The Brief: Overheard at SOCAP, local-currency guarantees, Oakland’s community capital, impact in Louisville



Greetings, Agents of Impact!

It was great to see so many of you at ImpactAlpha’s Agents of Impact event last night to talk innovative finance and catalytic capital. Special thanks to co-host Rockefeller Foundation. If you’re still at SOCAP, come to the “after-party” at noon today. We’ll hold office hours to follow up, plot plans and exchange contacts on all those good ideas we talked about last night. Bring your own lunch to meeting room No. 6 in the Festival Pavilion. Sign up.

 – David Bank, editor

Featured: ImpactAlpha Original

Show me the money: Overheard at SOCAP. Agents of Impact are making news. Seated next to Prime Coalition’s Sarah Kearney on the main stage, Packard Foundation’s Susan Phinney Silver announced a commitment to the Prime Impact Fund for early-stage climate innovation. “Now is the time to be bold and really push ourselves to make new and different types of investments in our fight against climate change,” said Phinney Silver. ImpactAlpha earlier broke news of the Packard and MacArthur foundations’ investments in the $90 million Terra Silva sustainable forestry fund, and dug into Rockefeller Foundation’s new role as an impact fund manager, with $60 million for “Zero Gap” initiatives to meet the Sustainable Development Goals.

Our team on the ground was boosted by fellows Shifali GuptaRohan Jha, and Bethany Wylie from the Kellogg School of Management, who fanned out to capture the big ideas of the day.

  • Capital being catalytic. Nearly all the deals that got done this week rely on the creative and flexible use of capital to jog nascent markets. That includes grants. “Catalytic philanthropy can mobilize a lot of capital with small amount of money,” said Jennifer Schorsch of Water.org, who called for funders and implementers to back solutions with customer input. “Your customers should participate in the solution.” Panta Rhea Foundation’s Anna Lappé added, “We can use philanthropic dollars to beta test innovative interventions.” The biggest problem in the food system, she said: “democracy and access.” The Rockefeller Foundation, on cue, announced a $2 million food system vision prize with SecondMuse and OpenIDEO to test solutions for regenerative and nourishing local food systems. – Bethany Wylie
  • Building markets. Agents of Impact are rewriting the rules of finance to unblock capital for underserved communities. Habitat for Humanity is building a secondary market for affordable home mortgages, like its own 0% interest mortgages, to drive down lending costs for new homeowners. Habitat’s Daniel Gura explained, “Your ability to liquidate that asset if you need to, the ability to do trading, is what allows for better initial pricing.” Students face a tuition gap of $5,000 to $15,000 per year on average. Nationally, “That’s a $70 billion problem per year,” said SixUp’s Sunwoo Hwang. SixUp’s “Future Prime” underwriting model focuses on student success and ability to repay, rather than their credit score. Online tutoring and job placement support “de-risks that person along the journey,” Hwang said. – Bethany Wylie
  • Measurement in practice. Investors are putting impact measurement and management tools to work (see, “IRIS+ tool provides guidance to reset expectations for ‘impact performance’). Project X Global, which works with corporations on sustainable supply chains, is using IRIS+ towards its goal of shifting 10% of global procurement to sustainable sourcing. Capria Ventures is using the metrics to build credibility of first-time fund managers in emerging markets. AlphaMundi Foundation uses more than 150 of the metrics to track the impact of investments in smallholder farmers, financial inclusion, renewable energy and women. – Rohan Jha
  • Changing the narrative. “We’re not talking about ‘closing the racial wealth gap,’ we’re talking about dismantling a racially exploitative economic system,” said Agent of Impact Rodney Foxworth of Common Future (formerly BALLE). See ImpactAlpha’s Q&A with Foxworth. – h/t Antony Bugg-Levine
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Dealflow: Follow the Money

Ford Foundation, Citi and OPIC earmark $100 million to guarantee loans to social enterprises. The facility, Scaling Enterprise, is designed to help social enterprises working in emerging markets access finance in local currency. Startups like pay-as-you-go solar provider d.light and India’s INI Farms often have difficulty managing the local currencies their customers use and their own dollar-, euro- and pound-denominated loans.

Circulate Capital secures $15 million from oil company Chevron Phillips. Circulate, which backs recycling and other “circular economy” startups in Asia, will invest the new funding to curb plastic waste in the region, much of which ends up in the ocean. The fund, launched last year by Rob Kaplan of Closed Loop Partners, was anchored by PepsiCo. It has raised $100 million from corporate partners and has a $35 million loan guarantee from USAID.

Mexico’s InnoHub secures $13 million for startups supporting small businesses. Banco Santander Mexico and software company CONTPAQi backed InnoHub, which builds ventures that boost the odds of success for Mexico’s small businesses, which account for 75% of the country’s jobs. So far, InnoHub has launched cashflow management platform Avanttia and lending company LendInc.

Signals: Ahead of the Curve

Oakland’s community capitalists are modeling an inclusive economy. The New York Times columnist David Brooks wants to build a national movement of social fabric “weavers.” Oakland’s already on the case. Like many cities, it is grappling with racial inequality, rapid gentrification and a dire housing crisis. Oakland also has a deeply engaged community of activists building new models to reclaim their stolen future. They are channeling capital to African American entrepreneurs, preserving land for community use and putting power in community hands. “When the first money comes from the community, the community sets the agenda and the priorities,” Ed Whitfield of the Fund for Democratic Communities told the community capital, or COCAP, conference at Impact Hub Oakland. Some initiatives to watch:

  • Inclusive Opportunity Zones. The East Bay Community Foundation, working with the East Oakland Black Cultural Zone and Community Vision, is developing an Opportunity Zone fund that would prioritize the needs of Oakland’s most vulnerable residents. A community advisory board would vet projects.
  • Friends and family funding. The Runway Project, a black women-led loan fund, launched two years ago to fill the gap for ‘friends and family’ funding for entrepreneurs of color (see, “‘Believe in you’ money for black entrepreneurs). Runway has financed 26 entrepreneurs in Oakland and is bringing the model to Boston and other cities. “We’re building on the deep relationships that exist in Oakland,” says Runway’s Nina Robinson. “The trust is already there.”
  • Grassroots-informed lending. The REAL People’s Fund will complement Runway with bigger loans to a wider group of entrepreneurs of color. Five local grassroots organizing groups, including Restore Oakland and Communities for a Better Environment, are planning to raise $10 million, including $1 million in “community notes.” Representatives from the grassroots groups set impact objectives. The goal is “co-equal decision making,” says Community Vision’s Nate Schaffran.
  • Community-owned land. The East Bay Permanent Real Estate Cooperative is a nonprofit housing developer led by Noni Session, a third-generation African-American Oaklander. The group raises money from the community through $1,000 shares, as well as philanthropic grants, to buy property and take it off the speculative market.
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Impact modeling. “Social Impact Projection” modeling ties a company’s unmonetized external value (ie. impact) to its unit economics, allowing insights into metrics like revenue-to-impact and capital-to-impact leverage, writes Catherine Griffin of Good Company Ventures for ImpactPHL PerspectivesMore.

Impact of Agents: Stakeholders Report

Access Ventures’ “street corner” investment strategy boosts incomes in Shelby Park. Rent burdens are down, home prices are up five years into the impact investment firm’s place-based investment strategy in the small city neighborhood in Louisville, Kentucky. The racial mix of the neighborhood, a key indicator of dislocation for Access, became slightly more white and a bit less black (as well as more bi-racial). “The change in proportion of races in Shelby Park will be something to watch closely,” says Access Ventures. Shelby Park – Five Years In.

SVX US helps TechSoup raise more than $8 million in financing. The Canadian financial services firm piloted its impact capital raising platform in the U.S. with nonprofit tech marketplace TechSoup. It has 50 more potential issuers in the pipeline. Reflections on the SVX US Journey.

Agents of Impact: Follow the Talent

Laura Weidman Powers, co-founder of Code2040, joins Echoing Green as head of impact… FFLabs’s Employment Technology Fund is recruiting a managing director… Social Finance is hiring an associate director in Boston, Austin or San Francisco… The Global Impact Investing Network seeks a manager of finance and operations in New York… Join Kelly Buhles of RSF Social Finance, ImpactAssets’ Tim Freundlich and Tideline’s Kim Wright-Violich for “The role of donor-advised funds in an impact economy,” an Impact Entrepreneur webinar, Oct. 31.

Thank you for reading. 

– Oct. 24, 2019

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