The Brief

The Brief: Private equity giants share (a little bit of) the wealth with workers

ImpactAlpha · December 4, 2024

Greetings Agents of Impact!

📞 Next week’s Call: Napoleon Wallace and the Reconstruction of Black Wealth. ImpactAlpha’s first documentary production charts Napoleon Wallace’s quest to build a network of organizations in North Carolina to foster Black wealth-building and multi-racial prosperity – while living with the challenges of advanced ALS. We’ll screen the 20-minute video and discuss “equity and ownership” with Wallace through his text-to-voice “eye pad.” Watch the trailer and read the backgrounder, “A playbook for the Reconstruction of Black wealth.” Then, join Napoleon’s friends and other Agents of Impact for this exclusive showing, Thursday, Dec. 12, at 10am PT / 1pm ET / 6pm London. RSVP today.

In today’s Brief:

Private equity giants share (a little bit of) the wealth
Decarbonization Partners’ home electrification play
Easing mobile payments in French-speaking Africa
Why the care economy is ripe for returns and impact

Featured: Ownership Economy

As private equity firms start to share the wealth, low-income workers get just a little bit. A few years ago, the mere notion that private equity firms would share any profits at all with workers at the companies they sold was hailed as a breakthrough. As employee ownership strategies attract attention as a powerful way to build working-class wealth, the private equity giants are facing follow-up questions: How much are they actually sharing? And with whom? Led by KKR’s Pete Stavros, private equity firms formed the nonprofit Ownership Works in 2021 to promote shared ownership strategies, pledging to create $20 billion in wealth for workers by 2030 (listen to Stavros’ on ImpactAlpha’s Agents of Impact podcast). In the half-dozen or so exits from companies with shared ownership plans, Ownership Works’ members report they have so far distributed roughly $570 million to a few thousand workers, according to the organization’s latest report. Of that amount, just $176 million has gone to low- and moderate-income earners; only $143 million has gone to families of color. “The point of the work that we’re doing is to include workers who have been historically excluded from equity participation, to give them access to this really significant way to acquire savings and wealth,” Ownership Works’ Anna-Lisa Miller tells ImpactAlpha.

Wealth creation. The $570 million in payouts to date represent benefits only to workers outside of senior management, according to Miller. “Our focus is on the wealth that’s created and shared outside of the norm,” she says. “In the typical private equity transaction, only a handful of senior executives would get a payout.” The payouts to workers, while meaningful, pale in comparison to the returns reaped by the private equity firms themselves, which arguably are generating even more value with better-motivated workers, higher retention and increased productivity. In his keynote speech at Rutgers University’s Private Equity and Share Ownership Symposium late last month, Cory Rosen of the National Center for Employee Ownership raised concerns with private equity’s shared ownership strategy, including if it is really intentional in addressing wealth inequalities.
Worker voice. Ellen Frank-Miller of the Workforce and Organizational Research Center argues that to reap the benefits of shared ownership, companies and their private equity investors have to go beyond financial payouts and create higher-quality jobs as well as opportunities for employees to have a voice in workplace conditions and corporate governance. “An engaged workplace powered by employee-owners is what leads to lower turnover, more efficient services [and] production, and often better quality output,” agreed Michael Brownrigg of Apis and Heritage Capital Partners, which through its employee-led buyouts, or ELBOs, reserves a board seat for workers as it transitions ownership to employees. “We teach that everyone’s ideas should be heard, even if they cannot always be adopted. That creates a workplace of dignity and mutual respect, which is driven by values and which drives value.”
Keep reading, “As private equity firms start to share the wealth, low-income workers get just a little bit,” by Roodgally Senatus on ImpactAlpha. Snehal Shah contributed reporting. Catch up on all of ImpactAlpha’s coverage of the Ownership Economy.

Dealflow: Climate Smart

Decarbonization Partners leads $35 million round for smart metering company. Decarbonization Partners, the joint venture between BlackRock and the Singaporean sovereign wealth fund Temasek, is backing ConnectDER to support electrification and energy efficiency in residential properties. The partners joined with MassMutual Ventures to invest $35 million in the Philadelphia-based company. Existing investors including Avista Development, Clean Energy Ventures, LG Technology Ventures and Zoma Capital also participated in the Series D round.

Islanding. ConnectDER’s smart meters make it easier to integrate solar panels, batteries and other electricity sources into home energy systems. The funding will help the company launch its latest product, IslandDER, which allows “islanding” of distributed energy resources like batteries and EVs for backup power during outages. Decarbonization Partners was launched in 2022 with $600 million from BlackRock and Temasek. In April, it closed $1.4 billion for its first fund, with investors including Allstate, BBVA, Mizuho Bank, MUFG Bank and TotalEnergies.
Plug in.

Norrsken VC inks real estate ESG management software deal. Norrsken VC, the venture capital arm of Klarna founder Niklas Adalberth’s Norrsken Foundation, is looking to catch ESG tailwinds, which are strong in Europe. Norrsken VC led the €13 million Series A investment round for Predium, a Munich-based maker of AI-driven environmental, social and governance management software for the real estate and finance industries. Existing investors UVC Partners, b2venture and Mutschler Ventures also participated.

Net zero buildings. “The real estate market is undergoing a huge transformation as the pressure to decarbonize becomes ever stronger,” said Norrsken’s Agate Freimane. In the EU, new regulations require all new buildings to have zero on-site emissions from fossil fuels by 2030. Predium’s software, Freimane said, enables property owners and operators “to make smart, data-driven decisions that both increase the value of the property and have a sustainable impact.” Customers include Deutsche Investment Group, real estate firm Colliers, and insurance company Baloise.
Share this.

HUB2 snags $8.5 million to expand digital payments in French-speaking Africa. Early-stage investor TLCom Capital led a $8.5 million Series A investment in Cote d’Ivoire-based HUB2, which handles payments for mobile money providers in West Africa. Joining in the round were Dutch development bank FMO, which had invested €2.4 million ($2.5 million) in the startup in January this year, and French public investment bank Bpifrance, which works with sovereign funds and other institutional investors to finance small businesses. Enza Capital also participated.

‘Stripe’ for Africa. Mobile money – a digital service that allows users to make financial transactions using their phones – has become the backbone of payments and money transfers in Africa, where almost three-quarters of such accounts globally are held. Regulatory and technical issues create interoperability challenges. HUB2’s software acts as a “Stripe-like platform” to smooth payments between banks and digital financial services providers and facilitate online and app-based payments. “The one issue I wanted to solve in French-speaking Africa was creating infrastructure and unifying payments in the region,” said HUB2’s Ashley Gauzere. The startup operates in nine countries and works with regional cellular companies such as Orange and MTN. It says it’s on track to process more than $1 billion in transactions this year.
Share this post.

Dealflow overflow. Investment news crossing our desks:

The Hague-based Circularise, which helps companies create blockchain-based digital passports to identify a product’s origin and environmental impact, raised pre-series B funding from Japanese chemical and pharma giant Teijin Group. (Circularise)
Golub Capital made an undisclosed three-year commitment to the New York University Impact Investment Fund, a student-led fund at NYU. The partnership establishes the Golub Capital Social Impact Investment Education Fund, which will support NIIF’s experiential education activities. (NYU Stern)

Catalyst Fund, Renew Capital and others invested $1.4 million in Moroccan startup Enakl to incorporate AI into its ride-sharing app to optimize ride routes. (Technext)

Ireland-based solar installer Solarfix, which designs and installs solar panels, raised €1.8 million ($1.9 million) to expand services to household and commercial clients in Ireland and the UK. (EU-Startups)

Impact Voices: Care Economy

The untapped opportunity in America’s care economy. Retiring Boomers. Soaring childcare costs. The US care economy presents a significant impact investing opportunity. The $648 billion annual market “remains overlooked by most private investors,” Jenna Bussman-Wise of Tesser Capital Management, and Pooja Eppanapally and Safo Ngunga of Women of the World Endowment, write in a guest post on ImpactAlpha. Tesser and WOWE are out with a new guide for investors looking to find impact – and returns – in the sector. Investing in the care economy is not simply about meeting the growing demand for capital, but “reimagining a future where care is valued as a cornerstone of a thriving society and contributes to greater economic prosperity for all Americans.”

Something for everyone. The care economy offers investment options across asset classes and return profiles. For fixed income investors, municipal and other bonds – like ones from California Health Facilities Financing Authority – can offer lower-risk and consistent returns from senior living facilities and affordable housing. Mission Driven Finance’s Care Access Real Estate REIT owns and manages properties optimized for caregiving and gives providers a pathway to own the properties. “For those seeking higher returns, private equity is increasingly a major driver in scaling care services,” explain Bussman-Wise, Eppanapally and Ngunga. For instance, the private equity firm Builders Fund in 2022 invested in Acelero Learning, an early childhood education provider with a focus on eliminating education gaps. The authors also cite opportunities for catalytic and venture capital.
Keep reading, “The untapped opportunity in America’s care economy,” by Jenna Bussman-Wise, Pooja Eppanapally and Safo Ngunga on ImpactAlpha.

Agents of Impact: Follow the Talent

Courtney Joyner Gage, formerly of Tolleson Wealth Management, has joined Align Impact as senior advisor… Jesse Baver is promoted to head of innovative finance for mobilization at British International Investment… Nia Impact Capital is looking for a managing director in Oakland… Jordan Park is hiring a senior impact analyst in San Francisco or New York… Pacific Community Ventures seeks an associate director in Oakland or Los Angeles… The US International Development Finance Corp. is recruiting an environmental and social risk specialist in Washington, DC.