The Brief | June 13, 2022

The Brief: Local funds in emerging markets, real estate impact, decarbonizing fashion, guaranteeing clean energy, $8 billion in food-waste deals

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Greetings, Agents of Impact!

Featured: Small and Growing Businesses

Nyala Venture aims to catalyze local fund managers to unlock capital for small businesses in Africa. Who knows best the needs of a community but members of the community itself? First-time fund managers who understand local small businesses are an under-appreciated lever for inclusive development. The launch of Nyala Venture at last week’s convening of the Collaborative for Frontier Finance in Dar es Salaam is part of a renewed effort to overcome biases against investing in local capital providers, first-time managers, small-business lenders – and many emerging markets themselves. The new fund of funds, seeded with $10 million from FSD Africa Investments, aims to support a half-dozen first time fund managers, particularly those supporting women-led businesses. Nyala Venture, to be managed by Cardano Development and Total Impact Capital Europe, will have the ability to invest a mix of debt and equity. “Alternative local capital providers have better networks and embedded boots on the ground, enabling them to play a huge role in supporting and growing local businesses,” said FSDAI’s Anne-Marie Chidzero.

  • Funding the funders. Nyala Venture comes out of the work of the Collaborative for Frontier Finance, which represents dozens of first-time and emerging fund managers in Africa, the Middle East and South Asia. Small and growing businesses “are not served appropriately by local banks and multinational financial institutions,” said CFF’s Drew von Glahn. At the same time, “these local capital managers themselves lack the appropriate resources from government agencies and development institutions.” Tamara Abdel-Jabar of Amam Ventures, a gender-lens fund based in Jordan, said, “Investors don’t know where to put us within their structures. That won’t change unless we work together to share data and have conversations about how things are in our communities and how limited partners can help us.”
  • Missing middle. Many large investors, including development finance institutions, or DFIs, lack the flexibility to invest in small funds. “This is about urgency,” said Evelyne Dioh of Senegal-based WIC Capital. “We are creating jobs, we are closing the gender gap.” DFI representatives largely acknowledge that most local fund managers are too small, too complicated or lack a track record. “There’s a lack of bravery for creating real change,” said Lelemba Phiri of Africa Trust Group, which is testing pay-for-results financing for women-led funds in South Africa. “Somebody’s got to put the money where their mouth is to start to create that change.”
  • Keep reading, “Nyala Venture aims to catalyze local fund managers to unlock capital for small businesses in Africa,” by Jessica Pothering on ImpactAlpha.

Dealflow: Impact in Real Estate

Bridges Fund Management closes £350 million property fund. The U.K.-based impact investor’s fifth property fund will invest in healthcare, low-carbon logistics and affordable housing. Half of the $430 million fund has already been deployed in 17 investments. Bridges says its property funds are on track to deliver over 3,000 affordable homes and more than 1,300 assisted-living beds, and to avert nearly 100,000 tons of carbon emissions.

  • Impact management. The new Bridges Property Alternatives Fund follows its £220 million ($270 million) predecessor. All but 20% of commitments in the fifth fund came from investors in the previous fund, including Clwyd Pension Fund, East Riding Pension Fund, the Environment Agency Pension Fund, Merseyside Pension Fund and South Yorkshire Pensions Authority. The new fund also received new allocations from pension funds, family offices and private investors in Europe and North America – a “testament to the importance real estate investors are now placing on sustainability and impact factors,” said Bridges’ Simon Ringer.
  • Share.

Fashion Climate Fund secures $40 million to decarbonize the apparel supply chain. The global apparel and footwear industry is responsible for 2.1 billion tons of carbon emissions, equivalent to the emissions of France, Germany and the U.K. combined. Nearly all comes from third-party farms and factories. San Francisco-based Apparel Impact Institute enlisted Lululemon, H&M, and the Schmidt Family Foundation to launch the Fashion Climate Fund with $40 million to help halve the fashion industry’s carbon footprint by 2030. The fund is looking to raise $250 million for early-stage solutions to improve energy efficiency, eliminate the use of coal, and transition to clean energy and sustainable materials. Apparel Impact Institute is seeking $10 million each from 21 fashion industry leaders and philanthropic organizations.

  • Pilot to scale. The fund provides “a powerful mechanism to overcome the challenges of getting new solutions implemented by the industry,” said H&M’s Christiane Dolva. The Fashion Climate Fund aims to unlock $2 billion in blended capital, including debt and equity, to help lower the industry’s supply chain emissions.
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • The U.S. Department of Energy closed a $504.4 million loan guarantee to the Advanced Clean Energy Storage project in Utah, its first clean-energy loan guarantee in a decade and one of the world’s largest clean hydrogen storage facilities.
  • Beneficial State Bank received a $218 million equity investment from the U.S. Treasury’s Emergency Capital Investment Program to expand lending in marginalized communities.
  • Five to Nine raised $4.3 million in a round led by Black Ops Ventures to improve the efficiency of diversity, equity and inclusion initiatives.
  • committed $1.2 billion over five years to Latin America, including a $2 million grant to Pro Mujer to help Indigenous women-led businesses in Guatemala, El Salvador and Honduras access microloans and digital skills training (see, “Carmen Correa, Pro Mujer: Standing by low-income women to lift Latin America).

Impact Voices: Food Waste

What $8 billion in food-waste investments tells us about what’s next. In a word: upswing. Year-on-year growth in investment into food waste solutions averaged more than 100% over the last two years. From between $2 million and $5 million in the early 2010s, private deals in food-waste prevention, rescue and recycling grew to about $17 million in 2021. Driving the growth: the connection between food waste reduction and climate change mitigation, as well as investor interest in agtech and regenerative agriculture. “Food waste is an established investment sector with multiple demonstrations of financial and impact returns,” ReFED’s Alejandro Enamorado writes in a market update for ImpactAlpha. Data from the nonprofit’s new Food Waste Capital Tracker shows that private investment into food waste solutions has reached nearly $7.9 billion since 2011 – including a record $2 billion in 2021 – as more funders recognize the environmental, economic, and social benefits.

  • Inflection point. Solutions raising rounds and growing valuations include startups like Misfits Market and Seebo. ReFED’s Capital Tracker suggests 2016 was an inflection point for private U.S. funding for food waste, as increased media attention, data on food waste impacts, and a new crop of entrepreneurs propelled investments into more diverse solutions.
  • Next wave. “Long-term,” writes Enamorado, “food waste will continue to attract capital.” Enhanced demand planning, upcycling, markdown alert applications, and recyclers converting waste streams into biomaterials are all on the upswing, with rising deal sizes and increased overall investment.
  • Keep reading, “What $8 billion in food waste investments tells us about what’s next,” by ReFED’s Alejandro Enamorado on ImpactAlpha.

Agents of Impact: Where to Meet

  • PayPal’s Dan Schulman will keynote the Sorenson Impact Summit this week in Park City, Utah.
  • Big Path Capital’s Impact Capitalism Summit convenes July 20-21 in Nantucket, Mass.
  • The ROMBA Conference, the world’s largest gathering of LGBTQ+ business students and alumni, takes place in Washington, D.C., Oct. 6-8.
  • The GIIN Investor Forum will convene in The Hague, Netherlands, Oct. 12-13.

Thank you for your impact!

– June 13, 2022