Greetings, Agents of Impact!
Signals: Ahead of the Curve
Net-zero means water, too, for corporations serious about climate risk. Investors and customers are pushing food, apparel, energy, chemicals, pharmaceuticals and mining companies to address water security along with greenhouse gas emissions in their strategies for a net-zero economy. Indeed, water use is responsible for 10% of global emissions; those major industries account for 70% of the world’s water use. Ford Motor Co. and Anglo American have set goals of net-zero water withdrawals, with the mining giant tying executive compensation to freshwater reduction targets. Nissan Motor aims to eliminate wastewater discharges. “Companies need to invest to address these risks, minimize their impacts, and build resilience to mounting water-related risks such as water scarcity, flooding and chronic pollution,” writes Cate Lamb of CDP in an analysis of the water-related disclosures of nearly 3,000 companies. The business case: The companies tallied $301 billion in potential water risks – five times more than the $55 billion in investment needed to mitigate those risks – and $711 billion in water-related savings and revenues.
- Business innovation. Customer use of its products accounts for 99% of Unilever’s water footprint. The now-British company expects its “water-smart” line of personal care products, including no-rinse conditioners and dry wash spray, to generate up to $3.4 billion in sales by 2025. Mars is introducing wet-dry irrigation for rice cultivation that can reduce water consumption and boost farmers’ income by 30%. Global water infrastructure will require a $1.9 trillion infusion by the end of the decade (in the U.S., a water main breaks every two minutes). Autodesk announced a $1 billion acquisition of Portland, Ore.-based Innovyze, which makes modeling software used by 3,000 customers to design water distribution networks and wastewater treatment plants.
- Progress report. More companies are using less water. CDP’s global water report found that nearly two-third of companies highly reliant on water said they are decreasing or holding steady their water withdrawals. Where they’re falling short: water quality. Less than 60% monitor wastewater discharge – “a basic action that all companies should be taking.” Less than 5% set pollution targets and report on their progress.
- 2050 vision. The CDP report paints a picture of a thriving, sustainable economy with universal and equitable access to water supplies and sanitation, freshwater biodiversity, decreased disease burden and fewer pandemics. That will take “a water-use revolution” and a transformation in production. In 2021, wetlands are disappearing three times faster than natural forests. Groundwater withdrawals outstrips nature’s ability to recharge them. More than two-thirds of the world population may live in water-stressed regions by 2025. Water is not just a “developing world” issue: Last month’s deep freeze left millions in Texas and elsewhere without potable water, as aging pipes froze and water plants faltered.
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Principles for Responsible Investing will push signatories to vote their, uh, principles. The “voluntary and aspirational” PRI will beef up minimum standards for its 3,700 signatories in the wake of a study that found that PRI signatories voted for ESG shareholder proposals less often than non-signatories. “We know that some investors have joined the PRI, not out of any desire to incorporate sustainability into their investment practices, but to win mandates,” PRI’s Fiona Reynolds wrote in Responsible Investor. The U.N.-backed group next month will release “Making Voting Count,” to detail for signatories “how principle-based voting on shareholder resolutions can contribute to clear, effective and accountable stewardship.” Also on tap: a new leadership team at PRI that will emphasize stewardship. PRI acknowledged the lackluster voting track record in its 2019 vision for “active ownership 2.0.”
- Proxy preview. Members of the Interfaith Center on Corporate Responsibility have filed 244 shareholder resolutions at 152 companies this year, including resolutions addressing racial justice (64) and climate change (54). “Investor support for these proposals is critically important,” said Sanford Lewis of Shareholder Rights Group. Climate Action 100+ investors have filed 37 shareholder proposals, including resolutions targeting climate lobbying at Exxon, General Motors and Phillips 66, net-zero ambitions at General Electric and climate-risk reporting at Berkshire Hathaway.
- Get out the vote.
Indie.vc prioritized ‘revenues over rounds.’ Investors balked. Indie.vc launched six years ago with an image of a burning unicorn head and a fresh thesis: Operating businesses that focus on generating revenues will outlast those focused on raising their next VC round. Limited partners, it turns out, weren’t sold. After funding nearly 40 companies, Indie.vc will not accept or make further investments. “As we’ve sought to lean more aggressively into scaling our investments and ideas behind an ‘Indie Economy,’ we’ve not found that same level of enthusiasm from the institutional LP market,” writes founder Bryce Roberts..
- New model. “We want to embody values other than the growth-at-any-cost model and show that there’s a different way to build a real business,” Roberts told ImpactAlpha in an earlier interview (see, “VCs that help startups raise revenues, not rounds”). The model, which included revenue-based finance, spurred a movement towards alternative capital structures (see, “Beyond venture capital”) that is poised for growth – without Indie.vc.
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Dealflow: Follow the Money
Southern Opportunity and Resilience Fund to back small businesses in COVID recovery. The fund will increase the supply of affordable capital for small businesses and nonprofits in 15 southern states in the U.S. SOAR will offer flexible loans of up to $100,000 to enterprises with less than 50 full-time employees. “The COVID-19 pandemic has exacerbated an already uneven recovery from the Great Recession,” said LISC’s George Ashton. The fund “will tackle these issues head-on by addressing structural barriers to economic opportunity.” Arranged by Calvert Impact Capital and managed by LISC, the fund aims to raise $150 million. Capital One, Microsoft, Heron Foundation and Fidelity Charitable have provided early grants and loans.
- Repeat and replicate. SOAR’s model resembles COVID recovery funds established in New York and California (see, “California Rebuilding Fund strengthens regional community development financing infrastructure”). It will buy loans from roughly a dozen local community development financial institutions, including Accion Opportunity Fund, Black Business Investment Fund, Southern Bancorp Community Partners and TruFund Financial Services.
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Startups in Singapore, the U.S. and Nigeria attract capital for animal-free products. Singapore’s Next Gen raised $10 million for its plant-based chicken products. Singapore Economic Development Board, NX Food, FEBE Ventures and Blue Horizon backed the company just four months after its launch. The eco-friendly shoe company Allbirds invested $2 million in Illinois-based Natural Fiber Welding, which makes a plastic-free, plant-based leather out of hemp, coconut, vegetable oil and cork waste. And in Nigeria, Lagos-based VeggieVictory secured pre-seed funding from Sustainable Food Ventures, Capital V, Kale United and Thrive Worldwide for “vegan meat” snacks. The woman-led company is among the first to put African plant-based food startups on the venture capital map.
- Innovative food. Startups developing alt-proteins and other innovative ingredients raised $2.3 billion in 2020, in what was a record year for agri-food tech investing globally.
- Check it out.
Powered by People secures $1.5 million to connect artisans to markets. The Kenya-based “distributed manufacturer” enables artists and designers to become suppliers to large companies like Ikea and Crate & Barrel by pooling their individual making capacity to fulfill large batch orders. The company acts as a work pipeline for local artists and artisans. It also provides cash advances to makers to allow them to cover the costs of their materials. Powered by People raised the funding from a group of angel investors.
- Access to finance. Startups outside of Africa’s established tech hubs have a harder time fundraising, but are securing investor support for helping other entrepreneurs and small businesses access capital. In Cameroon, enterprise tech venture Diool raised $3.5 million from Lundin Group to enable small businesses to handle digital payments. In Angola, crowdfunding platform Deya secured $50,000 from angel investors to help impact-focused startups raise early funding.
- Read on.
Dealflow overflow. Other investment news crossing our desks:
- The Midwest Fund will cut checks of up to $100,000 in 30 to 40 companies in and around Chicago, Pittsburgh, Cincinnati and Detroit.
- Women-led software company Backstartup secures $1.2 million to support Colombia’s small businesses.
- A100x launches a ‘rolling’ impact tech fund to focus on blockchain, artificial intelligence and other deep tech startups driving social and environmental impact (see, “Robert Downey Jr.’s FootPrint Coalition launches sustainability ‘rolling funds’”).
- South Africa-based Metier takes a stake in Energy Vision, which develops distributed renewable systems to power cell towers in places where grid power is unreliable.
Agents of Impact: Follow the Talent
Margaret Chinwe Anadu becomes global head of sustainability and impact and chair of the urban investment group at Goldman Sachs Asset Management… Greg Konieczny and Kunal Desai, both ex- of Mobius Capital Partners, join GIB Asset Management as head of global emerging markets equities and portfolio manager, respectively… GenderSmart Investing and VC Include launch Capital Connect, a series of virtual showcases connecting gender-lens investors and funds (use code ImpactAlpha2021 for a 30% discount).
Missionary Sisters of the Sacred Heart and Mission Driven Finance launch “People on the Move” loans for businesses and nonprofits supporting immigrants, refugees, asylum seekers, low-income economic migrants and survivors of trafficking in the U.S… IMP+ACT Alliance and BlueMark host “How to accelerate confidence and transparency through impact classification and certification,” with Tazia Smith of Closed Loop Partners, Nestle USA’s Anna Marciano, IMP+ACT Alliance’s Claudia Coppenolle and BlueMark’s Christina Leijonhufvud, today at 11am ET.
Thank you for your impact.
– Mar. 3, 2021