The Brief: Overheard at the GIIN, lending to Indian enterprises, performance fact base, climate deals for retail investors, Acumen’s lessons in patient capital

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Featured: What’s Next

Overheard at the GIIN: As impact investing assets cross $1 trillion, investors eye a larger opportunity. Impact investing assets under management surpassed $1 trillion as funds, foundations, development finance agencies and other investors pursued impact in private-market opportunities. Still, the milestone, reported by the Global Impact Investing Network, is a drop in the bucket of global finance. The real action: the +$100 trillion in publicly-listed equities of corporations driving the global economy. The GIIN, long focused on the impact of private investments, is looking to stake out impact turf in public-equity and fixed-income investing. “So much capital is in listed equities,” The GIIN’s Amit Bouri told ImpactAlpha on the sidelines of the GIIN Investor Forum, which convened in The Hague this week after a three-year hiatus. “We would like that capital activated around driving positive impact in the world.”

Among the other takeaways gathered by ImpactAlpha’s Amy Cortese and Jessica Pothering in The Hague:

  • Total impact. Critics on the right and left have stepped up attacks on ESG. Some investors are moving beyond the controversies to look at companies’ “externalities,” both positive and negative. “We have to move to total impact investing,” said Steve Howard of Temasek, a global investment firm owned by the government of Singapore.
  • Proof points. Emerging market fund managers are proving exits are possible in markets many mainstream investors deem too risky. Lagos-based agribusiness investment firm Sahel Capital notched its first exit: a dairy company in northern Nigeria that it backed in 2015. Elevar Equity, Omidyar Network and WestBridge Capital exited financial services firm Vistaar Finance in India (see Dealflow below). Ascent Capital, an East African private equity fund that has raised $200 million through two funds, inked an exit from a healthcare diagnostics company in Ethiopia.
  • Embracing risk. Critical gaps in the impact ecosystem remain, including small business financing in emerging markets, women-led funds and climate adaptation. To bridge such gaps, British International Investment, formerly CDC Group, is piloting a new funding vehicle that can take on more risk than even its existing $1 billion “catalytic strategies” portfolio. The new investment facility, called Kinetic, has been funded with £40 million to use “highly flexible investment instruments” to invest in climate innovation in Africa and Asia, BII’s Yasemin Saltuk Lamy told ImpactAlpha.
  • Keep reading, “Overheard at the GIIN: As impact investing assets cross $1 trillion, investors eye a larger opportunity,” by Amy Cortese and Jessica Pothering on ImpactAlpha.

Dealflow: Financial Inclusion

Warburg Pincus takes control of Indian micro-enterprise lender Vistaar Finance. New York-based Warburg Pincus is acquiring a majority stake in Vistaar, a lender in India that provides credit to micro-enterprises in semi-urban and rural areas. Millions of micro and small businesses in India struggle to access credit in the formal financial system. In a statement, Warburg’s Narendra Ostawal said the private equity firm, which has $85 billion under management, believes Vistaar can be “a driver for broad-based growth” in the regions and communities it serves. The acquisition is subject to regulatory and other approvals.

  • Financial inclusion. Vistaar launched in 2010 to provide secured loans to general stores, garment shops, hotels, bakeries and other businesses underserved by traditional lenders. The company has deployed more than $30 million in loans across a dozen Indian states via more than 200 branches. Warburg’s acquisition provides an exit for early backers, including Elevar Equity, Omidyar Network and WestBridge Capital.
  • Check it out

Net Purpose raises £10 million for fact-based social and environmental performance data. The London-based data analytics provider helps investors measure the performance of their portfolios across climate, water, waste, gender, financial inclusion, healthcare and other social themes. “Investors are demanding the facts on the social and environmental performance of their funds, just like they do for financial returns,” said Net Purpose’s Samantha Duncan. The company says its “independent fact-base” allows investors to go beyond self-reported data and ESG rankings to understand actual performance.

  • Data driven. The Series A financing was led by Environmental Technologies Fund alongside M-Tech Capital and Exceptional Ventures. Existing investors include Jim O’Neill, ex- of Goldman Sachs Asset Management, IHS Market’s Kevin Gould, the Louis family, Illuminate Financial and Revent. “To make this moment matter, we must have a way to quantify purpose,” O’Neill said. “We must establish a global source of facts that investors can trust and understand.”
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Raise Green snags $1.2 million to expand access to climate deals for retail investors. Somerville, Mass.-based Raise Green manages an online marketplace that helps small-scale solar developers and green ventures get financing for hard-to-finance community solar projects (for context, see “Grassroots platforms are not waiting for Washington to invest in a green new deal”). Retail investors can invest as little as $100. Companies raising capital via Raise Green include Green Island EV Corp., an electric vehicle equipment manufacturer, and BlocPower, which is decarbonizing and electrifying buildings in low-income communities. The Connecticut Green Bank is offering “liberty notes” to finance zero-interest energy efficiency loans. The platform has helped small-scale developers, more than half of which are led by women and/or minorities, raise $5 million from accredited, non-accredited, institutional and corporate investors.

  • Spreading the word. Raise Green has recruited climate and clean energy leaders, influencers and youth ambassadors to promote its platform. Raise Green’s Franz Hochstrasser declined to disclose names of investors, but told ImpactAlpha the round includes “a collection of many different angel investors, a private family trust, a former founder of a community solar company and many more.”
  • Community solar. Separately, MyPower, an affiliate of Mitsui & Co., acquired Cambridge, Mass.-based clean energy provider Solstice to expand community solar access for households in the U.S.
  • Share.

Dealflow overflow. Other investment news crossing our desks:

  • BreezoMeter, an Israeli climate tech startup that uses sensors to monitor air quality, was acquired by Google for over $200 million.
  • Gurgaon-based edtech venture Adda247 raised $35 million in a round led by WestBridge Capital to help students from second and third-tier cities in India prepare for government jobs.
  • New York-based Flow Equity scored $14 million from AgDevCo, the Acumen Resilient Agriculture Fund and the Bill & Melinda Gates Foundation to build poultry businesses in Africa.

Signals: Catalytic Capital

Seven lessons from Acumen’s two decades of ‘patient capital’ investing. Acumen made a simple if unconventional promise to early backers of its strategy to make long-term and “patient” investments in companies serving poor customers in underdeveloped markets. “We won’t return your money,” they told philanthropic investors. “We will return you change.” Acumen’s Dan Waldron tells ImpactAlpha, “If you’re going to take on a lot of risks in early-stage experimental solutions to problems of poverty, it’s not an economical or commercial investment model.” You will get some returns, he says. “And you can create a ton of impact on much deeper stuff than you can if you’re trying to return 20% annualized.” Acumen’s return, in contrast, is projected at -9%, or 91 cents on every dollar invested, as detailed in “Investing as a Means,” a new report shared exclusively with ImpactAlpha. (The target return was 1x invested capital.) Acumen reports that its portfolio has touched an estimated 380 million people and has crowded in close to $1 billion in follow-on investment.

  • Lives impacted. Acumen has had profitable exits in six companies: d.light (partial), Sanergy, Ansaar Management Co., KopaGas, DART and M-KOPA. More than half of the customers of its energy portfolio companies are accessing renewable energy for the first time. Roughly 58% of clean cookstove customers say the stoves have “very much improved” their lives. The organization knows this through customer surveys conducted with the Lean Data methodology, which Acumen incubated and spun off as 60 Decibels.
  • Patient capital lessons. Serving poor customers is possible. Losers can be impact winners, too. And patient capital can build markets, not just companies. Acumen has invested more than $30 million in 27 off-grid energy companies that have reached more than 134 million people with solar products. The market “was just completely transformed,” says Waldron. In Kericho, Kenya, the number of solar products on the market increased from two to 84 in the years following Acumen’s investments in d.light and M-KOPA.
  • Keep reading, “Seven lessons from Acumen’s two decades of ‘patient capital’ investing,” by Dennis Price on ImpactAlpha.

Agents of Impact: Follow the Talent

Feona Castro, former managing director at 17 Asset Management, joins Deutsche Bank’s community development finance group as vice president of its New Initiatives Fund… UN Women seeks a humanitarian coordination specialist in New York… Amalgamated Foundation is hiring a remote philanthropic services associate in Washington, D.C… Deloitte is looking for a climate and sustainability consultant in New York… BlocPower seeks a remote data engineer in New York.

FoodCorps is recruiting a remote regional impact program director for the U.S. Northeast… The Aspen Institute is looking for an operations manager in Washington, D.C… Renewable Energy Wildlife Institute seeks a remote project manager… Public Health Institute is recruiting a remote program associate in Oakland… Silicon Valley Community Foundation is hiring a philanthropy advisor and a director of donor engagement operations in Mountain View, Calif.

Thank you for your impact!

– Oct. 13, 2022