The Brief: Sketching plans for a bottom-up economic revival

Greetings Agents of Impact! 

Don’t miss two upcoming Calls:

• Plugged In: Disrupting for good at Citi Impact Fund. In her latest conversation on LinkedIn Live, ImpactAlpha contributing editor Sherrell Dorsey hosts Meredith Shields, head of the $500 million Citi Impact Fund. Get Plugged In, Wednesday, Aug. 21, at 8am PT / 11am ET / 4pm London. RSVP now.

• The Call: Investing behind federal funding for water quality, community health and climate resilience. Join North Star Strategy’s Radhika Fox, who led the Environmental Protection Agency’s Water Office, and Rogelio Rodriguez of the nonprofit WaterFX, which helps communities finance equitable water infrastructure, to identify high-impact water investment opportunities, Thursday, Aug. 29 at 10am PT / 1pm ET / 6pm London. RSVP today. 

In today’s Brief:

• Harris’s bottom-up economic revival
• Munis for water infrastructure in low-income North Carolina
• Economics of low-carbon cement
• Investing to narrow the racial wealth gap

Featured: Impact Forward

Beyond Chicago, Harris seeks to ride a revival in wages, entrepreneurship and ownership. On her way to the Democratic National Convention in Chicago, Vice President Kamala Harris stopped in Moon Township, Pa., to talk, among other things, about her plan to expand the child tax credit for newborns and revive the expanded benefit available during the Covid-19 pandemic. How would she pay for the $6,000 credit, a reporter asked. Pandemic-era expanded child tax credits, since discontinued, helped cut child poverty rates by half. “The return on that investment, in terms of what that will do and what it will pay for, will be tremendous,” Harris said. She uses the same language of business to talk about other social priorities. Homeownership, for example, increases the tax base to provide vital funding for schools. Her focus on measurement and returns may have resonance for impact investors, many of whom are investing behind the same themes. “It’s a mistake for any person who talks about public policy to not critically evaluate how you measure the return on investment when you are strengthening neighborhoods, strengthening communities, and investing in a broad-based economy,” she said. “Everybody benefits, and it pays for itself in that way.”

• Bottom up, middle out. Harris has sought to refresh and relaunch the message of bottom-up, middle-out prosperity at the core of Bidenomics. Her current boss, President Joe Biden, struggled to get credit for the rising wages, record new-business starts and surge of investment in domestic manufacturing and green infrastructure. “It’s no surprise it’s going to take a woman to bring nurturing and equitable policies and support the middle class,” says KeepWol’s Lauren Fitzpatrick Shanka, who led Sunday’s “Black women and allies in tech 4 Harris” call. Harris’s vision of an “opportunity economy” resonated, reports ImpactAlpha’s Sherrell Dorsey, who also spoke on the call. Dorsey was in Raleigh, NC, for Harris’s economic speech on Friday and is in Chicago this week for the Democratic National Convention.

• Local revival. Entrepreneurial ecosystems. Access to capital. Small business support. Manufacturing investments. Workforce training. The menu of successful solutions is not that different for “blue” urban areas and “red” rural regions. About 30% of the US electorate is considered low-income. In so-called battleground states, that number rises to 40%. The Harris-Walz ticket “is a fusion ticket that could unite the poor and low-wage Southern Black Belt and the rural white Midwest,” says the Rev. Dr. William Barber II of Poor People’s Campaign (see, “A minister’s call for moral, as well as economic, revival”). “Politicians who embrace the language of fusion movements for economic justice have the power to both tap into the moral concerns that drive millions of Americans and multiply the energy of grassroots organizing,” he writes with his Yale colleague Jonathan Wilson-Hartgrove.
  
• Green gains. Pennsylvania may be in mind in Harris’s walkback on her earlier position opposing fracking. But polling suggests that two crucial groups – young voters and Latinos – especially prioritize positive climate action. “The IRA is the most significant piece of climate legislation in history,” says Mandela Barnes of Forward Together Wisconsin. “But we still have to close the equity gap.” Harris’s campaign has so far soft-pedaled climate action, but convention speakers are expected to hit themes of a just-transition and green jobs. Such tangible economic gains – for all – may be as important as the greenhouse gas reductions, at least politically. It was Harris who in 2022 cast the tie breaking vote that pushed the IRA forward. The legislation, which has mobilized nearly $500 billion in private investment for clean manufacturing, could create more than nine million green jobs over the next decade.
  
• Home ownership. Harris last week shared plans that include $25,000 in down-payment assistance for eligible first-time homebuyers. Surging rents and home prices burden more than 40 million renters and homeowners in the US in housing costs. Harris seeks to expand the supply of affordable housing with the construction of three million new housing units by the end of her first term. Incentives include tax credits for developers of new affordable rental housing development and new affordable single family homes for first-time home buyers, says Tai Christensen of down-payment assistance provider Arrive Home. The housing incentives respond to “the harsh realities facing today’s housing market for many low- to middle-class Americans.”
  
• Keep reading, “Beyond Chicago, Harris seeks to ride a revival in wages, entrepreneurship and ownership,” by David Bank, Amy Cortese, Dennis Price, Roodgally Senatus, Lynnley Browning and Sherrell Dorsey.

Dealflow: Muni Impact

In North Carolina, majority-minority Sanford raises $21.9 million to upgrade water infrastructure. Failures of water systems and other infrastructure hit low-income communities far more often than wealthier or middle-income communities. Think not only Flint, Mich., and Jackson, Miss., but Newark, NJ, and Chicago (most of the US’s water infrastructure needs an upgrade). And low-income, and particularly Black and other communities of color, are often least able to pay for critical infrastructure upgrades because of race-related bias in the municipal bond markets. The city of Sanford, NC, population 31,000, is issuing $71 million in municipal bonds to upgrade and expand its water infrastructure. Sanford, which has a majority-minority population, is pricing its bonds at an affordable 4%. It has already raised $21.9 million. Proceeds will help more than double the city’s water treatment capacity and filter out unregulated but harmful contaminants, such as PFAS “forever” chemicals. “Ensuring equitable and sustainable access to municipal bond financing will be crucial for communities across the country as they seek to upgrade aging infrastructure and adapt to a changing climate,” wrote Stella Yao of HIP Investor, which gives Sanford a positive impact rating of 56.3 of 100 for its water bond – marked down, in part, because of existing PFAS levels. The bond is being featured as part of ImpactAlpha’s collaboration with HIP Investor to highlight municipal bonds with environmental or social significance.

• Investing in health. Sanford has one of the most diverse communities in North Carolina, with 25% Black residents and 30% Latino or Hispanic residents. It also has a higher-than-average poverty rate of 21.5% compared to North Carolina’s overall rate of 13.3%. “With its water bond issuance, Sanford is enhancing infrastructure and improving the quality of life and health of its residents, including the most vulnerable,” observed Yao.
  
• Equitable economic development. Sanford is within North Carolina’s Research Triangle, the university-dense area around Raleigh-Durham and Chapel Hill. The city’s ability to provide water to the Triangle Innovation Point megasite helped attract Vietnamese electric car maker VinFast to build its first North American manufacturing plant. With continued investment in its water infrastructure, wrote Yao, “Sanford could position itself as a competitive location for businesses.”
  
• Get the full details.

Fortera raises $85 million for commercially scalable low-carbon cement. The Silicon Valley-based materials company has developed a process to capture CO2 emissions from carbon-intensive industrial cement production and convert it into a low-carbon cement that’s as strong and durable as traditional cement. The process was honed over nearly two decades of research and development and hundreds of millions of dollars in funding. Capital-intensive and low-margin cement made the economics difficult to crack, Fortera’s Ryan Gilliam told ImpactAlpha. “To do that and be cost competitive and not be reliant on a green premium, that’s really the difficulty of this space.” 

• Growing demand. Fortera partnered with cement plants and manufacturers, using their infrastructure to produce its cement in a way that’s economically competitive. A new commercial plant in Redding, Calif., will enable the company to capture 6,600 tons of CO2 and produce 15,000 tons of low-carbon cement each year, as global demand surges for the material. In the US, federal and state procurement is driving demand for green cement. The Biden-Harris administration earlier this year allocated $1.5 billion for low-carbon cement projects. 

• Low-carbon tech. Fortera’s Series C financing round, backed by Temasek, Khosla Ventures, Alumni Ventures, and other investors, will help it reach “true commercial scale,” Gilliam said. “When we closed our Series B round, it was all about getting the first commercial plant online and ready,” he added. “Now that we have that first plant up and running, and we have a product we’re getting to customers, the Series C is the catapult to put us into building out those pipelines of commercial plants.” Fortera raised its $30 million Series B round three years ago.
  
• Dive in.

Dealflow overflow. Investment news crossing our desks:

• Infrastructure investor Nova Infrastructure acquired UGE International, a community solar and battery storage owner-operator that has designed and built energy projects in the US with a total capacity of more than 500 megawatts. (Nova Infrastructure)
  
• Nigerian cross-border payments company Waza raised $8 million in a mix of debt and equity, including financing from Y Combinator and impact-focused Norrsken Africa, to help African businesses send payments to global suppliers. (TechCrunch)
  
• Germany’s Root clinched €8 million ($8.9 million) for software that helps food and beverage companies estimate, track and manage greenhouse gas emissions across their supply chains. (EU-Startups)

Impact Voices: Returns on Inclusion

Investing to close the $8 trillion US racial wealth gap. Centuries of policies that privileged white economic mobility while excluding or extracting from communities of color have created a racial wealth chasm in the US. “The racial wealth gap not only locks communities of color out of full participation in the ‘American Dream,’ but also stunts the economy as a whole,” observe Stephanie Kater, Andrew Key and Simon Stephanos of Bridgespan Group. “But it doesn’t have to stay that way.” New investments of $8.4 trillion in Black, Brown and Indigenous communities required to close racial wealth gaps could add up to $1.5 trillion in annual GDP growth by 2028, according to McKinsey.

• Drivers of wealth inequality. Bridgespan, a global nonprofit advisor, identified five main drivers of racial wealth inequality – family inheritance, income levels, home ownership, entrepreneurship, and excessive fees. Philanthropists and impact investors “should regularly use the full spectrum of investment returns – from market-rate to impact-first to grant funding – to scale up wealth-generating opportunities that disproportionately benefit those at the bottom of the economic pyramid,” write Kater, Key and Stephanost. “Strategies for narrowing the racial wealth gap are abundant.”
  
• Inclusive communities. One straightforward strategy: investments in leaders and fund managers of color. Collab Capital, for example, backs businesses with at least one Black founder with a controlling stake. To boost income and employee ownership, private equity firm Mosaic Capital Partners acquires lower and middle market companies through ESOP buyouts. Investors can also channel capital through community development financial institutions, or CDFIs. Camino Financial, for example, has deployed $30 million in affordable loans to underbanked Latino micro-entrepreneurs. The authors cite Santhosh Ramdoss of Gary Community Ventures to acknowledge that capital has done a significant amount of harm to communities of color. “To undo that, we need the same capital to become a restorative tool.”
  
• Keep reading, “Investing to close the US’s $8 trillion racial wealth gap,” by Bridgespan Group’s Stephanie Kater, Andrew Key and Simon Stephanos on ImpactAlpha.

Agents of Impact: Follow the Talent

Maya Burney, previously with Caleo Capital and founder of Womvest, joins Calvert Impact Capital as a senior investment officer… Creo is hiring a program manager in New York… Azolla Ventures is recruiting interns in Cambridge, Mass… The Interfaith Center on Corporate Responsibility is hiring a director of climate change and environmental justice… Harris for President seeks a climate engagement director in Wilmington, Del.

MassMutual is looking for an impact investment principal for its MM Catalyst Funds in Boston… Norselab, Investinor and Capricorn Investment Group will host the second edition of Norse Impact Day, a half-day program on Wednesday, Sept. 25, during Oslo Innovation Week. Use code IMPACTALPHA by Sunday, Sept. 1, for a 20% discount on one ticket.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– August 20, 2024