The Brief | February 14, 2023

The Brief: Private equity’s climate ambitions, ownership-lens investing, regenerating Morocco’s desert, Black-led impact tech, ChatGPT’s due diligence

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Greetings, Agents of Impact! 

Featured: Climate Finance

Private equity giants double down on the low-carbon transition and impact investing. Over the past week, one private-equity executive after another has singled out the low-carbon transition as a key opportunity for raising and deploying capital. Brookfield Asset Management, which last year closed fundraising for its $15 billion energy transition fund, is looking to raise a successor that could be double that size. Brookfield’s Bruce Flatt told investors last week the firm’s low-carbon transition business could scale to over $200 billion in the next decade, “thanks to significant macro tailwinds for the strategy and strong initial deployment.” Other publicly listed investment firms, including KKR, Apollo Global Management and TPG also are dropping details of their strategies in public filings and quarterly calls. 

  • Impact outperformance. KKR said its impact fund led the firm’s 17 other funds last year with a 32% internal rate of return. It has closed on at least $1.9 billion for a successor Global Impact Fund. It is also staffing up for a dedicated climate fund, bringing on Emmanuel Lagarrigue, a former Schneider Electric executive who helped establish General Atlantic’s BeyondNetZero fund, and Goldman Sachs partner Charlie Gailliot to co-lead the new fund. 
  • Green infrastructure. Apollo is adding a dedicated team to find climate and infrastructure deals. The firm has committed or deployed more than $6 billion for sustainable investing and will begin raising capital for a new clean transition fund and other “opportunistic vehicles” in the second half of the year, Apollo’s Jim Zelter told analysts. Brookfield’s portfolio includes hydroelectric, green hydrogen, wind, solar and storage facilities. In October, it acquired 51% of Westinghouse, which has been doing brisk business replacing aging Soviet-era nuclear plants. “We are willing to go where the emissions are,” said Flatt.
  • Concentrated capital. Institutional investors are increasingly concentrating their allocations with big players that can invest across a wide range of asset classes and strategies. TPG, which through its TPG Growth unit has raised $7.3 billion for its climate fund, will report its 2022 results Wednesday (see, “TPG Rise’s $7.3 billion climate plan takes shape”). TPG is looking to raise $3 billion for its third Rise impact fund, and a follow-on climate fund next year. In November, TPG’s Jim Coulter called climate tech “one of the real bright spots” in a volatile investment landscape.
  • Keep reading,Private equity giants double down on the low-carbon transition and impact investing,” by Amy Cortese. Spot emerging investment opportunities and persistent capital gaps with the Climate Finance Tracker on ImpactAlpha.

Dealflow: Worker Ownership

Social Capital Partners widens its ‘ownership lens’ with a $2 million fund. The Toronto-based nonprofit has made a specialty out of convincing Canada’s pension funds to invest in U.S. worker-ownership conversions through employee stock ownership plans, or ESOPs (see, “Canadian pension fund backs Taylor Guitars’ conversion to employee ownership”). Partners Jonathan Shell and Bill Young, with their own money, are building The Ownership Fund, a demonstration portfolio of companies and funds that facilitate broader ownership of homes and businesses. “There’s too much private equity. There’s too much consolidation,” Shell told ImpactAlpha. He said the fund’s portfolio could grow from eight holdings to as many as two dozen in the next year. “All of those things fit within a theme of ensuring that the economy doesn’t end up being owned by fewer and fewer people in a consolidated fashion.”

  • Ownership agenda. Many of the fund’s investments are familiar to ImpactAlpha readers, including Apis & Heritage Capital Partners, which focuses on ESOP conversions at companies with large BIPOC workforces, and Common Trust, which helps small business owners convert to employee-focused “ownership trusts” (listen to Common Trust’s Zoe Schlag on the Impact Briefing podcast). The Blackstar Stability Distressed Debt Fund buys predatory contract-for-deed home loans and helps homeowners transition to more stable, traditional mortgages. Indiegraf is a platform for journalists starting local newsletters. “We want the portfolio to run the gamut of all things you can use to try to disaggregate ownership to people who otherwise don’t have access,” Shell said.
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Sand to Green secures $1 million to regenerate Morocco’s desert. The France and Morocco-based company is completing a three-year sustainable agroforestry pilot that uses valuable crops, like rosemary and peas, to restore degraded land in Morocco for food production. Its drip irrigation systems are fed with water from solar-powered desalination plants, paid for with carbon credits. “We had better than expected results,” Sand to Green’s Benjamin Rombaut told ImpactAlpha. Nearly half of Moroccans make their living from agriculture. The country, which is two-thirds desert, is losing arable land to desertification. Farmers in the southern region “are having to leave because they can’t cultivate their land anymore,” Rombaut said. Biodiversity is returning in Sand to Green’s pilot project, with birds, insects, rabbits and other small animals coming back to the area. “Humanity has destroyed a lot of nature,” said Rombaut, “but just a bit of help can restore it quickly.”

  • Capital to scale. Sand to Green’s next phase is restoring a 50-acre plot of desert. BFA Global’s Catalyst Fund and Norwegian VC firm Katapult backed Sand to Green’s pre-seed round. Sand to Green is looking to raise €500,000 to €600,000 for the project, which it will operate. It’s investing its own capital as well. “For the first one, it’s important to show investors that we’re chipping in,” Rombaut said. “Longer-term, we’d like to be able to export the model without being the operator. We want others to replicate this so it can scale.”
  • Tech for nature. Rombaut says he’s excited by emerging, low-cost desalination technologies. For now, the company will offset its desalination costs by selling carbon credits generated from the land’s improvement. “There are so many ways that technology can be useful in nature,” said Rombaut. “We can’t just invest in technology for the sake of technology. If we don’t integrate it with nature, it’s pointless.”
  • Dive in.

Dealflow overflow. Other investment news crossing our desks:

  • Wind and solar energy developer Enlight Renewable Energy went public on the Tel Aviv Stock Exchange.
  • Berlin-based Planet A Ventures raised €160 million ($171 million) for its first fund to back European climate tech ventures. 
  • Morocco’s Chari secured $1 million from Orange Ventures to provide small businesses with logistics services and inventory financing. 

Six Short Signals: What We’re Reading

🏈 Jay Z’s NFL influence. With Rihanna, Dr. Dre and Snoop Dogg, The Weeknd, Jennifer Lopez and Shakira, Roc Nation’s partnership with the NFL has opened the Super Bowl halftime show to a more diverse set of music genres and artists. (Dan Runcie, Trapital)

🌱 Plant-based pet food. Customers are shifting their dogs and cats to a diet based on plants, insects and lab-grown protein, creating an opportunity for startups. (Bloomberg)

💅🏾 Black-led impact tech. Gro Intelligence, Planet FWD, Vericool and at least 22 other companies featured in The Plug’s “Black Tech Effect” report of 100 high-growth, Black-led tech ventures qualified in the “impact” category, with solutions to climate, water, food and healthcare challenges. (The Plug)

📈 Maturing impact market. Impact funds last year saw 187% year-over-year growth in the average amount of capital committed by institutional investors, which now stands at €278 million ($298 million), according to Phenix Capital. (Phenix Capital)

🏳️‍🌈 Inclusion alpha. The more open founders are about their sexual identity, the more capital and revenue they raise, according to a Proud Ventures survey of 130 LGBTQ+ founders in the U.K. (Proud Ventures)

🔍 ChatGPT does diligence. Kite Impact’s Gregory Neal asked the AI chatbot to come up with 10 red flags when conducting due diligence on impact managers. (Gregory Neal, Kite Impact)

Agents of Impact: Follow the Talent

President Biden is expected to name Federal Reserve Vice Chair Lael Brainard as his economic adviser, replacing Brian Deese, who will step down this month… Strive Asset Management’s Vivek Ramaswamy, known for his anti-ESG campaign, is “strongly considering” a run for the Republican presidential nomination next year. 

The IFC seeks an investment officer for disruptive tech and venture capital in Europe… The World Resources Institute is hiring a global director for a food, land and water program in Washington, D.C… 20 Degrees is recruiting a remote social finance director… Two Sigma Impact has an opening for an operating associate in Portland, Maine… Tiffany Manuel’s TheCaseMade is looking for a remote business manager… The Lede Company seeks a social impact director in New York.

AEG is recruiting a sustainability program manager in Los Angeles… UN Women is hiring an accountability framework lead in New York… Organon is looking for an ESG communications director in Jersey City, N.J… The Skoll Foundation has an opening for a portfolio and investments analyst in Palo Alto, Calif… Digital Green seeks a remote program strategy director… Citi is recruiting a Miami-based sustainability and ESG director for Latin America. 

The LEGO Group is looking for a senior director of sustainability engagement in London… MaRS Discovery District has an opening for a climate and cities senior manager in Toronto… Omidyar Network is accepting applications for two-year associates in Redwood City, Calif. or Washington, D.C… Impact Amplifier is launching the second phase of its Africa Online Safety Fund. Applications open March 1 (for context, see, “Africa’s online safety is a new frontier for social innovation).

Thank you for your impact.

– Feb. 14, 2023