The Brief | September 20, 2022

The Brief: Designing the Green Bank, CNote for community lenders, upskilling underrepresented talent, forest-based carbon credits, portfolio-first stewardship

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Greetings, Agents of Impact! 

👋 Agents of Impact Call No. 45: Creative capital for gender-smart investments. Women-led funds in emerging markets are finding innovative ways to raise and deploy high-impact capital. To learn how they’re doing it, join the conversation with Lelemba Phiri of Africa Trust Group in Cape Towh, Suzanne Biegel of GenderSmart, and other Agents of Impact in a special subscribers-only Call with ImpactAlpha’s Jessica Pothering and David Bank, Wednesday, Sept. 28 at 9am PT / 12pm ET / 6pm Cape Town. Mark your calendars.

Featured: Policy Corner

Designing the new EPA Fund to serve low and moderate-income people. Addressing climate change requires scale. “It also requires attention to fairness, resilience and core community development outcomes that benefit low-income individuals and communities,” Eric Hangen and Michael Swack of the Center for Impact Finance at the University of New Hampshire write in a guest post on ImpactAlpha. Among the components of the Inflation Reduction Act, passed into law last month, is the $27 billion Greenhouse Gas Reduction Fund at the Environmental Protection Agency. The fund will provide catalytic capital for state green banks, community development financial institutions, and other community-based lenders to finance renewable energy, reforestation, industrial decarbonization and other projects. To ensure the fund effectively serves low-income and underserved communities, Hangen and Swack identify five principles, developed with more than 100 community development and clean energy practitioners at a New York Federal Reserve Bank roundtable event, to guide the fund’s design. Among the principles:

  • Invest in project development. Building a pipeline of investable deals will require investments not just in financing entities, but in mission-driven clean energy project developers, installers and contractors, technical assistance providers, and others. Community-based groups can help conceive of and advocate for projects. “It will be critically important to deploy federal funding in smart ways to build this ecosystem capacity – and much of this funding will need to be deployed as grants, not just loans,” say Hangen and Swack.
  • Green means community development. “Community development needs to become part of the everyday work of the ‘green’ movement,” the authors say. The way climate issues are discussed also needs to change. Say the authors, “Connecting climate change to these core bread-and-butter issues, and integrating clean energy and resilience into the everyday work that community developers do, is essential.”
  • Accountability to low-income communities. Any institution intended to serve the needs of low-income and disadvantaged communities needs to engage deeply with those communities, “and should have a governance structure that is accountable to those communities,” say Hangen and Swack.

Dealflow: Community Finance

CNote raises $7.3 million to tap corporate cash for community development. Since it launched in 2017, CNote has become a go-to for individuals, institutions and corporations that want to put their idle cash to good use. The Oakland-based impact investing platform pools funds and invests them in community development financial institutions, which lend the funds to increase economic mobility and financial inclusion. Some 1,900 individual investors, and foundation and corporate investors such as Mastercard, Google, Netflix and Patagonia, invest with CNote. The platform reduces friction points for investors to activate their balance sheets quickly, and with minimal effort, to support low- and moderate-income communities, people of color and women entrepreneurs, says CNote’s Cat Berman. The B Corp. is raising capital for a fixed-income fund to support women of color (see, “The LIIST No. 1.”). 

  • Capital access. The Series A round was led by the American Family Insurance Institute for Corporate and Social Impact, with participation from Artemis Fund, Rebalance Capital, BankTech Ventures and others. “Capital access is one of the keys to producing generational wealth for underserved communities,” said Rob Kornblum of American Family Insurance. CNote will use the investment to expand its network of CDFIs.
  • Balance sheet activism. CNote has deployed about $300 million in investments, driven mainly by corporate support following the murder of George Floyd and the mass social protests that followed. Many corporations, says Berman, “see the corporate balance sheet as a tool for real change.” U.S. corporations are sitting on nearly $6 trillion in cash. “Unleashing even a small percentage of that cash balance sheet for low-income communities, for communities of color, and more responsible financial services, could be transformative across the U.S.,” she told ImpactAlpha.
  • Dig in.

PowerToFly raises $30 million to upskill and connect underrepresented talent with jobs. Millions of professionals use PowerToFly’s free online platform to scan job postings from Meta, Deloitte, Microsoft, Google, Morgan Stanley and other companies. Users have access to job fairs, an online community of peers, and professional development courses. PowerToFly works with employers on inclusive workplace and retention strategies. The New York-based, women-led company is building a membership portal for human resources representatives from partner companies.

  • Inclusive economy. The funding round was backed by Chartline Ventures, Grasshopper Bank and funds managed by Morgan Stanley, including Next Level Fund, a partnership fund with Hearst, Microsoft and Walmart to invest in early-stage tech startups led by women and founders of color. “This investment is symbolic of the irreversible momentum and support for advancing the representation of more diverse talent and intersectional identities in the workplace,” said PowerToFly’s Milena Berry, a queer-identifying immigrant and mother of four.
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Dealflow overflow. Other investment news crossing our desks:

  • Prime Movers Lab secured $500 million to invest in companies reinventing energy, transportation, infrastructure, agriculture and manufacturing.
  • Zócalo Health, a virtual primary care platform for Latino patients, snagged $5 million from investors including Kapor Capital’s Freada Kapor Klein and Cityblock Health’s Toyin Ajayi.
  • Miami-based neobank Majority raised $37.5 million in debt and equity capital to provide financial services for unbanked immigrants without U.S. documentation.
  • Estonian carbon data platform Arbonics scored $1.8 million in pre-seed funding to help forest and landowners in Europe generate income from forest-based carbon credits.

Signals: Universal Owners

Tanking one holding to boost returns and reduce risks across your portfolio. Few big institutional investors would deliberately encourage their portfolio companies to make moves that hit their valuations. But The Shareholder Commons, a nonprofit seeking to retool capital markets, is encouraging investors to sacrifice companies that pose systemic risks to protect and enhance the value of diversified portfolios. The Massachusetts-based organization is today publishing two case studies on the growing risks posed by antimicrobial resistance and greenhouse gas emissions to support the thesis that investors should use their financial muscle to redirect companies, even if the value of some individual holdings take a hit. “Without urgent action, we are heading for a post-antibiotic era in which common infections and minor injuries can once again kill,” warns one of the studies.

  • Institutional impact. ​​“If you’re a large investor with a diversified portfolio there is no way that you can run away from these problems,” Nicolai Tangen of Norway’s $1.3 trillion Norges Bank Investment Management told the FT. “If you have one part of the portfolio that is polluting and destroying the environment, you’re going to be hit in another part of the portfolio.” The Shareholders Commons’ Sarah Murphy says the concept is starting to resonate with asset owners more broadly. “Within the next couple of months, we expect to be running some pilot guardrails with the full-throated support of some pretty major investors,” Murphy tells ImpactAlpha.
  • Guardrails. The Shareholder Commons urges investors to agree on specific targets for greenhouse gas emissions and for antimicrobial use levels that protect the global economy. “Rather than engaging with companies to find agreement on how far they can go, shareholders themselves need to set the pace,” the study says. “By establishing such guardrails, shareholders can overcome the limits of decision-making at the company level.”
  • Keep reading, “Tanking one stock holding to boost returns and reduce risks across your portfolio,” by Dan Keeler on ImpactAlpha.

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events: 

  • Phenix Capital is hosting Impact Summit America featuring Fran Seegull of the U.S. Impact Investing Alliance, Rockefeller Foundation’s Thomas Belazis, ImpactAlpha’s Amy Cortese and other guests, Wednesday, Sept. 28 in New York. Asset owners and institutional investors can apply for a complimentary ticket.
  • GIIN Investor Forum 2022 takes place Oct.12-13 in The Hague with Roopa Kudva of Omidyar Network India, Yalin Karadogan of LeapFrog Investments, Ian Simm of Impax Asset Management and others. ImpactAlpha subscribers can register here to get 10% off.
  • The Regenerative Food Systems Investment Forum is set for Oct. 12-13 in Denver with Darren Baccus of Biome Capital Partners, Tripp Wall of Trailhead Capital, Cody Hopkins of Grass Roots Farmers’ Co-op, and other guests. ImpactAlpha subscribers get 15% off with code IMPACT.
  • SOCAP is back in person, Oct. 17-20 in San Francisco with CapEQ’s Tynesia Boyea-Robinson, Noramay Cadena of Supply Change Capital, Bronze Capital’s Stephen DeBerry, and other guests. Save $250 with code s22_ImpactAlpha.

Thank you for your impact!

– Sept. 20, 2022