The Brief | February 10, 2020

The Brief: Obvious sustainability disruptions, $455M for Ecosystem Investment Partners, ethical chocolate, Asian impact tech, decision time for BP’s new CEO

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Obvious trillion-dollar sustainability disruptions. New solutions often look impossible, or at least implausible, before they seem, well, obvious. Beyond Meat was a contrarian bet on conscious consumers until it became a Wall Street darling. “Even along the way, there were a lot of raised eyebrows from our peers around whether this was really a venture play or not,” says Andrew Beebe, a partner at Obvious Ventures in San Francisco. “It turned into an absolute home run.” The “world-positive” venture firm founded by Twitter co-founder Evan Williams just closed its third fund in six years at a quirky $271,828,182 to look for more obvious disruptions in energy and mobility, health, and the workplace. “All of these areas are extreme growth areas, driven by that underlying behavioral shift of consumers and then ultimately, business leaders,” says Beebe in a Q&A with ImpactAlpha.

Contrarian bets on the sustainability disruption are the stock in trade of a growing number of tech-for-good venture funds, including Al Gore’s Generation Investment Management and DBL Ventures, as well as relative newcomers like Fifty Years, Future Ventures and Obvious. “We look for omens and purpose-driven entrepreneurs who are disrupting trillion-dollar industries,” says Beebe. Purpose is a leading indicator. Beebe is excited about EVs beyond cars. “Cities are going to war on the internal combustion engine,” he says, opening an opportunity for all-electric trucks, fleet and shuttles. He says electric bus company Proterra, an Obvious portfolio company, is selling every bus it can make in its three U.S. factories as cities and delivery companies upgrade aging, polluting fleets. “We’re continually followed-on in rounds by some of the biggest typical or more traditional brands in venture,” Beebe says. Still, he says, “People are, I think, still raising their eyebrows, and I love that.”

Keeping reading, “Talking trillion-dollar sustainability disruptions with Obvious Ventures’ Andrew Beebe,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Ecosystem Investment Partners closes fourth conservation fund at $455 million. The private equity firm has been helping investors profit off of ecological restoration and conservation projects since 2007. Ecosystem Investment Partners establishes “mitigation banks” that finance wetlands restoration and build credits that public and private developers can buy to offset environmental damages from their projects (see, “How Private Capital is Restoring U.S. Wetlands”). Such mitigation trades damage in one place with a greater amount of restoration somewhere else. EIP has raised nearly $1 billion in funds that have grown from $181 million to $303 million and now $454 million. Investors include public pension funds, family offices and foundations.

  • Landscape scale. EIP targets wetlands and stream restoration projects costing $10 million to $50 million. It ensures permanent protection through conservation easements and deed restrictions. EIP has invested in 44 projects in 12 states covering 44,000 acres of wetlands and 176 linear miles of streams, including a 110-mile expanse across five counties in West Virginia. Restoration of 18 miles of waterways that feed into Chesapeake Bay will reduce harmful nitrogen and phosphorus flows.
  • Conservation demand. EIP claims mitigation bank transactions have increased 20-fold in 25 years (see, “The surprising leader in the $36 billion global market for ‘payments for ecosystem services’”).
  • Dive in.

Belgian family acquires stake in Tony’s Chocolonely. Verlinvest, the investment firm of the Spoelberch family that is behind the beer group AB Inbevacquired an undisclosed stake in the ethically-sourced Dutch chocolate company. Verlinvest is not an impact investor, however its food and beverage investments, typically €30 million to €150 million, follow health-focused consumer trends. The firm is an investor in alternative-milk company Oatly and previously backed healthy snacks company Popchips and Dutch natural foods grocer Marqt.

Asian Development Bank puts up $50 million initiative for early-stage impact tech. ADB Ventures is looking to de-risk Asia’s social tech startups with a flexible 17-year fund (compared to a standard 10-year fund) and a $12 million technical assistance facility. It has early backing from the Nordic Development Fund, Climate Investment Funds, and the Australian government.

SuperMoney raises early funding to provide financial services to India’s gig workers. The Mumbai-based fintech provides credit, savings and insurance products for gig and blue collar workers under-served by traditional banks. Unitus Ventures backed the company’s $1 million round.

BNP Paribas and European Investment Fund launch €10 million social impact bond fund. The BNP Paribas European Social Impact Bond Fund will invest in new pay-for-success initiatives in Europe. Three projects in France have been rolled into the fund, including an agricultural education program and initiatives aimed at keeping children out of the foster system.

Signals: Ahead of the Curve

Decision time for BP as new CEO takes the helm. On his first day as CEO of BP last week, Bernard Looney was greeted by Greenpeace protestors who blocked the entrance to the oil giant’s London headquarters with oil barrels and solar panels. Climate change will be the defining challenge for Looney, a 21-year veteran of BP who oversaw its worldwide oil and gas exploration, development and production. Now he must steer the company to a low-carbon future. That means milking current oil and gas profits while transitioning the company to more climate-friendly sources of energy—and writing down increasingly stranded fossil fuel assets. Shareholders and protestors alike will watch Looney’s first public remarks on February 12. Will BP, which once branded itself Beyond Petroleum only to fall into a Deepwater Horizon hole, leave the climate laggards to join the leaders?

  • What to look for. Looney is expected to broaden BPs emissions-reduction targets. “Scope 3” emissions include greenhouse gases generated by end-users of BP’s oil and gas, like people fueling their cars at the pumps. Those emissions make up 90% of BP’s carbon footprint. So far, only ShellTotal and Repsol are tracking their Scope 3 emissions.
  • Pay incentives. Oil and gas companies need to cut production by more than a third by 2040 to achieve Paris agreement targets. “The truth is, everyone is just planning to get bigger,” says Carbon Tracker’s Andrew Grant. Oil chiefs have long been rewarded for replacing reserves and increasing production. That must change as they manage declining production and exploration. The key: aligning executive compensation with climate goals.
  • Stick a fork in it. A global glut, rather than climate concerns, is depressing oil prices. But rapidly declining costs for renewables are making new fossil fuel projects economically unviable. Mad Money’s Jim Cramer declared on CNBC that fossil fuel stocks are “done.” Major asset owners and managers are pressing fossil fuel companies to explain how they fit in low-carbon scenarios. ExxonChevron and BP were excluded from a new climate-friendly passive index created by the Church of England Pensions Board and the London Stock Exchange.
  • Get the scoop.

Agents of Impact: Follow the Talent

John Duong is leaving his role as managing director of Lumina Impact Ventures… Sarona Asset Management will manage the Australian government’s new $40 million Emerging Markets Impact Investment Fund… Luminate seeks a principal of civic empowerment in Washington D.C… OpenInvest is looking for a strategic partnerships manager in San Francisco… Catholic Charities is hiring an impact investing fellow in Alexandria, Va… Roots of Impact is hiring for multiple positions on its impact-linked finance team (see, Impact-linked financial rewards help high-impact companies attract growth capital).

Roots of Impact, Ashoka, the Swiss Agency for Development Cooperation, New Ventures and IDB Lab are calling for proposals from vocational training and job placement enterprises in Latin America looking for premium payments for positive outcomes… Calvert Impact Capital’s 2020 impact investing survey is open for contributions… Register now for Transform Finance’s webinar, “Activating Cash Deposits to Support Native Communities” tomorrow, Feb. 11, at 10am PT/1pm ET (see, “An impact option for directing idle cash to community banks).

Thank you for reading.

–Feb. 10, 2020