Greetings, Agents of Impact! In today’s Brief:
- This month’s Liist of impact funds raising capital
- Brookfield’s bet on decarbonization and data centers
- Rising costs of state-level ESG bans
Featured: The Liist
Fund strategies for building inclusive communities and wealth. ImpactAlpha called out expanded ownership and access to capital to build wealth and bridge divides as a key trend to watch this year. Fund and investment managers are building out strategies that transfer agency and create wealth from real estate, businesses and the green transition. On this month’s Liist of impact funds that are raising capital: community-centric investors like Kensington Corridor Trust, which is buying up properties in Philadelphia’s former textile district and transferring control to local residents to “dictate what’s happening and how it’s happening” on their blocks, KCT’s Adriana Abizadeh told ImpactAlpha.
- Inclusive business. RuralWorks Partners, a joint-venture between Community Reinvestment Fund and Conduit Capital, is raising its first fund to invest in businesses in the US Northeast and Midwest to support sustainable rural economies and create good quality jobs. Sunwealth’s Solar Justice Fund backs community solar projects run by diverse- and women-led developers and invests in reliable, clean energy access in low-income communities. Maycomb Capital is in the market with its second Community Outcomes Fund to provide working capital to organizations improving early childhood development, health equity and workforce development.
- Beyond the US. Also on this month’s Liist: Netherlands-based funds of funds manager Wire Group, which invests in managers that link compensation to their impact. Wire Group links its compensation to impact too (see, “Moving from the ‘why’ to the ‘how’ of impact incentives”). Cauris Finance is a private credit fund working to bolster small businesses’ access to credit and vehicle financing in Africa.
- Keep reading, “Fund strategies for building inclusive communities and wealth,” by Jessica Pothering on ImpactAlpha.
- Subscriber benefit. Learn about more than 100 impact funds raising capital in the past year on The Liist, ImpactAlpha’s searchable database. Know an impact fund manager currently raising capital? Complete this short form.
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Dealflow: The Transition
Brookfield’s second Global Transition Fund raises $10 billion for decarbonization and data centers. After raising its inaugural $15 billion Global Transition Fund in 2022, Brookfield has identified a pipeline of investment opportunities, driven by “corporate demand for decarbonization technologies” and new emerging trends, “such as supplying reliable, clean power to the surging data and technology sector,” said Brookfield’s Connor Teskey. The fund received commitments from new and existing LPs and could raise as much as $25 billion.
- Clean tech portfolio. The global alternative asset manager has deployed most of its first transition fund, investing in companies like Mumbai-based CleanMax, which provides clean energy to corporate customers in India. The fund made a $1 billion investment in Avaada Group, also based in Mumbai, to finance green hydrogen and ammonia projects. In the US, Brookfield invested $500 million in Chicago’s LanzaTech to convert industrial carbon emissions into sustainable fuel and inputs for textiles, rubber and packaging.
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Blk Grvty secures $1 million from Surdna Foundation to back underrepresented fund managers. The commitment will go to Blk Grvty’s Equipped initiative, which is looking to raise $25 million to provide low-cost working capital loans and grants to diverse-led funds. The goal is “to maximize their ownership stake, save time getting to first close and raising larger funds, ultimately unlocking trillions of dollars of wealth in our economy,” said Blk Grvty’s JaNay Queen Nazaire, who inked a partnership with Known Holdings last year.
- Operational support. Blk Grvty recently made a $100,000 grant to Collide Capital, a Black-owned firm that invests in early-stage Black, Latino and female founders. Collide is gearing up to launch its second fund after raising $66 million for its first fund in 2022 (disclosure: Collide’s Aaron Samuels is on ImpactAlpha’s board of directors). “The injection of this capital is more than funding – it’s the keystone in expanding our capacity to build a platform that can withstand the turbulence of our industry,” said Collide’s Brian Hollins. Blk Grvty’s Equipped also provided a $100,000 grant to Black woman-owned venture firm Cake Ventures.
- Multi-donor fund. Separately, woman-led Inspire Access is tapping some of the roughly $234 billion sitting in donor-advised funds for gender- and racial equity-lens investments. Donors can transfer capital from their DAFs or make tax-deductible donations to ventures led by women and diverse founders. Inspire’s donors have backed Rethink Impact’s Jenny Abramson and Heidi Patel, and Nasir Qadree of Zeal Capital Partners (see, “Agent of Impact”).
- Check it out.
Dealflow overflow. Investment news crossing our desks:
- Mirova, the impact group of French asset manager Natixis Investment Managers, secured $282 million for a blended-finance debt fund for clean energy investments in emerging markets. (Mirova)
- Heart Aerospace, a Swedish hybrid-electric aircraft manufacturer, raked in $107 million in Series B financing, backed by Breakthrough Energy Ventures, Lowercarbon Capital, Norrsken VC and other investors. (FlightGlobal)
- Los Angeles-based ProducePay scored $38 million to provide working capital to fresh food producers and help reduce waste in the produce supply chain. (TechCrunch)
- Boston Metal clinched $20 million from Marunouchi Innovation Partners to recover valuable metals from mining waste and to deploy its green steel technology commercially by 2026. (Pulse 2.0)
Signals: Muni Impact
Red state bans on ESG-aligned underwriters raise costs for muni issuers. The state of Texas has banned Barclay’s from underwriting municipal bond deals in the state. The reason: the bank’s adherence to environmental, social and governance principles. The ousting of the British bank is the latest strike by conservative lawmakers against financial institutions that consider ESG factors in their investing decisions. Texas, Florida, Alabama and Wyoming have now banned or limited major banks from doing business with public entities in their states. Barclays was banned from Texas for being what state Attorney General Ken Paxton calls a “fossil fuel boycotter” just months after the bank drew protests for financing oil and gas extraction. Citi last year exited the muni market altogether after being banned in Texas for “discriminating” against firearms companies.
- Shifting costs. The estimated costs exacted by anti-ESG campaigns on municipal bond issuers’ underwriting costs topped a billion dollars as of early 2023. “It’s very clear that anti-ESG is a winning strategy politically for legislators in red states,” says Justin Marlowe of the University of Chicago’s Center for Municipal Finance. The anti-ESG stances are red meat for culture warriors and others who oppose the climate transition, Marlowe tells ImpactAlpha; increased borrowing costs are borne by bluer parts of the state. In Texas, for example, bond issuances are more frequent in Democratic-leaning Houston and Austin.
- Going direct. The anti-ESG fervor could nudge some municipalities to borrow money directly from banks or other lenders, rather than tapping the municipal bond market. That would allow them to circumvent the recent state-level legislation, Marlowe notes. But “direct placements” or “private placements” have less transparency than the bond market and often incur higher borrowing costs.
- Go deeper.
Agents of Impact: Follow the Talent
TPG names Scott Lebovitz, formerly with Goldman Sachs, as a partner and head of infrastructure for TPG Rise Climate… Janet Gumbs, previously with ABFE, joins Black Farmer Fund as finance director… JPMorgan is looking for a small business and local economies research lead.
Temasek Trust seeks a senior manager in Singapore… CFA UK is recruiting question writers for its new impact investing certification program… Abler Nordic is hiring an impact and ESG manager in Norway… Duke University will host an on-campus event on using federal funding as a catalyst for private investment, Wednesday, Feb. 28.
Thank you for your impact!
– Feb. 6, 2024