The Brief | April 11, 2022

The Brief: Sanctions and ESG, financing taxis in Peru, seeding health and climate tech, greening cement in Ghana, discounting food waste

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Greetings, Agents of Impact!

Agents of Impact Call: Catalytic capital for climate adaptation and social equity. As climate change affects every country, adaptation is imperative for the world’s most vulnerable communities. Apollo Agriculture’s Benjamin Njenga, the Lightsmith Group’s Jay Koh and other Agents of Impact will explore strategies for catalyzing capital for climate adaptation and share models for a more resilient and equitable future on Call No. 41, Tuesday, Apr. 19 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Institutional Impact

The curious case of the U.S. ESG critic at the head of a Russian aluminum conglomerate. As Western powers consider even tougher measures to punish Russia for alleged war crimes in Ukraine, the saga of EN+ Group provides a case study into how sanctions can actually play out for a particular asset. The Russia-based holding company that is publicly traded on the London Stock Exchange was, until 2018, owned and controlled by Oleg Deripaska, one of the oligarchs known to be closest to Vladimir Putin. EN+ owns a majority stake in the Russian aluminum company Rusal, the second largest provider of aluminum in the world. Under a 2019 settlement with the U.S. Treasury that lifted sanctions on the company, Deripaska continues to hold a major stake. The new chairman of the board of EN+ is Christopher Bancroft Burnham, a veteran U.S. consultant who has emerged as a leading critic of ESG investing. “As institutional investors flee Russian assets for political reasons,” ImpactAlpha’s Imogen Rose-Smith writes in her latest Institutional Impact column, “the head of an organization that has argued that fiduciaries should not be motivated by political ideologies is taking on the leadership of the board of one of the world’s most political hot potatoes.”

Burnham founded and still chairs the Washington, D.C. based not-for-profit Institute for Pension Fund Integrity, with a stated purpose of keeping politics out of pension-plan investment decision-making. “ESG factors should not dictate a political agenda for guiding public investment decisions,” IPFI says on its website. Politics are, of course, unavoidable in the current climate. Gregg Barker, a Tory peer and Burnham’s predecessor as chair of EN+, is stepping down, but not in protest over Russia’s invasion of Ukraine. Rather, Barker is set to head a spinout of Rusal’s non-Russia aluminum assets as part of the ongoing cleanup effort now headed by Burnham. Both EN+ and Rusal talk a lot about sustainability and ESG and on their websites and in their public fillings, Rose-Smith notes. “The continued operation of this business raises questions over just how cozy Western interests should be with assets that are tainted by the corruption of Putin and those around him,” she writes. “Are improvements to the business, in both ‘E’ for environmental and ‘G’ for governance, enough to qualify it as an ‘ESG’ investment. Or does the giant ‘S,’ for the social elephant in the room, undermine any such effort?”

Dealflow: Impact in Latin America

Blue like an Orange backs Acceso Crediticio for taxi lending in Peru. Blue Like an Orange, the investment firm launched by former World Bank officials to unlock debt financing for businesses advancing the Sustainable Development Goals in Latin America, provided $10 million in subordinated loans. Lima-based Acceso’s main product is an asset-backed lending program for taxi drivers and truck and bus fleet operators and owners to convert their vehicles from fossil fuel-based engines to natural gas. The conversion could help reduce the Peruvian transportation sector’s carbon footprint by 20%, according to Acceso. 

  • Credit gaps. Acceso lends to underbanked and unbanked borrowers in Peru, three out of every four of which don’t have access to any other lending options. It also provides loans to migrant populations in Peru, particularly from Venezuela. Peru’s government is aiming to reduce its dependence on imported oil by expanding the use of natural gas. The deal is Blue like an Orange’s 14th investment and second in Peru.
  • Financial inclusion. L.A.-based Camino Financial secured a $150 million debt facility from Community Investment Management to provide $1 billion in loans to underserved micro-businesses in the U.S. by 2023. Colombian fintech Finkcargo raised $7.5 million in a round led by Quona Capital to provide affordable financing for small and medium-sized importers in Latin America.
  • Share.

Wireframe Ventures raises $77 million for early-stage health and climate investments. Like its first fund, the second fund raised by the San Francisco-based venture firm is looking to invest in pre-revenue, and even pre-product companies. Its first fund made 25 pre-seed and seed-stage investments, including in SPAN, which recently raised $90 million for its line of home and vehicle electrification products. Others include grid monitoring hardware startup Gridware and sustainable alternative leather maker MycoWorks. The inaugural fund’s portfolio companies have gone on to raise $1.2 billion in follow-on capital, according to Wireframe. Two of the fund’s portfolio companies are unicorns. Wireframe has had two exits. Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Ghana’s Continental Blue Investment Ghana secures $7.5 million from Norfund and Société-Générale to decarbonize cement production and create local jobs.
  • Aclarity snags $3.3 million in seed funding to purify water from PFAS, “forever chemicals” that can cause decreased fertility, liver damage and cancer.
  • Enerkem rakes in $255 million to produce biofuels from non-recyclable waste for hard-to-decarbonize sectors, such as air and sea travel.
  • GoImpact, a Hong Kong-based ESG and sustainable finance learning platform for executives, reaches a $22 million valuation following a Series A financing round.

Impact Voices: Food Waste

Food startups are using discounts to give food a second life. When a business wants to move product, it cuts the price. Think 50% discounts on day-old bakery items. “While this is not a new model, there has been new funder interest driven by how this model is executed (through software and apps) and where the intervention is taking place in the food supply chain,” ReFED’s Alejandro Enamorado writes on ImpactAlpha. The result: More food is finding a second life by being sold at a discount.

  • Supply chains. MIT-founded Spoiler Alert raised $11 million last year for its software tool to help consumer packaged goods firms sell excess, short-dated and obsolete inventory. The traction: 400% growth in gross transaction value in 2021 – equivalent to 200 million pounds of product. Manufacturers using the platform include Campbell Soup Company, Danone and HelloFresh.
  • Retail and consumers. Markdown alert applications allow retailers and food service organizations to supplement in-store discovery or physical displays of discounted products. Canadian firm Flashfood’s mobile marketplace provides customers with access to discounted grocery retail food nearing its “best by” date. The company raised $12.3 million in February, backed by S2G Ventures.
  • Go deeper. FoodMaven, FreshFry, Mi Terro and other food waste startups raised capital in March. ReFED’s market update.
  • Keep reading, “Food startups are using discounts to give food a second life,” by ReFED’s Alejandro Enamorado.

Agents of Impact: Where to Meet

Don’t miss these ImpactAlpha partner events:

  • AVCA is convening its annual conference, “Private Capital in Africa at a Crossroads,” in Dakar, Apr. 25-29. Register today.
  • Island Innovation is hosting its online Island Finance Forum, Apr. 25-29. Register for free.
  • ImpactPHL is convening “Total Impact: Investing for New Economies,” in Philadelphia, May 16-17. ImpactAlpha subscribers get $300 off with code IMPACTALPHA. RSVP today.

Thank you for your impact.

– Apr. 11, 2022