The Brief | January 24, 2022

The Brief: Conflicted pensions in Canada, Azolla Ventures invests, SDG fund in Sweden, Black-led development in Philly, circular economy in Europe

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Greetings, Agents of Impact! 

Featured: Institutional Impact

O Canada, how do your pension plans get high ESG scores when you’re up to your neck in tar-sands oil? The think tank New America put itself on the ESG map with the Responsible Asset Allocators Index, a biennial list of the world’s most “responsible” pension, insurance and sovereign wealth funds. “Let’s be blunt: the list is stupid,” Imogen Rose-Smith writes in her latest Institutional Impact column. “The rankings rely on what the world’s largest allocators say they do, rather than what they actually do.” Keen to tell the world about all of the good ESG investments they are making, the allocators offer far less transparency around their negative impacts. Case in point: “It’s a disservice to the cause to rank Alberta Investment Management Corp., or AIMCo, in the world’s top dozen allocators for responsibility,” she says.

Founded in 2008, AIMCo manages $95 billion in assets and has historically been overweight in oil and gas, particularly in Alberta, one of the world’s major producers of tar-sands oil and gas, among the dirtiest of fossil fuels. “Alberta has an enormous amount of carbon beneath its soil. If it gets dug up and burned, then it will be calculably harder to limit the damage from climate change,” activist Bill McKibben wrote in The New Yorker last year. AIMCo’s 2021 responsible investment report says the fund has $3.2 billion of assets in low or no-carbon and renewable infrastructure investments. “AIMCo’s continued commitment to building Canada’s oil shale industry is not mitigated by these green commitments,” Rose-Smith writes. “They are undermining the global effort to transition to a clean-energy future.” AIMCo does account for its climate impacts under the recommendations of the Task Force on Climate-related Financial Disclosures, or TCFD. But it does not, for example, report its “Scope 3” greenhouse gas emissions from the actual use of the fossil fuel pumped and piped by AIMCo’s portfolio companies. Despite the trappings of transparency, Rose-Smith says, large institutional investors “spend their time and energy raising their ESG rankings, rather than actually changing what they do.”

Keep reading, “O Canada: How do your pension plans get high ESG scores when you’re up to your neck in tar-sands oil?” by Imogen Rose-Smith on ImpactAlpha. Catch up on all of Imogen’s Institutional Impact columns.

Dealflow: Climate Finance

Azolla Ventures invests in Heaten’s industrial heat pumps. Azolla is the successor to Prime Impact Fund, the early stage catalytic climate fund led by the Prime Coalition. In its first investment, Azolla co-invested in Norway-based Heaten with Shell Ventures and Nysnø Climate Investments. The €6 million ($6.8 million) in financing will help Heaten commercialize its high-temperature industrial heat pumps. “Heat pumps are one of the few tools for decarbonizing industrial-process heat,” Azolla Ventures’ Amy Duffour told ImpactAlpha, but it is a “notoriously unsexy” category that has not stirred investor interest. 

  • Catalytic capital. Electric-powered heat pumps, which channel ambient or waste heat, can replace oil and gas to cool and heat buildings. Industrial applications requiring higher temperatures have posed a challenge. Heaten’s pumps can deliver temperatures up to 215 degrees Celcius (419 degrees Fahrenheit), although its first applications will focus on industries such as food, plastic and pulp that require up to 165 degrees Celcius. The company has “an incredible team with proprietary technology that is critical for deep decarbonization,” Duffour says.
  • Getting warmer.

Summa Equity closes third SDG impact fund at $2.6 billion. The Swedish private equity firm launched in 2016 to invest in companies addressing the U.N. Sustainable Development Goals. Summa raised €470 million ($533.3 million) for its first fund in 2017 and €680 million for its second fund in 2019. It has also raised €540 million in co-investments, bringing its total raised to date to nearly €4 billion ($4.5 billion). Like the earlier funds, Summa’s third fund will focus on megatrends such as aging populations, migration, resource scarcity, population growth, climate change and technological disruption, and will invest in companies “across the spectrum from young, high-growth companies to more mature firms,” said Summa’s Reynir Indahl.

  • Climate finance. Global pension funds, insurance companies, foundations and endowments, family offices and other financial institutions backed the fund. Summa said its fundraising was completely virtual and completed within four months. Summa’s portfolio includes 22 companies, including ZeroAvia, which is aiming to decarbonize air travel with hydrogen-powered engines.
  • Check it out.

Black-owned developer Mosaic raises $10 million for equitable real estate in Philadelphia. Led by Leslie Smallwood-Lewis and Greg Reaves, Mosaic focuses on projects in neighborhoods largely left out of Philly’s development boom. Philadelphia 76ers managing partner Josh Harris invested $10 million to help the firm staff up to take on larger projects. “When we, as the developers, are making those decisions as to who the professional service providers will be in our projects, we’re able to reach out to those who have really not been selected to be parts of teams of these impactful projects,” Smallwood-Lewis told the Philadelphia Inquirer.

  • Inclusive real estate. Mosaic is among a half-dozen developers and investment professionals that last year teamed up to create The Collective, which is raising $100 million to deploy into Black-owned and operated developers. Mosaic’s projects include the redevelopment of the South Philadelphia Navy Yard and the Sharswood Ridge retail and public-housing complex in North Philadelphia, in partnership with Shift Capital.
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Dealflow overflow. Other investment news crossing our desks:

  • Paris-based SWEN Capital Partners’ impact fund secures €150 million ($170.2 million) to invest in renewable gas and circular economy companies, primarily in Europe.
  • SoLa Impact, a family of social impact-focused affordable housing funds, raises $25 million from PayPal to build housing in Black and Latinx communities.
  • Huruma Fund, managed by Spanish impact fund manager GAWA Capital, lends $5 million to EDPYME Alternativa to lend to smallholder farmers in Peru.
  • Off-grid solar company Bboxx receives a $5.5 million loan from Africa Go Green Fund to provide clean cookstoves to low-income households in Africa.

Agents of Impact: Follow the Talent

Henry Jones will resign as president of the CalPERS board on January 21 due to health issues… Ilonka Jankovich, ex- of Taptrove Ventures, joins Rubio Impact Ventures as venture partner… Mark Taylor, ex- of BloombergNEF, joins Kayrros as vice president of energy transition… Phung Ngo-Burns, previously with Keane Group, joins Catalyze Energy as chief financial officer… Lina Page, ex- of Opportunity Finance Network, joins OFN member Homewise as senior director of communications.

Azolla Ventures is hiring an investment associate, a finance and operations associate manager and an investment analystCapShift is hiring for multiple roles, including a director of client experience, an investment operations associate and a business development associateBlackRock is hiring a vice president of sustainable product innovation… SOCAP Global seeks a director of content and programs… The Nature Conservancy is looking for a director of investments.

Thank you for your impact.

– Jan. 24, 2022