Greetings, Agents of Impact!
🤝 Connect with ImpactAlpha. This week, catch ImpactAlpha’s Jessica Pothering at Financial Inclusion Week, Dennis Price and Cesar Chávez at Pro Mujer’s GLI Forum Latam in Medellín, and Amy Cortese at Phenix Capital’s Impact Summit America in New York.
Featured: Ownership Economy
Multiplying transitions to employee ownership with private capital and public policy. Giving workers ownership stakes in the companies they work for improves employees’ motivation, productivity, retention and drives long-term business growth. Not to mention the dramatic tax advantages for companies with employee stock ownership plans, or ESOPs. With thousands of Baby Boomer business owners looking to retire, ESOPs should be having a moment. Instead, the number of businesses owned by employees under ESOPs has been stalled at about 6,000 companies for more than a decade. “We’ve had ESOPs for a long time, but it’s been a stagnant field, despite the growing energy and attention,” says Jack Moriarty, who joined Lafayette Square Foundation last month from the nonprofit Ownership America. “Solving the problem of employee ownership is critical, and we need policy solutions to help make that happen.”
- Low-cost capital. Mosaic Capital Partners, based in Charlotte, NC, is the only registered small business investment company, or SBIC, under the Small Business Administration that is exclusively focused on employee ownership (see, “Labor and capital align in new movement for worker ownership”). Moriarty helped craft legislation, based on the SBIC model, to create employee equity investment companies, or EEICs. The legislation, introduced by Democratic Sen. Chris Van Hollen and Republican Sen. Marco Rubio, has attracted bipartisan support in the House of Representatives as well. Joining Moriarty at last week’s Ownership Economy Summit in New York were Common Trust’s Zoe Schlag, Natalie Edwards of Apis & Heritage Capital Partners, and Jeff Mendelsohn of LocalCode, a national nonprofit developing shared-ownership models for mixed-use assets in communities of color (see, “LocalCode adds community ownership to the real estate toolkit”).
- Meet the Players. Aspen Institute is presenting “Sustaining ownership: The promise of employee ownership trusts,” the third conversation in its worker ownership series, Wednesday, Oct. 25. On Thursday, Nov. 2, the Predistribution Initiative, along with the Ford and Rockefeller foundations, will host a mixer and discussion on financing worker and community ownership models. Participating practitioners include Apis & Heritage’s Todd Leverette, Good Scout Capital’s Rupal Patel, Joseph Blasi of Rutgers’ Employee Ownership Institute, and Jon Shell of Social Capital Partners (see “Social Capital Partners widens its ownership lens”).
- Keep reading, “Multiplying transitions to employee ownership with private capital and public policy,” by Roodgally Senatus on ImpactAlpha.
Dealflow: Muni Impact
Texas seeks to raise $169 million to future-proof the state against drought. This year has been one of Texas’s hottest and driest on record. About 80% of the state’s residents are experiencing extreme or exceptional drought. To finance the state’s Water Plan to ensure sufficient, affordable water, the Texas Water Development Board issued a $169 million water bond. HIP Investor gives the bond’s environmental and social impact objectives a rating of 69.2 of 100, connoting net-positive impact. ImpactAlpha is featuring the Texas bond as part of our ongoing series with HIP to highlight bond issues with social and/or environmental significance.
- Water conscious. Water demand in Texas is projected to increase by 9% by 2070. Existing water supplies, however, are expected to decline by 18% as aquifers are depleted and sediment builds up in reservoirs. The state has been proactive about residential consumption, reducing usage by 82% since 2005. It needs to invest about $80 billion in management measures and technologies or face more than $150 billion in annual economic losses. Texas voters will weigh in on Proposition 6 next month, which would authorize a $1 billion water fund to expand water supplies, including desalination, conservation and other efforts.
- Climate context. The apparent success of the Lone Star state’s water efforts contrast with the rest of its climate agenda (see, “Don’t mess with Texas’s lead in the low-carbon energy transition”). Efforts to enhance energy efficiency have fallen short. Bills to curb greenhouse gas emissions were dropped, while legislation to prohibit cities from addressing climate change was approved. “Climate risks are interconnected,” writes HIP Investor’s Stella Yao. “Responsible water management strategies are not enough to solve Texas’s water shortage.”
- Get the details on the water bond, and catch up on all of ImpactAlpha’s coverage of Muni Impact.
Incofin backs Rite Water to promote drinking water access in rural India. Rite Water makes and installs water purification systems in parts of rural and urban India that lack access to clean drinking water. The company, located in the central Indian city of Nagpur, has set up more than 2,500 units serving two million people. Belgian impact investor Incofin invested €7.5 million ($7.9 million) in Rite Water from its Water Access Acceleration Fund, a blended finance fund that will invest in water kiosks, technologies and piping in Africa and Asia. It’s the fund’s first investment.
- Liquid gold. Water, whether “too little, too much or too dirty,” is an increasingly urgent environmental and social issue worldwide. Yet less than 2% of impact venture capital over the past five years has gone to startups in water and sanitation. Incofin in March raised €36 million of its targeted €70 million water access fund. It wants its investments to reach 30 million people and to provide 50 million liters of drinking water daily by 2028.
- Dive in.
Dealflow overflow. Other deals crossing our desks:
- The Media Development Investment Fund acquired a minority stake in Wirtualna Polska, Poland’s largest online media publisher with award-winning coverage of Polish politicians and public institutions. (MDIF)
- NextEnergy Capital’s solar investment group raised £600 million ($730 million) to acquire solar plants in the UK. (RENews)
- UK-based venture capital firm Agronomics led the $33.5 million Series B financing for San Diego-based BlueNalu and its lab-grown bluefin tuna. (AFN)
Short Signals: What We’re Reading
📈 What private impact investors want. Nearly three in five wealthy private impact investors make some “catalytic” investments within their portfolio. Three-quarters perceive impact investments as being no riskier than traditional investments, according to a survey from the T100 Project at Toniic. Roughly two-thirds expect impact investments to generate commercial returns. (Toniic)
🛒 Is Ozempic bad for business? There’s anecdotal evidence that food consumption is down since the release of Ozempic, a diabetes drug that also suppresses addictive eating behavior. What does that mean for “universal owners,” institutions so broadly invested that they effectively “own the market”? (see, “Universal Owners”). “It would be a crowning achievement of postmodern capitalism if the corporate world, in aggregate, was able to make more money by charging people for not consuming stuff than it does by selling them stuff,” writes Bloomberg’s Matt Levine. (Bloomberg)
♀ Boosting women’s economic power. The Indian government’s investment of $15 billion in affordable credit for women has catalyzed over $90 billion from domestic financial institutions. Some of Africa’s largest economies are now experimenting with similar ideas. (Gates Foundation)
🤷 Republican climate confusion. Red states in the US are benefitting the most from clean energy investment stemming from the Biden administration’s landmark Inflation Reduction Act. But a new analysis finds that in the year since its passing, Republicans have voted 25 times to repeal provisions of the law, including 11 votes on the House floor and 14 votes in committees and subcommittees. (Climate Power)
⚡💸 Europe dominates environmental funds. Investors allocated roughly $32 billion to US climate funds as of the end of June, compared with $447 billion in Europe and $44 billion in China. The US currently represents just 6% of climate-fund assets. (Bloomberg)
🇹🇿 Climate finance in Tanzania. African nations are vying to increase their share of climate finance. Proceeds from 10-year bond of one trillion Tanzanian shillings ($400 million) from Tanzania’s NMB Bank kicked will finance projects in renewable energy, green transport and waste-water treatment. (Zawya)
Agents of Impact: Follow the Talent
Don’t miss SOCAP23, Oct. 23-25 in San Francisco. Use the code s23_impactalpha to save $250.
Social Finance names Karen Anderson, formerly with the University of Chicago’s Becker Friedman Institute for Economics, to lead its new Social Finance Institute… Denise Scott will step down as president of the Local Initiatives Support Corp. at the end of the year; Michael Pugh, ex-of Carver Federal Savings Bank is LISC’s new CEO.
Latanya Mapp Frett of Global Fund for Women will become president and CEO of Rockefeller Philanthropy Advisors in January; founding CEO Melissa Berman is stepping down… Conrad Pentaleri, ex- of CleanCapital, joins SJF Ventures as a senior analyst… Accion’s Center for Financial Inclusion is hosting Financial Inclusion Week, Oct. 16-19 online… RMI’s global climate tech accelerator Third Derivative is accepting applications for its next cohort through Friday, Oct. 27.
Thank you for your impact!
– Oct. 16, 2023