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The Brief: Hourly employee ownership, seeding vertical farms, eco-packaging, e-motorcycles in Brazil, tropical forests funds, stranded-asset write-downs



Greetings, Agents of Impact! 

The Call: Systemic impact investing. Tomorrow’s subscriber-only Call brings together the too-often separate conversations around systemic racism and systemic risk. Living Cities’ Demetric Duckett, Cambridge Associates’ Sarah Hoyt, Sinclair Capital’s Jon Lukomnik and The Investment Integration Project’s Bill Burckart join ImpactAlpha’s David Bank, Monique Aiken and other Agents of Impact, Thursday, August 13, at 10am PT / 1pm ET / 6pm London. RSVP now.

Featured: Agents of Impact podcast 

This private-equity giant has distributed more than $500 million – to hourly employees (podcast). Sharing wealth with hourly employees has not been a major part of the private-equity playbook, which has more often called for layoffs, plant closings and large helpings of debt. But at least in its industrial manufacturing portfolio, the $207 billion private-equity firm KKR has distributed approximately $500 million in dividends and other proceeds to about 20,000 hourly employees at eight companies making products like pumps and compressors, garage doors and safety harnesses. “The thing we’ve gotten really right is making everyone in the business an owner, down to the most junior levels of the organization,” KKR’s Pete Stavros says in the latest episode of ImpactAlpha’s Agents of Impact podcast.

The genesis of KKR’s employee-ownership strategy is Stavros’ experience listening to his father, who worked as an hourly construction worker in Chicago, explain the misalignment between hourly pay and company performance. “Our belief is that the results are better and the investment you’re making in the employees pays for itself,” Stavros says. “When you see turnover go down, absenteeism go down, quality go up, productivity go up, scrap go down – there’s a connection there.” When KKR took Gardner Denver, a maker of industrial compressors and pumps, private in 2013, only 86 of the company’s 6,000 employees had ownership stakes. By the time Gardner Denver went public again four years later, 6,400 employees had $100 million in stock, which increased in value after the IPO. KKR has pledged to distribute another $150 million in stock after Gardner Denver’s merger with Ingersoll-Rand. As for his father, now in his 80s, Stavros says, “He is surprised that this is not more common and that this has taken this long.”

Keep reading, and listen in to, “This private-equity giant has distributed more than $500 million – to hourly employees,” on ImpactAlpha’s Agents of Impact podcast. Catch up on all of ImpactAlpha’s podcasts, including our weekly Impact Briefing.

Dealflow: Follow the Money

Bayer and Temasek launch Unfold to accelerate vertical farming. Vertical farming ventures are raising capital on the promise of the technology’s impact on food security. Nascent technology means the approach remains costlier than traditional horizontal greenhouses. Bayer and Temasek’s new venture, Unfold, will develop seed varieties meant for indoor growing conditions using genetic material from agri-health giant Bayer’s repository. 

  • Seed funding. Unfold has been staked to an initial $30 million. The partners are launching the venture through Leaps by Bayer, a joint life sciences research, development and investment initiative focused on “human challenges.” 
  • More

TemperPack closes $31 million for eco-packaging. The Richmond, Va.-based company makes thermal insulation for delivery of perishable goods and medicine. TemperPack raised its Series C round amid “significant growth,” accelerated by COVID and the rising demand for home delivery. The pandemic is likely to spur “lasting changes in e-commerce behavior as well as increased interest in sustainability as trash bins overflow with non-recyclable shipping materials,” said Todd Klein of Revolution Growth, which re-upped in TemperPack’s latest round. 

  • Eco-investors. Also backing the round: Wheatsheaf Group, Harbert Growth Partners, SJF Ventures, Arborview Capital, Tao Capital, Third Prime Capital and Greenhouse Capital. 
  • Check it out.

Okta puts up $300,000 for TechSoup’s capital campaign. The investment was made through the identity technology company’s Okta for Good Fund, a donor-advised fund at Tides Foundation. San Francisco-based nonprofit TechSoup is looking to raise $11.5 million through a direct public offering to help nonprofits leverage technology to scale their impact. “The coronavirus pandemic has laid bare the critical need to build a more flexible and resilient technology infrastructure for nonprofits globally,” said TechSoup’s Rebecca Masisak.

Barn Investments backs Brazil’s e-motorcycle manufacturer Origem Motos Elétricas. Origem designs, makes and rents electric motorcycles as delivery vehicles for Brazilian companies and is building a network of battery-swapping stations. Terms of the deal were not disclosed. 

Signals: Ahead of the Curve

More than two dozen funds are investing in tropical forests and communities. The funds have at least $2.6 billion in capital to invest in firms and projects generating revenue from tropical forestry and agriculture products and benefiting smallholder farmers and forest-dependent communities. “Combating deforestation, incentivizing conservation, and improving livelihoods requires mobilization of significant capital, but many commercial investors are hesitant to participate because of the risks,” according to an analysis from ISF Advisors. To attract capital and drive more inclusive impact, fund managers are tailoring approaches and fund structures. Agriculture-focused funds like IDH’s Farmfit target cooperatives and agribusinesses that source from farmers adjacent to tropical forests. New Forests’ Tropical Asia Forest Fund invests in companies that source timber sustainably (see, “Taking an ‘impact tranche,’ Packard Foundation pushes forest fund beyond business as usual). Hybrid funds, like Moringa, focus on agribusinesses growing non-timber products in tropical forests. 

  • Catalytic capital. Newer funds such as &Green, AGRI3 and Farmfit are attracting commercial capital by structuring funds that co-invest or by taking junior positions. Terra Silva, a fund of funds, is aiming to help eight to 10 investment fund managers prove that sustainable tropical forests are a profitable bet for commercial investors (see, “Terra Silva has $90 million in catalytic capital for carbon reduction in tropical forests”). Project operators including ECOTIERRA and Terra Global, are responding to project pipeline challenges by sponsoring their own funds and stepping into the fund manager role.
  • Securing supply chains. Companies looking to secure inputs are investing in tropical forest funds. Michelin sponsored the The Tropical Landscapes Finance Facility managed by ADM Capital. Danone, Mars and other French companies set up the Livelihoods Carbon Fund and Livelihoods Fund for Family Farming.
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Write-downs keep coming for oil and gas companies. Don’t say we didn’t warn you! The stranded-assets tally so far: Occidental – $6.6 billion. Total – $8 billion. Chevron – $5.6 billion. BP – $17 billion. Shell – $22 billion. Oil and gas companies slashed the value of assets by tens of billions of dollars in the second quarter as the COVID pandemic accelerated the shift from fossil fuels to cleaner sources of energy. The write-downs have been accompanied by massive losses, cost-cutting measures and production cuts. BP is taking the cue and speeding up its plans for a low-carbon future.

Agents of Impact: Follow the Talent

Chris McIntire, ex- of KPM Analytics, is the new CEO of KKR and XPV Water Partners’ water-quality platform (see, “Why KKR is investing in wastewater treatment to manage nutrients)… One Nation Party USA’s Andrew Murray Dunn joins JumpScale as an advisor… Bloomberg launches ESG scores for 252 oil and gas companies and board composition scores for more than 4,300 companies… 

Housing Trust Silicon Valley is recruiting a chief executive in San Jose… Microsoft seeks a business development manager of U.S. societal impact in Bellevue, Wash… Pacific Community Ventures has an opening for an associate director/director of impact investing research and consulting in Oakland, CA… AARP is looking for a senior advisor for impact investing in Washington, DC… Rural Innovation Strategies is hiring a director of impact in Hartland, VT… The Urban Institute is hosting Sen. Cory Booker for a discussion today on closing racial wealth gaps in the wake of the COVID pandemic.

Thank you for reading.

–August 12, 2020

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