The Brief | March 14, 2022

The Brief: Community voices, building credit scores, renewable natural gas, health entrepreneurs in Arab communities, Latin American impact

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Greetings, Agents of Impact!

Featured: Impact Management

Listening to community voices to combat impact washing and promote good governance. Investors may face financiallegal and reputational risks, but it is local communities living and working on investment projects that bear the most risk. Until recently, however, impact measurement and management standards omitted requirements to hear from and be accountable to local communities. “Given local communities’ proximity to an investment, they can be the first to know if an investment is off track,” Margaux Day of Accountability Counsel writes on ImpactAlpha. “If they have a trusted channel to raise issues to investors, they will.” Community-informed impact measurement and management “could make impact investments more sustainable and better assure investors, regulators and the public that investment outcomes are living up to promised impacts.”

  • Community accountability. In Liberia, at a biomass plant that was championed as a sustainable investment, “serious abuses” pushed local communities even deeper into poverty. In India, international investments in a project aimed at increasing access to drinking water harmed Indigenous communities. In both cases, communities had access to an investor accountability mechanism to raise environmental and social issues and seek redress. In turn, investors learned of the negative impacts of their investments and had an opportunity to improve that investment and learn lessons for the future.
  • Good governance. In the past two years, impact measurement and management practices have started including communities’ voices, says Day. Impact standards from the United Nations Development Programme, for example, include an expectation for investors to establish “effective grievance and reparation mechanisms” for affected peoples. Still, many impact investors do not have mechanisms to hear issues raised by communities – a glaring governance gap, says Day. As impact measurement and management standards continue to recommend such mechanisms, she adds, “this gap can close.”
  • Keep reading, “Listening to community voices to combat impact washing and promote good governance,” by Margaux Day on ImpactAlpha.

Dealflow: Financial Inclusion

Stellar raises $7 million to help everyday consumers pay bills and build credit. The Austin-based B Corp. wants to disrupt the poverty cycle through credit building. It is targeting the 132 million Americans with little to no access to credit to buy a car or a house or pay for college. “Millions of Americans lack access because the current system is broken,” said Brian Tochman of Trust Ventures, which backed Stellar alongside Acrew Capital, Fiat Ventures and Vera Equity.

  • Inclusive fintech. Through Stellar’s subscription-based app, users’ payments for rent, utilities and streaming services help build their credit. Stellar reports monthly payments to major credit bureaus, while rewarding users with cash-back for future bill payments. “We don’t care if users don’t have a credit card or not, we designed the product to give them access to a line of credit,” Stellar’s Lamine Zarrad told ImpactAlpha. “They can almost instantly access thousands of dollars of credit after signing up.”
  • Small businesses. Zarrad, a former enlisted Marine and immigrant, previously founded Joust, a fintech venture for small businesses and gig workers that was acquired by ZenBusiness in 2020. Stellar is considering tools and services to help users launch their own businesses. “Once we figure out the consumer product, the natural expansion for us is to start looking at small businesses,” said Zarrad.
  • Dive in

TPG Rise backs Monarch Bioenergy’s renewable natural gas and bio-fertilizer. TPG Rise, the impact investing arm of TPG, last year raised more than $5 billion for TPG Rise Climate, a growth-stage climate fund targeting companies in clean energy, decarbonized transport, agriculture and natural solutions. Its latest investment, Monarch, is a joint venture between Saint Louis-based renewable natural gas producer Roeslein Alternative Energy and Smithfield Renewables, the clean energy investment group of Smithfield Foods. The investment will make TPG Rise an equal partner in the joint venture, which will support Monarch’s anaerobic digestion facilities to produce renewable natural gas and sustainable fertilizer, while sequestering the methane and carbon. TPG Rise Climate has also backed renewable natural gas company Element Markets and Bluesource, a nature-based carbon credits platform; Nextracker, a provider of commercial solar tracking systems; and Tata Motors’ Ionity to catalyze electric vehicle adoption in India.

  • Methane reduction. Applying Roeslein’s anaerobic digester technology to Smithfield’s hog farms is “a significant and meaningful step towards addressing methane emissions at their source,” said TPG Rise’s Marc Mezvinsky. Factory-farm animal production accounts for one-third of agricultural methane emissions.
  • Anaerobic digesters. The U.S. Environmental Protection Agency highlighted anaerobic digestion as key to the Biden Administration’s plan to reduce methane emissions by 30% by the end of the decade. A number of companies, including Bioenergy Devco and Amp Americas, are building anaerobic digestion facilities to help cut methane emissions.
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Dealflow overflow. Other investment news crossing our desks:

  • Redwoods Acquisition Corp., a blank check company targeting carbon-neutral and energy-storage businesses, files to raise up to $100 million in an initial public offering.
  • Israel’s NGT HealthCare raises $92 million for an impact fund to invest in life sciences companies and support early-stage health founders from Arab communities. 
  • Colombia’s Yuno raises $10 million in a seed round led by Monashees to bring digital payment and fraud detection to businesses in Latin America.

Agents of Impact: Where to Meet

Don’t miss these ImpactAlpha partner events:

  • Today: The Predistribution Initiative is hosting a discussion on the S.E.C.’s proposed rules for private funds at 12pm ET.
  • This week: New Ventures is hosting the Latin American Impact Investor Forum, or FLII, in Merida, Mexico, Mar. 15-17. ImpactAlpha subscribers save 45% with code IMPALPHA22Sign up today.
  • Phenix Capital is convening the Impact Summit Europe in The Hague, Mar. 29-30. Register now.
  • AVCA is convening its annual conference, “Private Capital in Africa at a Crossroads,” in Dakar, Apr. 25-29. Register today.
  • Island Innovation is hosting its Island Finance Forum virtually, Apr. 25-29. Register for free.
  • ImpactPHL is convening “Total Impact: Investing for New Economies,” in Philadelphia, May 16-17. ImpactAlpha subscribers get $300 off with code IMPACTALPHARSVP today.

Thank you for your impact.

– Mar. 14, 2022