The Brief | July 10, 2024

The Brief: LGBTQ+ investors find optimism at the White House

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Greetings Agents of Impact!

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In today’s Brief:

  • Optimism from LGBTQ+ investors at the White House
  • High-leverage, high-impact investment strategies for sustainable development 
  • Accelerating solutions for women’s reproductive health

LGBTQ+ investors and founders make the case at the White House for inclusive prosperity. Innovation. Job creation. Economic growth. The contingent of venture capital and private equity managers at last month’s first-ever White House meeting for LGBTQ+ investors made the business case for the tangible benefits and economic value of diversity and inclusion. “Ultimately, the goal is to demonstrate that supporting LGBTQ+ entrepreneurs is not just a moral imperative but also a smart economic strategy that benefits everyone,” says Maddie Stenger of Chasing Rainbows, the San Francisco-based VC firm that helped organize the “LGBTQ in Venture” roundtable (see, “Embrace the rainbow: The investment case for LGBT fund managers and startups”). Administration officials included the National Economic Council’s Navtej Dhillon, Deputy Assistant Secretary of the Treasury Suzanna Fritzberg, Kate Balcerzak, an assistant to the president, and the Commerce Department’s Jonathan Lovitz

  • Backlash pushback. The policy push is part of a larger effort, Venture Out Partnership, to raise the visibility of LGBTQ+ investors in venture capital and increase the flow of capital to diverse founders and entrepreneurs (LGBTQ+ led ventures received only 0.5% of the $2.1 trillion in 2023 startup funding). Last month’s Pride celebrations were tempered by an increase in anti-LGBTQ harassment and a legislative backlash, including bans for gender-affirming care for minors in more than two dozen states. “Standing in the White House, surrounded by trailblazers from the LGBTQ+ community and allies from the highest levels of government, we felt a profound sense of pride and optimism for the future,” Stenger tells ImpactAlpha.
  • Indexing LGBTQ leadership. Microsoft, Apple and Amazon each scored near the top of ExecuPride’s ratings of corporate policies and practices for LGBTQ+ inclusion. The tech giants also helped boost the performance of Morningstar’s new Developed Markets LGBTQ+ Leaders Index. The index tracks 100 publicly listed large- and mid-cap companies with strong LGBTQ+ inclusion efforts. “With more data and metrics on LGBTQ+ issues, investors have more insight, which can help them determine whether to consider these factors as material ones for their portfolios,” says Morningstar Sustainalytics’ Shavana Haythornthwaite. The index rose 11.5% in the first half of the year, slightly lagging returns for its broader parent index.
  • Systemic risk, systemic solution. Support for better data and increasing the number of accredited investors from LGBTQ+ communities were among the policies floated at the White House meeting. That LGBTQ+ individuals may not be fully participating as asset managers and entrepreneurs is a systemic risk that undermines the returns of diversified investors, argues Colorful Capital’s William Burckart, who participated in the roundtable discussion. Systemic risks require systemic solutions, says Burckart, who also leads The Investment Integration Project, or TIIP. “We know investors can successfully navigate systemic risks to strengthen systems and improve portfolio performance,” Burkchart writes in a guest post on ImpactAlpha. “The challenge of LGBTQ+ exclusion is no different.” One outcome of the White House session: an SEC subcommittee focused on the needs of LGBTQ+ investors. 

Dealflow: Catalytic Capital

Rockefeller’s Zero Gap Fund helps mobilize $1 billion-plus while realizing multiple exits. The Rockefeller Foundation teamed up with the MacArthur Foundation in 2019 to get capital moving toward hard-to-finance sustainable development challenges. Their $30 million Zero Gap Fund, now fully deployed, has helped mobilize more than $1 billion into new funds and investment strategies by using derisking mechanisms both creative and common (disclosure: the Rockefeller and MacArthur foundations are part of the Catalytic Capital Consortium, which support ImpactAlpha’s coverage of catalytic capital). Two of the 11 Zero Gap investments have fully returned invested capital, with interest. For its second Women’s Livelihood Bond, IIX in Singapore secured $1.5 million in first-loss capital from the fund in 2020 to expand access to finance for low-income women in Asia. Coupled with a 50% loan portfolio guarantee from the US International Development Finance Corp., the publicly-traded Women’s Livelihood Bond raised a total of $12 million and helped more than 100,000 women in Cambodia, Indonesia, Philippines and Sri Lanka access capital for their businesses and more than 14,000 female farmers integrate into formal agri supply chains. The bond repaid both principal and interest when it matured in January. Singapore-based IIX has issued its sixth bond in the Women’s Livelihood series, raising nearly $230 million.

  • Forest restoration. California-based Blue Forest raised a total of $4 million for its first Forest Resilience Bond by leveraging $1 million from the Zero Gap Fund. The debt facility provided capital for forest restoration projects in communities in the western US threatened by wildfires. The bond’s portfolio of projects restored nearly 2,700 acres of forestland and protected more than 8,000 acres. It has since returned all investor capital “plus interest in line with expectations,” the Zero Gap Fund noted in its latest portfolio report. Blue Forest launched a second bond in 2021, followed by a revolving loan fund, the FRB Catalyst Facility, to support 10 projects in Oregon, California and Washington. Zero Gap Fund seeded the new facility with $2 million; Blue Forest has since raised an additional $5.2 million.
  • Novel funds. Most of Zero Gap’s portfolio is still deploying capital. The fund invested $4 million in Lightsmith Group’s Climate Resilience and Adaptation Finance and Technology, or CRAFT fund, to make growth equity investments in tech firms focused on climate adaptation. CRAFT went on to raise an additional $182 million despite the shortage of capital for climate adaptation solutions. Zero Gap also anchored Apis & Heritage’s first Legacy Fund to acquire small and medium-sized businesses with mostly Black and Brown workforces and transition them to employee ownership. A&H raised an additional $55 million and has completed three deals. In 2022, Zero Gap Fund was the first non-development finance investor in Ukraine-based Horizon Capital’s fourth growth fund, which invests in Ukrainian tech businesses to ensure long-term economic opportunities in the country. 
  • Waiting on returns. LeapFrog Investments’ third Emerging Consumer Fund benefited from $3 million from Zero Gap for a complex insurance mechanism. It went on to raise $700 million and was fully deployed in 2022. For Sixup, which provided higher education loans to low-income students in the US, Zero Gap Fund provided $4 million in a mix of equity and debt for on-lending to students. It raised an additional $26 million in venture equity and debt, but underwrote only about 325 loans totaling $3 million. The model didn’t stick: The company is no longer lending, though its outstanding loans are still being serviced.
  • Learn more. 

Dealflow overflow. Investment news crossing our desks:

  • The US Department of Energy’s Loan Programs Office approved a $1.2 billion loan to ENTEK Lithium Separators to finance a manufacturing plant for lithium-ion battery separators in Terre Haute, Ind. (see related, “Left-behind communities ride bipartisan policies, if not politics, to prosper at last”). (Department of Energy)
  • The European Investment Fund committed €350 million ($379 million) to Spanish venture capital firm Kembara, which invests in climate and hard science-based startups in Europe. (EIF)
  • Mission Driven Bank Fund secured $177 million to support minority depository institutions and community development financial institutions addressing the racial wealth gap in the US. (Mission Driven Bank Fund)
  • Germany’s epilot raised €10 million ($10.8 million) from Expedition Growth Capital for software that helps utilities automate renewable energy sales and integration, and helps grid operators connect more people to green energy sources. (epilot)
  • Dutch startup Scaler inked $10 million in a Series A round led by Plural to streamline ESG reporting and guide sustainability-related business decision-making for European real estate companies. (Scaler)

Impact Voices: Investing in Health

Financing models to safeguard women’s reproductive health. One in five women in the US must cross state lines to get abortion services, and 20 million women now live in counties considered contraceptive deserts. Inadequate treatment of conditions such as endometriosis or menopausal symptoms can affect a woman’s daily life and career, and limited access to routine gynecological screenings and family planning can harm long-term health and derail financial planning goals. “The increased politicization of reproductive healthcare may force women to make unthinkable decisions about their lives,” writes Milken Institute’s Ashley Campany in a guest post on ImpactAlpha. At the same time, addressing women’s health disparities could add $1 trillion annually to the global economy, according to McKinsey. Since last year, the Milken Institute’s Financial Innovations Lab has convened more than 70 experts and launched an accelerator, Financing to Advance Innovation on Reproductive Women’s Health, or FAIR. 

  • Gender equity gap. The collaborative accelerator aims to help scale early stage innovation and investment through a network of public and private stakeholders. Similar to incubator and accelerator programs such as Johnson & Johnson’s JLabs, the FAIR network matches funders with entrepreneurs. “This kind of collaboration could help close the gender equity gap, foster healthier communities, boost economic productivity, and catalyze funding for women’s health,” says Campany.
  • Financing women’s health. The effort is part of a set of initiatives spurred by the Supreme Court’s 2022 decision overturning Roe v. Wade. The White House Initiative on Women’s Health Research recently announced $100 million in funding from the Advanced Research Projects Agency for Health, or ARPA-H, to fund research and innovation. Philanthropist Melinda French Gates pledged $1 billion over two years to women and families, including reproductive rights in the US. The FAIR network calls for blended finance to support sustainable business models and equitable access. Business interruption insurance, akin to the World Bank’s Multilateral Insurance Guarantee Agency for political risk insurance, could soothe anxious investors and mitigate disruptions from policy shifts and court decisions.  
  • Read the whole post. 

Agents of Impact: Follow the Talent

The McKnight Foundation promotes Ben Goldfarb to director of strategic democracy, media and policy initiatives; Sarah Christiansen to strategic climate initiatives director; and Ben Passer to Midwest climate and energy program director… Ronald Wong, previously with New Jersey Community Capital, joins BlueHub Capital as vice president of commercial lending for the BlueHub Loan Fund. 

Movement on the Ground welcomes Helen Maynard-Hill, previously with Euclid Network, as funds and impact director… The US Environmental Protection Agency appoints 19 new and returning members to the agency’s environmental financial advisory board, including Eric Hangen of the University of New Hampshire’s Carsey School of Public Policy, Anna Smukowski of Enterprise Community Loan Fund, and Climate Finance Fund’s Marilyn Waite

Boston Impact Initiative is recruiting an impact investing education programs director… The Climate & Clean Energy Equity Fund is hiring a strategic partnerships manager in Washington, DC… The Asian Development Bank seeks a blended finance investment specialist in the Philippines… Blue Ridge Labs, Robin Hood’s social impact venture studio, has an opening for a new ventures program manager and a community engagement associate manager in Brooklyn. 

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

Thank you for your impact!

– July 10, 2024