The Brief: Paving a pathway to owning (a fraction of) a home

Greetings Agents of Impact! 

This week at ImpactAlpha:

📞 Agents of Impact Call 64: Blending Billions. Here come the billion-dollar blended finance funds. This week’s Call will dissect how such mega-deals get done. The Hague-based Climate Fund Managers’ Climate Investor Two has leveraged a tranche of first-loss capital to raise more than $850 million. Project GAIA, led by Mitsubishi UFJ Financial Group, is targeting $1.5 billion, also for climate adaptation as well as mitigation, with at least 25% for least-developed countries and small island states. The SDG Loan Fund raised $1 billion from institutional investors with catalytic capital from FMO and MacArthur Foundation. On this week’s call, Climate Fund Managers will join Mitsubishi UFJ’s Ariane Pevide, MacArthur Foundation’s Debra Schwartz, and Nnamdi Igbokwe of blended-finance network Convergence, to share practical lessons in blending billions for renewable energy, sustainable agriculture, health, education and small business lending, this Thursday, Sept. 19, at 10am PT / 1pm ET / 6pm London. RSVP today.

🔌 Plugged In: Inside Wisconsin’s game plan to tap federal financing for the green transition. On her LinkedIn Live discussion this Wednesday, Sherrell Dorsey’s will engage Forward Together Wisconsin’s Mandela Barnes on the nonprofit network’s plan to leverage once-in-a-generation climate funding to improve neighborhoods and lower costs for the state’s rural areas and working-class families, communities of color and Tribal communities. Barnes, Wisconsin’s former lieutenant governor, narrowly lost his 2022 race for the US Senate. Get Plugged In, Wednesday, Sept. 18, at 11:30am PT / 2:30pm ET / 7:30pm London. RSVP today.

In today’s Brief:

• Buying a first home, brick by brick
• Impact investment activity in Latin America
• ‘Spheres of influence’ in carbon reporting

Featured: Ownership Economy

Ownify seeks to pave a fractional pathway to home ownership, brick by shared-equity brick. First-time home buyers in Raleigh-Durham and Charlotte, NC, are getting a new path to owning their own house – or at least a fraction of it. With $2 million from individual and impact investors, Raleigh-based Ownify has helped seven first-time homebuyers, or Ownis, gain a foothold in the housing market. The company says its model represents an equitable upgrade from predatory rent-to-own models, many of which lock aspiring owners into long-term lease agreements with unfairly high rents. “Rent-to-own is exactly what the word means: You rent, rent, rent, and then you have this hurdle to own,” says Ownify’s CEO Frank Rohde. “If you don’t make that jump, you don’t have anything to show for it, so there’s no real ownership.” 

• Shared equity. Ownify splits equity in a home into 10,000 “bricks,” each representing a basis point, or one-hundredth of a percentage point of ownership. “Ownis,” as the company calls its customers, buy into a home with 200 bricks, or 2% of the ownership of the home. For a $400,000 house, that means coming up with $8,000 – far less than a typical down payment. Ownify says its homeowners in their first year acquire $15,000 equity stakes, on average. As they acquire equity, Ownis can refinance the property and buy out the other investors. If they want to move after five years, Ownify buys back their stake at the current market value.
  
• Tradeoffs. Ownify is raising a $10 million fund to pilot the strategy in North Carolina’s most populous metropolitan areas, where it believes it can draw in up to 50 aspiring homeowners. In the Raleigh area, 32-year-old Zachary Baker is one of Ownify’s first-time homebuyers. “My parents always rented, so I was the first in my family to actually go down this process,” he tells ImpactAlpha. Baker discovered Ownify through a marketing event the company held for first-time buyers. He closed on a home priced between $350,000 and $400,000 within three days of making an offer. Being an Owni is “a little bit of a trade off,” says Baker, who is living in the home with his partner. He knows it might be better to buy the home outright or have a larger stake in it. “With what they’ve offered, and what they’re continuing to offer, especially for first-time homebuyers where it can be such an intimidating process, I think it’s certainly worth the trade.”
  
• Investment case. Ownify says it has generated an annualized return of 16% for investors. The company last year raised $7 million from seed investors, including Lobby Capital, Socially Financed, Gaingels and others. Rent-to-own and fractional ownership schemes have long walked a fine line between economic inclusion and predatory financing. Some of these strategies have indeed removed barriers to entry by allowing aspiring owners to share the financial responsibilities of ownership with other investors. The proverbial devil is in the details, which often include high fees and a long, drawn-out pathway to full ownership. Ownify is different, Rohde says, in that residents begin accumulating equity with their first payments, and accrue additional equity every month. “We started thinking about what if, instead of a debt-structured path, you create an equity-based path to homeownership,” he said. “Not borrowing money, but just buying it over time.”

• Keep reading, “Ownify seeks to pave a fractional pathway to home ownership, brick by shared-equity brick,” by Roodgally Senatus on ImpactAlpha.

Dealflow: Impact in Latin America

Overheard at Latimpacto’s ‘Impact Minds.’ “We’re here to bet on impact for Latin America,” Lorena Guille of the Monterrey-based Fundación FEMSA said at last week’s Impact Minds conference in Oaxaca, Mexico. Current business and investment models have allowed inequality and violence to take root in the region, said Guille. “It’s possible to build a different legacy. Today we’re writing a new chapter.” On the sidelines, ImpactAlpha’s Dennis Price nosed out catalytic deals, active fundraising, mergers and milestones that lent substance to such claims. 

• Catalytic capital. IDB Invest, the private sector arm of the Inter-American Development Bank, has mobilized private capital for a $50 million sustainability bond in Guatemala, a $50 million blue bond in Costa Rica, and an $80 million social/gender bond in El Salvador. The bank aims to be “a conduit between opportunities that generate scalable impact within our region and international and global investors,” IDB Invest’s Jan Petter Eskildsen told ImpactAlpha. Separately, leveraging a first-loss tranche and subsidized debt, Madrid-based Gawa Capital is more than halfway to its targeted €300 million ($332 million) Kuali Fund, a climate adaptation fund focused on solutions for farmers and small businesses in Latin America and the Caribbean.
  
• Actively raising impact funds. Fundraising is ahead of schedule for AlphaMundi’s Alpha Latin America 2030, or ALA 30 fund, according to the Geneva-based fund manager, which claims investor expressions of interest amounting to $25 million for the firm’s first equity fund in Latin America. Deetken Impact is raising a fresh $40 million for its Ilu Women’s Empowerment Fund, an evergreen gender-lens debt fund focused on Latin America and the Caribbean. Bogotá-based Corporación Inversor is actively raising its second fund. Quito-based IMPAQTO Capital is nearing a final close of its first, $2 million, revenue-based finance fund.
  
• Startup search. Two funds backed by IDB Lab launched this week with calls for proposals for funding. The Green Catalytic Fund invests in bioeconomy startups, and Region Plateada is backing companies providing elderly care. Impacta Fondo, an impact fund hosted at Bogotá-based Universidad EAN, has raised $1 million of its $10 million target, and made its first six investments. Haiti Startup Talent is actively raising to provide follow-on capital to the best of more than 100 Haitian startups and small businesses it has seeded with capital and technical assistance to boost their impact and alignment with the Sustainable Development Goals.
  
• Find more news, chatter and details from Oaxaca, and catch up on Dennis’s earlier coverage, “Meeting of ‘impact minds’ aims to catalyze capital for Latin America.”

Lightsmith and Chan Zuckerberg invest $16.6 million in Beep for in-home health in Brazil. With its mobile app, Beep Saúde helps patients obtain more than 30 vaccines, including for influenza and HPV, set up appointments with healthcare professionals and access home lab tests for fetal sex, Covid-19, hormone and glucose levels. Rio de Janeiro-based Beep, which launched in 2016 to simplify access to healthcare with in-home vaccines and lab tests, says it is profitable. Its latest round was led by New York-based Lightsmith Group. Existing investors Chan Zuckerberg Initiative and David Velez, the founder of Brazilian neobank Nubank, also participated. 

• Healthcare on demand. The prevalence of chronic diseases in Brazil are driving demand for in-home healthcare services. Beep partners with dozens of private insurers and says it has served more than one million households in 150 Brazilian cities across six states.

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Dealflow overflow. Investment news crossing our desks:

• The US Department of Energy’s Loan Programs Office approved a $72.8 million loan guarantee for a solar + storage minigrid on the Tribal lands of the Viejas Band near Alpine, Calif. The project, which will support the Kumeyaay Indian Nation’s energy sovereignty, is backed by US Bancorp Impact Finance and Starbucks, and has grant funding from the California Energy Commission. (DOE)

• Rethink Impact raised $250 million for its third fund to invest in women-led startups. (Forbes)
  
• Mumbai-based Omnivore raised $5 million from French development finance institution Proparco for its third fund, Agritech and Climate Sustainability. (Proparco)
  
• The national development bank of Brazil, Bndes, opened a one billion real ($180 million) low-cost credit program for sustainable agroforestry and reforestation projects in the Amazon basin. (Argus Media)

Signals: Climate Finance

Rather than only punishing emissions, why not reward solutions and systems-level climate impact? Conventional approaches for measuring a company’s progress in combating climate change focus on greenhouse gas emissions reductions (think Scope 1, 2 and 3 emissions). What’s missing: a broader measure of a company’s positive climate impact, a pair of researchers argue in Harvard Business Review. Kaya Axelsson at the University of Oxford’s Net Zero research program and Solitaire Townsend of Futerra, a London-based marketing agency, urge a new approach “to separately recognize, incentivize and measure the impact and influence of businesses trying to drive down emissions beyond their own doors.” The approach focuses on a business’s work in three “spheres of influence”: green products and services, catalytic and philanthropic funding, and pro-climate policy stances. The broader assessment, the authors argue, would help “mobilize companies as system-level actors.”

• Inventory and impact. Reducing emissions and creating impact “are fundamentally different questions, both equally important,” Townsend and Axelsson write. By separating the tracks, “we avoid organizations trying to conflate societal-level impact with operational reductions,” Townsend tells ImpactAlpha. The article argues that rewarding companies for what they contribute, rather than chastising them for what they don’t, can be a strong carrot. Still to come: details on what reporting on their spheres of influence would actually look like, and safeguards to prevent a new wave of greenwashing. 

• Co-benefits. Other groups are beginning to look at climate impacts beyond immediate value chains. The Exponential Roadmap Initiative has issued the “1.5°C Business Playbook“ with pillars including “accelerating climate action in society” and reducing value-chain emissions. The African Development Bank is developing “certified adaptation benefits,” to accompany traditional carbon credits (see, “Social co-benefits and ecosystem restoration begin to make climate adaptation investable”). Some proponents have been pushing the concept of “Scope 4” accounting to cover avoided emissions due to a company’s products or services (such as EVs or energy-optimization software). Achieving net zero carbon emissions globally “is more complex than just summing the emissions reductions achieved by individual actors,” Claire Wigg of the Exponential Roadmap Initiative says. “The current system of greenhouse gas accounting doesn’t take a systemic perspective.”
  
• Dive in.

Agents of Impact: Follow the Talent

Nathan Eskender, formerly with the Ford Foundation, joins Open Society Foundations as a senior investment analyst… Michele Joo Shank, formerly with Social Finance, joins Ascent as vice president of impact and senior counsel… Stefan Okhuysen of HCAP Partners is named a director member of the Latino Corporate Directors Association… Susan Lane, formerly with Mercy For Animals, joins 1% for the Planet in the new role of director of philanthropy.

The Coalition for Green Capital is on the hunt for a CEO in Washington, DC, to take over from founder and former FCC chairman Reed Hundt… Arnold Ventures has an opening for an impact investing director in Houston… Kataly Foundation is hiring a managing director of programs in the San Francisco Bay Area. 

Global Citizen’s Michael Sheldrick and Brandy Schultz of Sound Future will discuss Sheldrick’s new book, “From Ideas to Impact,” on Friday, Sep. 20 in New York… The REAL Summit: Intersection of Finance and Mental Health is happening October 17-18 in New York. Use the code REALIMPACT for 10% off of this ImpactAlpha partner event. 

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

Thank you for your impact!

– Sept. 16, 2024