Greetings, Agents of Impact!
Featured: Community Finance
The funds they are a-changin’ – and outdated regulations should, too. Small, place-based, and designed by and for community members: a new breed of community investment funds is channelling local capital into local enterprises to create shared prosperity, including in Black and Brown communities historically cut off from wealth-building opportunities (see, “How community investment funds are building resiliency to disasters, pandemics and economic shocks”). This week, Elevate/Elevar Capital, in the predominantly Black neighborhood of North St. Louis, joined Ujima Fund in Boston, Oakland’s Runway, REAL People’s Fund and East Bay Permanent Real Estate Cooperative, and the Southern Reparations Loan Fund to model a community-centric form of investment.
So what’s stopping every community from establishing its own fund? A big obstacle: an 80-year old federal law. The Investment Company Act of 1940 makes it prohibitively expensive to create community-scale funds, particularly those seeking to attract unaccredited investors. Currently, local funds must design their vehicles to fit within a dozen or so narrow exemptions allowed by the 1940 Act. The National Coalition for Community Capital is pressing the Securities and Exchange Commission to modernize the act to allow small funds to accept investment from retail investors, give fund managers flexibility to structure investments according to businesses’ needs, and share profits for wealth-building opportunities among all investors. That would open the door for community investment funds as “a new tool for economic development and community revitalization,” says Janice Shade of the Initiative for Local Capital.
- Simple revisions. “Community-sourced and community-focused capital should know no limits based on wealth status. It should be open to any citizen investor with the desire and financial wherewithal to invest for positive impact,” writes Shade, a founder of the National Coalition for Community Capital. “Just as the JOBS Act of 2012 delivered welcome and much-needed revisions to the Securities Act of 1933,” she says, “its equally outdated cousin, the Investment Company Act of 1940, is due for a 21st century makeover.” Read “To build inclusive, community-scale funds, modernize the Investment Company Act of 1940,” by Janice Shade on ImpactAlpha.
- Grassroots engagement. In Philadelphia and Atlanta, neighborhood trusts are taking on speculators and building community wealth. A community-led cooperative is reviving a Black cultural corridor in West Oakland. Transform Finance has given the practice of investing with meaningful input, decision-making power, and/or local community ownership a name: Grassroots Community Engaged Investment (see, “Centering community voices and power in investment processes”). Transform Finance is hosting Adriana Abizadeh of Kensington Corridor Trust and John Haines of Mercy Corps to discuss community engagement in real estate investment. Join the discussion, today at 1pm ET / 10am PT.
Dealflow: Follow the Money
Northwestern Mutual backs Black fund managers with a $100 million impact fund. The financial services giant is hoping to catalyze investments in underserved Black communities, especially in Milwaukee, where it is headquartered. The vehicle is backed by Northwestern Mutual’s $270 billion general account, the company’s Ray Manista told ImpactAlpha. It has already deployed $30 million in a pair of Black women-led funds: Gateway Capital Partners, which has raised $13.5 million to invest in early-stage startups targeting low-income Milwaukee County, and Clear Vision Impact Fund in New York, which will make loans to minority-led or owned small businesses.
- The Reconstruction. Corporations have stepped up to help Black and Latinx fund managers invest in companies addressing disparities faced by communities of color (see, “How some corporations are driving capital to Black founders and investors”). Black-led Brown Venture Group will receive up to $10 million from Best Buy to provide financing for Black, Latinx and Indigenous technology entrepreneurs.
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LACI makes SparkCharge the tenth investment from its cleantech debt fund. The Los Angeles-based cleantech incubator has made 10 investments since launching a debt fund for underrepresented founders “to play a role in scaling cleantech startups much earlier than conventionally understood.” The latest: SparkCharge, a Massachusetts-based company building a network of rapid electric vehicle charging stations. Other portfolio companies include Los Angeles-based Green Commuter, an electric car-sharing fleet provider; Perch Mobility, which partners with local governments and property owners to install electric charging stations for e-scooters and e-bikes; and San Francisco-based Nevados, which makes a solar tracker to maximize solar panels’ efficiency.
- Loan terms. LACI has raised $160,000 for the debt fund from Wells Fargo and Union Bank. The fund makes loans of $20,000 to $45,000 at 7% to 9.5%. Borrowers repay the loans over four to 36 months.
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Ambri and Nanotech Energy raise financing to scale green battery technology. Green batteries, critical for global decarbonization efforts, are getting cheaper. Bill Gates-backed Ambri makes molten-salt batteries to store wind and solar power. The Marlborough, Mass.-based company, which says its batteries are cheaper and more durable than lithium batteries, is targeting the grid-scale energy storage market and large industrial energy customers. It raised $144 million in an investment round led by Reliance New Energy Solar.
- Emerging technology. L.A.-based Nanotech Energy uses graphene to make non-flammable batteries. The company raised $64 million, led by Taiwan’s financial services company Fubon Financial Holdings. It will use the financing to establish a new headquarters in Amsterdam and build a manufacturing facility in Reno, Nev.
Dealflow overflow. Other investment news crossing our desks:
- Apollo Projects and Breakthrough Energy Ventures back early-stage carbon tech venture 44.01 (named for the molecular mass of carbon dioxide), which has developed a process for capturing and “mineralizing” carbon (more on how, here.)
- No-fee digital bank Kuda in Nigeria scores $55 million in Series B funding on the heels of its $25 million Series A round in March.
- Chicago-based Avathon Capital invests in ReUp Education to re-enroll adults who didn’t complete their degrees.
- MassMutual Catalyst Fund and Boston-based The Impact Seat back The Organic Project to grow sales of its buy-one give-one organic menstrual products.
Signals: Policy Corner
It’s time to accelerate investments in community development financial institutions. CDFIs are coming off of one of the most productive periods in the sector’s history, says Annie Donovan of the Local Initiatives Support Corp., or LISC, and former director of the U.S. Treasury Department’s CDFI Fund. “The challenge now is to build on that momentum, not slip back into business as usual,” Donovan writes in a guest post on ImpactAlpha. “Transformative progress requires better access to patient, flexible, risk-taking capital.” Read Donovan’s guest post.
Introducing Policy Corner, in partnership with the U.S. Impact Investing Alliance. Strengthening the Community Reinvestment Act. Fortifying critical small business lenders. Leveraging the lessons of international development finance. Carrying mandated environmental, social and governance disclosure over the finish line. “To make progress toward addressing our shared social, economic and environmental challenges, we must proactively engage with the public sector to create an enabling environment for truly impactful business and investment decisions,” writes the alliance’s Fran Seegull, who added, “The alliance is excited to collaborate with ImpactAlpha to establish the new Policy Corner.” Get policy updates and expert insights on our upgraded policy landing page. Read Seegull’s full post.
Agents of Impact: Follow the Talent
Omidyar Network is recruiting a principal for its Reimagining Capitalism team… CalSTRS seeks an associate portfolio manager for sustainable investment and stewardship strategies… Duke University’s CASE i3 is accepting applications from organizations with consulting projects for its MBA students… The Global Steering Group for Impact Investment, Torino Social Impact and Social Impact Agenda per l’Italia are accepting applications through Aug. 23 for the first Impact Narrative Awards.
Thank you for your impact.
–Aug. 12, 2021