The Brief: Impact incentives and lived experience on The Liist, climate tech in South Asia, COP’s finance day, racial-equity investing after affirmative action

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ImpactAlpha

Greetings, Agents of Impact! 

Featured: Impact Fundraising

Managers walk the talk on impact fund strategy and structure (The Liist, Dec. 2023). Women investing in women. Africans investing in Africa. Impact-aligned fund compensation and fees. This month’s Liist of actively raising impact funds highlights how fund managers are rethinking incentives and drawing from lived experience to achieve their impact goals. In Germany, Masawa has tied half of its carry, or profits, to its impact targets and pledged 10% of those profits to founders in its portfolio. Social Finance in Boston is charging below-market fees and taking no carry to deepen the impact of its Impact First Fund.  

  • Aligned incentives. Masawa is raising a €40 million fund to invest in mental health tech with a strategy that cares for the tech innovators. “As investors, we can help founders better navigate their inner world and balance the dilemmas inherent in leadership,” says Masawa’s Huria Ogbamichael. Social Finance, a nonprofit known for designing innovative finance structures, is raising the Impact First fund to support first-time fund managers with capital sitting in tax-advantaged donor-advised funds.
  • Locally-led. The three funds on this month’s Liist that are investing in emerging markets have teams from and based in the markets they’re serving. Nigeria-based and women-led Aruwa Capital makes growth equity investments in West African businesses that cater to female consumers and commit to empowering female team members. VestedWorld invests in early-stage startups throughout the African continent. Colombia-based EWA Capital is a women-led fund supporting female founders in Latin America and the Caribbean.
  • New food. Also on this month’s Liist: Rethink Food, with a targeted $100 million fund backing tech companies like climate analytics venture Gro Intelligence and lab-grown meat venture Omeat that are supporting a more sustainable food system.
  • Keep reading, “Managers walk the talk on impact fund strategy and structure,” by Jessica Pothering and Lucy Ngige on ImpactAlpha.
  • ✅ Subscriber benefit. Learn about more than 100 impact funds raising capital in the past year on The Liist, ImpactAlpha’s new searchable database. Know an impact fund manager currently raising capital? Complete this short form.

Dealflow: Climate Finance

British International Investment backs trio of climate tech funds in South Asia. The UK’s development finance institution made a $25 million allocation to GEF Capital’s third South Asia Growth Fund. The fund is looking to raise $300 million to provide growth capital to small and mid-sized projects and companies supporting the transition to a low-carbon economy in India and Southeast Asia. The fund “will support our goal of enabling sustainable practices, with a focus on renewable energy, efficient resource management and cutting-edge environmental solutions,” said BII’s Srini Nagarajan in a statement. BII committed to invest up to $1 billion in climate projects in India between 2022 and 2026. BII also backed GEF Capital’s second South Growth Fund.

  • Climate + gender. BII also made a $7 million commitment to Circulate Capital’s Ocean Fund alongside the IFC, European Investment Bank and Proparco. The Singapore-based fund has raised $73 million to invest at the intersection of climate tech, plastic recycling and the circular economy. The Circulate Capital Ocean Fund is the first circular economy fund to qualify for the 2X Challenge; its gender-lens goals include creating opportunities for women in waste management and recycling.
  • Low-carbon transition. Finally, BII is investing an undisclosed amount in Wavemaker Impact’s debut fund, helping the firm more than double its $25 million target. The venture arm of Southeast Asia-focused climate tech investor Wavemaker Partners also secured commitments from the DFC and Triple Jump. Wavemaker Impact invests in companies helping cut global emissions by 10% by 2035.
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FINCA Ventures invests in health access and financial inclusion startups. The impact investing arm of microfinance company FINCA backed Berlin-based Euclid, which connects smallholder farmers in Africa and Latin America to healthcare services. Large companies that source goods from the farmers cover the healthcare costs. Euclid markets the service to companies as a way of managing “reputational risk” in their supply chains.

  • Growing portfolio. FINCA Ventures also backed Lapaire, which offers affordable eye care in seven countries, and Bankingly, which provides digital financial infrastructure to enable small and mid-sized financial institutions to reach underserved customers. The impact venture firm has made more than two dozen investments.
  • Check it out

Dealflow overflow. COP28’s “Finance Day” had our inboxes overflowing:

  • Green Climate Fund backed Acumen’s Hardest-to-Reach blended-finance initiative, which is seeking $250 million to expand clean and affordable energy access for low-income households in Africa’s least-invested markets. (Acumen)
  • Copenhagen Infrastructure Partners is targeting $3 billion for a fund that will build renewable energy projects in low- and middle-income countries, starting in Asia-Pacific and Latin America. (Reuters)
  • The Climate Gender Equity Fund, a $20 million partnership of Amazon, 2X Global, Visa Foundation, USAID and others, announced its first grants to three accelerators supporting women-led climate solutions: Clean Technology Hub in Nigeria, WomHub in South Africa, and M-Kyala Ventures in Kenya. (Amazon)
  • Catalytic Climate Finance Facility, a partnership between Climate Policy Initiative and Convergence, is awarding $2.4 million to blended-finance vehicles, including Latin America’s Amazonia Impact Fund and Climate Collateral Alliance in Africa. (CPI)
  • The World Bank will increase its climate finance allocation to $40 billion a year, or 45% of its funding, by 2025. World Bank President Ajay Banga said he is pursuing an “originate-to-distribute” model that would create a “securitizable asset class” to attract institutional investors. (Bloomberg)

Impact Voices: Inclusive Economy

Navigating racial equity investment strategies for a post-affirmative action economy (Q&A). Last summer’s US Supreme Court ruling that struck down the consideration of race in college admissions opened the floodgate for other legal challenges to programs with race-based selection criteria. The rush included a legal challenge to Fearless Fund and its grant program for Black female entrepreneurs (for background, see “Legal challenge to Fearless Fund misses the mark on racial bias in venture capital”), and left companies and investors confused about the future of diversity, equity and inclusion, or DEI, strategies. In a guest post for ImpactAlpha, CapEQ’s Tynesia Boyea-Robinson speaks with civil rights attorney Farhana Khera about how investors and other organizations can navigate legal landmines. “Diversity, equity and inclusion programs were legal both before and after the Supreme Court’s decision striking down affirmative action in higher education,” Khera says. She urges investors to let asset managers, colleagues, the courts and elected officials know that racial equity investing “is necessary for the growth and strength of our nation’s economy; and that you don’t want roadblocks placed in the way.”

  • For investors. Investors committed to racial equity should double-down on their commitment, says Khera, and “inform their asset managers of their continued commitment to racial equity, and inquire how their asset managers will help them realize that commitment.” Investors may also consider providing instructions to asset managers to support shareholder resolutions on racial equity issues, such as requiring corporate board diversity or civil rights or racial equity audits. 
  • For grantmakers. Given Fearless Fund case rulings, “if you have some kind of racial equity or race-based grant program in place, it’s likely that program will have a limited life,” says Khera. One option: Institutions can convert racial equity grant programs into gift programs, which are protected as “expressive conduct” by the First Amendment. The upside: “Gifts” must come with “no strings attached,” ridding “giftees” of burdensome grant reporting.

Agents of Impact: Follow the Talent

👋 Agents of Impact Call: Finding hidden impact and risk in municipal bonds. On the next Call in ImpactAlpha’s Muni Impact series, join Activest’s Homero Radway, Kestrel’s Monica Reid, R. Paul Herman of HIP Investor, Court Street Group’s Matt Posner and other Agents of Impact, Wednesday, Dec. 13, at 10am PT / 1pm ET / 6pm London. RSVP today

Citing poor returns, activist investor (and one-time Agent of Impact) Jeffrey Ubben is winding down Inclusive Capital Partners, the sustainable investment firm he founded three years ago. The firm had $2.6 billion at the end of last year; Ubben had sought to raise $8 billion… President Gustavo Petro of Colombia, Latin America’s fourth-largest oil power, signed on to the Fossil Fuel Nonproliferation Treaty (see, “New Climate Leaders: Winning with a green agenda”).

The Employee Ownership Expansion Network is recruiting a director of nonprofit operations in Washington, DC… Nonprofit Finance Fund seeks a housing loan program director in Boston… Soros Fund Management is hiring an impact strategy analyst in New York… Goldman Sachs is looking for an associate of private equity sustainability investing in London… Also in London, Bates Wells has an opening for an impact finance solicitor… 2X Global is on the hunt for a remote certification associate and program manager

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Dec. 5, 2023