The Brief | March 23, 2021

The Brief: Interrupting gentrification, inclusive recovery, digital transformation, water and agtech, distributed utility-scale solar, seeding diverse investors

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Greetings, Agents of Impact! 

Featured: Bottom-Up Recovery

How neighborhood trusts interrupt gentrification and shift ownership to communities. The good news: tools exist to transform distressed neighborhoods like Olneyville, once a hub of the textile industry in Providence, R.I. The bad news: those tools can’t protect such communities from becoming whiter, better credentialed, more unequal and more expensive – the most reliable indicators of gentrification and predictors of displacement. To “interrupt this morally obscene trajectory,” Joseph Margulies, a professor at Cornell University, conceived the ‘neighborhood trust’ while researching the mostly Latino neighborhood for his forthcoming book, Thanks for Everything—Now Get Out. The structure achieves sustainable affordability in cities by transferring ownership and control of neighborhood assets to low-income residents and their allies. Pilots of the idea are underway in Philadelphia with the Kensington Corridor Trust and Kansas City with the Mixed Income Neighborhood Trust or MINT (see, “Neighborhood trusts are taking on speculators and building community wealth).

  • Community wealth. “A neighborhood trust will not solve all the problems that confront a place like Olneyville,” writes Margulies in a guest post on ImpactAlpha. It won’t stop climate change, revive the manufacturing sector, or make people tolerant, for example. “It will give the poor ownership and control of the wealth in their neighborhoods.” Low-income residents are then able to permanently capture increases in the value of land, to invest and manage their capital, and to deploy their assets as they see fit. 
  • Self-determination. Margulies argues neighborhood trusts can restore some of the wealth and social capital that have been drained away by decades of disinvestment and neglect, and align capital with the interests of the poor. “The thought that the poor might achieve the same control over their destiny that the wealthy expect as their birthright is a radical notion in this country,” he writes, “but that is the unapologetic ambition of the neighborhood trust.”
  • Keep reading, “How neighborhood trusts interrupt gentrification and shift ownership to communities,” by Joseph Margulies on ImpactAlpha.

Rethinking economic development for an inclusive recovery. Policy makers are embracing bottom-up strategies to address interlocking challenges of COVID-19, inequality and racial justice. The $1.9 trillion federal American Rescue Plan prioritizes families, individuals and the growing precariat (see “American Rescue Plan brings policy support – and $1.9 trillion – to the bottom-up reconstruction). The same thinking is poised to transform local economic development, which for decades has looked outside for solutions. The idea, says Local Initiatives Support Corp.’s Annie Donovan, is to “prioritize the people who live in those places and the assets that they bring.”

  • The new model: a systems-level approach informed by local voices and focused on areas that have the greatest potential to benefit from investment. “Community-Rooted Economic Inclusion,” an action playbook from LISC and Brookings’s Bass Center, draws on pilot initiatives in Los Angeles, Indianapolis and Philadelphia as blueprints for such inclusive placemaking. 
  • Action plan. The playbook prioritizes steps from identifying target neighborhoods and assembling coalitions to crafting plans to integrate community, economic and workforce development efforts in underinvested communities. One key: civic infrastructure. L.A.’s action plan calls for a “Crenshaw Corridor Resiliency Hub” to formalize networks between mutual aid groups and local businesses, and it provides resiliency funding for community-based organizations. 
  • Recovery funds. While the federal investment is historic, “cities, neighborhoods, blocks and households will be where the rubber hits the road in terms of the ability of this investment to deliver for the most distressed communities,” write Bruce Katz and Colin Higgins of Drexel University’s Nowak Metro Finance Lab. Among their suggestions for how local governments should deploy federal recovery funds: Ensure that public resources catalyze private and civic investment.
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Dealflow: Follow the Money

New York State pension backs 57 Stars’ impact fund. Private equity firm 57 Stars earned its reputation for backing companies and funds driving “technological disruption” on behalf of emerging consumers. The Washington, D.C.-based firm’s impact investing initiative will enable it to make direct investments, including in companies that are already indirectly part of its portfolio. The New York State Common Retirement Fund committed $50 million to 57 Stars Global Opportunity Fund 5 Direct Impact, according to the pension’s monthly investment disclosure. (The New York State pension also invested $100 million in 57 Stars’ Europe-focused positive ESG fund.) 57 Stars will focus on health, financial inclusion, housing, education, and energy and environmental sustainability.

  • Digital transformation. 57 Stars is eying high-impact applications for mobile adoption, e-commerce and particularly artificial intelligence. “We see a lot of applications for artificial intelligence already across our portfolio, whether it’s delivery models for healthcare or financial services,” 57 Stars’ Carl Balit told ImpactAlpha. The firm isn’t taking “an explicit AI focus,” Balit added, “but we expect many of the companies will have AI embedded in their solutions.”
  • Tune in. Join ImpactAlpha in conversation with 57 Stars’ co-founder Steve Cowan, along with futurist Brett King, NotCo’s Jose Mendez and MFine’s Amit Chandra today at 11am ET.
  • More

OurCrowd secures $50 million to invest in water and agtech ventures. Waterfund, a global water investment firm, backed the Israel-based venture investing platform. OurCrowd launched its first impact fund in 2019 (see, “Israel’s OurCrowd is targeting the Sustainable Development Goals – and measuring its own impact”). The platform has raised $1.5 billion and invested in more than 240 companies and 25 venture funds to date. The company will use the investment to build a portfolio of 15 water and agtech companies, including its first investment: Bay Area-based Plenty, an indoor vertical-farming company.

  • Blue bonds. Separately, Waterfund and OurCrowd are building Aquantos, a water-focused platform to issue blue bonds and other investment products. 
  • Dig in.

Dealflow overflow. Other investment news crossing our desks:

  • Independent energy producer Soltage and alternative asset investor Harrison Street will invest in 450 megawatts of distributed utility-scale solar and energy storage via a $250 million partnership. 
  • San Francisco-based Rithm School, which trains students from diverse backgrounds to become software engineers, secured $25 million to expand its income-share agreement program.
  • Allonnia scored $20 million from cleantech fund Evok Innovations to develop a biotech solution for reducing water waste.
  • Arlan Hamilton’s Backstage Capital closed out its $5 million fundraise on crowdfunding platform Republic with more than 7,000 investors (see, “New crowdfunding rules set to boost investment in diverse startups and founders”).

Agents of Impact: Follow the Talent

Daniel Brett, ex- of Pacific Community Ventures, joins the New Markets Support Company as vice president of impact… Angela Wood, ex- of Sawtooth Solutions, joins North Sky Capital as chief financial officer… The GIIN’s Amit Bouri joins Impact Entrepreneur to discuss “The New Capitalism, Impact Investing and Systems Change,” Thursday, Mar. 25… SoPact is hosting “Who Writes Rules of Impact Measurement and Management?” featuring Jeremy Nicholls of Social Value International, Tuesday, Apr. 6… 

Socap Digital is holding a book launch party for “21st Century Investing,” by Bill Burckart and Steve Lydenberg, and “Moving Beyond Modern Portfolio Theory: Investing That Matters,” by Jon Lukomnik and Jim Hawleyon, Tuesday, Apr. 13… Island Innovation is hosting the (virtual) Island Finance Forum 2021, April 13-16… “Philly Forward: Real Estate as a Portal to Change,” hosted by 17 Asset Management, The Collective, and SOCAP, will bring together Black real estate developers and local, regional, and national investors, Thursday, Apr. 22.

Thank you for your impact.

– Mar. 23, 2021