Greetings, Agents of Impact!
Agents of Impact Call No. 26: Looking ahead to 2021. New year, new possibilities. With our year-end roundups behind us (see below and all week), we’ll be getting ready for what’s next. Bring a prediction, a plan or even an ask for 2021 (limit: 60 seconds) to share with fellow Agents of Impact on our last Call of the year. You never know with whom you might connect. The ImpactAlpha team will share some stories (off the record!) and preview our own plans. Join us and special guests to raise a toast to the year ahead, Tuesday, Dec. 22, at 10am PT / 1pm ET / 6pm London / 9pm Nairobi / 11:30pm Delhi / 3am Tokyo (sorry!) RSVP today.
Featured: Looking Ahead
Centering Blackness in the U.S. economic recovery and reconstruction in 2021. The period after the Civil War was a time of ferment, division – and systemic change. Today’s confluence of pandemic, division and popular mobilization presents its own opportunities for system-change. The uprising against systemic racism that spilled into the streets this summer also pushed its way onto global investors’ agenda as a systemic risk on the scale of climate change. “If racism is a systemic risk, overcoming its legacy and investing in justice and equality are systemic opportunities,” we wrote over that long weekend that followed the killing of George Floyd (see, “Agents of justice are agents of impact”). On cue, investors and institutions with a proactive vision of racial justice and economic liberation emerged as critical to the COVID response and recovery. By shifting power and practices, they’re also modeling the broader economic reset, and our own reconstruction.
- Systemic risks, systemic opportunity. To play a role in uprooting systemic racism, investors have to modernize investing itself. Adasina’s new social justice ETF screens public equities on criteria identified by community and social justice activists. Cities that treat their residents fairly have longer, stronger fiscal outcomes, says Activest’s Ryan Bowers. “All investments lead to some kind of socioeconomic outcome,” says Transform Finance’s Andrea Armeni.
- Redistributing power. It’s no longer enough to invest for impact. The investment process – who decides, how it is structured and who benefits – is also under scrutiny. Heron Foundation’s Dana Bezerra is leading an effort to shift investment decision-making to community leaders. Local funds such as RUNWAY, Ujima Fund and Boston Impact Initiative are sharing power and wealth with community members. From Apis & Heritage Capital to KKR, investors are using employee ownership models to boost livelihoods, save small businesses and narrow the racial wealth gap.
- Expanding financial capillaries. When the pandemic shut down the economy, community development financial institutions sped capital to small businesses outside traditional banking channels, particularly in rural areas and communities of color. Corporations from Netflix and Google to Twitter and Yelp deployed corporate cash into CDFIs. Offerings from CNote, Tiedemann Advisors and StoneCastle Cash Management and others made it easier for big investors to park cash with community lenders.
- Returns on inclusion. Asset owners and fund managers are seeking “inclusion alpha” in overlooked founders and markets, unlocking value and executing deals that others can’t. The year’s proof points include raises by Kesha Cash’s Impact America, which is targeting tech solutions to systemic racism, and Daryn Dodson’s Illumen Capital, which is rooting out bias in asset management.
- What we’re watching. “The Reconstruction is a beat, it’s a podcast series and it’s a platform for the emerging positive vision that centers Blackness as we recover from the pandemic, reset for climate action and reimagine capitalism here in the U.S. and around the world,” says ImpactAlpha contributing editor Monique Aiken. ImpactAlpha is watching for all the ways finance drives racial injustice and for the investors doing the opposite: deploying their financial and social capital to root it out.
Keep reading, “Centering Blackness in the U.S. economic recovery and reconstruction in 2021,” by Dennis Price and Amy Cortese on ImpactAlpha.
Dealflow: Follow the Money
Netflix invests $25 million in Enterprise’s Equitable Path Forward initiative. Netflix committed $25 million to an ambitious effort by Enterprise Community Partners to uproot the legacy of systemic racism in the U.S. housing market. Maryland-based Enterprise is looking to raise $350 million, and catalyze $3.1 billion more, to diversify the real estate sector and boost homeownership among Black, Indigenous and other minority communities. Enterprise’s Equitable Path Forward aims to tackle disproportionately low homeownership rates for Black Americans and other people of color, relative to white Americans; the widening wealth gap between Black and white Americans; and low representation of Black and other people of color in the real estate sector – just 2% of real estate development firms are Black-led.
- Corporate cash. Netflix earlier committed to moving $100 million of its cash into Black-led lenders, businesses and institutions, including Hope Credit Union and Local Initiatives Support Corp. (see, “Netflix to move $100 million in cash deposits to lenders in Black communities“).
- Three strategies. The $350 million Growth Fund will provide debt, equity, grants and credit enhancement to attract additional capital. Enterprise is seeding the fund with $10 million in first-loss capital from its own balance sheet. The organization is also earmarking $15 million to advise companies in communities where Enterprise owns and manages affordable housing, and $10 million to diversify leadership in the real estate sector.
- Dive in.
Entrepreneur Backed Assets Fund aims to provide liquidity for community lenders. The nonprofit fund will buy loans originated by a half-dozen members of a collaborative of community development financial institutions, or CDFIs, to enable them to make more loans. The fund will sell them to banks to satisfy their Community Reinvestment Act requirements. Initial funding of $8.8 million comes from the Citi, Gates and Robert Wood Johnson foundations, Microsoft and Woodforest National Bank. Entrepreneur Backed Assets Fund grew out of work by the Aspen Institute and the Microfinance Impact Collaborative and will be managed by Revolve Asset Management, a firm that spun out of Accion. “We’re trying to build something that goes beyond the life of this pandemic and create a true secondary market for these loans,” Aspen’s Joyce Klein told ImpactAlpha.
- Underserved markets. The participating CDFIs make 75% of their loans to business owners of color, and 61% to low- and moderate-income business owners. The Collaborative’s six members are Albuquerque-based Dreamspring, Justine PETERSEN in St. Louis, LiftFund in San Antonio and three units of Accion – Ascendus (formerly Accion East), Opportunity Fund and the Accion branch serving Illinois and Indiana. The fund expects to purchase 1,000 small business loans by February.
- Paths to liquidity. To free up capital for CDFIs to redeploy for COVID recovery, similar loan-buying and liquidity facilities have been launched in New York, California and Chicago. The government-backed “recovery vehicles” have been structured as special purpose vehicles to buy and hold the loans.
- Share this.
Builders Fund invests in affordable residential solar firm PosiGen. PosiGen launched a decade ago to help low-income households switch to solar power and save roughly 20% on energy costs. The New Orleans-based company has more than 17,000 customers in Louisiana, Connecticut, New Jersey, New York and Florida. Builders Fund’s Tripp Baird praised PosiGen’s “unique model combining economic upside with carbon mitigation and economic empowerment.” Builders led PosiGen’s $33 million Series D equity round, with 2040 Fund and Emerson Collective. The deal is the first from Builders’ second fund, which recently reached a $30 million first close. Check it out.
Ginkgo Bioworks acquires “microbial engineering” company Novogy. Novogy is developing sustainable varieties of fats and oils from oleaginous yeasts. The microbes are promising sources of biofuel and less resource-intensive to produce than oilseed crops. Boston-based biotech Ginkgo Bioworks acquired the startup, along with its intellectual property and much of its team. Ginkgo’s research spans from food-based alternative proteins to COVID-19 testing. More.
Dealflow overflow. When it rains, it pours. Short takes on some of the deals crossing our desks:
- MacKenzie Scott’s $4.2 billion in new grants include community financiers. The latest round of giving follows the $1.7 billion the philanthropist, Agent of Impact and ex-wife of Jeff Bezos gave to organizations including historically Black colleges and community lenders four months ago. On the new list: CDFIs Coastal Enterprises, IFF, Community First Fund, Community Vision, Craft3, Invest Detroit, Reinvestment Fund and Rural Community Assistance Corp.
- Microfinance investor Te Creemos to acquire Mexico’s Banco Forjadores. The Mexico City-based holding company’s acquisition of the microfinance bank will expand Te Creemos’ reach to ultra-micro borrowers and depositors. Te Creemos’ portfolio has delivered loans and insurance to 600,000 mostly women-led micro-enterprises.
- Senegal’s Oolu raises $8.5 million to deliver affordable off-grid solar. The Dakar-based solar startup offers pay-as-you-go solar products and systems to 60,000 West African households. Persistent Energy Capital, All On, Gaia Impact Fund and DPI Energy Ventures backed Oolu’s Series B round. The COVID crisis has boosted demand for reliable energy access (see, “Zola Electric scores $8 million partnership for solar mini-grids in Africa”).
- DFC boosts emerging markets COVID relief. The U.S. development finance institution will commit $50 million to a COVID micro- and small-business relief fund, in partnership with the Netherlands’ FMO. DFC separately approved loans of $93.8 million to Paraguay’s Sudameris Bank and $150 million to South Africa’s Taxi Impact Fund as part of $2.1 billion in newly approved investments.
- Kingsland University secures $20 million to offer income-share-based higher education. The Atlanta-based online university will launch an income-share agreement, or ISA, to enable students to defer tuition payments until they secure well-paying jobs. Kingsland’s programs focus on emerging tech training, like blockchain and cybersecurity (listen to the podcast, “Career impact bonds transfer risk to investors as the future of work arrives”).
- Capital One Ventures invests in food waste tech company Goodr. Atlanta-based Goodr has developed a service that redistributes surplus food to families in need. The female-led company is the first impact investment from Capital One’s venture capital arm.
- Pickrr Technologies raises $4 million to boost India’s delivery logistics. As small businesses shift en masse to online sales, particularly amid pandemic shutdowns, Delhi-based Pickrr has developed smart route-planning to improve the efficiency of India’s courier services. Omidyar Network India and Guild Capital backed the startup.
Agents of Impact: Follow the Talent
Joe Biden is expected to name Natural Resources Defense Council head and former EPA chief Gina McCarthy as White House climate czar to work alongside presidential envoy for climate John Kerry. Former Michigan Governor Jennifer Granholm is on tap to run the Energy Department… FaithInvest is recruiting a CEO… Morgan Stanley seeks a sustainability associate and an ESG data specialist… Arctaris Impact Investors is looking for a chief compliance officer in Boston… The U.S. Treasury Department is recruiting a senior advisor for the CDFI Fund… Triple Jump is hiring a junior ESG and impact officer in Amsterdam.
Thank you for reading.
– Dec. 16, 2020