The Brief: Investing in the ownership economy

The team at

ImpactAlpha

Greetings Agents of Impact! In today’s Brief:

  • Alternative ownership models and Ownership Economy funds
  • Vertical farming in Dubai
  • Credit guarantees in Africa 
  • State of social enterprise

Featured: Ownership Economy

Alternative ownership enterprises challenge conventional models for companies and funds. Conventional models of enterprise ownership have created millionaires and billionaires but left many workers and other stakeholders out in the cold. Alternative forms of ownership and governance are cutting in workers, farmers and customers and embedding higher purposes. Alternative ownership enterprises are all around: Retailer Publix is employee-owned via a stock ownership plan. The food distributor Organic Valley is a cooperative co-owned by farmers. Outdoor lifestyle brand Patagonia is governed by a perpetual purpose trust to keep it true to its mission. Even OpenAI, maker of the buzzy ChatGPT, is controlled by a non-profit tasked with ensuring the technology benefits humanity. In a guest post on ImpactAlpha, Julie Menter and Curt Lyon of Transform Finance offer a taxonomy for “alternative ownership enterprises.” “Now is a critical time for impact investors to get engaged and provide capital to accelerate growth at each stage,” the authors  write. 

  • Alt-ownership models. As millions of businesses owned by baby boomers reach retirement age, alternative ownership structures are being embraced by billionaires like Yvon Chouinard and Michael Bloomberg, private equity giant KKR, and dozens of impact fund managers. There is bipartisan support for the Employee Equity Investment Act, which would provide loan guarantees for funds that convert businesses to employee ownership (for background see, “Expanded ownership and access to capital to build wealth and bridge divides”). Transform Finance identifies 10 core alt-ownership models, plus variants, and sorts them by their primary beneficiaries, including workers, other stakeholders and purpose itself.
  • NEW! Searchable funds database. Finance in the ownership economy includes private equity, private debt, venture capital and funds of funds, along with guarantees, blended finance and grants. Sourced from our own coverage and in partnership with Transform Finance, ImpactAlpha has identified more than 60 funds and tagged them by asset class, geography and ownership metrics. Speed your landscape analysis and build your pipeline with ImpactAlpha’s new Ownership Economy fund database.  
  • Move the ball forward. Join Smitha Das of WES and Santhosh Ramdoss of Gary Community Ventures for “Closing the racial wealth gap by shifting ownership,” based on their article on ImpactAlpha and presented by Transform Finance. “We are on the verge of an ownership movement,” write Das and Ramdoss. “We see a different path forward.” Register for the webinar, Wednesday, Jan. 31 at 10am PT / 1pm ET / 6pm London.
  • Keep reading,Alternative ownership enterprises challenge conventional models for companies and funds,” by Julie Menter and Curt Lyon of Transform Finance on ImpactAlpha. 

Dealflow: Agrifood Investing

IGS scores £22.5 million to build a giant vertical farm in the UAE. The United Arab Emirates imports more than 80% of its food. The country is betting on indoor, vertical farms to boost the country’s food security. Scotland-based Intelligent Growth Solutions is partnering with Dubai-based ReFarm to build a 900,000-square-foot farm to replace 1% of the UAE’s food imports and recycle 50,000 tons of food waste. Plans were announced at last month’s COP28 climate summit in Dubai. IGS’s Series C equity round was backed by COFRA Holding, DC Thomson, S2G Ventures, Ospraie Ag Science and other investors.

  • Desert farming. The vertical farming sector took a hit last year (see, “Collapse of AeroFarms augurs a reckoning for vertical farming”). AeroFarms and its R&D facility in Dubai was caught in the downswing, but projects in moving forward in the UAE include a facility opened in October by Dubai-based Space Farm and Finland-based iFarm. One of the country’s largest vertical farms, opened in 2022, is a $40 million partnership between Siemens, Emirates Flight Catering and Crop One. Intelligent Growth Solutions’ David Farquhar has called for transparency and collaboration in the vertical farming sector.

African Guarantee Fund backstops Vista Group’s lending to small businesses and green ventures. The African Development Bank and Danish and Spanish governments launched the African Guarantee Fund more than a decade ago to spur small business finance on the continent with credit guarantees that buffer local lenders. A $50 million guarantee for Guinea-based Vista Group aims to ramp up lending to “green” businesses and companies in Guinea, Burkina Faso, Sierra Leone and Gambia. The deal, which is supported by the AfDB’s Affirmative Finance Action for Women in Africa guarantee initiative, requires that one-fifth of Vista Group’s loans go to women-led businesses.

  • Catalytic capital. The guarantee fund supports local and regional lenders in financing small businesses, farmers, female entrepreneurs and other underserved borrowers. Last year, the fund inked a $200 million risk-sharing agreement with Ecobank, one of the more active small business commercial lenders in Africa. It partnered with Gulf African Bank on an Islamic finance-compliant credit risk guarantee to support businesses in Kenya. With Kenya’s Family Bank, African Guarantee Fund is encouraging women’s financial inclusion. It’s eyeing opportunities to use carbon markets to finance clean cooking technologies.
  • Check it out

Dealflow overflow. Investment news crossing our desks:

  • General Atlantic buys UK-based Actis to roll out its sustainable infrastructure strategy. (General Atlantic)
  • Israel-based SeeTree notches $17.5 million for remote monitoring of orchard and forest health. (AFN)
  • Climate tech accelerator NEX Ventures reups its investments in Indonesian solar services firm SolarKita and energy software and financing company Synergy Efficiency Solutions. Another NEX portfolio company, EV battery swapping network Swap Energy, raised $22 million in a Series A round led by Qiming Venture Partners. (NEX Ventures)

Short Signals: What We’re Reading

💥 State of social enterprises. Some 10 million social enterprises, half of them led by women, generate roughly $2 trillion in revenues each year while employing 200 million people. The investment opportunity: meeting the sector’s demand for at least $1.1 trillion in financing. (WEF)

✅ Voting matters. Just 3% of 257 shareholder resolutions aimed at improving companies’ social and environmental impacts received majority support in 2023. That’s down from 14% in 2022 and 21% in 2021. Large US managers drove the downward trend; European support grew. (ShareAction)

⚡ Climate tech returns. Investments in wind and solar mostly notched losses in 2023. Where were the returns in climate tech? Electrical grids that distribute clean energy generated double-digit returns. The Nasdaq Clean Edge Smart Grid Infrastructure Index (QGRD) rose more than 20% last year. (Bloomberg)

⚖️ Prison risk mitigation. Apple, Target, Intel and Starbucks top the most recent FreeCap Financial list of S&P 100 companies ranked by support for hiring workers with criminal records and minimizing engagement in prison labor. Freecap notes an increase in average total scores over last year’s report. (Freecap Financial)

🤖 AI and scientific discovery. Microsoft’s Quantum team used artificial intelligence to screen more than 32 million candidates and “discover and synthesize” a new material with the potential to improve solid-state batteries. The tech company says AI accelerated the discovery process “from years to weeks to just days.” (Microsoft)

💲Billionaire ambitions. New billionaires minted in 2023 accumulated more wealth through inheritance than entrepreneurship, according to UBS. Successor generations are “reluctant to gift money that they have not earned,” according to the bank. The alternative trend: “impact investing or managing businesses in ways that address environmental and social issues.” (UBS)

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

The Equity Alliance promotes Adam Kiki-Charles to partner… Kavita Vijayan, formerly with Reinvestment Fund, joins ImpactAssets as head of marketing… Seattle Foundation is on the hunt for a social impact investing director… Pacific Environment seeks a San Francisco-based senior director to manage a $6 million climate campaign… The  UNICEF USA Impact Fund for Children has an opening for an impact investing director in New York (see, “Child Lens: Unicef leads investors to see their investments through children’s eyes”).

CalSTRS is looking for a sustainable investment and stewardship strategies portfolio manager… Metrus Energy is hiring an asset manager in the San Francisco Bay Area… The New Jersey Economic Development Authority is recruiting a sector financing and incentives analyst… TCW Group is looking for a sustainable investment analyst in Los Angeles… McConnell Foundation seeks an impact investment analyst in Montreal… Catalyst Fund is on the hunt for an investment associate in Nairobi… The US Federation of Worker Co-ops has an opening for a development director to lead fundraising.  

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Jan. 22, 2024