The Brief | July 12, 2022

The Brief: Sobering proxy season, KKR’s second impact fund, agrifood tech in India, energy-efficiency-as-a-service, impact management leaderboard

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Greetings, Agents of Impact!

Featured: Public Impact

Why did shareholder resolutions on climate action and racial equity fall short? Big asset managers. The 2022 proxy season should have delivered a thumping to corporate laggards on climate, racial equity and governance issues. Instead, as the proxy season draws to a close, the results are sobering. As the year got underway, shareholder activists looked to build on big wins in 2021 (for context, see “Emboldened shareholders ready fights with management on human rights, climate and political spending). Ambitious resolutions at oil and gas majors and banks called for alignment with the goals of the Paris climate agreement. Advocates filed dozens of proposals for racial equity audits and better disclosure of political spending and lobbying. Key directors were to be held accountable with votes against their re-election. With few exceptions, the efforts fell short. What gives? Majority Action’s Eli Kasargod-Staub lays the blame at the feet of BlackRock, Vanguard and State Street which together control 25% of shares across the S&P 500. “It appears that while leading investors were stepping up their ambition in line with the escalating risks of climate change, the largest asset managers returned to backing business-as-usual at the most climate-critical laggards,” Kasargod-Staub writes in a guest post on ImpactAlpha.  

  • Racial equity. Calls for racial equity audits fared better than climate proposals, winning majority votes at McDonald’s, Apple, Johnson & Johnson and Home Depot, while ​​JPMorgan Chase, Pfizer and Verizon came to agreements with racial equity proponents. A proposal for a racial equity audit at Chevron fell just short of a majority; BlackRock, holding 6.5% of the oil company’s common shares, voted “against.”
  • Political contributions. Of 47 political spending and lobbying proposals that came to a vote by mid-June, just five received majority support, according to Institutional Shareholder Services. A proposal asking AT&T to explain its contributions to politicians backing voter suppression efforts could have won a majority with the support of a large asset manager or two. The full voting records for asset managers will be available next month. Investors would be wise, says Kasargod-Staub, “to interrogate how large asset managers are supporting – or thwarting – their efforts to drive boardroom accountability on these systemically important issues.”
  • Keep reading, “Why did shareholder resolutions on climate action and racial equity fall short? Big asset managers,” by Eli Kasargod-Staub on ImpactAlpha.

Dealflow: Private Impact

KKR raises nearly $1.5 billion for its second global impact fund. The $471 billion asset manager reported the first close in an S.E.C. filing. Fundraising for its second impact fund already has exceeded the $1.3 billion KKR raised for its first global impact fund in 2020. “What’s different this time is there are proof points,” KKR’s Ken Mehlman said at a Morgan Stanley event last month. Mehlman said KKR’s first impact fund, which has made 15 investments, has recorded a gross internal rate of return of more than 50%. The new fund will employ the same thematic strategies across climate action, sustainable living, lifelong learning and inclusive growth. “We’re having very good conversations, and we’re excited about the opportunity to continue to build this platform,” Mehlman said.

  • Counter-cyclical. The current market correction makes it “a good time to be putting capital to work,” Mehlman said, “if you’ve got dry power, which we do.” Impact investments with “structural tailwinds” may outperform in a downturn, he added. For example, cities and counties that don’t meet water-quality standards because of stormwater runoff, he said, have to upgrade “regardless of where the market is.” KKR earlier this year invested in Texas-based Resource Environmental Solutions for its stormwater management and restoration solutions for wildlife habitats, wetlands and streams. “When the market goes down, and there is fiscal stimulus by governments, a lot of times it focuses on things like, ‘How do we make our infrastructure more resilient?’” Mehlman said.
  • PE parade. Private equity giants continue to raise big impact funds. BlackRock in May said it had raised $800 million for its Impact Opportunities fund to invest in companies led by or serving people of color. TPG Rise closed its climate fund at $7.3 billion in April. Apollo is raising a ​​$1 billion impact fund. Like Apollo, KKR has created a sustainability expert advisory council. KKR’s panel includes SASB’s Robert Eccles, Ford Foundation’s Roy Swan and Andrew Stern, former president of the Service Employees International Union. KKR is also said to be readying two sustainability-focused credit funds.
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Ankur Capital backs impact tech ventures Vegrow and String Bio. The Mumbai-based impact fund seeks out early businesses that are using technology to drive down the cost of high-impact products at scale. Ankur invested in the $25 million Series B round of Bangalore-based Vegrow, a B2B marketplace that connects 20,000 fresh produce farmers with customers in 100 cities in India. Vegrow’s platform predicts demand and pricing across markets to help farmers increase yield and reduce waste. Vegrow’s Praneeth Kumar said the company adds value for consumers and producers. “On the farmers’ side, we ensure a better realization through the right matchmaking, fair and transparent business practices and value chain innovations.” Prosus Ventures and Elevation Capital invested alongside Ankur.

  • Climate tech. Ankur Capital also backed String Bio’s $20 million Series B round. The Bengaluru-based company’s fermentation technology converts methane, a potent greenhouse gas, into animal feed, protein and other sustainable products. Ankur Capital’s Ritu Verma said the investment will help String Bio “bring their products to market with like-minded partners across the globe and drive the climate impact they envision.”
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Budderfly, a provider of energy-efficiency-as-a-service, secured a $500 million investment from Partners Group, which will acquire a majority stake in the company.
  • Iceotope Technologies raised £30 million ($35.7 million) in a round led by ABC Impact to reduce the energy and water needed to keep data centers cool.
  • Simplifyber scored $3.5 million in a seed round led by At One Ventures to manufacture sustainable clothing and footwear from liquid cellulose.
  • CleanO2, which captures carbon from HVAC systems and turns it into fertilizers, soaps, shampoos and other products, snagged seed funding in a round led by Regeneration.VC.

Signals: Impact Management

Five investors that are driving a ‘race to the top’ in impact management. Stockholm-based Trill Impact, an impact investment firm with more than $1 billion in assets under management, has set itself apart with impact incentives that align with the social and environmental targets of its investees. Such practices have landed Trill on BlueMark’s Practice Leaderboard, highlighting the company’s clients with high scores against the “Impact Principles,” an industry framework for integrating impact throughout the investment lifecycle. The leaderboard, featured in BlueMark’s latest “Making the Mark report, also includes Bain Capital Double Impact, Finance in Motion, LeapFrog Investments and Nuveen Private Equity Global Impact. The analysis is based on impact-management verifications BlueMark completed for 60 impact investors managing a combined $160 billion in impact assets. At Trill, impact targets are linked to compensation at its portfolio companies; Trill’s own staff is evaluated on team members’ contributions to the investee’s impact. Trill provides a discount on its financing for companies that achieve their impact targets.

  • Raising the bar. With increased scrutiny of ESG- and impact oriented investments, “the urgency to effectively channel capital towards companies and projects capable of delivering tangible, measurable, and manageable impact is more acute than ever,” writes BlueMark’s Christina Leijonhufvud. Only by raising the bar for what constitutes best practice impact performance, says Leijonhufvud, “will we drive a ‘race to the top’ that enables impact investors to deliver on their promise of making the global economy more sustainable.”
  • Stakeholder input. Roughly 40% of firms integrate impact considerations into staff performance management systems – down from 47% a year ago. And only one in five investors link bonuses or carried interest to impact. On the upside, 28% of investors in the sample now engage with key stakeholders to solicit their input, up from only 11% last year (disclosure: Tideline, BlueMark’s parent company, is an ImpactAlpha sponsor).
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Agents of Impact: Follow the Talent

Energize Ventures promotes Katie McClain to chief operating officer; Hannah Magnuson, ex- of APTIM, joins the firm as content marketing strategist; Adam Katz, ex- of Golub Capital, joins as head of legal; and Honour Masters, previously a fellow with Union Square Ventures’ Climate Fund, joins as senior investment associate… Nathaniel Bullard, formerly chief content officer at BloombergNEF, joins Voyager Ventures as a venture partner… Otis Rolley, previously with Rockefeller Foundation, is named head of social impact at Wells Fargo… Paulina Stannard, ex- of Align Impact, joins CI Financial as head of impact.

Symend co-founder Tiffany Kaminsky is named the company’s chief impact officer… Terviva’s Naveen Sikka joins Elemental Excelerator’s board of directors… SVX Mexico is hiring a principal for its Regenera Ventures fund… Impak Finance seeks several remote junior impact analysts… The Union of Concerned Scientists is looking for a full-time remote/hybrid director for its climate and energy program… Beneficial Returns seeks a full-time remote fund manager… Colorful Capital is looking for a director of investments (for context, see “LGBTQ+ focused venture capital firm comes out for Pride month).

Blue Earth Capital seeks a private equity analyst/associate in New York… Pro Mujer is looking for a remote partnership and development associate for health and wellbeing in Latin America… Today is the deadline to apply for Closed Loop Partners’ senior associate of growth equity position in New York… IIX presents “Investing in technology for impact,” as part of its Impact Partner investor showcase series, July 28… And happy birthday to ImpactAlpha co-founder and Agent of Impact extraordinaire, Zuleyma Bebell.

Thank you for your impact!

– July 12, 2022