The Brief: Impact’s fallen star, financing fresh produce, microgrid maintenance, solar unicorn, bringing racial justice to finance

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ImpactAlpha

Greetings, Agents of Impact! 

  • Hop on The Call. Today’s Agents of Impact Call No. 28 will explore how some wealthy families are optimizing their portfolios for impact. Join Ceniarth’s Diane Isenberg, Libra Foundation’s Regan Pritzker, Sobrato Philanthropies’ Sheri Sobrato Brisson and other principals in conversation with ImpactAlpha’s David Bank, today at 10am PT / 1pm ET / 6pm London. Zoom right in.

Featured: Institutional Impact

In a world where fairness is in short supply, a star’s fall isn’t enough to redeem private equity. There will be no summer soirees on Richard Branson’s private island for Bill McGlashan, the one-time prince of impact investing. The founder of TPG Growth and – with the rock star Bono and billionaire Jeff Skoll – the Rise Fund, McGlashan is due to report to the minimum-security federal prison in Lompoc, Calif., next month for his part in the Varsity Blues college admissions scandal. A federal judge this month sentenced McGlashan to three months and ordered him to pay a $250,000 fine for paying $50,000 to boost his son’s ACT scores. “In a world where fairness is in such short supply, what I did was totally unacceptable,” McGlashan told the court. In her latest Institutional Impact column, Imogen Rose-Smith admits to “an icy shiver of schadenfreude.” But, she says, the hand wringing and gloating belies a larger point: “Impact investing has a toxic masculinity problem.”

“The rich white men who are among the most prominent voices in impact and sustainable investment may be upholding and maintaining the status quo, rather than disrupting it,” Rose-Smith writes. Impact funds from not only TPG but Apollo Global, KKR, Bain Capital and other legacy private equity giants are doling out investment capital to piecemeal solutions to the very problems those firms helped create and profited from, she argues. “McGlashan was a winner. And winners make money,” enabling him to recruit to the Rise Fund’s institutional investors, like the University of California, the New Jersey Division of Investment, the Florida State Board of Administration, the San Francisco Employees’ Retirement System and Washington State Investment Board. The social contract embedded in impact investing requires a redistribution of power to women, people of color and those not fortunate enough to have an education from an elite university. “This change needs to happen both in terms of the investments being made, and in the impact investing funds and firms themselves,” Rose-Smith says. “As a source of wealth creation, impact investing needs to make sure it is not just generating wealth for the people already at the top of the economic heap.”

Keep reading, “In a world where fairness is in short supply, a star’s fall isn’t enough to redeem private equity,” by Imogen Rose-Smith on ImpactAlpha. Catch up on all of Imogen’s Institutional Impact columns.

Dealflow: Securing Supply Chains

ProducePay raises $43 million to build an inclusive supply chain for fresh produce. The L.A.-based startup launched in 2014 to bring transparency and fairness to the $300 billion fresh produce market. That supply chain is “opaque, fragmented, and dominated by manual processes,” said ProducePay’s Pablo Borquez Schwarzbeck. Bringing fintech to agriculture, ProducePay’s flexible financing and online marketplace connects over 700 growers, distributors and suppliers in Mexico and Latin America. International Finance Corp. led the $43 million round alongside Silicon Valley-based G2VP and IDB Invest. IGNIA, Astanor Ventures, Finistere Ventures, CoVenture and Anterra Capital also participated.

  • Latam expansion. Farmers that grow over $30 billion in fresh produce per year are underserved by traditional banks, according to the IFC. ProducePay’s financing has primarily gone to farmers of fresh produce in Mexico. The financing will help the company expand into Chile, Peru, Central America and the Caribbean. ProducePay is “uniquely positioned to address social and economic inequalities in the global produce market,” said Astanor’s George Powlick.
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60Hertz Energy secures $1.3 million for microgrid management. Anchorage, Alaska-based 60Hertz helps energy providers manage more than $140 million in remote microgrid assets in seven countries. The pre-Series A financing round was led by Factor[e] Ventures and Climate Impact Capital, with SeaChange Fund, Alaska Investor Network and Clean Energy Venture Group angels. Maintaining microgrids will become even more critical “as we see more climate change driven mega weather events,” said Climate Impact’s Alex Rozenfield

Dealflow overflow. Other investment news crossing our desks:

  • San Francisco-based Aurora Solar, which helps solar installers plan installations, secures $250 million in Series C funding, valuing the company at $2 billion (see, “Aurora Solar raises $50 million to digitalize solar energy”).
  • Somerville, Mass.-based Kula Bio scores $10 million to make sustainable nitrogen bio-fertilizer that helps farmers improve yields. The seed financing was led by Collaborative Fund, and backed by The Nature Conservancy, Lowercarbon Capital and the Grantham Environmental Trust’s Neglected Climate Opportunities Fund.
  • Wells Fargo backs The Harbor Bank of Maryland and Washington, D.C.’s Industrial Bank as part of its $50 million commitment to Black-owned banks.
  • Initiative Ireland, an impact housing finance company, partners with Fairfield Real Estate Finance to lend €600 million ($733 million) to build 5,000 social and affordable housing units in Ireland. 

Signals: Racial Reckoning

Seven ways finance has changed in the year since George Floyd’s murder. The raw injustice, and the social protests that followed, pushed investors, corporate executives and policymakers to acknowledge the risks of systemic racism. Alongside the rhetoric and unfulfilled pledges, the work of rewriting financial rules and norms went on. Here are seven ways George Floyd’s legacy is changing investing and finance. 

  • Racial justice investing ripples. More than 200 institutions and individuals signed the Racial Justice Investing Coalition pledge to integrate racial justice into investment decision-making. More than 180 signatories to Confluence Philanthropies’ Belonging Pledge represent $1.9 trillion in assets (read the strategy). Almost 50 asset owners and allocators with more than $71 billion in assets have committed to the nine practices of Due Diligence 2.0 to fight racial bias in asset allocation.
  • Overlooked founders and fund managers shine. Cut the check” became a rallying cry for boosting allocations to Black and other non-white (and non-male) founders and fund managers. Carta Ventures built a portfolio of some of the year’s hottest new venture funds, including Collab Capital, Harlem Capital, Lightship Capital, Rarebreed Ventures, Zeal Capital and Sixty8 Capital. We’re watching: Impact America’s $55 million fund, Illumen Capital’s $85 million fund, and how Black VCs are gaining an edge in the green economy.
  • Surge in Black-owned businesses. Job losses, digitization and well-timed federal stimulus programs may be reversing the long slump in U.S. entrepreneurship. New business starts are surging, particularly in Black communities. “This is more about survival than it is about wealth creation,” cautions Brookings Institution’s Andre Perry. The share of businesses born out of necessity has more than doubled to 30%.
  • Relief for Black farmers. Tucked inside President Joe Biden’s COVID relief bill was $4 billion in debt relief for Black and other non-white farmers, who have faced decades of financial discrimination from lenders, including the U.S. Department of Agriculture. Despite racial justice pledges from JPMorgan Chase, Bank of America, Citi and other members, major banking groups are actively lobbying against the bill. Their fear: lost interest income from early repayments.
  • New uses for corporate cash. U.S. corporations pledged up to $50 billion in donations to civil rights organizations, investments in communities of color, and internal recruiting and training. Actual spending was a small fraction of that, according to Creative Investment Research. Apple, PayPal, Twitter and Netflix are among those that delivered. Community development financial institutions, Black-owned banks and Black fund managers were among the top recipients of corporate cash.
  • Fiscal-justice risk is priced. City expenses linked to racial injustice add up, says Ryan Bowers of Activest, which last week launched The Fiscal Justice Credit Rating Agency. The startup bond rating agency will grade debt based on how much social injustice and unrest could end up costing cities and states. “These fiscal justice issues have very long tails,” Bowers told Bloomberg. Information about such issues is “important for investors who are taking on uncompensated risk.”
  • “Defund the police” goes local. At least 20 large cities including Seattle, Minneapolis and Austin have reduced their police budgets by a combined $840 million, according to Interrupting Criminalization. Cities shifted funding to community-based violence prevention programs, mobile mental health teams, substance abuse programs, food access programs and workforce development.
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Agents of Impact: Follow the Talent

Leland Richards, ex- of Churchill Asset Management, joins Adams Street as partner… Felecia Hatcher, ex- of Miami’s Center for Black Innovation, is named CEO of Black Ambition, a nonprofit launched by Pharrell Williams in December… Katherine Lynch, ex- of Kiva, joins Republic as director of partnerships and communities… JPMorgan Chase is looking for an associate for its Sustainability and ESG Strategies Growth Equity Fund in San Francisco… Vancity is seeking an impact investment manager in Vancouver… Acumen America is hiring a partnerships associate in the San Francisco Bay Area.

Thank you for your impact.

– May 25, 2021