The Brief: Social determinants of wealth

Greetings Agents of Impact! We’re at the FLII in Mérida. Follow us on Instagram.

Today’s Agents of Impact Call: How fund managers drive alpha through impact. Join Tideline’s Ben Thornley, Impact Capital Managers’ Marieke Spence, Bain Capital’s Larissa Quinn and S2G Ventures’ Aaron Rudberg, in conversation with ImpactAlpha’s David Bank, to explore levers for financially-material impact value-creation, today at 10am PST / 1pm EST / 6pm London. Zoom right in.

• Background reading. “Impact value-creation playbooks provide X’s and O’s for generating alpha,” and “After the investment and before the exit, how fund managers drive alpha through impact.”

In today’s Brief:

• Overheard at Neighborhood Economics in San Antonio
• Cooperative impact funds
• Impact’s private equity engine

Featured: Inclusive Economy

Addressing the social determinants of wealth at Neighborhood Economics. The zip code in which a person grows up in America is more a determinant of their health than their DNA. That makes “neighborhoods a really important unit of change,” said Carol Naughton of Purpose Built Communities at Neighborhood Economics, the annual gathering of local economy investors and ecosystem builders. Inside the historic Travis Park Church in downtown San Antonio, pastors, community organizers, business owners and local investors crafted a narrative of abundance and bottom-up reinvestment. Churches aren’t in decline but are economic engines in their communities (UCC Church Building and Loan Fund’s Patrick Duggan). Asylum seekers are not a burden but a symbol of America’s promise (Dianne Garcia, pastor at San Antonio Mennonite Church). Ending discrimination in lending is an opportunity for financial growth for all (Neighborhood Economics’ Jeremiah Robinson). “You are the actual health creators,” Douglas Jutte of Public Health Institute told local innovators in the room. “You should own it and talk about it.”

• Wealth determinants. Just like there are social determinants of health, “there are social determinants of wealth,” said Ida Rademacher of the Aspen Institute, which last year released “The New Wealth Agenda” with a bold target: 10x the wealth of households of color. Among the levers: Positive cash flow, debt resolution, wealth-building career pathways and homeownership. Rademacher is working with Partners in Equity, Local Code and Chicago TREND to expand wealth building strategies (see also, “Paths to inclusive wealth run through residential and commercial real estate”). “We can demonstrate an iterative process to elevate opportunity in Black and brown communities,” said Wilson Lester of Partners in Equity, which is raising its second fund to help Black business owners buy the commercial properties in which they operate (see Lester on “Agents of Impact Call No. 50”).
  
• Church economics. Religious congregations add over $400 billion annually to the American economy and are sitting on hundreds in billions in real estate assets. Yet up to 100,000 churches and other houses of worship are set to close in the next few years. An alternative narrative is possible, says Patrick Duggan of UCC Church Building and Loan Fund, which trains up to 300 churches to finance and redevelop their real estate. “We can take our assets and rearrange them and do something different that’s missional and impactful” (see also, “Can Black churches spark a revival in Jackson, Mississippi?”). Rather than shut down or sell out to speculators, one church sitting on five acres in San Jose, Calif. is working with the city to develop affordable housing in a city that needs it, explained Mark Sampson of Rooted Good, which helps churches develop new economic models.
  
• Corridor model. Geographic focus. Participatory decision-making. Shared ownership. Blended capital stacks. And… speed. Community leaders from Kensington Corridor Trust in Philadelphia, Innovation Works in Baltimore, Downtown Crenshaw in South LA, LocalCode in Kansas City, and Estar West in San Antonio aim to create “gentrification without displacement” with an emerging set of investment strategies in real estate and local businesses. “We are not building power. The neighborhood already has power,” said Adriana Abizeda of the Kensington Corridor Trust. The citizen-governed trust, she says, channels that power to deliver “what the folks in that neighborhood want and need.”  
  
• Keep reading, “Addressing the new social determinants of wealth at Neighborhood Economics,” by Dennis Price on ImpactAlpha.
  
• Check out ImpactAlpha’s specialized database of nearly three dozen fund managers investing in local economies, developed in collaboration with Neighborhood Economics.

Dealflow: Capitalism Reimagined

Kachuwa Impact Fund scores $3.2 million to bring cooperatives to impact investing. Blake Jones, a “cooperative geek,” launched Kachuwa Impact Fund to bring the principles of cooperative ownership and governance to impact investing (see “Blake Jones: Making co-ops work for investors, too”). In six annual raises, the Boulder, Colo.-based evergreen fund has raised over $20 million from more than 225 members, nearly 40% of whom are non-accredited investors. “One of our goals is for our cooperative to be as inclusive as possible, which is why we have a low minimum investment requirement of $5,000,” said Kachuwa’s Alicia Robb. Some members have invested more than $1 million. The $3.2 million raised through the latest private stock offering will be used to broaden its investment pipeline. “We’ve already deployed over half of the proceeds towards investments in multiple impact companies in the US,” Jones told ImpactAlpha, as well as two affordable housing projects in Portland.

• Impact portfolio. Kachuwa manages a $30 million portfolio of impact real estate, private equity and private debt investments. At least 60% of the public benefit corporation’s assets are in real estate. Kachuwa’s portfolio includes funds like Apis & Heritage and Harlem Capital and enterprises includingUncommon Cacao and Meow Wolf. “Our cooperative members are seeking a reasonable return — but not an extractive return — by investing in an impactful and diverse portfolio like Kachuwa’s,” said Lizette Pena of Kachuwa.
  
• Share this post.

Prime Coalition’s Trellis Climate backs Ample Carbon and Ebb Carbon. Trellis Climate, formerly Early Climate Infrastructure, was born last year when Actuate Climate, a nonprofit climate tech research and development shop “spun in” to Prime, a nonprofit climate fund manager. Prime brought on Actuate’s Lara Pierpoint as director of Trellis. Trellis offers impact-first, catalytic capital to early-stage climate tech startups to close capital gaps on their way to commercial scale. “Trellis aims to expedite the scaling of climate technologies so that they fulfill their promise to the planet on a timeline that matters,” says Prime.

• Low-carbon transition. Trellis has backed Ample Carbon, which is looking to bring green jobs to coal communities by repurposing retired coal plants into bioenergy plants with carbon capture and storage. Ebb Carbon, based in San Carlos, Calif., is developing an electrochemical process to enhance the ocean’s natural capacity as a carbon sink. Ample and Ebb will use the investments from Trellis to build demonstration facilities.
  
• Check it out.

Dealflow overflow. Investment news crossing our desks:

• Arevon Energy secured over $1 billion in a tax equity and debt financing package, backed by Wells Fargo, BNP Paribas and other global banks, for a solar-plus-storage project in California. Once completed, the project will generate 200 megawatts of electricity to meet the power needs of Southern California residents. (Arevon)
  
• Bangalore-based Shadowfax, whose network of hyper-local, on-demand drivers provide delivery services to over 100,000 merchants in India, raised $100 million in Series E funding from TPG, Flipkart, IFC and other investors. (Mint)
  
• Charles Schwab Bank committed $10 million to Opportunity Finance Network’s Finance Justice Fund, which has provided over $210 million in loans and grants to more than 100 member community development financial institutions, or CDFIs, in underserved US communities. (OFN)
  
• Women-led Halcyon spinoff, Halcyon Venture Partners, raised $5 million towards a $50 million-target fund that will invest in early-stage climate, health and equity tech startups. The firm is led by Kate Goodall and Dahna Goldstein.

Signals: Private Equity

Impact Engine doubles down on “purpose built” private equity with $85 million fund. Impact investing has become trendy among private equity firms, as the sector seeks to redeem its reputation for debt-fueled and externality-laden profits. In 2019, when Impact Engine created its first fund to allocate capital to impact private equity funds and invest in middle market companies, the firm’s partners could identify only a half-dozen impact-focused PE funds. Today, there are more than 150 funds with some kind of impact strategy, Impact Engine’s Priya Parrish told ImpactAlpha. Impact Engine is looking for managers in which the entire firm is committed to impact, not those that relegate it to a single fund of two. With the close of its $85 million second fund, Impact Engine is doubling down on its “purpose built” strategy (see, “Scaling purpose built impact with Priya Parrish” (podcast).

• Impact everywhere. The Chicago-based impact asset manager and public benefit corporation has grown from a $500,000 accelerator fund in 2012 to a diversified investment firm with $240 million in assets. The firm invests in companies and funds pursuing health equity, environmental sustainability, and economic opportunity, from early-stage ventures to private equity and buy-outs. It shows, says Parrish, that “impact investing is very achievable across all stages of the business, all asset classes.” 
  
• Track record. Impact Engine Private Equity Fund II is backed by Builders Initiative as well as the Kellogg and Surdna foundations. The fund, nearly three times the size of the firm’s first PE fund, is its biggest yet. That’s validation, says Parrish, “that impact is a significant opportunity in the middle market, as well as of the firm’s track record as a pure-play impact investor producing PE-like returns.
   
• More.

Agents of Impact: Follow the Talent

Carlyle appoints Jeff Currie, a former global head of commodities research at Goldman Sachs, to chief strategy officer of Energy Pathways, the private equity firm’s energy investment platform… Nuveen is looking for an impact investing associate in New York… Also in New York, Apollo Global Management is hiring a sustainable finance associate… Crown Family Philanthropies is on the hunt for an equity lead in Chicago.

Chemonics International seeks a senior monitoring, evaluation and learning specialist in London… Synechron has an opening for a sustainable finance and ESG senior consultant in Amsterdam… Rally Assets is on the hunt for a portfolio administrator… Blue Forest is recruiting a remote investment analyst…  NETI’s Climate Tech Bootcamp, a 10-week virtual pre-accelerator program for climate tech and energy founders, is accepting applications for its second cohort. 

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

Thank you for your impact!

– Feb. 28, 2024

*This post has been corrected. An earlier version stated that Impact Engine’s AUM was $140 million. It is actually $240 million.