The Brief | May 30, 2023

The Brief: Muni strategies for racial equity, outsourced impact investment officers, EVs in West Africa, Indigenous resilience in Indonesia

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Greetings, Agents of Impact!

👋 Agents of Impact Call No. 51: How asset allocators are driving racial equity in municipal bonds. Audit the racial equity impacts of fixed-income strategies. Ask tough questions of issuers and fund managers. And engage – or divest – from issuers with practices that reinforce systemic racism. Pension funds, endowments, asset managers and other allocators are exploring new ways to mitigate structural risks and address racial inequities in municipal bond markets. Join Harvard’s David Wood, Renaye Manley of the Service Employees International Union, and other Agents of Impact, Wednesday, June 14 at 10am PT / 1pm ET / 6pm London. RSVP today

Featured: Agents of Impact Podcast

Capricorn Investments makes the outsourcing case to foundations and families seeking impact alpha (podcast). Jeff Skoll first became well-known as the president (and first full-time employee) of a nascent Internet marketplace known as eBay. He built the Skoll Foundation into a platform for social entrepreneurship and social innovation. His social-action movie company, Participant Media, has won Oscars for “Spotlight,” “Green Book” and “An Inconvenient Truth,” among other films. Since 2000, Skoll’s fortune, estimated by Bloomberg at $5.9 billion, has been managed by Capricorn Investment Group, which now has about $9 billion in assets under management. “If you speak to folks here at Capricorn, they’ll tell you, ‘Great, we’ve built all this intellectual property around sustainability and integrating it into the investment process,’” Capricorn’s Kunle Apampa tells ImpactAlpha on the latest Agents of Impact podcast. “But we cannot get to where we need to if others are not buying into this model.’” Apampa is working to share Capricorn’s capabilities with other asset owners “that get it and are willing to put their capital to work as well.”

  • Outsourcing. Many smaller foundations and family offices enlist “outsourced chief investment officers,” or OCIOs, to manage their assets rather than building their own investment teams. Capricorn is seeking to differentiate itself with a pitch that combines 100% mission-aligned portfolios with competitive returns. “High-conviction, deeply researched and out-of-the-mainstream ideas,” is what Apampa considers Capricorn’s calling card. “That’s where you’re going to find alpha. That’s not in the normal flow of how everyone else is chasing alpha.”
  • Track record. About one-third, or $2 billion, of Capricorn’s OCIO business is invested in products or managers that Capricorn has seeded or started, Apampa says. Capricorn’s first Technology Impact invested in technology moonshots such as Helion’s small-scale fusion reactors, Form Energy’s long-duration iron air battery technology and Span’s home-electrification products. Capricorn’s Sustainable Investors Fund has seeded more than a dozen impact fund managers, including real assets investor Vision Ridge Partners and Martis Capital, formerly Capricorn Healthcare. “The goal isn’t to allocate capital into our strategies,” Apampa says. That said, “If you have strategies that are consistently in the top quartile, you definitely want to deploy capital in places where you’re going to see the return from a double-bottom-line standpoint.”

Dealflow: Energy Transition

Ghana’s Kofa raises seed round for multi-purpose EV batteries. The action in Africa’s electric vehicle market is in electric motorbikes. Much of the early activity is concentrated in East Africa and scale remains small: companies like Ampersand in Rwanda have gotten hundreds of bikes on the road. Kofa is one of West Africa’s early movers. The company runs a battery swapping network for e-motorbike users, allowing them to trade in depleted batteries for fully charged units through its swapping stations. It raised an undisclosed amount of seed funding from Mercy Corp Ventures, Wangara Green Ventures, Shell Foundation and others.

  • EV impact. There are an estimated 30 million motorcycle taxis on the road in Africa. Individual fuel costs average about $11 per day (see, “High fuel prices spur Africa’s transition to electric mobility“). “Motorbike drivers spend about 40% of their income on filling the tank,” Mercy Corp Ventures’ Toffene Kama wrote in a note about the Kofa investment.
  • Grid back-up. Many African countries have incomplete or unreliable electricity services. Kofa designs its batteries to be used as a backup power supply for the home or for shopkeepers to power appliances. “At scale, the meshed network of batteries and stations starts operating as a micro-grid,” explained Kama. “As it evolves, it could be used to store excess energy generated by decentralized renewable sources for use during times of high demand.” In Germany, Voltfang is repurposing EV batteries for grid storage.
  • Nascent sector. Much like the early off-grid solar sector, Africa’s early EV companies have to do it all to prove the market: product design and/or import, distribution and financing. Key to investing in the sector is finding companies with supply chain advantages, since battery charging and swapping infrastructure is not yet integrated across providers, Mercy Corp Ventures’ Dan Block told ImpactAlpha.
  • Check it out

Packard and Ford foundations back Nusantara Fund to bolster climate resilience for Indonesia’s Indigenous communities. Indonesia is among the world’s small number of “mega bio-diverse” countries – and has one of the world’s highest rates of deforestation. Nusantara Fund invests in Indigenous communities to support livelihoods and climate resilience while restoring land and protecting biodiversity. In its pilot phase, Nusantara funded more than 30 communities. It raised $3 million from philanthropic organizations and local NGOs toward a targeted $20 million fund.

  • Community-led. Less than 2% of climate finance goes to Indigenous communities and other land stewards. Nusantara is a joint effort of AMAN, a community-led organization representing 20 million Indonesians; KPA, which focuses on agrarian reform; and environmental group WALHI. Members of local and Indigenous communities sit on the fund’s advisory board. KPA’s Dewi Kartika said Nusantara represents “a new model for delivering development support to the people most capable of reducing environmental damage [and] realizing food and economic sovereignty.” Ford Foundation’s Darren Walker said Nusantara is “placing grassroots leaders at the center of climate solutions.”
  • Land rights. Nusantara provided a grant to the village of Ibun, about 100 miles southeast of Jakarta, to reclaim and rehabilitate depleted state-controlled land. The community is growing coffee and other high-value crops and has helped restore wildlife to the area. Nusantara is supporting the $1.7 billion Forest Tenure Pledge, made at the 2021 COP26 climate summit in Glasgow, to assist Indigenous communities in securing rights to ancestral land.  
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Dealflow overflow. Other news crossing our desks:

  • KKR’s Global Impact Fund reupped its investment in EQuest Education Group to expand EQuest’s network of international schools in Vietnam. (EQuest)
  • Mission Driven Finance invested in KIGT, a Black-owned startup that is developing small-sized charging stations for residential and commercial parking lots, starting in San Diego. (Oralia Alvarez / Mission Driven Finance)
  • Generation Investment Management backed Toronto-based BenchSci, which is using artificial intelligence in new drug discovery and life sciences research. (BenchSci)
  • Boston Impact Initiative invested in Boston While Black, “a digital and in-person membership network focused on creating spaces, tools and resources that enable Black people to thrive in Boston.” (BII)

Six Short Signals: What We’re Reading

🏃🏿‍♀️ ImpactACTIVE. With 38 deals in the first quarter of 2023, ImpactAssets ranks among the top 10 most active venture capital dealmakers globally. The impact investment firm ranks fifth in US venture capital deals, third in late-stage VC deals, and fifth in early-stage VC deals. (ImpactAssets / Pitchbook)

😇 Faith-based investing. Hundreds of religious congregations across the US are building homes to stem the housing crisis. Enterprise Community Partners, Local Initiatives Support Corp. and other nonprofit lenders are guiding leaders through the complex development process. (The Chronicle of Philanthropy)

☀️ Global clean energy economy. Investment in solar power ($1.7 trillion) is expected to exceed spending on oil production ($1 trillion) this year for the first time, said Fatih Birol, head of the International Energy Agency. (Financial Times)

💸 Climate reparations. Calls for oil, gas and coal producers to take financial responsibility for climate harm are rapidly growing in the scientific literature, among climate movements, and in the policy debate. One Earth has quantified reparations for the top 21 fossil fuel companies. (One Earth)

🇺🇦 Ukraine’s green reconstruction. Ukrainian activists, scientists and architects are pushing for a post-war rebuild with a small carbon footprint that improves the nation’s resilience to climate impacts. (Bloomberg)

✈️ Rise of alternative jet fuels. New policies in the EU and the US are boosting sustainable aviation fuels, many of which can be used by existing planes. Airlines’ ad campaigns feature their efforts to switch fuel sources. (MIT Technology Review)

Agents of Impact: Follow the Talent

Isabelle Schmidt, ex- of Wellington Management, and Pooja Monga, ex- of KOIS, join Beyond Capital Ventures as an operations associates… Domini Impact Investments has an opening for a senior marketing and communications associate in New York… Also in New York, AXA IM is on the hunt for a global health investing vice president… Triple Jump is hiring a seed capital investment manager in Amsterdam.

FinDev Canada is recruiting an environmental and social risks director in Montreal… TELUS Pollinator Fund for Good is looking for a senior associate and principal in Toronto… Ontario Teachers’​ Pension Plan seeks a sustainable investing principal for a 16-month contract… Applications are open for the UK Social Enterprise Awards until Friday, June 30. Winners will be announced in a gala ceremony on Nov. 30 in London. 

Fifty Years is accepting nominations for Fifty 50 Climate, a program for scientists with research to address climate change across bioengineering, chemistry, and environmental electrical engineering… The Global Steering Group for Impact Investment is giving free tickets to students and young professionals to this year’s GSG Global Impact Summit, Oct. 2-3 in Malaga, Spain.

Thank you for your impact.

– May 30, 2023