second pool of blended capital provides equity for project construction as an alternative to bank financing. Once completed, project developers can tap a refinance fund or banks for operational capital. In the final phase, says Beukering, CFM helps sell off the projects.
- Track record. Beukering sees “a significant appetite for real, green infrastructure assets.” The blended structure reduces risk and increases returns for commercial investors. Institutional investors in the Climate Investor funds include Sanlam, Norwegian pension fund KLP and U.K. pension fund LPP. Four of the six projects in the Climate Investor One portfolio are fully operational, including a 138-megawatt hydropower project in Uganda and a 48-megawatt wind farm in Vietnam.
- Get on board.
ZenBusiness raises $200 million to scale support for micro entrepreneurs. The Austin-based public benefit corporation, which has helped more than 200,000 U.S.-based micro entrepreneurs start their businesses, is bringing on billionaire Mark Cuban as an advisor and spokesperson. “As a serial entrepreneur, I understand the challenges that come with launching and running your own business,” said Cuban. The new financing, which values ZenBusiness at $1.7 billion, was led by Oak HC/FT, a women-led healthcare and fintech investment firm, with participation from SoftBank Vision Fund 2, Cathay Innovation and Greycroft.
- Financial services. The company will use the financing to help users send invoices, connect to their bank accounts and categorize expenses. Since ZenBusiness acquired small business fintech Joust last year, it has hired 10 refugees and plans to hire as many as 100, according to Amplio Ventures, an early investor in Joust.
- Check it out.
Spring Lane Capital reaches $151 million first close for its second sustainable infrastructure fund. The Boston and Montreal-based private equity firm is looking to raise $400 million to support food and agriculture, energy, water, waste and transportation entrepreneurs and projects in North America. Spring Lane’s first fund made a half-dozen investments, including Vandalia Growers USA, an indoor grower of tomatoes in West Virginia, and an animal waste-to-fuel developer. “The sustainability market for private equity has never been stronger,” said Spring Lane’s Rob Day. More.
Dealflow overflow. Other investment news crossing our desks:
- U.K.-based Nomod scores $3.4 million in seed financing to help small merchants in emerging markets get paid online.
- Philippines-based Pentina, a buy now, pay later app for vendors and merchants in emerging markets, raises $2.2 million to expand internationally.
- The Clean Fight NY, a nonprofit climate tech accelerator, backs nine companies working to retrofit non-luxury residential and commercial buildings in New York.
- Bridges Fund Management backs Tier 1 to help corporate customers recycle and resell computer equipment.
Signals: Public Benefit Investors
Sustainable infrastructure company Generate Capital becomes a public benefit corporation. Generate Capital is embedding its mission to build a more sustainable world into its charter. The San Francisco-based investor, owner and operator of sustainable infrastructure is the latest company to re-incorporate as a public benefit corporation, or PBC. Generate’s Scott Jacobs says the move will help protect the interests of community members, customers, suppliers, employees and other stakeholders. Generate has long been structured as a corporation, not a series of funds. “The fiduciary duty of the board and the shareholders now includes a duty to the public benefit,” Jacobs told ImpactAlpha. “We think this is stakeholder capitalism at its finest.”
- Public benefit investors. PBCs are gaining as a way for companies to signal their values – and protect them from short-term profit pressures. Companies including ZenBusiness (see above), Novata, Lemonade, Vital Farms, AppHarvest, WeFunder, Coursera and Amalgamated Bank have adopted the legal structure (for context, see, “A stock market test for stakeholder capitalism as public benefit corporations go public”). Still, their ranks are slim compared to the masses of companies making social and environmental pledges. Generate, which raised $2 billion in July, hopes other companies and investors “feel the pressure to make their sustainability bona fides more transparent,” Jacobs said. “What we have done today is we’ve changed our incentives. And we’re calling on everybody else to do the same thing.”
- Walk the talk.
Agents of Impact: Follow the Talent
Neil Hardwick, formerly of WPP, is named CEO of RethinkX… The Aspen Institute is hiring a deputy director of strategy for its energy and environment program in Washington, D.C… Mission Driven Finance seeks a real estate strategist… Water.org is recruiting a strategic development executive… CDC is looking for a quant analyst of asset allocation and capital solutions in London… Applications are open for the Los Angeles Cleantech Incubator.
Thank you for your impact.
– Nov 17, 2021