Greetings, Agents of Impact!
Featured: Climate Finance
Rockefeller Foundation’s new climate strategy: A Q&A with Thomas Belazis. In late July, Rockefeller Foundation’s Raj Shah announced a major shift: the $6 billion foundation would make climate central to everything it does. A world on track to warm by three degrees Celsius would wipe out all the work the Rockefeller Foundation and its partners have accomplished over decades, Shah warned. The move comes two years after the foundation, created by oil magnate John D. Rockefeller in 1913, committed to divesting from fossil fuel companies. Much of the climate strategy will fall to the foundation’s innovative finance group, its de facto impact investing arm. ImpactAlpha’s Amy Cortese interviewed Rockefeller’s Thomas Belazis, a director in the group, about the strategy at the recent Phenix Capital conference in New York. Some highlights:
- Energy access. The foundation has spun out its energy strategy into the Global Energy Alliance, a $1.5 billion joint venture with Bezos Earth Fund and IKEA to accelerate energy transition and energy access in emerging markets. “Our underlying mission is focused on promoting the well being of humanity, so our key stakeholders have largely been poor and vulnerable populations,” Belazis said. “The reality is that if we want to support vulnerable populations, we really have to tackle climate change.”
- Nature-based solutions. Belazis’ group has an initial $30 million mandate to make three to five investments over 18 months. Belazis said the foundation is exploring “the full suite of decarbonization solutions,” with a particular interest in nature-based solutions including reforestation, conservation, the blue economy, and carbon markets. “We see this tremendous demand for carbon, which isn’t necessarily matched with a commensurate amount of supply,” said Belazis. “There’s a lot of opportunity to use our catalytic funds to accelerate that part of the market.”
- Carbon markets. Buyers of carbon credits are starting to recognize, and pay for, “co-benefits,” for example for Indigenous communities or biodiversity. “We are starting to see the market pay a premium, and so in some ways that type of work is starting to pay for itself,” Belazis said. “Our hope here is that you’ll see direct alignment between the amount people are willing to pay and not only the financial liabilities of projects, but the impact of those projects.”
- Keep reading, “Foundation’s new climate strategy: A Q&A with Thomas Belazis” by Amy Cortese on ImpactAlpha.
Dealflow: Placed-Based Investing
East Boston Community Development establishes a neighborhood trust to preserve affordable housing. A Mixed-Income Neighborhood Trust, or MINT, in East Boston has acquired 114 units across 36 multifamily buildings that will be preserved as affordable for current and future residents in the long term. Local organizations in cities like Atlanta, Los Angeles, Portland and Tulsa, Okla. have formed such trusts to preserve housing affordability in fast-gentrifying neighborhoods (see, “Neighborhood trusts are taking on speculators and building community wealth”). The East Boston Community Development Corp. created the trust with $8 million in financial assistance from the Boston Impact Initiative, local social justice group City Life/Vida Urbana, the Hyams, Boston and Eastern Bank foundations, and private individuals. The city of Boston provided $12 million in public funding to make the acquisition, $9 million of which was drawn via funds provided by the American Rescue Plan Act.
- Neighborhood organizing. “For many years, families in East Boston have been fighting to stay in their homes and live their lives in peace, without constant fear of displacement or deportation,” said CityLife/Vida Urbana’s Mike Leyba. “This major acquisition and preservation of affordable housing to the neighborhood is only possible because of the power and tenacity of local residents who continuously fight for community-wide stabilization.”
- Share this post.
BlackRock and Builders Fund back early childhood learning platform Acelero. New York-based Acelero launched in 2001 to work with local communities to improve early childhood education outcomes for low-income students in the U.S. Through Accelero’s Head Start and other early childhood learning programs, parents promise to read to their children, engage them in dialogues and establish consistent family routines. Acelero says it has reached more than 150,000 children and their families in 28 states. “Acelero’s strong fundamentals and leading technology-enabled services platform, along with its vision to eliminate historical biases and systemic inequities in the U.S. education system, makes the company a compelling investment for our clients,” said Aarthi Sowrirajan of BlackRock’s Impact Opportunities Fund, which co-led an investment in the organization with Builders Fund.
- Bridging the gap. Sowrirajan, Builders Fund’s Katharine Hawthorne, and A-Street’s Mora Segal will join Acelero’s board of directors. Early backers in Acelero include W.K. Kellogg Foundation, the David and Lucile Packard Foundation and BlueHub Capital (see ImpactAlpha’s deep dive from 2015, “Acelero Learning: Kids Get a Head Start, but Investors Must Wait“). Acelero will use the investment to support the company’s future growth and provide services to more low-income children and families.
- Share this post.
Dealflow overflow. Other investment news crossing our desks:
- Organic produce company Soli Organic raked in nearly $125 million to expand its large soiled-based indoor farms.
- East African asset-based financing company Tugende raised $10 million in equity and debt funding to support micro, small and medium-sized enterprises.
- India’s Vecmocon snagged $5.2 million from Tiger Global, Blume Ventures and angel investors to build safety-monitoring tech for two- and three-wheeled electric vehicles.
- Dandi scored $3.7 million in seed financing from Impact Engine, Alleycorp Impact and other investors to help companies advance diversity, equity and inclusion in the workplace.
Signals: Catalytic Capital
Foundations leverage their balance sheets to expand the impact investing toolkit. Faced with 2020’s cascade of crises, a group of foundations mobilized $3 billion from capital markets for community relief and public health with a string of social bonds. The issues are now booked as liabilities on their balance sheets. The bond issuances by Ford, Rockefeller, MacArthur and at least six other foundations opened a new front in foundation impact investing. Many foundations have adopted spending strategies, such as program-related investments from their required 5% annual payout, to invest in solutions aligned with their missions. Others have begun to deploy endowment assets in mission-related impact and ESG strategies. Social bonds, along with tools like loan guarantees, represent an opportunity for foundations to catalyze capital using institutional liabilities, or catalytic leverage. “Collectively, these strategies represent a toolkit that foundations can use to make a greater impact on local and global communities,” says Fran Seegull of the U.S. Impact Investing Alliance. In “Impact in the Balance,” the Alliance examines the full suite of tools at the disposal of philanthropic institutions based on where they sit on a foundation’s balance sheet or financials.
- Guaranteed impact. Loan guarantees, for example, have a number of benefits, including helping fund projects that might be too expensive to fund otherwise. Foundations including the Gates, Kresge, MacArthur and Robert Wood Johnson foundations all actively provide guarantees. The instruments require no cash to change hands until and unless there is a guarantee payout (for context, see “Guaranteed Impact: How Gates Foundation increased supplies and cut prices for contraceptives without spending a dime”). “This structure is particularly advantageous during times when the need for liquidity is high,” the report says.
- Keep reading, “Foundations leverage their balance sheets to expand the impact investing toolkit,” by Dan Keeler on ImpactAlpha.
Agents of Impact: Follow the Talent
Melissa Berman is stepping down after two decades at the helm of Rockefeller Philanthropy Advisors. Berman will remain CEO until a successor is identified… Calvert Impact Capital rebrands as Calvert Impact and forms a 501(c)(3) holding company to house impact investment products and service offerings. Calvert Impact Capital, now a subsidiary of Calvert Impact, will continue to issue Community Investment Notes… S2G Ventures seeks an investment associate and an investment analyst.
S&P Global is hosting “Beyond ESG on the road to COP27,” Wednesday, Oct. 19… VC Include invites asset allocators interested in impact investing and diversity, equity, and inclusion to its showcase of emerging fund managers, Tuesday, Nov. 1 (for context, see “VC Include to accelerate investments into a dozen diverse first-time fund managers”)… Mission Investors Exchange’s national conference convenes in person Dec. 5-7 in Baltimore with Judy Belk of The California Wellness Foundation, Don Chen of the Surdna Foundation and others. MIE members can register here.
Thank you for your impact!
– Oct. 18, 2022