The Brief | September 19, 2023

The Brief: Employee-ownership edge, nature-based solutions, lower-carbon capital, financing Africa’s farmers, corporate impact investing

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Greetings, Agents of Impact!

👋 Agents of Impact Call: The employee-ownership edge. Helping employees buy out the companies they have helped build can be a win for departing owners, workers and the growing number of investors financing ownership transitions. Private equity firms are likewise finding impact alpha in broad-based employee ownership strategies. Join us as Common Trust’s Zoe Schlag, Ownership Works’ Anna-Lisa Miller, Mosaic Capital Partners’ Ian Mohler, and other Agents of Impact share employee-ownership strategies for wealth and impact, Wednesday, Sept. 27, 10am PT / 1pm ET / 6pm London. RSVP today.

Catch up on ImpactAlpha’s Ownership Economy coverage, including: 

Featured: Natural Capital

Nature-based solutions are key to meeting Paris climate goals. restored oyster reef in Bangladesh. Rejuvenated mangroves in Kenya and Tanzania. Replenished wetlands in Nepal. And reintroduced beavers in the North York Moors in the UK. Nature-based solutions are helping communities build resilience to rising sea-levels, floods and droughts, replenishing soil, and enhancing biodiversity. At this week’s UN General Assembly and Climate Week NYC, investors are noticing a rise in nature-based solutions in the climate change discourse. “Effective climate action goes beyond changes in energy and transportation, to how we farm, build, manufacture, invest, and, yes, how we conserve and restore nature,” argues Razan Khalifa Al Mubarak in a guest post on ImpactAlpha.

  • Naturally faster. “Engineered solutions like electric cars and carbon capture and storage mean little to some communities,” especially those living in poverty, argues Al Mubarak, a high-level champion for the UN’s COP28 climate summit and president of the International Union for Conservation of Nature. Nature-based solutions can be implemented faster and more cost-effectively than technological fixes, many of which are capital intensive and in the early stages of development.
  • Human element. Nature-based solutions “address societal challenges effectively and adaptively, providing human wellbeing and biodiversity benefits,” Al Mubarak says. Scientists from the IUCN define nature-based solutions as “actions to protect, sustainably use, manage and restore natural or modified ecosystems.” 
  • Keep reading, “Nature-based solutions may be the key to meeting Paris climate goals,” by Razan Khalifa Al Mubarak on ImpactAlpha.

Dealflow: Climate Finance

Chris Sacca’s Lowercarbon Capital raises $550 million for two climate tech funds. One fund will focus on early-stage climate ventures, hunting down pre-seed and seed-stage deals. The other will make select follow-on investments. Lowercarbon has cut a series of deals since tech investor Sacca and his wife, Crystalinvited in outside investors two years ago (see, “Chris Sacca: ‘Cheaper, better, faster, stronger, simpler and just plain cooler’”). Recent investments include UK-based Isometric, which is building a carbon registry for long-duration carbon credits, and San Francisco-based Charm Industrial, which is converting agricultural waste into carbon-rich bio-oil and sequestering it underground. Quilt, in Redwood City, Calif., is designing and building small, energy-efficient heat pumps.

  • Strategic LPs. Since 2021, Lowercarbon has raised several hundred-million dollar funds, including a $350 million fund to commercialize carbon removal. Lowercarbon closed a $250 million fund last October to back fusion energy startups. “We’ve built all this without taking any blood money from countries actively working to undermine democracy while trampling human rights and obstructing efforts to solve the climate emergency,” Sacca boasts. The new fund brings Lowercarbon assets under management to $2 billion.
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Emata nets $2.4 million for East Africa’s smallholder farmers. The Uganda-based fintech partners with agricultural cooperatives to extend low-cost loans to smallholder coffee, maize and dairy farmers. It says it has provided $1 million in micro-financing to 40,000 farmers through partnerships with 50 organizations. Emata’s seed round will support its expansion into Tanzania. African Renaissance Partners, Norrsken Accelerator, Zephyr Acorn, Draper Richards Kaplan Foundation and Swedish angel Marcus Boström backed the round, which includes $800,000 in equity and $1.6 million in debt for on-lending.

  • Collateral-free. Lack of access to flexible or affordable capital to cover farming and household expenses, like school fees, during the growing season means farmers resort to informal lenders, often at extractive rates. “They will actually sell their harvest prematurely, or mortgage their farm to lenders,” Emata’s Bram van den Bosch told ImpactAlpha. Emata works with agro suppliers so farmers can buy inputs on credit and offers no-collateral cash loans for emergency needs. “It actually reduces risk because it allows the farmer to farm properly and not sell their harvest prematurely or deal with informal lenders,” van den Bosch says.
  • Read on.

Mottu raises $50 million for motorcycle rentals for Latin American gig workers. São Paulo-based Mottu launched in 2020 to train, finance and insure motorbikes for gig delivery workers. Last year, it built out a logistics platform to connect more than 50,000 couriers in 30 cities in Mexico and Brazil to restaurants, retailers and e-commerce businesses. With its Series C equity round, Mottu is expanding into commuter services. “Mottu is changing the reality of millions of people who traditionally would have no credit and no way to start fighting for a better livelihood,” said Nigel Morris of QED Investors, which led the round alongside Bicycle Capital. Endeavor Catalyst and Caravela participated. Check it out.

Dealflow overflow. Other deals crossing our desks:

  • New York Life committed $50 million to Momentus Capital to make small business loans tailored to entrepreneurs from underserved communities under the Small Business Administration’s 504 program. (Momentus)
  • Boston-based sustainable farm inputs company Indigo Ag scored $250 million in a round led by Flagship Pioneering to ramp up the carbon credits side of its business. (Indigo Ag)
  • Chile-based CleanLight raised $3.2 million in debt from Re Royalties to manufacture power generators and other renewable energy hardware products. (LatamList)
  • Superorganism, a new investment firm focused on biodiversity preservation and extinction prevention, invested in 11 companies, including cocoa-free chocolate maker Planet A Food, and Inversa, which makes leather products from invasive species. (Bloomberg)

Six Signals: What We’re Reading

💰Corporate impact investing strategies. Comcast, Google, Microsoft and other corporations are deploying their balance sheets for impact. Patagonia, Salesforce and Schneider Electric are pulling on- and off-balance sheet funding into established impact funds. (Global Impact Investing Network)

🤖🎓 AI + edtech. Reach Capital identified over 280 education tools that incorporate generative AI as a core engine. Tools for personalized learning, along with career and skill development, represent two-thirds of the pipeline. In these two categories, three dozen companies have raised over $350 million. (Reach Capital)

⚠️ Integrating social issues in sustainable finance. Like a changing climate, socio-economic inequality is a systematic risk. The UN Development Programme makes the case that environmental and social impacts are inextricably linked, and the financial services sector must better respond to both. (UNDP)

✅ ESG edge in private equity. A Novata survey of 20 European private equity firms found that those with a best-practice approach to ESG reduce operational inefficiencies, generate revenue from ESG-friendly products, enhance customer loyalty, and prepare for regulatory changes. (Novata)

🇨🇳☀️ China’s solar boom. China’s installed solar PV capacity could double over the next three years, from 500 gigawatts in 2023 to a terawatt by the end of 2026, driven by “significant boost in large-scale projects.” (PV Magazine)

🔋 Benchmarking battery cells. Falling commodity prices caused the price of battery cells to plunge in August, bringing the technology close to the “tipping point” where battery-powered EVs match the cost of internal combustion engine cars. (Renew Economy)

Agents of Impact: Follow the Talent

Luminate promotes Toyin Akinniyi to vice president of Africa… Tidesseeks a remote impact investing vice president… REDF is looking for a capacity building manager in San Francisco… Also in San Francisco, New Forestsis hiring an investor relations associate director… Nuveenis recruiting an impact investing associate in Singapore.

The Visa Inclusive Fintech Accelerator, a new eight-month program for diverse fintech founders in North America, is accepting applications until Friday, Sept. 29… The Climate Gender Equity Fund, a partnership between USAID, Amazon and Visa Foundationseeks applications by Friday, Oct. 6 for grants of up to $500,000 to organizations developing and scaling gender-lens climate solutions in emerging markets.

Thank you for your impact!

– Sept. 19, 2023