The Brief | June 16, 2021

The Brief: Inclusive community lending, industrial modernization, Kenya COVID relief, carbon tracking tech, getting impact-first capital off the sidelines

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Greetings, Agents of Impact! 

  • The Call No. 29: Capitalism Reimagined. Join former Delaware Supreme Court Chief Justice Leo Strine, U.S. Impact Investing Alliance’s Fran Seegull, Center for American Progress’ Andres Vinelli and hundreds of other Agents of Impact for “Rewriting rules and designing policies for the stakeholder economy,” Tuesday, June 29 at 10am PT / 1pm ET. RSVP today.

Featured: Community Finance

With billions in fresh capital, community lenders step up to finance a more inclusive economy. The COVID-19 disruption made stark how badly traditional banks and lenders have underserved small businesses and real estate in Black, Latino, Native, rural and other U.S. communities. In contrast, community financial institutions made a higher proportion of their loans to smaller borrowers in low- and moderate-income areas and provided more than $34 billion in Paycheck Protection Program loans. On Tuesday, the Treasury Department pumped nearly $1.3 billion in flexible grants into 863 community development financial institutions, or CDFIs – the first tranche of $12 billion allocated to community lenders in December’s COVID stimulus bill (see, “U.S. coronavirus relief package boosts lenders in underserved communities”). “More than repair, we must reimagine our economy,” with small businesses at the center, U.S. Vice President Kamala Harris said at the White House. As a senator, Harris worked to include the funding in the stimulus bill with California Congresswoman Maxine Waters and Virginia Senator Mark Warner. Each dollar allocated to community loan funds, credit unions and banks can catalyze $8 in private-sector investment, said Treasury Secretary Janet Yellen. Who can and can’t access credit and capital is “at the root of many long-term structural problems in our economy,” she said. “Capital is bottlenecked by race and region.”

  • Front lines. The grants can help CDFIs build loan-loss and capital reserves (see, “Corporate deposits in CDFIs are good. Equity investments would be even better“). “Today the country has heard our call,” said Opportunity Finance Network’s Lisa Mensah, who introduced Harris at the White House. Mensah noted CDFI loan-loss rates are historically low and “our impact is astoundingly high.” Three-quarters of the more than 50 CDFIs responding to a CNote survey have an “urgent” or “somewhat urgent” need for capital in the coming year.
  • Good jobs. Pacific Community Ventures, a California-based CDFI, saw demand increase 10,000-fold for its loans and advisory services during the COVID crisis. PCV lent $4.8 million last year, with an average loan size of $70,000. More than 80% of the small business owners served were women or people of color in economically distressed communities. Median full-time wages across the portfolio were $21 an hour and more than half of full-time employees were eligible for health benefits and 70% got paid time off.
  • Corporate capital. Tech and other companies have turned to CDFIs to make good on their racial-justice pledges of the last year (see “Corporates emerge as a source of capital for community investment”). Twitter in November committed $100 million to seed Opportunity Finance Network’s targeted $1 billion Finance Justice Fund. PayPal anchored LISC’s $250 million Black Economic Development Fund and announced another $135 million in deposits in CDFIs around the country. Prudential Financial, Goldman Sachs Urban Investment Group and UnitedHealth Group are investing billions through CDFIs. “This is an industry and a cause whose time has come,” Senator Warner said at Tuesday’s press conference.
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Dealflow: Sustainability Alpha

G2 Venture Partners raises $500 million for second sustainability fund. The Menlo Park, Calif. venture firm spun out of Kleiner Perkins in 2017 to invest in the modernization and greening of transportation, agriculture, energy and other industries. Its $350 million first fund invested in clean energy access company Arcadia; ProducePay, which connects growers, distributors and suppliers in Mexico and Latin America; and electric bus maker Proterra, which yesterday went public through a merger with ArcLight Clean Transition Corp., a special purpose acquisition company, or SPAC (see, “Electric fleet company Proterra to go public through merger with ArcLight SPAC”). The second fund “places us in a position to significantly mitigate the climate crisis while continuing to create value for our investors,” said G2 Venture’s Brook Porter. Share this post

Kenyan businesses score COVID recovery funding from Vital Capital. Cyprus-based Vital Capital made loans from its $10 million relief facility to solar product manufacturer Sollatek and to agribusiness Privamnuts, which sources macadamia nuts for export from 10,000 smallholder farmers. The capital will help ensure business continuity at a time when “many impactful small and medium-sized businesses in Africa face ongoing challenges,” said Vital Capital’s Nimrod Gerber (see, “The investment case for COVID relief for Africa’s essential businesses”).

  • Relief funding. Vital Capital runs a $350 million impact fund focused on Africa. The relief facility for companies not in Vital’s portfolio addresses “a clear imbalance between supply and demand for credit,” Vital’s Francisco Machado told ImpactAlpha. Vital is cutting checks of up to $1.2 million for up to four years, with a six-month repayment moratorium.
  • Read on

MacKenzie Scott backs ‘teams empowering voices the world needs to hear.’ Common Future, Social Finance, Kiva and Souls Grown Deep are among the 286 organizations that received a combined $2.7 billion from the philanthropist and her husband Dan Jewett (see, “MacKenzie Scott, Agent of Impact”). “More than the monetary value of this gift, we are grateful for the terms under which it was given: none,” wrote Common Future’s Rodney Foxworth, who said Scott’s unrestricted seven-figure donation, the largest in the organization’s history, will support “equitable and impactful community wealth-building opportunities.” Listen up.

Dealflow overflow. Other investment news crossing our desks:

  • Merritt Community Capital raises $102 million to build 450 affordable housing units in California.
  • The Pill Club, which aims to make primary care more affordable and accessible for women, secures $41.9 million, led by Base 10 Partners.
  • Orange Middle East and Africa and AXA Assurance Maroc acquire Moroccan digital healthcare company DabaDoc.
  • Circulor raises $14 million from The Westly Group, Salesforce Ventures, Future Positive Capital and others for carbon tracking and sourcing transparency across supply chains.
  • L.A.-based DroneBase scores $12.5 million for drones that provide data for solar and wind-energy asset owners.
  • Ghana-based Oasis Capital invests $1 million in Ghanian digital payments company appsNmobile Solutions via its $50 million Oasis Africa VC Fund.

Impact Voices: Catalytic Capital

How one New York fund is getting impact-first capital off the sidelines. Program-related investments, or PRIs, should be the type of impact investing most attractive to foundations. But 52 years after the first PRI, the tool remains woefully underutilized. The New York Pooled PRI Fund lowers transaction costs for foundations offering flexible capital for nonprofits that provide social services in low-income neighborhoods. SeaChange Capital Partners, which manages the fund, “has spent a lot of time trying to understand and reduce the real-world barriers that can prevent funders with a genuine interest in impact investing from acting on it,” John MacIntosh writes in a guest post on ImpactAlpha. The pooled fund has nudged 11 foundations to give PRIs a try by collectivizing sourcing, due diligence and fund management, among other measures. Borrowers include the Brooklyn Community Bail Fund, Greater Jamaica Development Corp. and the NYC COVID-19 Response & Impact Fund.

  • Catalytic tools. Other ways to mobilize latent impact-first capital: taking a first-loss position to attract less risk-tolerant investors, making loan processing infrastructure or investment professionals available to impact-first funders, and seeding new funds. “To get more impact-first capital off the sidelines, we need to do much, much more,” writes MacIntosh. “Time is wasting. Let’s get to work.”
  • Read MacIntosh’s post.

Agents of Impact: Follow the Talent

Michael Smith, who leads My Brother’s Keeper Alliance, is nominated by U.S. President Joe Biden to be CEO of AmeriCorps… Entrepreneur Kim Lane is named chief operating officer of Right to Start… Julia Mensink, ex- of Ceniarth, joins Acumen as head of impact… JFF is looking for a director for its Employment Technology Fund… Domini Impact Investing is hiring a senior research associate in New York… The Austin Community Foundation is recruiting a director of community impact in Austin… TruFund Financial Services seeks a director of New Market Tax Credits in New York… BSR is hiring an associate director of sustainability in New York.

Community Foundations of Canada, Inspirit Foundation, Vancity and First Nations Bank of Canada are among the 10 organizations launching Impact United to mobilize Canadian impact investment. The group will hold its “United for Climate Action” convening, on Tuesday, June 22… Catholic Impact Investing Collaborative is hosting “Refugee lens investing,” with Tim Docking of the Refugee Investment Network, Yanki Tshering of Accompany Capital, and Jay Dunn of DF Impact Capital, tomorrow, June 17… Also tomorrow, Transform Finance is hosting “Grassroots Community Engaged Investment: The Nuts and Bolts of Sharing Investment Governance.”

American Sustainable Business Council and Social Venture Circle are hosting “Invest Strategically to Close the Wealth Gap: Converting Businesses into Employee Owned Enterprises,” with Ed Whitfield and Brendan Martin of Seed Commons, Christina Jennings of Shared Capital Cooperative, Todd Leverette of Apis & Heritage Legacy Fund, Jonathan Ward and David Hammer of ICA Group/The Fund for Jobs Worth Owning, and Harold Pettigrew of Washington Area Community Investment Fund, today at 1pm ET.

Thank you for your impact.

– June 16, 2021