The Brief | March 15, 2023

The Brief: Investing in gap-closing startups, flexible growth capital in Uganda, affordable housing in West Africa, reversing biodiversity loss, deinfluencers

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Greetings, Agents of Impact!

Featured: Returns on Inclusion

Freada and Mitch Kapor write the book on startup investing to close gaps of equity and opportunity. Freada Kapor Klein and Mitch Kapor have spent more than a decade betting on diverse founders with lived experience who are working to bridge equity and opportunity gaps. With more than $100 million in investments made via Kapor Capital, the couple has been a key builder of the now-thriving impact tech ecosystem led by founders of color that includes fast-growing companies such as BlocPower, Bitwise and Aclima. After turning over the active management of Kapor Capital to the next generation of leadership, they set out to write a book that chronicles their journey and that of dozens of founders who are laying the groundwork for a more inclusive economy. “When we started out in 2011, we had a thesis about why it was possible and how to do it,” the Kapors write in “Closing the Equity Gap: Creating Wealth and Fostering Justice in Startup Investing,” out this week. “Now we have lots of evidence, both in terms of financial returns and the social impacts.”

Mitch Kapor, who founded Lotus Software and developed the Lotus 1-2-3 spreadsheet before selling to IBM for $3.5 billion in 1995, is not afraid to take on tech moguls or others with different perspectives on social equity. When Kapor tweeted that, while “genius is evenly distributed by zip code, access is not,” Elon Musk fired back. “This is false,” Musk tweeted; Kapor held his ground. The exchange has been viewed 2.8 million times. “None of the critique, and certainly none of the haters, actually challenged the central idea that there’s this underestimated and overlooked talent that we can do something about,” Kapor says. The Kapors last year turned over Kapor Capital’s leadership to co-managing partners Brian Dixon and Ulili Onovakpuri, both of whom came up through Kapor’s internal talent development programs (listen to all four on ImpactAlpha’s podcast, “New leadership at Kapor Capital doubles down on diversity and impact“). Kapor Klein, an educator and activist, was recently elected to the national board of the NAACP, and is working with them on investment-related activities. “Everything that we’ve invested in since 2011 at Kapor Capital has been a tech company where the core business closes gaps of access or opportunity or outcomes for communities of color and/or low income communities,” she tells ImpactAlpha. “We really want to bust the myth that you sacrifice returns for having gap-closing companies.” 

Sponsored by CalCEF Innovations

Seeking proposals for a China climate ETF or mutual fund. California Clean Energy Fund (CalCEF) Innovations, a nonprofit public benefit corporation, is seeking proposals from sustainable financial advisors and fund management companies that specialize in the development of climate-aligned exchange-traded funds and mutual funds and the marketing of those products to U.S.-based retail and institutional investors. The purpose of the request for proposals is to expand China-focused, climate-aligned investment product offerings for the U.S. market through the development of a climate-friendly fund product in the form of an ETF, index fund or mutual fund that tracks a designated climate index. The RFP will offer a sponsorship of up to $300,000 to deliver the fund. All work required for regulatory approval must be concluded by Oct. 31.

  • How to apply. Proposals must be submitted by Friday, March 31. For more information read the full RFP.

Dealflow: Growth Capital

Inua Capital secures $8 million to offer flexible capital for small businesses in Uganda. “Small businesses in Uganda have a complete lack of access to capital,” says Inua’s Kim Kamarebe. She founded the Kampala-based fund management firm to provide growth equity and mentorship to local businesses with up to $1 million in revenue that are creating jobs and providing essential products and services. “In that space, we’re losing 99 of 100 entrepreneurs because they don’t have the right guidance or enabling factors to be successful,” Kamarebe told ImpactAlpha. Inua cuts checks of $100,000 to $500,000 using a mix of equity and quasi-equity instruments, including convertible notes. The gender-focused firm is targeting agriculture companies and those making essential goods.

  • Funding the funders. Inua’s first fund, called Inua Impact Fund, is backed by IPDEV, part of the impact investing group I&P, and EDFI AgriFI, a European agriculture-focused blended finance facility. Inua is I&P’s first fund investment in East Africa. The French firm, which largely invests in francophone countries, has anchored six small business-focused funds in West Africa and aims to increase that to 10 across the continent by next year.
  • Local ecosystem. Inua’s open-ended fund is targeting local institutional investors for future raises. Such investors have a mandate for alternative assets but little experience with private equity. Kamarebe says local investors can help close the capital loop and support local wealth and opportunity creation. “They’re excited by the idea of impacting entrepreneurship and jobs,” she said. “But the education curve is high.”
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Caisse Régionale de Refinancement Hypothécaire raises $274 million for affordable housing in West Africa. CRRH aims to help 6,000 families become homeowners and will invest in affordable housing throughout francophone West Africa. The Togo-based financial institution raised the capital via a long-term bond issuance. The offering included $217 million in 17-year, euro-denominated notes and $57 million in local-currency notes. Bank of America, Brean Capital and Bank of New York Mellon participated in the offer.

  • Catalytic capital. The U.S. International Development Finance Corp. provided a credit guarantee as an incentive to private investors. “This project will not only support homeownership, which has the economic impact of wealth accumulation, but also positive health gains through improved quality of housing,” the agency said in an investment summary. USAID provided funding to advisory firms MiDA Advisors and CrossBoundary to help CRRH ready the offering.
  • Check it out.

Mirova SunFunder secures $171 million to finance the energy transition in emerging markets. The asset manager’s Gigaton Empowerment Fund is aiming to raise $500 million to make debt investments in small-scale solar projects in Latin America, Africa and Asia. Its goal is to make 130 investments that impact more than 10 million people and cut carbon and carbon-emission equivalents by 18 million tons (see, “The LiiST”). The company says it has a pipeline of projects in 30 countries. Several development finance institutions backed the fund’s first close, including the DFC in the U.S. and Swedefund and Sida in Sweden. Natixis Investment Managers, Mirova’s parent, invested via its private equity group. Dig in.

Dealflow overflow. Other investment news crossing our desks:

  • Tyson Foods, one of the biggest meat processors in the U.S., invested in Athian, a carbon credit marketplace for corporate buyers in the livestock industry. Tyson made the investment through its corporate venture fund.
  • Swiss development finance institution SDC invested 15 million Swiss francs ($16.4 million) in the Bamboo-UNCDF Initiative for the Least Developed, or BUILD Fund. The commitment includes nine million francs in first-loss capital. Most of the capital will support gender-lens investments in Zambia and Zimbabwe.
  • Chicago-based ClearFlame Engine Technologies raised $30 million from Mercuria Energy Group, Breakthrough Energy Ventures and others to help heavy industry transition from diesel fuel to cleaner biofuels.

Six Short Signals: What We’re Reading

🌱 Agtech’s climate bump. Agrifood tech sectors with a climate angle, including bioenergy and biomaterials, ag biotech, and farm management software, saw an increase in funding year-over-year, even as funding in agrifood tech overall fell 44% to $29.6 billion. (AgFunderNews)

🌊 Reversing biodiversity loss. More than 190 countries have reached a deal to protect the biodiversity of the world’s oceans, agreeing on a common framework for establishing new protected areas in international waters. (Washington Post)

✔️ Sustainability responsibilities. ESG reporting, overseeing sustainability projects, and managing stakeholder relationships are among eight responsibilities of chief sustainability officers. (Harvard Business Review)

👩🏽‍🦱👨🏾‍ Young, Black and disruptive. While Black investors at the partner-level align with the industry trend of Ivy League representation, there is greater diversity in university pedigrees among junior and mid-level Black talent. (BLCK VC)

🎥 #Antihaul TikTok. “Deinfluencers,” who use social media to share things they believe people should stop buying, are sparking a conversation around climate change, consumption and equality. (Buzzfeed)

🚂 Pro-rail safety. The recent train derailment in East Palestine, Ohio has made odd bedfellows of Ohio Senators JD Vance and Sherrod Brown. (Washington Post)

Agents of Impact: Follow the Talent

Carol Adams, professor of accounting at Durham University Business School, is named chair of the Global Sustainability Standards Board. She takes the reins from Judy KuszewskiAlex Amouyel is stepping down as MIT Solve’s executive director to join Newman’s Own Foundation as president and CEO… David Barley, former director of Mirova’s sustainable oceans fund, joins Gravis Capital Management as an investment director. 

BlocPower is recruiting a clean energy project associate in Denver… World Wildlife Fund is looking for an aquaculture impact investment intern… Bridge Investment Group is looking for an ESG analyst in Sandy, Utah… In New York, the Global Impact Investing Network seeks a director of communications; Goldman Sachs is recruiting a nature-based solutions investment associate; and Franklin Templeton is looking for a sustainable investments research analyst. 

The Ford Foundation seeks a regional director in Beijing… IIX has an opening for a marketing and advocacy senior executive in Singapore… In London, Snowball is hiring an impact investing manager and associate, and Cambridge Associates is looking for a sustainable and impact investment analyst… Morgan Stanley’s Inclusive Ventures Group is looking for an investment analyst in Budapest.

The Draper Richards Kaplan Foundation has an opening for an analyst in Boston or San Francisco… Occam Advisors is hiring an analyst in Portland… The Environmental Defense Fund is accepting applications from graduate students for its Climate Corps fellowship program… Criterion Institute will host an online workshop on using finance as a tool for social change on Monday, March 20.

Thank you for your impact.

– March 15, 2023