The Brief: Open funds that share profits and incentivize impact on this month’s Liist

Greetings Agents of Impact!

☎️ Agents of Impact Call: Mapping an impact investing path through the new legal landscape. Impact investors will confront a dramatically changed policy environment no matter the outcome of the upcoming US presidential election. The effects of this summer’s Supreme Court decisions gutting the “administrative state” already are playing out in legal challenges to rules on climate action, labor rights and corporate accountability. On the next Agents of Impact Call, Better Markets’ Dennis Kelleher, B Lab’s Jorge Fontanez, and The Shareholder Commons’ Rick Alexander will join Fran Seegull of the US Impact Investing Alliance and ImpactAlpha’s David Bank to explore how investors can protect critical impact priorities in the shifting policy environment. Spoiler alert: Material risks, systemic stewardship and state-level organizing will become even more important as regulatory pathways narrow. Join other Agents of Impact, Wednesday, Aug. 14 at 10am PT / 1pm ET / 6pm London. RSVP.

• Catch up quickly. For background see, “Supreme Court rulings turn policy tailwinds into headwinds for impact investors,” and “Free markets and impact investing in the aftermath of the Supreme Court’s rulings.” Catch up on all of ImpactAlpha’s coverage at Policy Corner, sponsored by the US Impact Investing Alliance. 

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In today’s Brief:

• Actively raising funds on this month’s Liist
• Flurry of fusion funding
• Streamlining agricultural supply chains in India
• Community foundations go regional

Featured: The Liist

These fund managers incentivize impact and share profits with communities and founders. In a difficult fundraising environment, some impact fund managers are standing out by linking financing terms and profit-sharing to impact outcomes. On this month’s Liist of impact funds that are in active fundraising mode, Texas-based Beyond Capital Ventures, which is in the market with a pair of funds to bridge early-stage debt and equity funding gaps for social enterprises in Africa and India. The planned $75 million equity fund, Beyond Capital’s third, includes a profit-sharing model that gives a cut of the fund’s carried interest to portfolio company founders who meet gender and climate targets (see, “From funds to managers to enterprises, some investors are aligning incentives for impact“). “We want a partnership with our investees where we’re bonded in the success of our fund,” Beyond Capital’s Eva Yazhari told ImpactAlpha earlier this year.

• Community finance. In Canada, Indigenous-led Raven Group is raising an outcomes-based finance fund to test community-driven approaches to climate and healthcare on tribal lands. Raven lines up public off-takers for the fund’s successful projects for residential green energy retrofits, diabetes care and other issues. Half of the fund’s carried interest will go to the Raven Indigenous Impact Foundation, Raven Group’s philanthropic arm. Raven Indigenous Outcomes Fund is one of the only outcomes-based finance funds in North America (read about Maycomb Capital’s Community Outcomes Fund and other inclusive community investing and wealth-building fund strategies).
  
• Emerging markets. Two other fund managers on this month’s Liist are directing equity and debt capital to emerging markets businesses as other investors shy away. Washington, DC, and Addis Ababa-based African Renaissance Ventures is looking to raise $10 million for its first fund to boost financial inclusion, climate resilience, and skills and employment in East Africa. Switzerland-based Symbiotics is in the market with a $25 million debt fund to invest in financial inclusion, climate resilience and impact tech companies (see, “Emerging market debt investors debunk risk myths”). The fund has Article 9 designation under the EU’s Sustainable Finance Disclosure Regulation for its impact mandate (check out other private credit andemerging market strategies in the market).
  
• Ownership economy. San Diego-based Mission Driven Finance’s Care Access Real Estate fund aims to move capital into America’s “severely undercapitalized and undersized” child care sector. The fund, which has a target of $50 million, will acquire childcare facilities and help childcare entrepreneurs purchase the properties they operate from and build wealth as the properties appreciate (check out otherwealth and ownership-focused fund strategies and ImpactAlpha’s searchable database ofOwnership Economy funds).
  
• Keep reading, “These fund managers incentivize impact and share profits with communities and founders,” by Jessica Pothering and Lucy Ngige on ImpactAlpha.
  
• Learn about more than 100 impact funds on The Liist, ImpactAlpha’s database of managers that have been raising capital in the past year. Know an impact fund manager currently raising capital? Complete this short form.

Dealflow: Commercial Fusion

Zap Energy clinches $130 million amid a hot streak for fusion energy startups. The vision of abundant clean energy powered by fusion has attracted billions of dollars from climate investors, governments and corporations. Mimicking the sun has proved notoriously difficult, however; commercial viability remains perpetually years away. Everett, Wash.-based Helion Energy’s ambitious contract with Microsoft to deliver fusion power for data centers by 2028 signaled that fusion energy may be within reach. Now, Zap Energy, based in Seattle, has raised $130 million, bringing its total raised to roughly $330 million from big-named climate tech investors including Energy Impact Partners, Lowercarbon Capital and Breakthrough Energy Ventures. Zap is building a compact “Z-pinch” fusion energy system that confines plasma without expensive magnets. University of Washington professors Uri Shumlak and Brian Nelson launched Zap in 2017 to commercialize technology developed with researchers at the Lawrence Livermore National Laboratory, which achieved net energy gain in a fusion reaction two years ago. Zap and other fusion startups have yet to match that milestone. 

• Seed-stage fusion. It’s a sign of how capital intensive fusion is that Middleton, Wis.-based Type One Energy’s $82.4 million raise is considered a seed round. Investors include Breakthrough Energy Ventures, Centaurus Capital, New Zealand’s GD1 and several funds from Australia. Type One is looking to build a fusion power plant for commercial fusion production by 2030. Type One’s stellarator fusion technology “offers the opportunity to directly develop and deploy a fusion pilot power plant without the need to resolve any more fundamental science or engineering challenges,” said BEV’s Carmichael Roberts. In New Zealand, OpenStar Technologies raised $6.2 million in a seed round backed by Outset, Icehouse Ventures and other investors. More than three dozen fusion startups have raised more than $7 billion over three decades – including nearly $1 billion in the past year, according to the Fusion Industry Association.
  
• Check it out.

India’s Agrizy scores $9.8 million to digitalize agricultural processors. Just 10% of the produce harvested by India’s farmers gets processed in-country, presenting a revenue opportunity for farmers and others in the agricultural value chain. Bangalore-based Agrizy manages a digital marketplace that connects agricultural suppliers, processors and buyers. More than two million small food processors and smallholder farmers have used the platform since 2021 to gain access to financing and support managing their businesses. “Agrizy aims to transform India into a global food processing hub by helping agri-processors access export markets and comply with global quality standards, while offering these underserved stakeholders working capital from formal financial institutions,” said Agrizy’s Vicky Dodani.

• Inclusive finance. Agrizy is addressing “the lack of quality financing for small processors and the farmer producer organizations that supply them, helping to increase incomes in rural communities,” said Accion’s John Fischer of Accion, which led the Series B funding round. Other investors in the round include Omnivore, Capria Ventures, Thai Wah Ventures and Ankur Capital.
  
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Dealflow overflow. Investment news crossing our desks:

• New York-based Spring Health raised $100 million to offer mental health as an employee benefit. The round, led by Generation Investment Management, values Spring Health at $3.3 billion. (Spring Health)
  
• UK-based investment manager M&G injected $100 million into responsAbility’s Asia-focused climate investment strategy, which blends capital for clean energy and battery storage, energy efficiency and other low-carbon projects. (responsAbility)
  
• Oakland’s Unspun, a maker of 3D weaving technology that cuts down on waste by enabling on-demand manufacturing of textiles, secured $32 million from Lowercarbon Capital, DCVC and other investors. (FinSMEs)
  
• JFF Ventures, through its second workforce tech fund, invested in Pace AI, a Boston-based language platform for immigrant workers (see, “JFF Ventures aligns venture capital with a national nonprofit to invest in the future of work”). (JFF Ventures)

Impact Voices: Deploy!

Local community foundations go regional to tackle climate change. Community foundations have long taken a hyper-local approach, connecting donors with nonprofits, establishing emergency disaster funds, and financing affordable housing, health clinics and other local priorities. To tackle systemic challenges such as climate change and income inequality, some place-based organizations are lifting their gaze beyond local borders. Collaborations with other community foundations “can open doors and amplify impact,” write Lillian Kuri, Lisa Schroeder and RT Rybak, leaders of community foundations in Cleveland, Pittsburgh and Minneapolis, respectively. Launched two years ago, the Community Foundation Climate Collaborative, or CFCC, now includes more than 50 US community foundations. The regional response “is a recognition that, as the frequency and severity of weather-related crises intensify, reaction-based disaster philanthropy is not enough,” they write in a guest post. 

• Climate collaboration. CFCC members are working together to help under-served and under-resourced communities access federal climate funds. The Industrial Heartland Solar Coalition, which includes community foundations in Pittsburgh, Cleveland, Indianapolis, and Buffalo, NY, was awarded $156 million through the Solar for All program of the Inflation Reduction Act. The coalition is led by Ohio-based Growth Opportunity Partners, the US’s first Black-led green bank (see, “In Cleveland, stakeholders mobilize to deploy climate funds for community infrastructure”). The Minneapolis Foundation was awarded $50 million from the Biden administration’s Environmental Justice Thriving Communities program to serve as a regional grant maker across the Midwest and 35 tribal nations. “We are just scratching the surface of what is possible when community foundations join forces for the greater good,” Kuri, Schroeder and Rybak write. “By working together, we can accelerate positive change in the places that each of us call home, and drive sustainable change that can benefit neighboring cities, communities, and states across our great country.”

Agents of Impact: Follow the Talent

Sorenson Impact Foundation names Eliza Roady, formerly with Sorenson Impact Institute, as managing director… US SIF names Sireen Hajj, previously with Morningstar Sustainalytics, as its director of investor outreach… The Bezos Earth Fund appoints Eric Wilburn of consultancy NatureBridge as program officer for nature finance…Gulf International Bank names Victoria Barron, previously with BT Pension Scheme, as chief sustainability officer.

The Justice Climate Fund seeks a chief sustainability officer… The Wharton School at the University of Pennsylvania is looking for a program manager for impact investments in its ESG Initiative… Community Investment Management is hiring an investment analyst in Bogota or Washington, DC… The Philanthropic Impact Credit Fund is recruiting a chief investment officer.

Denmark’s Investment Fund for Developing Countries seeks an investment director in Nairobi… AVPN is looking for for a consultant on gender + climate investment strategies for Asia… The US Department of Energy will host a webinar, “Celebrating the Inflation Reduction Act’s second anniversary,” Wednesday, Aug. 14.

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

Thank you for your impact!

–  Aug. 6, 2024