The Brief | June 14, 2022

The Brief: Lessons in catalytic capital, good jobs at small businesses, mini-grids as a service, net-zero pledges, ESG’s regulatory reckoning, global impact leaders

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Greetings, Agents of Impact!

Featured: Catalytic Capital

Lessons for harnessing the power of catalytic capital from a growing community of practice. The use of flexible and risk-taking “catalytic capital” is becoming a “badge of honor,” ImpactAlpha claimed last year. True? “Increasingly, the answer appears to be yes,” writes Debra Schwartz of the MacArthur Foundation. The growing appreciation, she says, “reflects investors’ awareness of capital gaps, market failures and the need for flexibility and risk-taking to fuel the success of impact-focused innovations, enterprises and funds.” Impact-first catalytic capital can bridge gaps, unlock impact and crowd in commercial investors. The approach has accelerated investments in clean energy technology, diverse-led investment managers, and small and growing businesses in emerging markets, among other strategies, says Schwartz. The Catalytic Capital Consortium, or C3, an effort of the MacArthur and Rockefeller foundations and Omidyar Network, last year supported a series of learning labs to collect catalytic capital best practices (disclosure: C3 also sponsors ImpactAlpha’s Catalytic Capital coverage). 

In a guest post on ImpactAlpha, Schwartz shares insights from the first of three “guidance notes” (for more, see the executive summary and full report). The note collects practitioner insights on the “seeding role” of catalytic investments that back impact enterprises or managers that have neither the track record nor ready comparables required to attract mainstream capital. Schwartz’ post kicks off ImpactAlpha’s series featuring Learning Lab participants Margot Kane of Spring Point Partners, Rebekah Saul Butler of the Grove Foundation, Dia Martin of the U.S. International Development Finance Corp., Najada Kumbuli of Visa Foundation, and Yasemin Lamy and Prerna Choudhury of British International Investment. “We recognize that there are no absolutes, no silver-bullet approaches or solutions, and no clear-cut accepted wisdom,” writes Schwartz. “There is abundant expertise, insight and advice from which other investors, new and old, can learn.”

Dealflow: Good Jobs

Nava Benefits raises $40 million to help small businesses lower the costs of employee benefits. Larger companies have the capital and resources to offer more and higher-quality benefits. Smaller businesses are burdened by excessive fees when trying to do the same. Nava’s search engine includes more than 600 benefit providers across 28 categories, including primary care, life insurance, mental health, and education tuition, fertility and adoption assistance. Nava says it has helped smaller employers save up to 22% on their benefit plans. 

  • Inclusive economy. “The stakes have never been higher when it comes to employee health and benefits: costs are spiraling and employees are overwhelmed,” said Nava’s Brandon Weber. The company wants “to level the playing field for SMB employers and their people by giving them access to the same benefits, tools, and member support enjoyed by the Fortune 500.” The company’s Series B was led by Thrive Capital, with participation from existing investors Avid Ventures, Quiet Capital and Sound Ventures.
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AXA invests $15 million in GreenStruxure for zero-carbon onsite energy. Boston-based GreenStruxure is a joint venture of Schneider Electric and impact investor Huck Capital to help large building owners transition to clean energy by covering upfront costs (see, and listen to, “Shutdown accelerates shift to digitized, decentralized, decarbonized electricity). With its zero-carbon, clean energy microgrids, “GreenStruxure is providing sustainable, more resilient and stable energy solutions,” said AXA’s Jonathan Dean. GreenStruxure, launched in August 2020, raked in $500 million from ClearGen, a Blackstone portfolio company, last month.

  • AXA’s impact portfolio. Recent deals from AXA’s Impact Fund include Mexico’s, which sells farmers low-cost biodigesters that convert waste into clean energy and biofertilizer. The French investment manager also backed Forest Carbon to restore wetlands in Indonesia.
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Dealflow overflow. Other investment news crossing our desks:

  • Lowercarbon Capital made its first deal in India, backing SolarSquare’s $4 million seed round to increase access to residential rooftop solar.
  • Indian fish and meat distribution startup FreshR raised $1.2 million in a round led by Axilor Ventures and 1crowd.
  • Baltimore-based Ecomap Technologies raised $3.5 million in a round led by Las Olas Venture Capital to map entrepreneurial ecosystems.
  • Environmental compliance platform Encamp raised $30 million from Drive Capital, OpenView, High Alpha Capital and Allos Ventures.

Signals: Impact Accountability 

For investors and companies, net-zero pledges prove easier than action. It’s one thing to join a climate initiative, another to commit assets, and yet another to align assets with those climate goals. More than 273 asset management firms responsible for $61.3 trillion in assets have joined the Net Zero Asset Managers initiative, a group of investment managers committed to reaching net-zero greenhouse gas emissions by 2050 or sooner. Of those, 83 have set net-zero targets, and those targets cover just $16 trillion of their combined $42 trillion in assets, according to the group’s progress report (signatories have a year from the time they join to submit their targets). Among challenges to progress: the current energy crisis, the changing regulatory environment and the increased politicization of ESG issues, says the group.

  • Corporate net zero. In a separate analysis, Net Zero Tracker finds that a third of world’s largest publicly traded companies now have net-zero targets, up from a fifth in 2020. The downside: About 65% of the targets do not meet “minimum procedural standards of robustness.” Only 38% of companies claim to cover all Scope 3 emissions in their supply chains.
  • Beyond net zero. In another report, none of the 35 leading ESG passive funds align with a new Paris-aligned passive investing framework from the World Resources Institute. “Although many investors have made net-zero commitments to reduce carbon emissions, the Paris Agreement encompasses more than just emissions reductions,” write WRI researchers. WRI’s framework includes guidance for climate mitigation and resilience, a just transition, and how to “do no harm.”
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“Greenwashers” on notice as global crackdown on ESG mislabeling continues. Another day, another bank under investigation over misleading ESG claims. Goldman Sachs is the latest financial institution to come under investigation by the Securities and Exchange Commission for whether investments made from environmental, social and governance, or ESG, funds managed by the firm’s asset management arm are in violation of metrics promised in marketing materials, reports The Wall Street Journal. Last month, the S.E.C. charged and fined BNY Mellon Investment Adviser for similar misstatements and omissions regarding the marketing of ESG funds. And German authorities raided the offices of asset manager DWS in May over allegations of “greenwashing” in its ESG funds. Separately, the S.E.C. opened a probe of DWS last year.

  • Regulatory reckoning. The ESG crackdown comes even before the S.E.C. enacts new regulations that would force funds calling themselves “ESG,” “green,” “sustainable,” or “low carbon” to market themselves more accurately and disclose their practices. “I believe these are the first ripples of a wave of regulatory interventions that we are likely to see in the coming months,” Sonali Siriwardena of Simmons & Simmons told Bloomberg. “It’s no surprise that the regulators want to set expectations to maintain market credibility.”
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Agents of Impact: Follow the Talent

Kiva’s Premal Shah, Carbon Tracker’s Mark Campanele, Nuveen’s Rekha Unnithan, and ImpactAlpha‘s David Bank and Imogen Rose-Smith are among 70 experts in a network of “Global Impact Leaders” organized by Sorenson Impact Center. The effort, led by journalist Matthew Bishop, a Sorenson Impact Center senior fellow, will be announced today at the Sorenson Impact Summit in Park City, Utah. 

Cait Brumme is named CEO at MassChallenge… Andrea Dalton, ex- of Revelio, joins Nia Impact Capital as a senior portfolio manager… Kresge Foundation’s Bill Moses is among more than a dozen appointees to President Biden’s board of advisors on Historically Black Colleges and Universities… Rukaiyah Adams steps down as chief investment officer of Meyer Memorial Trust… Sean Hinton steps down as CEO of the Soros Economic Development Fund and co-director of the economic justice work at Open Society Foundations.

Pi Investments seeks an investment advisor to manage its public equities portfolio… AgDevCo seeks an impact manager or senior impact manager in Cape Town or Nairobi… Tideline is hiring an impact investing business development and marketing analyst… BlueMark, a Tideline company, is looking for an impact investing analyst… Aeris is recruiting a senior associate of business development and administration… Harvard Public Health Magazine is hosting “From idea to impact: The new market for public health entrepreneurs,” today at 1pm ET.

Thank you for your impact!

– June 14, 2022