Greetings, Agents of Impact!
Don’t miss these upcoming ImpactAlpha calls:
⚡ Plugged In: Local climate innovation with Aina Abiodun of VertueLab. The Portland-based climate nonprofit’s investments include EV charging startup OpConnect in Portland and solar panel efficiency venture BlueDot Photonics in Seattle. Like peer nonprofit early-stage climate investors Elemental Excelerator and Prime Coalition, Abiodun believes the right mix of community and capital can help “close the gap between the urgency of our situation and the slowness of the bureaucratic ways in which money is coming through the system.” Join host Sherrell Dorsey in conversation with VertueLab’s Aina Abiodun live on LinkedIn, Wednesday, Nov. 8 at 10am PT / 1pm ET / 6pm London. RSVP today.
📞 Agents of Impact Call: Women as agents of change for climate resilience. Join Camilla Nestor of MCE Social Capital, Shally Shanker of AiiM Partners, Noramay Cadena of Supply Change Capital, and Samantha Anderson and Rose Maizner from Heading for Change, Wednesday, Nov. 15 at 10am PT / 1pm ET / 6pm London. RSVP today.
Featured: The Liist
Impact fund managers target creators of quality jobs and economic mobility. Raising incomes from the bottom up mitigates a key systemic risk: social dislocation and economic disengagement. Sustainable Development Goal No. 8 puts it simply: decent work for all. Policy has to do the heavy lifting, but impact investors have plenty of opportunities to put capital to work in livelihood resilience, small business growth, good jobs and worker upskilling (see related, “Do investments in ‘good jobs’ meet the needs of jobholders?“). Impact funds on this month’s Liist of managers currently raising capital are fostering livelihoods with a variety of strategies. US-based JFF Ventures, the venture arm of nonprofit Jobs for the Future, invests in tech companies supporting worker upskilling and economic opportunities for low- and middle-income earners, particularly youth, veterans, women, immigrants and people of color. In Spain, Q Impact is targeting youth employment across Southern Europe.
- Small businesses. Small businesses are the backbone of their local economies and key job creators – and have an annual appetite for roughly $5 trillion in debt and equity across emerging markets. Advance Global Capital in London provides working capital and trade financing to small and growing businesses, with a portfolio that includes costume makers in Colombia and media producers in Botswana. Teranga Capital in Senegal is investing in small businesses, from informal and microfinance businesses to tech-focused startups, in francophone West Africa.
- Impact-linked agri investing. Netherlands-based Grounded Investment Company writes small equity checks to East African agri-processing companies supporting smallholder farmers. The women-led firm links its own cut of investment profits to its impact outcomes. In the US, farmland investor Fractal Agriculture likewise ties its compensation to outcomes, such as improved soil and water quality through regenerative techniques.
- Women driving change. The intersection of climate and gender is proving a fertile place to look for investment opportunities (RSVP for The Call: “Women as agents of change for climate resilience”). Mauritius-based Altree Capital and a growing crop of fund managers are looking at investments through both gender and climate lenses. “Women are a benefit multiplier and should have a seat at every table,” the women-led and first-time fund manager says. Four of the seven funds on this month’s Liist have female partners.
- Keep reading, “Impact fund managers target creators of quality jobs and economic mobility,” by Jessica Pothering and Lucy Ngige on ImpactAlpha. And explore more than 100 impact funds raising capital in the past year on The Liist, ImpactAlpha’s searchable database and new subscriber benefit. Know an impact fund manager currently raising capital? Drop us an email or complete this short form.
Dealflow: Private Equity Impact
KKR clinches $2.8 billion for second impact fund. The global impact fund launched by KKR five years ago has become one of the private equity giant’s highest performing strategies. That helped KKR more than double the size of its second global impact fund, which clocks in at $2.8 billion. The fund – which invests in climate solutions, sustainability, education and training, and inclusive growth – benefits from macro tailwinds around sustainability, resilience and geopolitics, KKR’s Ken Mehlman told ImpactAlpha. The pitch: build great companies “solving very big problems that often have both an economic imperative and also a sustainability imperative or a workforce imperative,” he said. “That combination is powerful.” KKR will invest $250 million from its balance sheet alongside pension funds, insurance companies, family offices and other institutional investors.
- Ownership economy. KKR has staked out employee ownership as a key part of its private equity thesis. That’s filtering into funds such as its global impact funds. Four out of 18 portfolio companies across KKR’s two impact funds have employee ownership built in, including Utah-based edtech Graduation Alliance; Boston- and Idaho-based labor economics provider Lightcast; and GreenCollar, an Australian environmental projects developer. KKR sold its GreenCollar stake to the Ontario Teachers’ Pension Plan in September. “Our goal is to have [ownership] in as many companies as we can in the portfolio,” said Mehlman. “We are huge believers in the employee engagement model built around ownership.”
- Get the scoop.
Social Finance taps donor-advised funds for impact-first investments. The Social Finance Impact First Fund aims to make it easier and more cost effective for tax-advantaged donor-advised funds to invest in impact-first deals. DAF managers and philanthropists “have struggled with how to put more philanthropic capital to work to advance their visions for change,” said Kirstin Hill, who joined Social Finance in September after 25 years at Bank of America. The open-ended fund is looking to raise $250 million by the end of 2025 to invest in impact funds that support enterprises led by and serving individuals from marginalized communities, targeting a low single-digit return on capital. It secured recoverable grants from DAFs at Boston Foundation, Fidelity and Vanguard Charitable, and a direct commitment from a Combined Jewish Philanthropies’ DAF. Holders of DAFs are seeking to diversify their portfolios across investments that prioritize positive impact over financial returns, according to a study by the Rockefeller Foundation and Social Finance.
- Impact first. The Social Finance fund made a $5 million commitment to Black-owned Blackstar Stability’s Distressed Debt Fund, which buys predatory mortgage loans to help homeowners transition to more stable, traditional mortgages (see Q&A, “Replacing predatory loans to build equity and wealth for homeowners of color”). It also invested in Candide Group’s Afterglow Climate Justice Fund to develop impact projects in climate-vulnerable communities.
- Fund of funds. The diversified structure is making a comeback after falling out of favor because multiple layers of fees sapped returns. In legacy alternatives, a fund of funds manager might charge a management fee of 2%, plus 20% of the “carry,” or fund profits, on top of a similar fee structure for the managers of the underlying funds. As a nonprofit, the Impact First Fund is charging a management fee of only 1.5%, with no carry.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- New Delhi-based Euler Motors raised 6.9 billion rupees ($83 million) from Blume Ventures, ADB Ventures, British International Investment and other investors to make electric three-wheelers used for cargo transport. (BII)
- Austin-based Talus Renewables scored $22 million in Series A funding, led by Material Impact and Xora Innovation, to develop modular green ammonia systems. (Talus Renewables)
- Aclarity snagged $16 million in Series A funding to develop an electrochemical process for removing PFAS and other contaminants in water and liquid waste. (InvestorsObserver)
- Wyoming-based utility-scale wind developer Airloom Energy clinched $4 million in a seed financing round backed by Breakthrough Energy Ventures, Lowercarbon Capital and MCJ Collective. (FinSMEs)
Short Signals: What We’re Reading
🙏 Losing faith in impact? Faith has a stated role in the investment policies and guideline statements of just over half of faith-based asset owners (down from 69% in prior research), according to FaithInvest. Just over a third (36%) explicitly permit impact investing (down slightly from the last study). (FaithInvest)
🏢 Real estate impact funds. Impact in real estate investments can range from building more affordable housing to using more sustainable materials in construction to reducing energy consumption in-use. Phenix Capital has identified 174 real impact estate funds that have raised €33 billion ($35 billion), including 76 funds that are open for investment. (Phenix Capital)
🌿 The US hemp opportunity. After 80 years of legal prohibition, the nascent US hemp industry is decades behind China, Canada and France. With policy, private investment and market development, US hemp could reach $2.2 billion in annual revenue by 2030, create up to 10,000 jobs and sequester over two million tons of CO2. (bioSolutions Initiatives)
💲 The (sorry) state of climate blended finance. Total blended finance deal volume decreased by roughly 45% last year, according to Convergence; blended climate finance was down 55%. One bright spot: Transactions that address climate mitigation and adaptation goals attracted almost half of institutional investments into climate finance. (Convergence)
☀️ Climate in the boardroom. Amundi, LGIM, and Franklin Templeton stood out for their proxy voting against board directors at climate-critical companies. BlackRock, Vanguard, State Street, and Fidelity all served to “rubber-stamp” existing board directors of recalcitrant climate-critical companies. (Majority Action)
🇳🇬 Nigeria’s solar gamble. An abrupt decision to end fuel subsidies in Lagos is jump-starting a solar future – and making electricity more expensive in Africa’s biggest city. (Bloomberg)
Agents of Impact: Follow the Talent
Maria Oliva Farriol, ex- of Oryx Impact, joins MCE Social Capital as impact manager… CapitalOne seeks a community impact and investment project manager for its social impact team… Lowercarbon Capital is hiring an energy systems technical associate in San Francisco… BlackRock Investment Stewardship is looking for healthcare and energy analysts in New York… Pivotal Ventures is recruiting a director of equity and belonging.
Visa Economic Empowerment Institute is on the hunt for an executive director in Washington, DC… MAPS Public Benefit Corp. has an opening for a remote head of market access… Urban Institute and Public Finance Initiative will host a virtual event on how issuers and other stakeholders can use a new “Municipal Bond Racial and Social Equity Scorecard” to advance equity in municipal bond markets, Thursday Nov. 9.
Thank you for your impact!
– Nov. 7, 2023