Greetings, Agents of Impact!
Featured: Metrics Madness
Q&A with Napoleon Wallace: Tracking investment theses against the promise of Reconstruction. Napoleon Wallace has a challenge. After decades of developing racial equity and economic development strategies, he knows what he is looking for in the Ownership and New Equity Fund, or FundONE, a project of the Southern Reconstruction Fund (see, “Agent of Impact: Napoleon Wallace“). Opportunities like an equity investment into a mixed-use development in an historically-Black neighborhood, which provide direct opportunities for personal and generational wealth creation through residential and businesses ownership. Or like a fund to provide patient, equity capital to help Black entrepreneurs in the South make down payments to purchase the commercial spaces in which they operate. But Wallace and his partner Dorian Burton are not sure how to measure the impact of the very early-stage fund managers they are backing. Nor, by extension, how they should measure their own success. “As we have been working through our goals around impact management, we have seen a need for metrics and reporting infrastructure that will allow us to compare inputs, outputs and, optimally, outcomes across various funds and concepts,” Wallace told ImpactAlpha in an email exchange.
The result is Metrics Madness, a two-week sprint by the Southern Reconstruction Fund, in partnership with ImpactAlpha, to identify the most relevant and useful metrics to track in investment strategies for racial equity and wealth-building. Thanks to all the Agents of Impact who already have contributed metrics. Ben Bingham of 3Sisters Sustainable Management proposes reductions in emergency room visits by uninsured and underinsured patients. Nuveen’s Roberta Lobo advocates for the mean racial pay gap for full-time employees. Toniic’s Adam Bendell shared the organization’s approach, informed by the work of the Donors of Color Network’s Climate Justice Pledge. Karin Chamberlain of Clean Yield Asset Management suggests a model such as Boston Impact Initiative’s investments in community-owned or -controlled real estate to prevent displacement. “By using catalytic, integrated capital, communities of color will build intergenerational wealth and collective power,” Boston Impact states on its website. And thanks as well to ChatGPT, which offered a concise summary of eight possible metrics, including wealth-gap reduction, home and small-business ownership rates, and increases in access to education and training. “The headline population-level indicator we expect to track to assess progress towards that outcome in priority communities is ‘Quality Adjusted Life Years,’ disaggregated by race,” Wallace said. The search for universal and convertible metrics created more questions than answers. “That led us to think about opening our question to a broader community and gamifying the process to see how much wisdom we could get from the crowd.”
- Nominate a metric. What’s the best indicator to use for tracking strategies to bridge racial wealth gaps and build racial wealth? Use this short form to nominate a metric to be included in next week’s finals.
- Join the Call. Wallace will welcome leading agents of impact measurement and management for the fun and fruitful finale of Metrics Madness, on Agents of Impact Call No. 50, Wednesday, March 29 at 10am PT / 1pm ET / 6pm London. RSVP today.
- Keep reading, “Q&A with Napoleon Wallace: Tracking investment theses against the promise of Reconstruction,” by David Bank on ImpactAlpha.
Dealflow: Water and Sanitation
Incofin secures €36 million to invest in access to safe drinking water. Less than 2% of impact venture capital over the past five years has gone to startups in water and sanitation, a recent survey estimates. Belgian impact investment firm Incofin’s Water Access Acceleration Fund is blending finance to derisk water access solutions and crowd in private capital. Last week, British International Investment and Metito Utilities announced a partnership to invest in commercial water and sanitation projects in Africa.
- Entrepreneurial solutions. Incofin’s private equity fund will back water kiosks and water technologies, as well as new piping. The fund’s purpose is “to prove that the drinking water sector is investment-ready, even when targeting low-income people,” said Incofin’s Dina Pons. Incofin is looking to reach 30 million people in Africa and Asia with its investments.
- Blended backers. Danone, BNP Paribas, the U.S. International Development Finance Corp., Danish development finance institution IFU, and Dutch nonprofit Aqua for All backed the Water Access Acceleration Fund. USAID provided catalytic first-loss funding. Incofin is looking to close the fund at €70 million ($75 million).
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Avaana Capital backs Aerem to convert India’s small businesses to solar power. Mumbai-based Aerem is connecting small businesses with solar installers and financing. The company estimates that businesses can cut energy costs by 30% to 70%. Aerem raised $5 million in a mix of debt and equity from growth-equity investor Avaana Capital, Blume Ventures and others. Avaana, a woman-led tech investment firm launched in 2018 by former TPG executive Anjali Bansal, invested via its second climate tech fund.
- Climate resilience. Climate tech in India is proving a resilient sector despite the tech downturn (see, “Investors in India are betting on climate tech’s financial opportunity”). Most of the venture capital in the market is going to early-stage ventures like Aerem. Two-thirds is focused on renewables. India requires an estimated $1 trillion by 2030 to finance its low-carbon transition goals.
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Dealflow overflow. Other investment news crossing our desks:
- SWEN Capital Partners closed its Blue Ocean Fund, which invests in ocean health and ecosystem regeneration, at €170 million ($182 million).
- Investments in Closed Loop Partners’ and Brookfield’s recycling company, Circular Services, approached $1 billion with new commitments from Microsoft, Nestlé, PepsiCo, SK Group, Starbucks and Unilever.
- Robeco raised €130 million ($139 million) to offer private debt to help small and mid-sized companies in northern Europe bolster sustainability initiatives.
- California-based Andes clinched $30 million with backing from Bayer’s venture fund to make soil treatments that help farmland absorb more carbon.
Signals: Climate Finance
Global Innovation Lab develops new financial models to tackle climate challenges in emerging markets. Global finance is not keeping up with the urgent challenge of decarbonizing the economy and helping communities adapt to a rapidly changing climate. That’s why we look forward each year to the Global Innovation Lab for Climate Finance’s latest batch of creative ideas. The investor-led initiative, managed by the Climate Policy Initiative, selects roughly a half-dozen climate finance ideas to help develop and commercialize. This year’s six winners are working on solutions from transitioning degraded lands in Brazil to supporting climate startups in Africa. The cohort represents the Lab’s new focus on gender equity (for context, see, “Gender lens + climate finance = broader reach”).
- Affordable, green homes. Africa’s housing shortage of 50 million homes is worsening with urbanization, population growth and climate change. Social Infra Ventures plans to build small-scale, mixed developments in Africa’s secondary cities with rent-to-own units for lower-income and vulnerable groups, including migrants and women. “We hope to achieve a paradigm shift in the sector by offering green, climate resilient housing for low-income families that considers the needs of women in particular,” says Anna Vilarrubi of SIV, which is planning a pilot in Morocco with Cardano Development.
- Sustainable agriculture. The Vox Vert Land Use Transition Fund aims to transition degraded land into sustainable agriculture use in the Brazilian Amazon and Cerrado regions. The private credit fund combines a credit line with attractive rates, a technical assistance facility, and an income transition guarantee. Brazil-based Vert Capital and Vox Capital will focus on pasture recovery, sustainable livestock, integrated systems, agroforestry and the bioeconomy (see, “Latin America’s impact entrepreneurs find opportunities in nature-based solutions and smarter services for low-income consumers“).
- Credit for climate. In India, the Impact Financing Facility for Climate Focused Social Enterprises, will support small and early-stage social enterprises. The blended finance fund combines technical assistance and shorter credit cycles to help entrepreneurs build credit scores and access funding from traditional financial players. Blended finance is “a crucial step towards improving access to finance to social enterprises developing innovative climate solutions,” says Vibha Sharma of Villgro, the incubator leading the fund. Use cases: clean energy-powered farming, waste-to-value technologies that reduce waste, and sustainable agriculture practices that save water and land use.
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Just Capital and Ford Foundation set a research agenda for human capital management. As much as 90% of the value of S&P 500 companies comes from “intangible” assets, most importantly talent. Yet accounting standards continue to reflect mostly tangible assets. Just Capital and the Ford Foundation selected seven projects from among more than 80 responses to an RFP intended to establish a research base for human capital management. The grants come as the SEC readies rules for disclosure of data around how corporations invest in their workforces (see, “Inside the generational opportunity to reshape rules of corporate disclosure”). The funded research includes:
- Employee value-added. Columbia Business School’s Shiva Rajgopal and Shareholder Value Advisors’ Steve O’ Byrne will expand their research on measuring gain-sharing between labor and capital.
- Job quality. WORC’s Ellen Frank-Miller will measure how the quality of frontline jobs affects financial outcomes of private equity-owned companies.
- Data disclosure. George Georgiev of Emory University’s law school will analyze corporate disclosure under the SEC 2020 human capital management disclosure requirements.
- Freedom of association. UMass Amherst’s Lenore Palladino will examine the effect of corporate policies and behaviors toward employees’ freedom of association, including on labor organizing.
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Agents of Impact: Follow the Talent:
Former Georgia state representative Stacey Abrams will join climate tech nonprofit Rewiring America as senior counsel… Former Los Angeles Mayor Eric Garcetti will become U.S. ambassador to India as the country takes on a pivotal role in climate efforts (see, “India poised to lead – and to test – the just energy transition”)… Aegon Asset Management promotes Anne Scott to global climate solutions lead, a new role.
Open Society Foundations seeks a climate justice associate director in New York… New York Life Investments is hiring an impact investing analyst and senior associate… Community Investment Management has an opening for an investment analyst in San Francisco… Sustainable Finance Initiative is recruiting an impact investing project coordinator in Hong Kong.
San Francisco Climate Week will gather climate founders, investors, innovators and other leaders, April 17-23… Nia Impact Capital’s Kristin Hull and ERA Coalition’s Zakiya Thomas will host “Investing in equality: Actions we can take for an equal future,” Wednesday, March 22.
Neighborhood Economics will convene impact leaders including Irvine Foundation’s Leslie Payne, Partners In Equity’s Wilson Lester, Forward Mississippi’s Shonda Allen, and the Federal Reserve Bank’s David Erickson for a three-day summit in Jackson, Miss., April 24-26.
Thank you for your impact.
– March 20, 2023