Greetings, Agents of Impact!
A warm welcome to MBA students from nearly two dozen business schools around the world who signed up with ImpactAlpha yesterday as part of our collaboration with the Turner MIINT competition. How can we be helpful? Drop us a line at [email protected] (or reply to this email).
👋 Agents of Impact Call. New York City’s sale of $400 million in social bonds last month will finance more than 3,000 units of affordable housing. The success of the city’s first social bond sale is a signal of growing investor demand for tangible positive impact and equity. Marjorie Henning, NYC’s deputy comptroller for public finance, will join Public Finance Initiative’s Lourdes Germán, Rob Fernandez of Breckinridge Capital Advisors, and Kimberlee Cornett of the Robert Wood Johnson Foundation, for “Optimizing muni bonds for racial equity.” Join the conversation, Wednesday, Nov. 16 at 10am PT / 1pm ET / 6pm London. RSVP today.
Featured: Financial Inclusion
Inclusive fintechs build on gains to help emerging market businesses weather the economic storm. First it was Covid lockdowns. Then, global supply-chain disruptions. Now, inflation and rising interest rates are tightening the squeeze on merchants that provide the majority of basic products and services to emerging market consumers. Helping these essential businesses meet the polycrisis was a recurring theme at Accion Venture Lab’s Fintech for Inclusion global summit last week in The Hague. Inclusive fintech providers are drawing on troves of data – nonexistent for these mostly-informal businesses just a few years ago – to manage inventories, access capital and unlock growth potential. “Demand for our services is only going up,” Vahid Monadjem of Nomanini, a credit facilitator for Africa’s informal shopkeepers, told ImpactAlpha at the event.
Companies like Nomanini are bringing to market tech platforms that provide a trifecta of inventory services, embedded financing and digitalization for frontline consumer businesses in Africa, Latin America and Asia. “Fintechs have a clear ability to leverage partnerships, transaction data and technology to serve these businesses at scale and in a way that drives resilience and growth,” said Accion Venture Lab’s Amee Parbhoo. With many fresh off of significant funding rounds from last year’s tech boom, they’re devising solutions to the shifting needs of their customers amid new economic realities.
- Sharing the burden. In Mexico and Peru, rising prices mean informal retailers “need more capital now to buy the same amount of goods,” explained Dan Cohen of Tienda Pago, a lender to such businesses. The company has chosen not to raise fees for reliable, paying customers. It’s also urging fast-moving consumer goods companies to share the cost burden. “We’re saying, ‘Hey, you may have to eat part of these costs if you want to keep the supply chain healthy,’” said Cohen.
- Market opportunities. Nomanini, which is backed by African banking giant Standard Bank, is doubling-down on Africa’s most financially-underserved. A new partnership with financial services provider Baobab Group will provide supply-chain financing to 180,000 micro and small merchants in the Democratic Republic of the Congo. Jacob Haar of Community Investment Management, which finances fintechs offering responsible small business credit, sees new upmarket opportunities emerging. “Companies are tightening their credit standards,” he said, creating “a massive opportunity to move upmarket to customers you would not have been competitive with before but have now fallen out of having financial access.”
- Aligning incentives. Field, which provides inventory management, forecasting and credit to registered, independently-owned pharmacies in Kenya and Nigeria, has had to increase the cost of its services. The hikes are offsets by helping customers cut costs by reducing stock wastage. Field’s Michael Moreland says the company’s model flips the power structure between creditor and borrower. “We’re their service provider,” he said of Field’s customers. “We are structurally incentivized to think about their success. By aligning with them and investing in their growth, we only win when they win.”
- Keep reading, “Inclusive fintechs build on gains to help emerging market businesses weather the economic storm,” by Jessica Pothering on ImpactAlpha.
Dealflow: Circular Economy
Climate funds deploy capital to waste tech. Nearly two billion tons of waste have been dumped in the air, oceans, waterways and land this year. The volume is projected to increase 70% by 2050. Climate investors see recycling as an opportunity not to be, well, wasted. Wellington Management and Congruent Ventures led a $91 million Series C financing round for Colorado-based AMP Robotics, which is using AI and robotics to enhance recycling efficiency. AMP’s AI systems identify waste by color, texture, shape, size, pattern and even brand labels, helping its robots sort recyclable materials. Participating investors include Blue Earth Capital, Sequoia Capital and Valor Equity Partners. AMP is building a fleet of 275 recycling robots.
- Plastic-eating enzymes. Enzymes capable of breaking down plastic are joining the fray. Sydney, Australia-based Samsara Eco raised $54 million AUD (about $35 million) in Series A funding from Temasek, Assembly Climate Capital, DCVC, Clean Energy Finance Corp. and Breakthrough Victoria, the $2 billion investment fund of Victoria’s state government. Samsara’s enzyme technology breaks down plastics to their molecular building blocks to make new products, a process that can be repeated “infinitely,” according to the company. New Haven, Conn.-based Protein Evolution offers similar enzyme-based recycling tech for the chemical industry. Protein raised $20 million, backed by Collab SOS, the climate fund of the Collaborative Fund and New Climate Ventures.
- Compostable packaging. Leonardo DiCaprio’s Regeneration.VC, One Small Planet, One Ventures and SoundVentures invested in Cruz Foam’s $18 million Series A funding round. The Santa Cruz, Calif.-based company is looking to replace single-use, petroleum-based plastic packaging with compostable foam for consumer packaged goods, electronics, appliances and durable goods. The Series A investment “will allow us to accelerate and scale the commercialization of our circular materials,” said Cruz Foam’s John Felts.
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Dealflow overflow. Other investment news crossing our desks:
- Egyptian fintech venture Money Fellows raised $31 million to digitize traditional savings circles, formally known as rotating savings and credit associations, or ROSCAs.
- Brazil’s Franq raised $12 million in a round led by Quona Capital to democratize access to financial services for small businesses and consumers in Latin America.
- Carbon Re scored £4.2 million ($4.8 million) to help companies in energy-intensive industries, such as cement, steel and glass, reduce their carbon footprints.
- Impact ratings agency Impak acquired London-based fintech data firm Exerica to boost its impact assessment capacity.
Signals: Policy Corner
Anticipating election wins, conservative politicians escalate attacks on ESG ‘collusion.’ Republicans are feeling emboldened as Americans head to the polls for today’s midterm elections. Just days ago, a group of conservative senators sent threatening letters to 51 law firms warning of possible antitrust violations for pursuing environmental, social and governance, or ESG, initiatives. “Over the coming months and years, Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of ESG, and refer those violations to the F.T.C. and the Department of Justice,” wrote Iowa Senator Charles Grassley and four of his Republican colleagues. Law firms and their ESG clients should preserve relevant documents, they warned. The latest attacks, like the broader anti-ESG agenda, are riddled with contradictions, and could blow back on the five senators as they attempt to dictate how attorneys advise their clients.
- At stake. Republicans have seized on ESG – which helps identify company-level risks – as an unlikely red-meat issue, painting it as “woke capitalism,” “climate cartels” and “collusion” to restrict fossil fuels. Red state governors and treasurers have taken aim at ESG in pension funds and muni markets (see, “Riskwashing: How the crusade against ESG is hurting businesses, taxpayers and retirees”). If the U.S. House of Representatives tips Republican, as expected, watch for bank CEOs, asset management honchos like Larry Fink, and agency heads such as the S.E.C.’s Gary Gensler to be hauled before Congress.
- Rollbacks. The threats have already caused banks in the Global Financial Alliance for Net Zero to roll back their commitments to phase out fossil fuel support. Also at risk: disclosure rules, reproductive rights and election integrity (for background, see, “What’s at stake for climate, ESG and impact investors in the U.S. midterm elections“). “I agree with President Biden when he says democracy itself is at risk,” Morningstar’s Jon Hale said on ImpactAlpha’s weekly podcast.
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Short Signals: What We’re Reading
💰 Eric Schmidt’s exclusive new club. The charitable network P150 could one day rival the Gateses. (Puck)
🗳️ Democracy matters. What Fortune 500 companies said after Jan. 6 vs. what they did. (ProPublica)
🚗 Electric returns. Hertz reports electric vehicles are 50% cheaper to maintain in its fleet than similar petrol or diesel vehicles. (The Driven)
🥩 Climate transition proteins. “Meat-free” and “alternative,” meet “climate-transition” proteins. The new term is a catch all for food sub-categories with a lower environmental impact than high-impact animal-derived proteins and ingredients. (FAIRR)
👽 Space solar. Caltech is collecting solar power in space and transmitting the energy wirelessly to Earth through microwaves. (SciTechDaily)
⚡ Heat pump era. The first all-electric heating mandate for buildings passes in Washington state. (Grist)
Agents of Impact: Follow the Talent
Ed Shelton, ex- of RWE Renewables, joins Low Carbon as managing director for investments in North America… Yi Jean Chow, ex- of Future Energy Ventures, joins Clean Energy Ventures as an investment principal. Victoria Martins, ex- of Project Bread, also joins Clean Energy Ventures… Toniic is hiring a relationship manager for the Americas… Netflix is looking for an ESG director in Los Angeles… Breakthrough Energy seeks a manager of technical review and selection in Seattle.
Azolla Ventures is recruiting a principal in San Francisco and an investment analyst in Cambridge, Mass… Equality Fund seeks a remote vice president for its investment program in Ottawa… U.S. Securities and Exchange Commission chair Gary Gensler will share his thoughts on the future of impact investing at the Mission Investors Exchange national conference, Dec. 5-7 in Baltimore. MIE members can register here.
Land Innovation Fund is accepting applications for funding opportunities for climate-smart agriculture projects and programs in the Cerrado, Gran Chaco, and Amazon South American biomes… The Aspen Institute is accepting applications from young leaders to attend its Future Leaders’ Climate Summit taking place March 3-6 in Miami.
Thank you for your impact!
– Nov. 8, 2022