Greetings, Agents of Impact!
Featured: Policy Corner
Racial equity investors lean in, not out, after the Supreme Court ruling on affirmative action. Another legal shoe may yet drop, but until then investors committed to racial equity strategies say they are more, not less, determined to increase access to capital for Black and Brown founders and diversity in asset management. Last week’s US Supreme Court decision barring affirmative action in university admissions has raised concerns that affirmative racial preferences in other areas may also face legal challenges. “It’s disappointing, but we’re right back at work,” Illumen Capital’s Daryn Dodson tells ImpactAlpha. He says Illumen’s thesis – that the elimination of racial bias drives better performance – is economically based and consistent with fiduciary duty, and thus not at risk. Melissa Bradley of 1863 Ventures says post-George Floyd commitments to founders and general partners of color were waning even before the Supreme Court ruling. She says, “I and many others have shared the need to focus on returns, stay focused, and build remarkable businesses.”
- Mission investments. The SCOTUS decision “may slow racial equity investing but doesn’t have to stop it,” says Urban Institute’s Hannah Martin. A policy brief identified potential barriers to foundations using mission-related investments, or MRIs, to advance racial equity goals by investing in fund managers of color. The ruling “could have implications for how foundations can make decisions about selecting fund managers,” Martin tells ImpactAlpha, adding that there are legally permissible ways to structure racial equity-focused MRIs.
- Inclusion alpha. Keeping the focus on equity outcomes could safeguard strategies from legal challenges. “The value of diversity is not reflected solely by race,” says Rockefeller Brothers Fund’s Keesha Gaskins. “It obviously includes viewpoints and life experience.” Thinking about these issues, she adds, can help “goal-focused institutions function better, more fully, and more effectively by maximizing the scope of diversity.”
- Keep reading, “Racial equity investors lean in, not out, after Supreme Court ruling on affirmative action,” by David Bank and Dennis Price.
Dealflow: Ownership Economy
Everytable raises $25 million to open new locations for food entrepreneurs of color. The capital will support the Los Angeles-based fast-casual dining chain’s growth plan, “which includes opening retail locations that will be managed by franchisee candidates as they go through Everytable University and then eventually go on to own,” Everytable’s Sam Polk said. Everytable will open up to 25 stores in food deserts in California and New York City this year that will go to candidates in Everytable’s Social Equity Franchise Fund (see, “With inclusive loans and business support, franchise ownership offers a path to wealth for entrepreneurs of color”). In March, Polk told ImpactAlpha that the company’s goal is to launch new locations “until there’s tens of thousands of Everytable franchises across the country, with all of them owned and operated by franchisees of color.”
- Healthy food. Everytable is the first investment from the Dohmen Company Foundation’s $60 million impact fund, which plans to back up to 10 social enterprises expanding access to healthy food. “We encourage other foundations, socially-conscious businesses and investors to join us in prioritizing investments in healthy food solutions, such as Everytable, to address the growing diet-related disease epidemic,” said Dohmen’s Rachel Roller. Creadev and Kaiser Permanente Ventures also participated in Everytable’s Series C round.
- Check it out.
Nuru secures over $40 million for clean energy access in the Democratic Republic of the Congo. Nuru, which is Swahili for “light,” plans to break ground on three projects in the DRC’s eastern region. One of the projects, located in Bunia, would be the largest off-grid solar metrogrid in Africa. The DRC “suffers from one of the lowest electrification rates in the world,” despite its immense renewable energy potential, said Joseph Nganga of the Global Energy Alliance for People and Planet, which backed Nuru’s Series B equity round. Other investors include the IFC, Schmidt Family Foundation, Proparco and GAIA Impact Fund.
- M&A. In a separate deal, Actis, a UK-based sustainable infrastructure investor, is selling South African clean energy producer BTE Renewables to Engie and Meridiam. BTE has a nearly 500-megawatt operating portfolio of wind and solar assets. Engie will acquire BTE’s five assets in South Africa while Meridiam will acquire a project in Kenya.
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Dealflow overflow. Other news crossing our desks:
- Mumbai-based Avaada Group secured $1.3 billion to finance green hydrogen, methanol and ammonia projects. Brookfield Renewables invested $1 billion in the round through its Brookfield Global Transition Fund. (Avaada Group)
- Treebula, a Swedish online marketplace for trading forest-based carbon credits, raised €2.4 million ($2.6 million) from Industrifonden and other investors. (EU-Startups)
- Tuma, a DRC-based fintech venture that helps merchants receive payments via smartphones, snagged $500,000 from Visa, Visible Hands and the Social Justice Fund. (TechCabal)
- Steady Energy scored €2 million ($2.2 million) in seed financing, led by VTT Technical Research Center of Finland, to build a modular nuclear reactor by 2030. (VTT)
- Agel raised pre-seed funding from Seedstars International Ventures and Flat6Labs to provide Islamic finance-compliant credit to merchants in Egypt. (Disrupt Africa)
Signals: Climate Finance
Passive investing is making it harder to accurately price climate risk. Market-tracking passive investment strategies have lowered fees and lifted returns as the broader stock market rose. With such funds now representing more than half of US equity fund assets, investors are missing climate risks and opportunities, writes Zach Stein of the investment advisor Carbon Collective in a guest post on ImpactAlpha. “As more of those long-term investors have adopted passive investing strategies, movements in the market are increasingly being dictated by short-term investors.”
- Peak oil. Electric vehicles provide a clear example. The exponential growth of EV sales is disrupting oil majors’ single most important market – ground transportation. An estimated one in five cars sold today globally are electric. Yet short-term profits have led passive investors to double down on oil. “I won’t be retiring for 30 years,” writes Stein. “Does it make sense to not only hold oil stocks in my retirement account, but hold 55% more of them in my portfolio than I did in January 2020?”
- Redefining fiduciary duty. In the face of such mispriced risks, Stein calls for a rethink of the concept of fiduciary duty, especially for stewards of retirement assets. “It’s time for our understanding of what it means to be a fiduciary to re-align with strategies built for the long-term goal of retirement,” Stein writes. (Carbon Collective offers funds and ETFs that avoid fossil fuels and target climate solutions). “We have to lead by example,” he says, “because nobody else will adopt an evolved definition of fiduciary that accounts for the market’s inability to price in long term threats like climate change until we do.”
- Keep reading, “Passive investing is making it harder to accurately price climate risk,” by Zach Stein of Carbon Collective on ImpactAlpha.
Agents of Impact: Follow the Talent
ESG legal authority Paul Watchman has died at age 70. Read this Law Society Gazette profile of Watchman… Founding members of Impact Capital Managers’ new LP advisory council include Mark Berryman of Caprock, Cynthia Muller of Kellogg Foundation, and Sanjeev Krishnan of S2G Ventures and Builders Vision, among others… Tides is on the hunt for an impact investing vice president in San Francisco… Sandoz is hiring an ESG reporting project manager in Munich.
JPMorgan Chase seeks a VP of impact venture investing on its impact finance and advisory team in New York… RBC Capital Markets is recruiting a VP of portfolio management renewable energy tax credit syndications… Members of International Climate Finance Accelerator’s new cohort include SVX México, Annycent Capital and Ship2B Ventures… World Resources Institute India and Sangam Ventures are accepting applications for the Land Accelerator South Asia program through Saturday, July 15.
Thank you for your impact.
– July 6, 2023
