The Brief | April 12, 2021

The Brief: Making the case, career impact bonds, financial innovation and climate investment in emerging markets, de-risking college tuition

ImpactAlpha
The team at

ImpactAlpha

Greetings, Agents of Impact! 

Make sure to add these ImpactAlpha partner events to your calendar:

  • Island Finance Forum. Prime ministers Gaston Browne of Antigua, Frank Bainimarama of Fiji, Allen Chastanet of Saint Lucia, along with guests from BNP Paribas, the World Bank and Eastern Caribbean Central Bank join Island Innovation’s “Island Finance Forum” to highlight the unique financial challenges and opportunities faced by global island communities, this week, April 13-16. Register for free.
  • Next Normal Now. “Re-imagining Capitalism for Our Future,” from the Global Impact Investing Network will feature Quona Capital’s Monica Engel, Tracy Kartye of Annie Casey Foundation, Guarantco’s Lasitha Perera, and HKEX’s Grace Hui, Tuesday, April 20. Register for free.

Featured: The Reconstruction

Seeing the world of our children’s children to help make the case for justice (podcast). Tiffany Manuel’s handbooks for social change warn about messaging backfires. These days, she’s wielding such tools to counteract the backlash to social change. A social scientist and founder of TheCaseMade, Manuel has released a blueprint for “strategic case-making” to help leaders on the path to what could be called a new Reconstruction. “To the extent that we as change leaders are able to grasp that skill set and deploy it, we’re able to get people to reimagine what community can look like and also to reimagine justice and to achieve the outcomes that we’re pushing for,” Manuel told host Monique Aiken on the latest episode of The Reconstruction podcast series on ImpactAlpha. In issue after issue, she said, evidence is undermined by dominant narratives that are misinformed at best. “As a social scientist, I had to step back and say, ‘This is not working… What does it take to get people to lean forward on the hard stuff?’”

Adaptive challenges require broad alignment of stakeholders, the redesign of systems, and time to shift culture, practice, mindset, process, relationships and institutions and withstand the inevitable backlash. “Our values around equity are changing, the way we think about how we use our land, who has access to it,” Manuel says. Countering divisive narratives with an imagination of the world of our children’s children can establish a new narrative, Manuel says. “Paint the picture of what it looks like,” she says. “When you think of the future of your city, whether that’s Detroit, or Hartford, or Chicago, what’s the future look like? A community where every kid has a shot at success, goes to a school that engages them, that makes them excited about what they’re learning, comes home to a house where they’ve got great access to the things they need to grow and thrive. And then ask people, ‘So how do we get there?’ That is case making – allowing people to visit the future and live in that for a moment. And then asking them to join you in the effort to get us there, and say, ‘That future is totally possible, completely 1,000% possible.’”

Read on and listen to, “The Reconstruction: Seeing the world of our children’s children to help make the case for justice,” by Monique Aiken and Anjali Deshmukh on ImpactAlpha.

  • Podcast series. The Reconstruction features engaging conversations with leaders of this reconstruction. Meet Melissa Bradley, Rodney Foxworth, Carmen Rojas, Daryn Dodson and others who are centering Blackness in the service of economic liberation for all. Catch up on Spotify, Apple or Anchor.
  • The beat. The Reconstruction’s landing page on ImpactAlpha has summaries of all of the podcast episodes, as well as original coverage, dealflow, features and Agents of Impact.

Dealflow: Follow the Money

Social Finance raises $36 million for ‘career impact bonds’ and backs American Diesel Training. Career impact bonds are bringing income-share agreements, which dozens of universities are using to help low-income students with college tuition and other expenses (see Impact Voices, below), to vocational and certificate programs that up-skill workers for in-demand occupations. Boston-based Social Finance is launching a $4.7 million career impact bond with American Diesel Training Centers, or ADTC, to help unemployed and low-income Americans get trained as diesel technicians for careers in the trucking industry. The commercial trucking industry will need approximately 200,000 truck technicians over the next decade, according to the American Trucking Associations. The financing will “unlock career opportunities for people who can’t pay the upfront tuition costs or lack the credit history for loans,” said Social Finance’s Tracy Palandjian (hear Palandjian on ImpactAlpha’s Agent of Impact podcast, “Career impact bonds transfer risk to investors as the future of work arrives”).

  • Catalytic capital. New investors in Social Finance’s UP Fund include the MacArthur Foundation, which invested $5 million as part of the Catalytic Capital Consortium, or C3, seeking to demonstrate the value of patient, risk-tolerant, concessionary and flexible capital (disclosure: C3 is a sponsor of ImpactAlpha). Also investing are Bill Ackman’s Pershing Square Foundation, the Dell Foundation, MFS Investment Management and clients of Align Impact (see, “Blue Meridian, Schmidt Futures back Social Finance”). A dozen holders of donor-advised funds at Fidelity, Vanguard, ImpactAssets and the Boston Foundation also backed the fund. The UP fund is targeting a $50 million close by the end of June.
  • Pay for success. The American Diesel career impact bond aims to train up to 550 people for a 300-hour, two-year training program on truck mechanical fundamentals. Graduates who make between $30,000-$40,000 per year will repay the tuition in 48 monthly payments of $150. Students making more than $40,000 pay $280 per month. The UP Fund also has backed Alchemy Code Lab’s software engineering training, General Assembly’s accelerated tech education, and Acuitus’ IT education, which targets veterans.
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Village Capital backs tech startups in Jordan and Chile. The Washington, D.C.-based investor made its first pair of investments through the early-stage Financial Innovation Fund it manages on behalf of MetLife Foundation. The fund is backing Kader, a Jordan-based on-demand mobile platform connecting gig-workers with employers in hospitality, retail and service. Village Capital also invested in Chile’s Houm, which is aiming to streamline leasing, selling and buying properties for both tenants and landlords in Latin America. MetLife Foundation’s Evelyn Stark said Kader and Houm “are giving their low-income clients confidence to pursue their dreams.”

Investors commit $25 million to expand lab-grown foods. Cellular meat is not just for burgers. Lab-grown food startups are now producing chicken, pork, steak, seafood and even fat. California-based Mission Barns raised $24 million to cultivate animal fat for use in other lab-grown meat products and plant-based meat alternatives. A roster of investors including Lever VC, Humboldt Fund, Joyance Partners and Green Monday Ventures backed the company’s Series A round (see, “Green Monday raises $70 million to ramp up alt-protein in Asia”).

  • Alt-seafood. Wisconsin-based Cultured Decadence raised $1.6 million in pre-seed funding to develop cell-cultured shellfish, such as lobster, crab and shrimp. Other lab-grown seafood ventures, like Singapore’s Shiok Meats and California’s Finless Foods, primarily focus on fish varieties. Joyance, Revolution’s Rise of the Rest Seed Fund and China-based Dao Foods were among the Cultured’s backers. The Wisconsin Economic Development Corporation committed grant funding.
  • Go to market. In December, Eat Just introduced its cellular chicken nuggets to restaurant diners in Singapore—the only country that permits the sale of cellular meat products. Its product mixes lab-grown meat and plant-based proteins. The Netherlands’ Mosa Meat recently raised fresh capital for 100% cellular meat products. Regulatory uncertainty means these products are at least a year or two from market. Early-stage investor Clear Current Capital launched a second fund to focus on companies in the U.S. developing plant-based, cell-cultured and fermented foods.
  • Dig in. 

Dealflow overflow. Other investment news crossing our desks:

  • Newly public high-tech greenhouse operator AppHarvest acquires agricultural robotics maker Root AI (see, “Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers”).
  • Icelandic private equity firm Freyja takes a 15% stake in Matorka, which farms Arctic char. Matorka is a portfolio company of Aqua-Spark, an aquaculture-focused impact investor.
  • Black-owned hair care company Mielle Organics secures an undisclosed amount of capital from Berkshire Partners, which typically invests between $100 million and $1 billion.
  • Dealflow overflow. Other investment news crossing our desks:
    Newly public high-tech greenhouse operator AppHarvest acquires agricultural robotics maker Root AI (see, “Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers”).
  • Icelandic private equity firm Freyja takes a 15% stake in Matorka, which farms Arctic char. Matorka is in the portfolio of Aqua-Spark, the Netherlands-based aquaculture-focused impact investor.
  • Black-owned hair care company Mielle Organics secures an undisclosed amount of capital from Berkshire Partners, which typically invests between $100 million and $1 billion.

Signals: Ahead of the Curve

Changing the climate for climate investments in emerging markets. Energy-transition investments surged by 24% in developed nations last year. In emerging markets strained by the COVID pandemic, it fell by almost as much. Global recovery efforts and the COP26 global climate summit in Glasgow in November create openings to narrow that gap. A new Africa Adaptation Acceleration Program, for example, is looking to secure $25 billion over five years for climate adaptation. A prerequisite: an enabling policy environment. In “Unlocking Private Climate Finance in Emerging Markets,” the Climate Finance Leadership Initiative, created by Michael Bloomberg in partnership with the United Nations, lays out policy considerations to help attract private capital to green projects. “When climate leadership in emerging markets is combined with the right mix of policy enhancement and commitment by the private sector, a thriving market for clean technologies can emerge rapidly,” the authors write.

  • Beyond net-zero. Just 18% of developing nations have set net-zero goals. Strong policies addressing specific sectors such as clean energy, transportation and sustainable land use are also needed. Examples: Brazil, Vietnam and Chile. Chile set an ambitious target of 60% clean energy generation by 2035, with clean-energy auctions and net-metering schemes, to help expand wind and solar from 4% to 14% of total power generation between 2015 and 2019. Brazil’s clean-energy policies helped it attract $70 billion in clean energy over the past decade despite the country’s political volatility.
  • Pilot projects. India and Indonesia will be the first test-beds for CFLI, which will work with governments to implement policy recommendations and drive investment. The report, produced in partnership with the Association of European Development Finance Institutions and the Global Infrastructure Facility, draws on insights from 6,000 global experts and stakeholders.
  • Carbon bubble. The real cost of electricity generated by coal, gas, nuclear, and even hydro power plants has been vastly underestimated for years by policy makers, analysts and even bodies such as the International Energy Agency, according to a new analysis from RethinkX. Repricing such estimates makes renewables even more attractive in comparison. At issue: the assumption that utilization of capacity at such legacy energy plants will remain high over their lifetimes. In fact, usage is already declining. That results in overvalued fossil-fuel assets that are creating “a large and rapidly-expanding global financial bubble,” the authors warn.
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Impact Voices: Pass the Mic

Three ways risk-sharing aligns colleges with student outcomes. “College still provides a strong return on investment for many students,” says Tonio DeSorrento of Vemo Education. “But the risk profile of that investment has gone up dramatically.” A growing number of colleges and universities are sharing some of the risk with their students – through tuition freezes and buy-back guarantees, as well as creative financing like income-share agreements, which allow students to pay nothing upfront in exchange for a portion of their salary for a fixed time once they graduate and are gainfully employed. Vemo, based in Oakton, Va., helped design one of the nation’s first “income-share agreements” at Purdue University. 

  • Student assistance. The University of Utah tailors its income-share agreement program to maximize support for students within a year of graduation. Utah’s graduation rate has climbed to 70% today from 55% six years ago. Colorado Mountain College launched an income-share agreement for undocumented Dreamer students who don’t qualify for federal grants or loans. “They aren’t just sharing risk, they’re reducing it, too,” writes DeSorrento.
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Agents of Impact: Follow the Talent

Waymo’s Tekedra Mawakana, Stripe’s Claire Hughes Johnson, TaskRabbit’s Stacy Brown-Philpot and Confluent’s Erica Schultz join Operator Collective’s board of advisors… Taj Ahmad Eldridge is departing Los Angeles Cleantech Incubator to focus on his role as general partner at Include Venture Partners. LACI seeks a senior director of investment relations… Genius Guild is hiring an analyst for its Greenhouse Fund (see, Agent of Impact: Kathryn Finney)… Adjuvant Capital is looking for an investment analyst in San Francisco… Marin Agricultural Land Trust is recruiting a director of people and community.

Justice Funders seeks a U.S.-based co-director of leadership programs… The Urban Innovation Fund has an opening for an associate in San Francisco… VC Include is hosting “Black voices in sustainable investing,” with COI Energy’s SaLisa Berrien, Julia Collins of Planet FWD, and Msaada Partners’ Kerry Bowie, along with VC Include’s Bahiyah Robinson and Taj Ahmad Eldridge, Thursday, Apr. 22.

Thank you for your impact.

– April 12, 2021