Greetings, Agents of Impact!
Featured: Policy Corner
Opportunity Zone deals flow as investors eye new rules. The Trump administration touted Opportunity Zones among its policy achievements. President Biden is proposing changes to make them work better for Black and Brown communities and small businesses. Impact investors aren’t waiting. Arctaris Impact Investors committed $8.5 million to companies in Opportunity Zones in low-to-moderate income census tracts in Ohio’s Cuyahoga County. The Arctaris Cuyahoga Impact Program includes a $1.5 million loan from the county and aims to maintain the region’s manufacturing base “while encouraging minority manufacturing business ownership and creating quality jobs for residents,” says Arctaris’ Uche Osuji. Arctaris also is building broadband networks in Opportunity Zones in Belfast and South Portland, Maine, and last year launched a $40 million Opportunity Fund for Erie, Penn. Verte Opportunity Fund last month backed electric vehicle charging startup OBE Power in a Miami Opportunity Zone.
- Transparency. The Biden administration wants more clarity around where capital is flowing, and the impact it’s creating (see, “Opportunity Zone capital flows to real estate but not to small businesses – or impact”). “One of the frustrations across the marketplace, no matter where you stand on the program, is that there’s not enough transparent data about how capital flows are going to the funds, and to projects, and to which parts of the country geographically,” Develop LLC’s Steve Glickman told BizNow. In Cuyahoga County, a community advisory committee will approve investments based on their social impact.
- Policy corner. Investors with late 2020 capital gains have a couple more months to claim Opportunity Zone tax advantages. Because of COVID, the IRS extended the deadline for reinvesting capital gains into Opportunity Zones. Under the new notice, gains realized by taxpayers since October are now eligible for Opportunity Zone investments through March 31. ImpactAlpha has collected recent policy-related coverage in a new landing page.
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Say it again: climate action means job creation. President Biden marked his first week in office with 30 executive orders aimed at tackling the climate emergency. “Today is climate day at the White House, which means that today is jobs day at the White House,” said Biden, vowing to create millions of skilled jobs building “a new American infrastructure and clean energy economy.” A Civilian Climate Corps is aimed at conserving at least 30% of the U.S.’s public lands and waters by 2030. Other actions: electrifying the national fleet, supporting clean energy innovation and revitalizing communities dependent on coal, oil, natural gas and power plants. Federal agencies are to direct 40% of investments in clean energy, clean water and wastewater infrastructure to low-income communities of color that have borne the brunt of pollution. Biden suspended new oil and natural gas leases on public lands and offshore waters and called for an end to fossil fuel subsidies. “These are concrete actionable solutions,” added Biden. “And we know how to do this.″
- Catalytic carbon offsets. Demand for carbon credits is heating up as corporations scramble to fulfill net-zero pledges (see, “Larry Fink’s corporate net-zero mandate pushes carbon markets mainstream.”) A blueprint from the Taskforce on Scaling Voluntary Carbon Markets aims to boost projects and technologies in emerging markets “where the economics are not yet quite there,” U.N. special envoy Mark Carney said at the World Economic Forum’s online ‘Davos’ gathering. “The way forward is to connect these private-sector payments to innovation” around tough challenges like green cement, steel and aviation fuel, added Bill Gates.
- Climate laggard. ExxonMobil is considering changes to its board and increasing carbon-reducing investments in order to fend off activist investors. It is facing pressure from D.E. Shaw and Engine No. 1 (see, “There’s a new impact sheriff in town: activist hedge funds”). Engine No. 1 nominated four energy veterans for Exxon’s board, including former Vestas Wind Systems CEO Anders Runevad and Kaisa Hietala, who headed renewable products at Neste. The candidates, said the firm, “ensure a clean break from a strategy and mindset that have led to years of value destruction and poorly positioned the company for the future.” The next move: Exxon is expected to take a $20 billion writedown and report its fourth consecutive quarterly loss next week.
Dealflow: Follow the Money
Bank of America places $150 million with minority-led fund managers. The second-largest bank in the U.S. is backing 40 minority-led fund managers to bridge the funding gap for Black, Latinx, women and other under-represented entrepreneurs. The managers include New York-based Harlem Capital (see, “Harlem Capital raises $40 million to ‘change the face of entrepreneurship’”); Atlanta’s Fearless Fund, led by Adrian Simone, Keisha Knight Pulliam and Ayana Parsons; and Zeal Capital Partners in Washington, D.C., which invests in early-stage tech companies focused on bridging wealth and skills gaps. Others include Marathon Fund, Serena Ventures, VamosVentures and the New Community Transformation Fund.
- Pledge watch. The commitment is part of Bank of America’s September pledge to commit $1 billion over four years to tackle economic and racial inequality. “The funds support diverse entrepreneurs across the U.S. and will drive innovation and economic opportunities, creating more jobs and wealth in communities,” said BofA’s Brian Moynihan.
- Featured funds. Fearless, Harlem and Zeal also were among the fund managers selected by Paypal, which in October injected $50 million into eight early-stage venture funds as part of a $350 million commitment to support Black-owned businesses and minority communities.
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Rise Fund’s renewables group acquires Chilean solar energy portfolio. The Rise Fund’s solar investment arm, Matrix Renewables, is buying up a 154-megawatt solar portfolio from Santiago-based Verano Capital. The acquisition includes 25 solar projects approved under Chile’s small-scale distributed energy generation scheme. The deal is Matrix Renewables’ first portfolio acquisition since it was launched by Rise Fund with a one-gigawatt acquisition from China’s Trina Solar last July. Terms of the deal were not disclosed.
- Ahead of the curve. Chile has been aggressively developing its renewable energy capacity, in an effort to achieve 70% renewably-sourced power by 2050. Indeed, the country appears poised to reach that target 20 years ahead of schedule, thanks to its significant hydro-power capacity.
Digital workflow platform ServiceNow launches $100 million racial equity fund. The Bay Area company launched a $100 million Racial Equity Fund to invest in “homeownership, entrepreneurship and neighborhood revitalization in Black communities.” ServiceNow helps companies integrate online work streams, operations and employee- and customer-engagement.
- Local lending. ServiceNow will buy up community loans to fuel more lending by local banks in cities like Chicago, Houston and Orlando. Its fund is managed by RBC Global Asset Management’s impact investing group.
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Dealflow overflow. Other investment news crossing our desks:
- Elevate Capital raises $26 million for second fund to back under-represented founders. The Portland-based firm has made six investments from the fund in women, Black and other minority-led early-stage businesses. It was backed by Meyer Memorial Trust, the Oregon Growth Account and Battery Ventures’ Chelsea Stoner.
- FreeWire Technologies secures $50 million for fast-charging EV stations. The company’s Series C round was led by Riverstone Holdings (see, “We have entered the climate decade”).
- Hurdle raises $5 million to provide mental health care for people of color. Only one in three Black Americans have access to mental healthcare when they need it. The Black-owned mental health startup is building an app to offer culturally sensitive teletherapy. Hurdle’s seed round was co-led by 406 Ventures and Seae Ventures.
Signals: Ahead of the Curve
Impact Beacon helps entrepreneurs shine light on their impact stories. The free tool from City Light Capital guides entrepreneurs to illuminate their social impact in investor pitch decks and marketing materials. For example, the tool calculates that recycling 10 tons of aluminum saves 100 cubic yards of landfill space and 140,000 kilowatt-hours of energy, and ticks Sustainable Development Goals Nos. 11, 12 and 13. City Light’s Josh Cohen tells ImpactAlpha that such unit-level impact analysis can help entrepreneurs articulate, “When I get to $100 million in revenues, here’s what my impact will look like.”
- Seed stage. Impact Beacon grew out of City Light’s seed-stage fund City Spark, which has made approximately 60 investments of $50,000 each in ventures targeting education, climate, and safety and care, particularly mental health. With the increased flow of capital from impact-oriented investors attracting more entrepreneurs, Cohen says, the new challenge has become: “How do you get more of them to stay and build more impactful companies?”
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Short takes. More research and data points crossing our desks:
- What Biden’s private prison ban means… what it doesn’t. “It doesn’t go far enough,” writes Candide Group’s Morgan Simon. “I think the markets are right not to overreact here, for the very reason many advocates and families with loved ones sitting inside private prisons and immigrant detention centers are not celebrating this ‘ban’ quite yet.”
- Peer-selected investment. Village Capital has been doing it for years. Year Here and Kindred are testing versions of the peer-selection model in the U.K. Evidence suggests giving entrepreneurs the power to decide which of their peers should receive investment can be a strong predictor of revenue growth – and reduce bias in venture investing.
Agents of Impact: Follow the Talent
Jessica Long, ex- of Accenture, joins Closed Loop Partners as chief strategy officer and managing director… Tamara Close, previously with Close Group Consulting, joins KKS Advisors as managing director and head of ESG integration… Nonprofit Finance Fund is hiring a senior loan officer… The Institute of International Finance seeks a senior policy associate in Washington, D.C… Also in D.C., ISF Advisors, housed at Global Development Incubator, is looking for a strategy associate.
Santa Clara University is hosting “Women in impact investing” with TIIP and ImpactAlpha’s Monique Aiken, 1863 Ventures’ Melissa Bradley, Ulu Ventures’ Miriam Rivera and Venrock’s Cami Samuels, today at 4pm ET/1pm PT.
Thank you for your impact.
– Jan. 28, 2021