The Brief | December 1, 2022

The Brief: Inclusive development in Baltimore, Lafayette Square’s non-dilutive growth capital, distributed power plants, building the Long COVID economy

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Greetings, Agents of Impact!

Featured: Inclusive Communities

Real estate developers in Baltimore test strategies for inclusive growth and community wealth. On the west side of downtown Baltimore, a $45 million rehabilitation of Lexington Market is turning the long-ago hub of the slave trade, into a community market that reflects that city’s diverse demographics. In Poppleton, further west, a fresh foods market, mixed-income housing and small businesses are rising in a designated Opportunity Zone. And on Baltimore’s east side, nonprofit ReBUILD Metro is rehabilitating vacant and distressed buildings and helping local residents buy them at a discount. “Baltimore is propelling inclusive economic growth that can be a model for the region and the country,” says James Wahls of Mission Investors Exchange. The network of foundations and other asset owners is meeting in Baltimore next week to share “powerful examples of impact investing in action,” as Wahls says.

The common threads through the inclusive real estate projects: creative development models, impact capital and intentional community engagement. The overhaul of Lexington Market was financed through New Market Tax Credits, city and state grants, funds from the American Rescue Plan Act and private debt, as well as low-interest business loans for the market’s new vendors. At numerous town hall meetings, community members shared that they “wanted the refurbishment to be reflective of the city and serve the city,” says Colin Tarbert of Baltimore Development Corp., the city’s economic development agency. At least half of the 40-plus stalls in the market are Black-owned – up from 5% in the old market – more closely reflecting Baltimore’s demographics. In its neighborhood redevelopment efforts, ReBUILD has been intentional about “making sure people who live there can continue to live there,” explains John Muchai of Baltimore Community Foundation, an investor in both ReBUILD and Lexington Market. Such projects are helping create wealth “for people who were very strategically picked to be included,” Muchai adds. “Now you have more diverse communities, too, not only in terms of race but economically.”

Dealflow: Investing in Place

M&G’s Catalyst backs Lafayette Square’s direct lending business with $200 million. The capital commitment is a boost for the upstart impact investment firm’s flagship credit strategy, which backs growing middle-market companies with senior secured debt. Such business loans are non-dilutive for founders, allowing them to maintain ownership and control of their companies. Lafayette’s “worker solutions” platform works with borrowers to support employee well-being and retention. The Catalyst strategy of M&G, a spinoff of Prudential with €400 billion under management, aims to invest up to $5.6 billion into privately-owned businesses working “to create a more sustainable world.” Through the partnership with Lafayette, “we can provide business owners with the capital they need to grow while also helping improve the lives of workers in underserved communities,” said M&G’s Thierry Masson. Lafayette says it will measure the partnership’s impact on the lives of workers.

  • Institutional impact. Lafayette Square, led by Damien Dwin, ex- of Brightwood Capital Advisors, Credit Suisse and Goldman Sachs, last year raised $100 million in equity from Morgan Stanley to build an institutional investment platform to drive capital into affordable housing, basic services and local small businesses in underserved communities. The firm has been on a hiring spree, gobbling up impact talent including Antony Bugg-LevineOmmeed Sathe and Don Baylor.
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Swell Energy’s $120 million raise points to the energy grid of the future. There’s a place for large, centralized power plants and for big checks from the giant private equity firms that finance them. Still, “The world is moving to smaller, distributed power plants,” Greenbacker Capital’s Jeff Sheridan told ImpactAlpha. The New York-based independent power producer and asset manager teamed with Softbank to lead a $120 million investment in Santa Monica-based Swell Energy. Swell aggregates residential and business solar and battery storage into “virtual power plants” that can help balance electricity grids. The funding will help Swell finance 26,000 additional rooftop solar and storage systems throughout the U.S.

  • Local developers. Greenbacker made the investment out of its $142 million Development Opportunities Fund, which provides flexible capital to emerging renewable energy developers. “We’re trying to make sure that there’s a diverse and resilient business out there,” said Sheridan. The investment in a virtual power plant provider was a first for Softbank’s Vision Fund, which is better known for its big – and lately losing – bets on tech unicorns. Greenbacker, said Sheridan, “helps someone like Softbank be more comfortable with the process.” Ares’ Infrastructure Opportunities fund and Ontario Power Generation Pension Fund also participated.
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Dealflow overflow. Other investment news crossing our desks:

  • TriLinc Global Impact Fund secured $50 million from Blue Orchard and Germany’s KfW to finance growth-stage small and medium enterprises in select developing countries.
  • Huruma Fund, managed by Spain’s Gawa Capital, provided a $5.2 million loan to Nigeria’s Babban Gona to provide financing, training, inputs and other services to smallholder farmers (see, “And a Skoll Award goes to…Babban Gona, for boosting incomes of Nigerian farmers).
  • Carbon Reform snagged $3 million in seed funding to decarbonize buildings, from Azolla Ventures and Revolution’s Rise of the Rest Seed Fund
  • Totem, a Tulsa, Okla.-based neobank for Native Americans scored $2.2 million in pre-seed funding, led by Raven Indigenous Capital Partners.

Impact Voices: Disability Justice

Six ways to build the Long COVID economy. Roughly 100 million people globally never recovered from the novel coronavirus. In the U.S. alone, two to four million working-age “COVID Long Haulers” are unemployed, leading to $168 billion in lost earnings – about 1% of our national GDP. Ibrahim Rashid, a graduate student who had lost the ability to walk due to the virus, wrote in ImpactAlpha last year about how Long COVID has focused new attention on disability justice. “I wrote that piece in a moment of vulnerability, hoping that my suffering would inspire action. It did,” Rashid writes in a follow up. “At the urging of fellow Agents of Impact who heard my message,” Rashid says, he has built Strong Haulers, a tech platform to help COVID Long Haulers manage their symptoms. “I want to show that there is a market opportunity in helping COVID Long Haulers and shift capital and policy support in that direction.” Among the opportunities

  • Back disabled entrepreneurs. Two-thirds of people with disabilities are unemployed. Over one billion people experience some form of a disability, making it one of the largest, and most underserved, markets globally (see, “Regina Kline, Enable Ventures: Closing the disability gap). “We can close this gap by supporting disabled entrepreneurs in creating accessible technologies,” says Rashid. Other efforts include Synergies WorksChisos Capital, and Startup Health’s Health Equity Moonshot.
  • Expand access to remote jobs. The COVID pandemic has created an ‘accommodation economy,’ in which remote working is now the norm. This creates new opportunities to bring people with disabilities into the workforce. Companies like Chronically Capable and Flexa Careers vet and post job listings for disability inclusive companies. Suggests Rashid: “Consider asking your portfolio companies to subject themselves to their review.”
  • Keep reading, “Six ways to build the Long COVID economy,” by Strong Haulers’ Ibrahim Rashid on ImpactAlpha.

Agents of Impact: Follow the Talent

The Equality and Human Rights Commission’s Helen Mahywill joinNextEnergy Solar Fund’s board as a non-executive director on April 1, 2023. Mahy will also succeed Kevin Lyon as chairman of NextEnergy in August 2023… Lisa Neuberger Fernandez, ex-of Accenture, joins 374Water as global head of sustainability and ecosystems.

Blue Dot Capitalseeks a remote senior associate for ESG research and integration in New York… Also in New York, BlueMarkis looking for a senior associate for impact investing research and development, FCJis hiring a senior manager and UBSis recruiting a social impact program manager… The Environmental Defense Fundhas an opening for a corporate climate policy specialist in Washington, D.C.

Thank you for your impact!

– Dec. 1, 2022