Greetings, Agents of Impact!
The Call No. 31: Optimizing for Impact. Many thanks to the hundreds of Agents of Impact who joined yesterday’s Capitalism Reimagined call. Next up: A special hands-on Agents of Impact Call, led by Cathy Clark of the Center for the Advancement of Social Entrepreneurship, or CASE, at Duke’s Fuqua School of Business. The 60-minute workshop will provide a quick how-to on impact measurement and management, and preview a new online course, Tuesday, Sept. 28 at 10am PT / 1pm ET / 6pm London. Sign up here.
- Background reading. “Managing investments to meet goals for impact – and expectations of regulators,” by Cathy Clark on ImpactAlpha.
- Back to school. Sign up for the full eight-hour course, “Impact Measurement & Management for the SDGs” (free, with a certificate option available).
Featured: Small and Growing Businesses
New channel of capital for small businesses worldwide: enterprise tech startups. There’s no shortage of capital for global small business lending. What have blocked small businesses from access to working capital, inventory financing and other lending are broken or inefficient distribution channels for such financial services. Economic development efforts have long focused on banks, microfinance institutions and other financial services providers, to limited effect. A new wave of startups is coming at the problem from a different direction: enterprise tech. Spurred by pandemic shutdowns, enterprise tech startups have supported the digitization of small businesses worldwide, down to the kiosk owners and mom and pop shops that distribute the majority of consumer goods and food staples in emerging markets. The trove of data collected by these tech providers is in turn opening up previously restricted sources of capital. “The premise is that this is an on-ramp to financial inclusion, because using the digital data collected, you can offer credit or other financial services,” says Maelis Carrarro of inclusive tech accelerator Catalyst Fund, which supports enterprise tech and e-commerce startups through its Inclusive Digital Commerce Accelerator.
In Kenya, MarketForce’s retail distribution software helps informal and small retailers procure food products and other essentials. It provides data on the businesses’ ordering and sales history to Pezesha, which in turn connects small businesses to financial services firms offering affordable working capital. Previously, small retailers couldn’t secure loans because their book-keeping wasn’t digitized, says MarketForce’s Tesh Mbaabu. “So they’re perceived to be high-risk because they don’t have any data.” In India, Kirana247 is unlocking small business capital simply by making the movement of goods work better for shopkeepers. “Because our warehousing model is closer to them, it means they can get products daily and they don’t have to overstock anymore,” explains co-founder Tarun Jiwarajka. Kenya’s Sokowatch goes a step further, offering East Africa’s business owners small lines of credit from its own supply-chain financing. “The opportunity at the B2B level is being able to aggregate their buying power,” says founder Daniel Yu. “That’s huge.”
Keep reading, “New channel of capital for small businesses worldwide: enterprise tech startups,” by Jessica Pothering on ImpactAlpha.
Sponsored by Morgan Stanley
The rise of sustainable bonds for affordable housing. Are sustainable bonds key in helping solve the U.S. housing crisis? Learn more.
Dealflow: Inclusive Economy
Opportunity Finance Network’s Finance Justice Fund secures $23 million. The Washington, D.C.-based network of community development financial institutions, or CDFIs, is looking to raise $1 billion in debt capital and $150 million in grants to finance Black, Latinx, Indigenous and rural borrowers across the country. “Investing in CDFIs is one of the most effective ways banks, corporations, and philanthropies can ensure their money reaches underserved communities,” said OFN’s Lisa Mensah (see, “Agent of Impact: Lisa Mensah”). The fund has raised $150 million, $110 million of which will be deployed as loans and the rest as grants to CDFIs in communities of color, small and mid-sized cities, rural markets and areas of persistent poverty. It has allocated $57 million in loans and grants to California FarmLink, Indianapolis Neighborhood Housing Partnership, Carolina Small Business Development Fund and more than a dozen other CDFIs.
- Catalytic capital. The Finance Justice Fund’s new commitments include $10 million in long-term and flexible debt from Truist, and $13 million in philanthropic contributions from MacArthur Foundation, W.K. Kellogg Foundation and Focusing Philanthropy. Wells Fargo committed $25 million in grant capital in June. The fund’s largest commitment to date came last November from Twitter.
- Read more.
Black Venture Capital Consortium closes $7.5 million for student-led fund. The Student Venture Fund is part of BVCC’s two-year venture capital training for students from historically Black colleges and universities. Students from HBCUs such as Howard University, Spelman College, Morehouse College and others will work with experienced professionals at partner VC firms and tech companies, such as Netflix, General Catalyst, Reach Capital and Google.
- Inclusive VC. “This new fund will help to radically shake up many of the structural challenges in venture capital that have previously prevented talented HBCU students from breaking into these notoriously exclusive roles,” said Adeyemi Ajao of Base 10 Partners, an investor in the fund (for context, see “Base10 will donate half its profits in a new $250 million fund”). Ford Foundation’s Depelsha McGruder, a Howard University alum, will sit on the fund’s board.
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Compound Foods raises $4.5 million to climate-proof your morning cup of joe. Imagine your day without coffee. Climate change is wreaking havoc on coffee production. Half of today’s coffee-growing land may become unsuitable for the crop in the future. San Francisco-based Compound Foods uses food science, fermentation and microbes to produce coffee without the beans. The startup, founded by Costa Rican native Maricel Saenz, raised its seed round from Lowercarbon Capital, SV Latam Capital, Humboldt Fund, Collaborative Fund and other investors. Saenz says her beanless java, which she expects to launch by year end, will have just 10% the emissions and water use of farmed coffee. Get wired.
Dealflow overflow. Other investment news crossing our desks:
- Investors including Mark Cuban unleash $23 million for Wild Earth to develop pet food made with cell-based meat.
- U.K. asset manager Schroders is launching an Emerging Markets Equity Impact fund, following the debut in June of its Emerging Markets Climate Bond fund.
- Danish startup Responsibly raises a $2 million pre-seed round to bring transparency and sustainability to corporate supply chains.
- Bangalore-based REVOS snags $4 million from Union Square Ventures and Prime Venture Partners to expand its smart EV charging stations in 500 Indian cities.
- Paris-based Greenly secures $3 million to help small and mid-sized businesses track and lower their greenhouse gas emissions.
Signals: Systemic Risk
Disinformation poses systemic risks – so universal owners are pressing media companies to renounce it. Talk about negative externalities. False information intended to mislead viewers on climate, COVID-19, racial justice and other issues may drive ratings and clicks, but it is costing lives and destroying trillions of dollars of economic value. Concerned that the spread of disinformation represents a systemic risk to the rest of their portfolio, a group of diversified investors are initiating a campaign to push media companies to improve the accuracy of news.
- Corporate purpose. The campaign is rallying shareholders for a vote at the November annual meeting of Fox Corp., the parent of Fox News. The campaign, led by advocacy group The Shareholder Commons, has introduced shareholder resolutions to ask Fox and other media companies to enshrine as their corporate purpose the provision of an “accurate understanding of current events through the exercise of journalistic integrity.”
- Fiduciary duty. “We’re trying to solve for an underlying problem. That is: spreading bad information pays,” said Sara Murphy of The Shareholder Commons on an Agents of Impact call on Tuesday where she announced the campaign. Spreading misinformation, she says, “is actually a reasonably good strategy to increase revenues. But it is not good for the rest of your portfolio.”
- Keep reading, “Disinformation poses systemic risks – so universal owners are pressing media companies to renounce it,” by Dennis Price on ImpactAlpha.
‘Criminal justice footprints’ present risks and opportunities for investors. With its first set of corporate ratings, FreeCap Financial has identified 10 indicators investors can use to screen companies for prison-risk exposure (e.g. vending relations with prisons) and identify leaders in fair-chance hiring practices. The combined score for these metrics gives investors an overall picture of a company’s criminal justice footprint. “Our role is to focus on transparency,” FreeCap’s Tanay Tatum-Edwards tells ImpactAlpha. “We need a benchmark and to know who’s better than everyone else in the industry. Then create a race to the top.” Tatum-Edwards, ex- of MicroVest Capital Management, founded FreeCap to benchmark company activities and fill the gap in information needed to design racial-justice investment products.
- Spotlight on leaders. Some of the best performing companies had earlier been called out for relying on prison labor in their supply chains. “Reputational risk matters,” says Tatum-Edwards. Starbucks, for example, now conducts background checks only after a conditional offer of employment is extended. JPMorgan Chase, a laggard historically, is the only financial services company on the leaders list; the bank found overlooked talent once it “banned the box,” delaying inquiries into applicants’ involvement with the criminal legal system until later in the hiring process. Last year, the bank hired 2,100 people with criminal records.
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Agents of Impact: Follow the Talent
Cervest names Microsoft’s Lila Tretikov chairman of its board… Allison Spector, ex- of Nuveen, joins One Rock Capital Partners as head of ESG… The Nature Conservancy is looking for a manager of investment fundraising in New York City, San Francisco or London… Rockefeller Foundation is hiring a manager of impact investment in New York… LOCUS Impact Investing seeks a manager of asset management and servicing in Richmond, Va.
Thank you for your impact.
– Sept. 15, 2021