Greetings, Agents of Impact!
Signals: Ahead of the Curve
Tale of two markets: Public-market ESG funds roar, private-market impact funds struggle. Investors continue to pour billions into sustainability-themed stock funds, making “ESG” one of the hottest trends in asset management. But new private impact funds worldwide raised just €10 billion ($12 billion) last year – less than 30% of the capital raised by new funds in 2019, according to Phenix Capital’s 2021 Impact Fund Universe report. With a global pandemic, an economic emergency, a climate crisis and a mass mobilization for racial justice, 2020 should have been the year impact investors turned on the tap (see, “The 10x challenge: Pandemic is a chance for impact investors to step up by an order of magnitude”). It wasn’t. Fewer new impact funds launched in 2020 than 2019 and those that did faced strong headwinds. Amsterdam-based Phenix reports that 621 impact funds are currently in the market, seeking to raise a combined €125 billion ($150 billion). There’s no sugar coating it: 2020 was a bad year for private-markets impact fundraising.
- Public market inflows. The fundraising picture was reversed for publicly-traded environmental, social and governance, or ESG, and sustainability funds. Investors poured a record $20.5 billion into sustainability and ESG funds during the final three months of 2020, double the previous record for a quarter, according to Morningstar. For all of last year, net inflows hit $51 billion, more than double the total for 2019 and nearly 10 times more than in 2018. A separate tally from Sustainable Research and Analysis found that total net assets in sustainable exchange-traded funds, or ETFs, hit $93.1 billion at the end of 2020, up 176% from $33.7 billion at the end of 2019. The driver: outperformance.
- Fewer and slower. Phenix tracked data from 1,600 public and private impact funds. Investor skittishness affected fundraising early in the year as the pandemic took hold and the shutdown of roadshows made it difficult for managers to meet with potential investors. “In impact investing, there are a lot of younger fund managers who don’t have a fully established investor base, and for them to be unable to travel and hold meetings makes it really difficult to raise capital,” Phenix’s Dirk Meuleman told ImpactAlpha. Emerging market funds took a particular hit, attracting only 10% of commitments last year, down from 15% in 2019. “In the second half of 2021 and next year, there will definitely be people looking to make up for lost time,” said Meuleman.
- Impact alpha. Public impact funds that aim to go beyond negative and ESG screening to contribute to actual solutions have outperformed benchmarks through the pandemic. Mid- and large-cap impact funds did especially well, beating their benchmarks by between 3.4 to 4.4 percentage points over six-month and one-year time periods, Phenix reported. The second half of the year saw an explosion of green and sustainable IPOs, mostly via special purpose acquisition companies, or SPACs. In an MSCI survey of asset owners representing a total $18 trillion, 73% planned to increase their ESG investments in 2021.
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Dealflow: Follow the Money
SJF Ventures closes $175 million fifth fund to ride COVID acceleration. The Durham, N.C.-based impact investing firm will back at least 20 high-growth impact companies over five years in clean energy and climate, circular economy, logistics, mobility, civic tech, health, education, future of work and sustainable food. “We have our heads down, looking for promising companies,” SJF Ventures’ Alan Kelley told ImpactAlpha. He says SJF is looking for companies where COVID has accelerated market adoption, as well as companies with strong long-term fundamentals that have lost financing opportunities due to the pandemic.
- Portfolio companies. SJF has invested in 70 companies since it was founded by Rick Defieux and Dave Kirkpatrick in 1999 (see, “Agent of Impact: Dave Kirkpatrick”). In the portfolio: Berkeley, Calif.-based Terabase Energy, which makes software to automate utility-scale solar projects; Fort Lauderdale-based Shipmonk, which provides inventory and fulfillment services to small and mid-size businesses; and mPulse Mobile in Southern California, which sends patients reminders via SMS and mobile chat.
- Dig in.
Online grocer Good Eggs raises $100 million to deliver fresh food and good jobs. The San Francisco-based company says it’s committed both to local growers and to good jobs that offer employees equity stakes and living wages in one of the U.S.’s highest-priced metro areas. The pandemic has helped Good Eggs nearly double its customer base and grow revenues above $100 million. Good Eggs plans to return to L.A., after leaving the market in a retrenchment five years ago.
- New and returning. The company’s newest investors include Glade Brook Capital Partners, GV, Tao Invest, Finistere Ventures and multinational food company Rich’s. Existing investors Benchmark Partners, Index Ventures, S2G Ventures, DNS Capital and Obvious Ventures re-upped in the round.
- AppHarvest hits Nasdaq. Shares of the controlled-environment agtech company operating in what was once considered coal country began trading last week. Morehead, Ky.-based AppHarvest went public via a merger with special purpose acquisition company Novus Capital Corp. (see, “Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers.“ Mea culpa: AppHarvest completed its first harvest before its shares began trading.)
- Read on.
Energy Impact Partners takes stake in battery maker Powin Energy. The equity infusion will help Oregon-based Powin accelerate grid-scale energy storage. EIP’s corporate collaborative has attracted partners pledged to decarbonization, including utilities Xcel Energy and Southern Co., as well as Microsoft and rental car giant Enterprise (see, “Corporate collaboration: Microsoft backs Energy Impact Partners to speed the low-carbon transition”). EIP took a controlling stake in Powin alongside private equity shop Trilantic North America.
Dealflow overflow. Other investment news crossing our desks:
- Monkey Exchange scores $6 million to improve access to small-business credit in Brazil. The São Paulo-based fintech aims to democratize access to credit for small mid-sized businesses in Latin America. The Series A round was co-led by Quona Capital and Kinea Ventures. The company has raised $7.5 million to date.
- PGIM secures £190 million for U.K. affordable housing fund. The fund will develop and acquire affordable and workforce housing to help bridge the U.K.’s roughly 90,000-unit annual shortfall. PGIM raised the financing from Northern LGPS and Brunel Pension Partnership, both collaboratives of local U.K. pension schemes.
- Women-focused Halogen Ventures closes second fund at $21 million. Six-year-old Halogen Ventures will invest in early-stage consumer tech ventures founded by women. The firm has backed 60 such companies to date.
- Healthy Roots Dolls raises $1 million to make children’s products more representative. Backstage Capital led the round, which included Lightship Capital, Broadway Angels, Alpha Bridge, The Community Fund, Sequoia Scout and individual investors, including Gumroad founder Sahil Lavingia.
- Antler commits $100,000 each to a pair of Kenyan startups. The venture capital firm, which launched in Nairobi in 2019, is allocating pre-seed funding to meal-kit company Cooked and skincare provider Uncover.
Agents of Impact: Follow the Talent
Inclusive Capital Partners’ Jeff Ubben is under consideration for a board seat at ExxonMobil (see, Agent of Impact: Jeffrey Ubben)… Don Baylor Jr., ex- of the Annie E. Casey Foundation, is Lafayette Square’s new managing director of services… Thierry Koffi, ex- of Root Capital, joins ISF Advisors as West Africa manager… The Carbon Tracker Initiative and Global Energy Monitor have been selected to develop a public global registry of fossil fuel reserves for the Fossil Fuel Nonproliferation Treaty (see, “Agent of Impact: Mark Campanale“).
BLCK VC seeks an executive director… Blue Marble is hiring a chief technology officer in Europe… Pacific Community Ventures is recruiting a chief of staff in Oakland… DivInc. seeks a manager of strategic partners in Austin… North Sky Capital is hiring an associate for marketing and investor relations in Minneapolis… Acumen America is looking for a senior associate of partnerships in San Francisco… Ignia is recruiting an investor relations manager in Mexico City.
Reinvent’s Peter Leyden presents The Transformation, a positive scenario for the years “02020 to 02050,” in a free seminar from the Long Now Foundation, Tuesday, Feb. 9… Bloomberg is hosting former Bank of England chief and U.N. climate envoy Mark Carney, Wednesday, Feb. 10… Church Pension Group is hosting “Faithful Investing – Linking Faith and Finances,” Thursday, Feb. 18.
Thank you for your impact.
– Feb, 8, 2021