The Brief: Mapping an impact investing path through the new legal landscape

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In today’s Brief:

• Supreme Court rulings raise the stakes for shareholder engagement
• Climate-smart biotech in India
• Energy impact investors fall short

Featured: Policy Corner

As legal safeguards are eroded, it’s up to investors to hold corporations accountable. Last term’s US Supreme Court rulings raised concerns for democracy – and investors. The troubling rulings fall into two categories, Rachel Robasciotti and Julianne Zimmerman of Adasina Social Capital explain in a guest post. One set stripped power and autonomy from vulnerable populations, “making everyday life more challenging for large populations of people who are already disenfranchised by criminalizing basic health and survival activities and depriving them of individual freedoms and collective political power.” The court’s decision in Grants Pass v. Johnson allows municipalities to criminalize homelessness; Alexander v. South Carolina NAACP allows South Carolina to continue to use a racially gerrymandered voting map. The other set of SCOTUS decisions undermines checks and balances and the rule of law, say Robasciotti and Zimmerman. In particular, Loper Bright Enterprises v. Raimondo, which overturned the so-called “Chevron deference,” hobbles the Environmental Protection Agency, the Food and Drug Administration, and the Securities and Exchange Commission, and eliminates key safeguards against corporate corruption and abuse (for background see, “Supreme Court rulings turn policy tailwinds into headwinds for impact investors“). In the wake of the decisions, they write, investors “have a prerogative to affirm and exercise our rights in the financial markets.”

• Market uncertainty. Even for traditional investors trying to make informed assessments of risks and opportunity, the high court’s decisions “throw all disclosure and regulatory expectations into question, spawn entire classes of unpriced costs with varying opacity and unknowable consequences, and create alarming uncertainty,” write Robasciotti and Zimmerman. What can investors do?
  
• Investor action. We can no longer assume the equal access to information and enforcement of regulations that are pillars of a free and fair market, the authors say (see also, “Free markets and impact investing in the aftermath of the Supreme Court’s rulings,” by Fran Seegull of the US Impact Investing Alliance). “The burden now falls to investors to ensure corporations act responsibly in our long-term best interests,” argue Robasciotti and Zimmerman. “We must collectively hold significant market share to protect the many from the abuses of the few and invest in a sustainable and prosperous future for all.”

• Keep reading, “As legal safeguards are eroded, it’s up to investors to hold corporations accountable,” by Adasina Social Capital’s Rachel Robasciotti and Julianne Zimmerman on ImpactAlpha.

• Agents of Impact Call. Join Robasciotti, along with Better Markets’ Dennis Kelleher, B Lab’s Jorge Fontanez, and The Shareholder Commons’ Rick Alexander, in conversation with Fran Seegull and David Bank, in “Mapping an impact investing path through the new legal landscape,” Wednesday, Aug. 14, at 9am PT / 12pm ET / 5pm London. RSVP now. 

Dealflow: Climate-Smart Agriculture

Omnivore leads financing for Scimplify’s biotech products in India. The Mumbai-based agrifood impact investor is making a push to support homegrown biotech companies alongside other Indian agrifood tech ventures to help mitigate climate impacts in agriculture. “We consider innovations in life and material sciences as a vital part of climate action,” Omnivore spokeswoman Saborni Poddar told ImpactAlpha. The VC firm’s latest investment is Scimplify, which produces specialty insecticides and fungicides, as well as other chemicals for pharmaceuticals, fragrances and flavors. Omnivore led Scimplify’s $9.5 million round to support its R&D. Bertelsmann India Investments, 3one4 Capital and Beenext also invested.

• Biotech funding gap. Omnivore launched a biotech and life sciences investment strategy two years ago and dedicated a portion of its third fund to seeding domestic agrifood life sciences companies. “Virtually all of the current startup activity and venture investing in agritech [in India] focuses on digital technologies, e-commerce, full-stack farmer platforms, rural fintech and marketplaces,” Omnivore’s team wrote at the time. It has made five biotech and life sciences investments, including insect farming venture Loopworm and sustainable crop treatment maker Barrix. Omnivore sold its stake in Barrix last year to Japanese conglomerate Sumitomo.
  
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Carbon recycler LanzaTech Global secures $40 million convertible note from Carbon Direct Capital. LanzaTech uses microbes to convert industrial carbon emissions into sustainable fuel, textiles, rubber and packaging. The Chicago-based company went public last year through a SPAC merger. Since then, the woman-led company has been raising capital to ramp up global production and meet demand from large customers “interested in the waste-derived products and fuels that our platform produces at scale,” said LanzaTech’s Jennifer Holmgren. In India last week, LanzaTech struck a deal to provide NTPC Limited, a Delhi-based utility, technology that converts carbon and green hydrogen into ethanol fuel, chemicals and raw materials. The fresh round of working capital from Carbon Direct will help LanzaTech roll out new carbon recycling product lines. Carbon Direct could invest an additional $110 million in convertible notes. 

• Quarterly reports. During this year’s second quarter, LanzaTech increased its ownership stake from 23% to 37% in LanzaJet, a subsidiary that converts low-carbon ethanol into sustainable aviation fuel. LanzaTech also launched CirculAir, a joint commercial product with LanzaJet, to convert waste feedstocks, carbon and hydrogen and clean energy sources into green aviation fuel. LanzaJet said CarbonSmart, its ethanol-based products business, has made its first “pure-play ethanol” fuel sales. 

• Carbon recycling partners. Brookfield Renewable, through its $15 billion Global Transition Fund, invested $550 million in LanzaTech two years ago, with an option to invest an additional $500 million should the company reach specified carbon capture and conversion targets. As part of the partnership, Luxembourg-based steel manufacturer ArcelorMittal adopted LanzaTech’s carbon recycling technology to build a “steelanol” facility that captures carbon waste gasses from steelmaking and converts them into ethanol. LanzaTech has partnerships with Lululemon, Zara, Unilever and L’Oreal, among other brands, to manufacture products made from recycled carbon.
  
• Check it out.

Dealflow overflow. Investment news crossing our desks:

• Arctaris Impact Investors made a $27 million Opportunity Zone real estate investment in a mixed-use development in Brooklyn’s Gowanus neighborhood. (Arctaris)
  
• Boston-based renewable energy and battery storage asset manager SYSO raised $14.5 million from Kimmeridge Carbon Solutions and Lacuna Sustainable Investments. (Kimmeridge)
  
• Cala Systems raised $5.6 million from Massachusetts Clean Energy Center, Collaborative Fund, Climate Capital and other investors for its hot water heat-pump system. (Cala)

• UK-based Cocoon, which is turning industrial waste like steel slag into green cement, snagged $5.4 million from Wireframe Ventures, Gigascale Capital and other investors. (TechCrunch)

• Karma Primary Healthcare raised 110 million rupees ($1.3 million) from UBS Optimus Foundation, Ankur Capital and others to extend healthcare services in India’s rural communities. (IST)

Impact Voices: Impact Management

Impact performance benchmark challenges energy investors to raise their game. A majority of impact investors allocate at least some of their capital toward climate action, with nearly three-quarters targeting climate change mitigation. But investments made by impact investors that are represented in the Global Impact Investing Network’s energy impact performance benchmark showed a median annual increase of 3.7% in Scope 1 greenhouse gas emissions, compared with the 8.7% annual decrease the UN Environment Programme says is needed to limit warming to 1.5 degrees Celsius. “Comparing performance to widely used thresholds and peers provides a strong foundation for managing toward positive outcomes for people and the planet,” the GIIN’s Dean Hand writes in a guest post on ImpactAlpha. “Once you know how far off or ahead of the mark you are, it becomes hard to ignore the actions required to achieve meaningful impact results.”

• Falling short. Even energy impact investors are not on track to limit emissions to meet climate goals, the report concludes. Relatively few companies are responsible for the bulk of the increased emissions, however. At the 75th percentile, investments represented a 5.8% decrease in greenhouse gas emissions. “While some investments are closer to the UNEP target, they are not close enough,” Hand writes. “This shows that investors can set better targets by comparing their impact performance to peers, the market, and the Sustainable Development Goals.”
  
• Setting targets. Hand says investors can increase the value of impact benchmarking tools by collecting impact performance data and setting their own targets. “Transparent, data-driven conversations with investees and end-users can keep investment companies on track toward their goals,” she writes. To contribute to the growing body of knowledge, he urged investors to share impact data with the GIIN, Novata, BasisPoint+, Proof and other providers. Asking for such analytics “creates demand for the comparative performance data crucial for decision-making,” Hand says.
  
• Keep reading, “Impact performance benchmarks challenge energy investors to raise their game,” by Dean Hand on ImpactAlpha. Find all of our coverage of impact measurement and management on ImpactAlpha.

Agents of Impact: Follow the Talent

The Rockefeller Foundation names Mark Wattley, previously with Cooler Screens, as senior vice president and chief people officer… Amalgamated taps Nicole Steele and Emily Robichaux from ​​the US Department of Energy as climate partnerships directors… VC Include adds Erika Seth Davies of Rhia Ventures and Milken Institute’s Troy Duffie to its advisory board.

CrossBoundary is hiring a project management lead… Jordan Park seeks an impact senior analyst in San Francisco… Community Investment Management is looking for an investment analyst in Bogota… Kresge Foundation is on the hunt for a portfolio management director in Troy, Mich… Justice Climate Fund has an opening for a chief operating officer in Washington, DC… World Education Services is recruiting an associate director for grants management.

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

Thank you for your impact!

– Aug. 12, 2024