Greetings, Agents of Impact!
ImpactAlpha Podcast: Institutional Shift
Institutional Shift: Corporate operations are the front lines of sustainability (podcast). From Moline, Ill., John Deere & Co. drives operations in 180 countries and nearly $40 billion a year in revenues. To grow, the farm equipment and agtech giant is pointing its considerable research and investment capacity toward climate-change solutions for farmers. “They’re thinking about the whole spectrum: If climate is changing, how does our business model and our equipment model have to adapt to what is becoming a reality?” Equilibrium Capital’s Dave Chen, who recently spent a day with executives at Deere’s headquarters, says in the latest episode of ImpactAlpha’s Returns on Investment podcast.
Corporate investment in climate adaptation and low-carbon solutions dwarfs private equity and institutional investments. A report from Climate Policy Initiative found corporations account for approximately $183 billion per year in climate investment, compared to about $9 billion a year from institutional investors and only $5 billion a year from venture capital, private equity and infrastructure funds. If the stock market functions like a massive referendum on corporate value-creation (and destruction), shifts over time could reward companies investing in 21st-century solutions and punish those creating the problems. “A bunch of fund managers are asking, ‘What sustainability value-add, what future-proofing value-add, is actually hidden inside your company that hasn’t been well understood yet’?” Chen said. “Some of these sustainability fund managers are looking at companies like Deere and saying, ‘Your sustainability value add has not been priced into your stock.’”
Keep reading, and listen in to, “Corporate operations are the front lines of sustainability,” the latest episode in ImpactAlpha’s Institutional Shift podcast series.
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Dealflow: Follow the Money
Reskilling frontline workers, Guild Education becomes a B Corp unicorn. The Denver-based startup helps companies invest in workers who keep sales and operations rolling in storefronts and on factory floors. In four years, Guild has helped 400,000 wage workers start or return to degree programs with corporate tuition assistance programs it has developed for clients like Chipotle, Walmart and Disney. A fresh $157 million in equity funding will help the company reach more of the 88 million U.S. adults “in need of reskilling and upskilling in order to compete in the future of work,” said founder Rachel Carlson. The deal pushes Guild’s valuation above $1 billion and signals venture capitalist interest in workforce development in the U.S. and globally. Guild’s Series D round was led by General Catalyst and included Emerson Collective, Iconiq Capital and Lead Edge Capital (see “Guild Education raises $21 million to help wage workers pay for higher education.”) Impact-focused Rethink Impact and Salesforce Impact Fund were among the company’s early investors.
- Workforce dealflow. Publisher Pearson recently acquired Lumerit Education, which has a similar focus to Guild. Trilogy, a developer of tech bootcamps, was acquired by 2U for $750 million. Lambda School raised funding to offer tech skills training through a pay-as-you-earn model. Investors also backed SV Academy‘s employer-supported tech training, Climb Hire for its cooperative twist to the income share model, and Make School for offering a full degree in two years. Techtonic secured $6 million for software apprenticeships. Austin-based Interplay Learning raised funding to teach trade skills.
- Global trend. Andela, an investment darling for workforce upskilling in emerging markets (see, “Andela rakes in $100 million to staff out Africa’s technical talent”) is pivoting away from entry-level workers. Peru’s Laboratoria and Crehana, Argentina’s Digital House and Mexico’s Holacode are teaching tech skills in Latin America. Hungary’s CodeCool is focusing on Central and Eastern Europe. Rwanda’s BAG Innovation scored funding for “virtual internships.”
- Investment thesis. Pearson launched a $50 million education and workforce skills venture fund. Salesforce Ventures, Lumina Foundation and Robin Hood are partners on a workforce development fund. Jobs for the Future is investing in skills-tech companies like Cell-Ed and PAIRIN via its recently acquired Employment Technology Fund.
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Aqua-Spark backs Scottish aquatech firm Ace Aquatec. The undisclosed investment will help Ace Aquatec expand its predator-deterrent technology (see, “Aqua-Spark: Investing in aquaculture for a protein-hungry planet”).
Doble Impacto and Quest Capital launch $10 million Chilean impact fund. Doble, a crowdfunding platform for impact projects and Quest, a corporate finance advisory firm, created one of Chile’s first impact funds to back ventures targeting environmental, social, educational and cultural impact.
Signals: Ahead of the Curve
These investors are mapping systems to catalyze structural change. Say it louder for the people in the back: Impact investors can’t invest their way out of structural problems. More than 55 impact investors are putting a “whole-system” lens on issues like inequality, discrimination and resource exploitation. Enclude’s “Systems Change: An Emerging Practice in Impact Investing,” documents how investors have mapped systems to inform investment strategies. “We must be modest about the claims we make for investment as a solution,” warns Open Society Foundations’ Sean Hinton, who backed the report. Investors, he says, need to play their part “at a scale unlike anything the world has seen to date, and doing so fully cognizant of the complex systems in which they are investing.” Some examples:
- Systems mapping. Open Society’s Economic Justice Program (which includes Soros Economic Development Fund) leverages transparency and accountability in corporate supply chains to address labor exploitation related to refugees and migrants. The program backed Humanity United’s Working Capital fund, which has invested in analytics firm Ulula, training program QuizRR and traceability platform Provenance. When Economic Justice Program mapped the ecosystem for a possible investment in a sustainable fish farm, it found that fisheries were selling fish to female traders in exchange for sex. It is developing partnerships to support changes across the industry.
- Market infrastructure. Philanthropic investment firm Omidyar Network is funding research, tools, training and networks to ensure digital identity truly empowers individuals, while building a “Good ID” investment portfolio that includes Digi.me, Learning Machine, Terbium Labs, Cambridge Blockchain and the Bharat Inclusive Technologies Seed Fund.
- Stakeholder collaboration. Asset management firm Encourage Capital, with ClimateWorks Foundation and the Growald Family Fund, identified an unaddressed 15-gigawatt market for rooftop solar in India. Encourage raised a $40 million fund to help India’s small businesses switch to solar, a key priority of the Indian government.
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Agents of Impact: Follow the Talent
LOCUS seeks a credit analyst and an underwriting and credit manager for its community investment guarantee pool… Dallas-based Impact Ventures is recruiting women and founders of color for its startup accelerator… Mastercard Foundation’s RAF Learning Lab and ISF Advisors are introducing their Pathways to Prosperity report on rural and agricultural finance at an event in Nairobi on Dec. 4 (see, “Digital and financial innovation is transforming small-farmer finance”)… Sopact is hosting a webinar, “Scaling social business with impact measurement and management” on Nov. 20.
Thank you for reading.
– Nov. 14, 2019