The Brief: Diverse fund managers actively raising capital on this month’s Liist

Greetings Agents of Impact! This month’s Liist adds to our searchable database of more than 150 impact funds that have been actively raising in the 18 months. We also have listings of 39 funds working at the intersection of climate and gender, 68 funds investing in the ownership economy, 40 funds with a local-economy focus, and even a cool map of climate co-investors, with more curated data sets in the works. What kinds of specialist managers are you searching for? On what list do you belong? Drop me a note if you want to share your data needs or data resources. – David Bank

In today’s Brief:

• The Liist: Diversifying the landscape of fund managers
• Greenhouse Gas Reduction funds begin to flow
• De-risking impact investments with ‘equity-like debt’ 
• Private equity’s carbon footprint

Featured: The Liist

Diversifying the landscape of problem solvers, wealth builders – and fund managers (October 2024). Deliberate efforts to expand the share of capital that is owned and managed by non-white, non-wealthy non-men is meeting (predictable) resistance from politicians, asset owners and others who prefer the status quo. The share of capital managed worldwide by women, Indigenous and non-white individuals has remained stuck for years at 2% or less. Closer to the ground, diverse-led, -owned and -focused investment theses are only continuing to multiply (see, “These six women-led funds are capitalizing the commercialization of climate tech“). Take, for example, AiiM in California, which launched in 2020 to invest in climate solutions that are early in their growth phase but can demonstrate commercial interest. The woman-led firm tries especially to be a resource for women-led companies. “There isn’t a pipeline problem,” AiiM founder Shally Shanker told ImpactAlpha. “There’s a nurturing problem.” 

Fund managers on this month’s Liist of impact funds that are open for investment represent the diversity of strategies for diversifying opportunities. AiiM is betting on climate tech. North Carolina-based Ownify is pursuing “fractional” home ownership as a way to help more people in the US buy homes and build wealth (see, “Ownify seeks to pave a fractional pathway to home ownership“). “We’re helping the missing middle of blue-collar workers with good jobs, good credit but without the savings for a down payment,” explained Ownify’s Allie O’Shea. 

• Emerging managers. One of the biggest barriers to getting more money in the hands of diverse fund managers is the time and cost of getting a fund launched. “The two-year process it can take to get a fund capitalized makes it extremely difficult for managers without personal networks of wealth to build a fund while keeping the lights on,” said Stephen Nunes of Mission Driven Finance. The California-based impact investor’s MDF Capital Partners unit is in the market with a $10 million fund to provide new managers with bridge financing, working capital advances, subscription lines and deal warehousing. The resources can “help fund managers demonstrate their theses to prospective investors, move faster, and attract more capital.”

• Climate gaps. Also on this month’s Liist is Mumbai-based Ankur Capital, a women-led impact investment firm that is in the market with its third fund to support India’s early stage tech ventures focused on climate, agriculture and economic inclusion (see our video interview with Ankur’s Rema Subramanian on using science and technology to solve global problems in India). The targeted $150 million fund is set up to help founders bridge an R&D funding gap and, for the most promising ideas, get them all the way to an early growth round.
  
• Keep reading, “The Liist: Diversifying the landscape of problem solvers, wealth builders – and fund managers,” by Jessica Pothering and Lucy Ngige on ImpactAlpha. Scan ImpactAlpha’s database of more than 150 impact funds that have been raising capital in the past year or so.
  
• Asking for a friend. Know an impact fund manager currently raising capital? Complete this short form.

Dealflow: Deploy!

Greenhouse Gas Reduction funds begin to flow with $32 million loan for Arkansas solar project. The first GGRF deal has been inked, just six weeks after awards were finalized by the Environmental Protection Agency. Climate United, a coalition led by Calvert Impact, has extended a $31.8 million loan to Scenic Hill Solar, an Arkansas-based solar power developer, to cover pre-construction costs for 18 solar plants for the University of Arkansas system, a state-funded network of schools, including the historically Black University of Arkansas at Pine Bluff. At 66 megawatts, the project will be the largest commercial and industrial solar deployment in Arkansas. The transaction is Climate United’s first from its nearly $7 billion allocation, and the first from the GGRF’s National Clean Investment Fund. Climate United’s Beth Bafford said the coalition expects to close more deals by the end of the year, before kicking into high gear in 2025 (see, “Beth Bafford on Climate United’s $7 billion strategy to mainstream green lending”). Other awardees include the Coalition for Green Capital – a network of green banks – and Power Forward Communities, which is made up of community lenders, housing nonprofits and the advocacy group Rewiring America.

• Catalytic capital. Climate United’s loan will cover the costs of land, equipment and interconnections to bring clean energy to the state university system’s 70,000 students. Such pre-development financing, especially in the form of non-dilutive debt, is difficult to come by. “There are not many lenders or suppliers of debt capital that would have funded this, and if they did, it would have been at double-digit interest rates,” said Bill Halter of Scenic Hill. The injection of funds enabled Scenic Hill to pay for utility interconnections before Sept. 30, when the state’s more stringent net-metering rules kicked in. The financing also paves the way for private investors to capitalize the next phase of the project, which Halter expects to cost more than $110 million. The Arkansas project will qualify for solar tax credits under the Inflation Reduction Act, as well as bonus credits for projects using US-made equipment, offering workforce training, and based in so-called “energy communities.”
  
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Ibtikar raises $25 million to invest in Palestinian startups. The European Bank for Reconstruction and Development’s $3 million injection helped Ibtikar surpass its fundraising goal for its second fund. Ibtikar reached a $15 million first close in 2022 from a pool of investors including Dutch Good Growth Fund,  International Finance Corp. and the World Bank’s $3 billion Women Entrepreneurs Finance Initiative, or We-Fi. “We are excited to support the further establishment of the early-stage innovation ecosystem in the West Bank,” said Anne Fossemalle of EBRD. The investment was the development bank’s first in a West Bank venture fund.    

• Early-stage focus. The humanitarian crisis in Gaza and the West Bank has exacerbated the struggle to secure investment for Palestinian businesses. Palestine has limited tech ecosystem infrastructure, like accelerators or incubators. “There was a lot of intense effort at the ideation stage of business, and then nothing. So if you had a good idea, there was no one to fund you,” Ibtikar’s co-founder Ambar Amleh told ImpactAlpha (see, “Putting Palestinian entrepreneurs on the map”). Ibtikar’s first fund invested more than $10 million in two dozen Palestinian startups. Its portfolio includes Verity, a financial literacy platform for teens and kids, and Mashvisor, a data platform for real estate investors. 

• Job creation. Ibtikar’s second fund will cut checks of around $500,000 for seed and pre-Series A startups in the West Bank and Gaza, as well as Palestinian-led businesses elsewhere in Middle East and North Africa. The aim is to bolster job opportunities, particularly for women and youth, in the region, where 99% of businesses are small family-owned enterprises that employ fewer than 20 people. The fund has invested in Algebra Intelligence in Jordan, which uses AI to track energy consumption. Alma Health provides digital health services for users with chronic conditions. Vatrin offers payments and order management solutions for small businesses. 

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Dealflow overflow. Investment news crossing our desks:

• Germany’s Atlas Metrics, which uses AI and data to help organizations track their ESG and sustainability performance, clinched €12.2 million ($13.6 million) in Series A funding. Briink, also in Germany, snagged €3.8 million ($4.2 million) in a seed round for AI-powered ESG and sustainability management. 

• South Africa’s Pembani Remgro Infrastructure Managers secured $15 million from Proparco to invest in African infrastructure projects, including renewable energy, energy efficiency and waste management. (APEN)

• Gurgaon-based Lissun scored $2.5 million in a round led by RPSG Capital Ventures to expand mental health access in India, as well as child development services for neurodivergent children. (Lissun)

Signals: Private Equity Watch

With AI demanding energy, private equity firms pour money into fossil fuel investments. Private equity firms are sinking hundreds of billions of dollars into oil, gas and even coal companies as demand soars from energy-hungry data centers to support artificial intelligence. Many of the firms have pledged climate action; some have raised multi-billion dollar funds to invest in low-carbon opportunities. But a new study by Private Equity Climate Risks, a nonprofit consortium, found the top 21 private equity firms, including Blackstone, Carlyle and KKR, have invested roughly $1 trillion in fossil fuel companies since 2010. The report estimates their investments represent greenhouse gas emissions equal to those of the entire aviation industry. 

• Escaping accountability. While banks and oil majors face shareholder pressure over their climate risks and emissions, “private equity firms continue to dodge the spotlight, pouring billions into fossil fuels and pushing us further from a sustainable future,” said Alex Hurley of Global Energy Monitor, which anchors the consortium with nonprofits Americans for Financial Reform Education Fund and Private Equity Stakeholder Project.

• Hungry AI. Private equity accounts for up to 90% of all investment in data centers, which are increasingly used to train AI large language models. Last month, Microsoft, BlackRock and a state-backed investor from the United Arab Emirates launched a $30 billion fund to invest in data center infrastructure for AI applications. The trio hasn’t said whether it will use clean energy. To secure energy for its data centers, Microsoft also unveiled a deal to restart Three Mile Island, a nuclear plant in Pennsylvania that suffered a partial meltdown in 1979 – the worst nuclear accident in US history. This year, private equity firms have announced 47 investments in oil and gas companies through Aug. 20, according to S&P Global. 

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Catalytic investors deploy ‘equity-like debt’ to de-risk high-impact investments. Investors are finding new ways to finance high-impact projects while managing risk. Allocations to “equity-like debt” surged over the last five years to more than $16 billion through last year, a compound annual growth rate of 104%. Often used in mezzanine, subordinated or bridging positions, the hybrid debt and equity instrument features prominently in blended finance structures in which different types of capital are pooled to derisk investments and attract commercial investment. “Investors are leveraging the unique features of these asset classes to derive value, indicating a strategic shift in how capital is deployed,” the Global Impact Investing Network’s Dean Hand writes in GIIN’s “State of the Market 2024“ report. GIIN surveyed more than 300 impact investing organizations managing nearly $490 billion in impact assets. The findings on equity-like debt are from a subset of 71 survey respondents that also provided data in 2019. That subset showed growth in impact assets under management at a 14% compound annual growth rate over the five-year period. The GIIN’s annual market-sizing survey is due in coming weeks. 

• Taking risks. The growth in equity-like debt was driven by a relatively small number of large-ticket investors (the number of investors that allocated to equity-like debt fell by 20% over the same period). The bulk of impact assets is allocated to private equity and private debt. But equity-like debt, positioned between senior debt and equity, is nimble, offers higher returns than traditional loans, and can in some cases be converted to equity. Investors deploying the instrument, according to GIIN, “act as catalysts, establishing track records in new regions, products, services and returns that pave the way for larger institutional investors who are typically more risk-averse and less inclined towards blended deals.”
  
• Mobilizing capital. Equity-like debt, and other catalytic tools such as first-loss reserves and guarantees, are helping mobilize commercial capital across sectors like energy and housing (see, “How commercial investors are streamlining blended fund structures”). The GIIN report reveals that investors allocated more to market-rate blended finance structures than to the next three biggest blended finance strategies combined (flexible terms, subordination and guarantees). “These findings suggest that there may be additional demand for derisking capital as this area of the industry grows,” the report said. Also true: “The promise of blended finance mechanisms to leverage increasing volumes of market-rate capital is at play.”
  
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Agents of Impact: Follow the Talent

BlocPower co-founder Donnel Baird is stepping down as CEO. He’s passing the torch to co-CEOs Hanan Levin and Brian Lindsey… North Sky Capital appoints Danny Zouber, who has been at the firm since 2006, as co-CEO alongside Scott Barrington… Rafe Monteiro joins Impact Capital Managers as an analyst of finance and operations… New York State Insurance Fund is recruiting a senior lead of ESG and sustainable investments.

Robert Wood Johnson Foundation has an opening for an executive vice president… The IFC is looking for a corporate learning operations officer in Washington, DC… ClimateWorks Foundation is on the hunt for a director to lead its global energy transition initiative… CapShift is hiring a marketing and growth managing director… ImpactAssets is accepting applications for next year’s Impact Fund Manager Showcase through Thursday, Oct. 25.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Oct. 1, 2024