The Brief | August 23, 2021

The Brief: Restoring justice in criminal justice, digital transformation in Latin America, recycled housing, children and ESG

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Greetings, Agents of Impact! 

Featured: The Reconstruction

Leadership for criminal justice reform from those most affected by mass incarceration (podcast). The overhauling of mass incarceration to advance justice in criminal justice requires the leadership of people who have been directly affected by imprisonment and injustice. “We are proximate to the problem,” says DeAnna Hoskins, CEO of JustLeadershipUSA, who was a mother of two young children when she was incarcerated during her struggles with addiction in the 1990s. “If our voices are not heard, we’re going to continue to recycle this inequity.” Hoskins spoke to host Monique Aiken for this week’s Reconstruction podcast about the lost leadership talent among people who have been arrested, incarcerated, or on probation or parole. More than 4.5 million Americans aren’t allowed to vote because of a past conviction. Black people are seven times more likely than white people to be wrongfully convicted of murder and 11 times more likely to be wrongfully convicted of drug possession, according to the National Registry of Exonerations. Asks Hoskins, “Can we uproot this tree?”

The 2018 First Step Act, the first federal reform in over a decade, sought to cut some sentences and improve prison conditions. New Jersey, Indiana and Utah adopted legislation to reduce sentencing enhancements in “drug-free” school zones, which disproportionately affect people of color in dense urban areas. Oklahoma recategorized low-level felony drug and property offenses as misdemeanors. Colorado, Nevada and New Jersey have expanded voting rights to citizens caught in the justice system. “It’s easy for people to say ‘That’s not my issue – they committed a crime, do your time,’ right? Hoskins said her own experience helped her see how policy plays out in marginalized and Black communities. Systems worked against her healing; her children struggled to feel connected to her and manifested their own traumas. Biases against formerly incarcerated people blocked her from jobs that matched her skills. “How do we actually train communities across this country to walk into their greatness?” asks Hoskins. “Because we do have power as people. We just haven’t utilized that voice and momentum.”

Decarceration-lens investing gains momentum in public and private markets. Criminal justice is a growing part of racial-justice investing. To equip investors in public markets, Adasina Social Capital has built a data set of listed companies with practices that exacerbate systemic racial injustice, including those invested in prison bonds, which are used to fund detention center infrastructure and services. Major financial institutions among the 71 prison bondholders flagged by Adasina include Goldman Sachs, Prudential, State Street and Wells Fargo. “Demand for metrics and data relevant to racial justice has never been higher in the investment industry,” Adasina’s Rachel Robasciotti told ImpactAlpha.

  • Stranded assets. The data on prison bondholders comes after a raft of banks, including Wells Fargo, JPMorgan Chase and Barclays have pledged to break financial ties to the private prison industry. “Jail facilities stand to be one of the most obsolete assets of the future,” argue Activest’s Ryan Bowers, Napoleon Wallace and Chelsea McDaniel.
  • Justice tech. In private markets, a wave of “justice tech” entrepreneurs are disrupting the extractive products and services that have grown around the criminal justice system (for background see, “‘Justice tech’ entrepreneurs look to disrupt the cycle of recidivism”). Since Kapor Capital’s investment in inmate communications platform Pigeonly in 2013, venture firms have invested at least $77 million in more than 100 early-stage justice tech startups, according to Village Capital’s Justice Tech For All.” Still, “a lack of market awareness and a strong perception of risk among investors,” has limited justice tech funding, Village Capital’s Marcia Rosado tells ImpactAlpha. Other investors in the space include Social Venture Circle, American Family Insurance, Bronze VC and SustainVC.
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Dealflow: Follow the Money

Brazil’s Nuvemshop scores $500 million to support digitization of small businesses. The pandemic has drawn investors to e-commerce platforms accelerating the shift to online business. Sao Paulo-based Nuvemshop’s nine-figure funding round signals the opportunity: Less than 6% of business sales are transacted online in Brazil and Mexico, Latin America’s most populous countries, in spite of high internet adoption rates in both countries. Nuvemshop has enabled 90,000 businesses in Brazil, Argentina and Mexico to set up and transact through online shops; 70,000 have joined the platform since early 2020, TechCrunch reports.

  • Shopify model. Nuvemshop helps businesses set up branded webshops and handle logistics and digital payments. It is an e-commerce platform like Shopify, rather than an online marketplace like Amazon. Insight Partners and Tiger Global Management led the company’s latest round. The funding follows Nuvemshop’s $90 million Series D in March. Impact investor Elevar Equity backed the company in its 2017 Series B round.
  • LatAm venture boom. Startups in the region raised $9.3 billion in the first half of 2021, nearly double last year’s pace, according to CB Insights. Separately, Pitchbook estimates venture capital investors have deployed $8.8 billion into Latin America this year, more than total VC financing for 2019 and 2020 combined. “VCs are clamoring for Latin American digital transformation opportunities at an unprecedented pace,” Pitchbook reports.
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Makhers Studio is building affordable housing from recycled shipping containers. The Atlanta-based company raised $250,000 from RSF Social Finance to lease its first manufacturing facility in Atlanta to build modular shipping-container housing units with community partners in underserved neighborhoods across the country. Makhers has built five projects to date, including a commercial kitchen and restaurant to support Black food entrepreneurs in Atlanta. Many community development financial institutions remain reluctant to provide financing, and some local governments make it difficult to build the affordable units. “We’ve had to go through this with our first project and that was a lot,” Makher’s Wanona Satcher told ImpactAlpha. “But the more projects we complete, the more people will understand.”

  • Sustainable housing. The company’s current pipeline includes spaces for small business owners, green battery companies and affordable housing developers. Makhers has raised $450,000 toward its $600,000 goal. Other backers include SheEO, Visa, Esther Dyson, Reed Marill and a crowdfunding campaign on iFundWomen.
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Dealflow overflow. Other investment news crossing our desks:

  • PNC Financial Services Group pledges to invest $20 billion by 2026 in green buildings, renewable energy, clean transportation and issuing sustainability-linked debt.
  • change:WATER Labs, Boddle Learning and DrugViu share $500,000 as the winners of Next Wave Impact’s Founders of Color Showcase.
  • Goldman Sachs acquires ESG investment specialist NN Investment Partners for $1.6 billion. Federated Hermes acquires the BT Pension Scheme’s remaining stake in Hermes Investment Management.
  • South Africa-based early-stage hardware investor Savant invests in small-scale biogas venture Renewco.

Impact Voices: Care Economy

​​It’s time to integrate children’s issues in ESG frameworks. Beyond hot-button issues like child labor, many investors and businesses have a blind spot when it comes children’s issues, says UNICEF’s Charlotte Petri Gornitzka in a guest post on ImpactAlpha. UNICEF has created a tool for investors to integrate children’s issues, such as paid leave policies, online marketing and child labor in the supply chain, into environmental, social and governance, or ESG, assessments. 

  • ‘S’ is for social. Last week, 300 business leaders called on Congress to pass paid leave legislation in the U.S. More than two million women have dropped out of the workforce since the start of the COVID pandemic as schools went virtual. The Biden administration has argued that social infrastructure and the “care economy” are critical to U.S. productivity and economic growth. Enhanced childcare credits rolling out to American families under the American Rescue Plan and universal preschool and affordable childcare provisions in the proposed $3.5 trillion spending bill represent dramatic steps forward. “Focusing on children is an investment, not a cost,” Gornitzka says.
  • Keep reading, “It’s time to integrate children’s issues in ESG frameworks,” by Charlotte Petri Gornitzka on ImpactAlpha.

Agents of Impact: Follow the Talent

Illumen Capital seeks a director of investments in the San Francisco Bay Area… The Black Economic Alliance Entrepreneur’s Fund is recruiting a managing director … The Shareholder Commons is looking for a program associate… Stanford University’s Stanford Impact Labs is hiring an executive director… Boston Impact Initiative has an opening for an impact investment associate in Boston… SVX is hiring an intern analyst in Toronto… Alterna Impact is looking for an impact investment manager in Guatemala City.

BLCK VC is hosting “BIPOC representation in the climate startup ecosystem,” Wednesday, Aug. 25, with Prime Impact Fund’s Amy Duffuor, Aligned Climate Capital’s Nneka Kibuule, Sidewalk Infrastructure Partners’ Christian Okoye, and Include Venture Partners’ Taj Ahmad Eldridge (go deeper: “Solving for climate justice is giving these Black investors an edge in the green economy”)Socap Global is holding INTEGRATE21, a conference on transitioning corporate finance to a sustainable model, at Fordham University in New York and online, Nov. 8-10.

Thank you for your impact.

– Aug 23, 2021