The Brief | December 6, 2023

The Brief: Social premiums in muni bonds, Milwaukee’s cautionary tale, Africa’s local funds, foundations of social justice, tools for institutional investors

The team at


Greetings, Agents of Impact! 

Featured: Muni Impact

From Atlanta to St. Paul, bond issuers are steering muni markets toward racial equity. When the city of St. Paul, Minn. needed to remove and replace trees devastated by an invasive insect, the city floated a municipal bond and prioritized neighborhoods with the lowest tree canopy, largely in low-income parts of the city. In Atlanta, proceeds from a “social bond” last year were earmarked for affordable basic infrastructure, access to essential services, and socio-economic advancement. Issuers across the country are increasingly tapping the $4 trillion municipal bond markets for capital to redress long-standing inequities. Boston-based Public Finance Initiative is convening issuers from St. Paul and Atlanta, as well as Chicago, Dallas and other places, to better understand the racial equity and social impacts of bond issuances. “There’s no common system for measuring impact,” Atlanta Treasurer Courtney Knight tells ImpactAlpha. “We wanted to take a leadership role in the bond market and be very scientific about developing a specific set of measurements around the impact of our investment.” 

  • Pricing benefit. The investor appeal of projects that reduce social risks may help issuers reduce their costs of capital. Demand for Atlanta’s social bond, for example, was triple the supply. New York City’s first social bond last year raised $400 million for affordable housing projects and similarly allowed the city to lower its cost of capital. The social premium is muted, however, by the short supply of any kind of muni bonds; investors prize the tax exemption that muni bonds offer, while state and local governments have limited their issuances to avoid taking on additional debt. That means issuers may not have to do the hard work of ensuring their bonds have “social” labels or ESG principles in order to find willing buyers. “One of the things we find is that issuers very much want to test the question of, will I see a pricing benefit?” says Public Finance Initiative’s Lourdes Germán.
  • Sharing lessons. The technical assistance is part of Public Finance Initiative’s wide-ranging effort to nudge the municipal bond markets to address systemic inequities (disclosure: the Robert Wood Johnson Foundation supports PFI’s efforts and ImpactAlpha’s Muni Impact coverage). A framework for municipal bond issuers, released earlier this year, lifts up the best practices for embedding racial equity in municipal bond-funded projects and capital investments. The new cohort of issuers will test the guidance, including ways to communicate racial equity efforts with investors. “The concept of social equity is part of Atlanta’s very being,” Knight said. “It has evolved since the Civil Rights Movement to a modern conversation of what we’re now talking about in terms of social equity in the muni bond market.”
  • Cautionary tale. Milwaukee’s common council this summer debated the merits of filing for Chapter 9 protection to become the second-biggest US city, after Detroit, to go bankrupt. Behind the budget crisis is a pattern of investments that have prioritized economic development over inclusive community growth, writes Court Street Group’s Matt Posner in his weekly Community Finance Brief, now syndicated on ImpactAlpha. The strained relationship between Milwaukee and the state of Wisconsin has created a vicious cycle, Posner says. “The city’s financial struggles make it more reliant on state aid, while the state’s reluctance to provide adequate support further weakens the city’s financial position.” Read the Community Finance Brief.
  • 👋 Agents of Impact Call: Finding hidden impact and risk in municipal bonds. On the next Call in ImpactAlpha’s Muni Impact series, supported by the Robert Wood Johnson Foundation, hear from Matt Posner, along with Activest’s Homero Radway, Kestrel’s Monica Reid, R. Paul Herman of HIP Investor and other Agents of Impact. Join us, Wednesday, Dec. 13, at 10am PT / 1pm ET / 6pm London. RSVP today

Dealflow: Funds of Funds

Emerging fund managers score nearly $30 million for Africa’s small businesses. Mastercard Foundation’s Africa Growth Fund has allocated $200 million for investment managers supporting economic opportunities for women and youth (see, “Funds of funds provide more than capital for local investors in small and growing businesses”). Mastercard’s latest deals, totalling $27 million, include $8 million for Tanzania-based SME Impact Fund, which invests in agrifood businesses that work with smallholder farmers. VestedWorld scored $10 million for its second fund, a $50 million vehicle called Rising Star Fund that makes early-stage investments in Ghana, Nigeria and Kenya and intends to expand to other African countries (see, “The Liist”). Nairobi-based Chui Ventures, a women-led fund, notched $9 million for its planned $20 million fund for seed-stage tech investments in Kenya and Nigeria. The investment is a “game-changer for exceptional African startups,” said Chui’s Joyce Ann Wainaina.  

  • Climate + gender. Separately, FSD Africa Investments, through its Nyala fund, committed $1 million to WIC Capital, a women-led investor of invests equity and quasi-equity in female-founded companies in Senegal and Cote d’Ivoire (for background, see, “Mapping the climate edge for gender investors – and vice versa“). The investment gets WIC, which is also backed by Dutch development bank FMO, to a $5 million first close. It positions the firm to attract bigger pools of capital, said FSDAi’s Anne-Marie Chidzero. FSDAi, a UK government-backed investment firm, seeded Nyala last year with £8.5 million ($10.7 million) to support Africa’s ecosystem of local private fund managers. Nyala, which focuses on women-led funds, earlier invested in Aruwa Capital (also featured on this month’s Liist).

Seed funding to decarbonize buildings with wood. Forest-based products, such as timber and wood, can capture and store carbon for long periods of time. Strong by Form, based in Spain, raised $5.2 million to develop timber-based biocomposites as an alternative to steel, aluminum and concrete in new buildings and cars. “Our technology has been designed to deploy on a massive scale across multiple industries, allowing timber to play a pivotal role in solving the climate crisis,” said Strong by Form’s Andres Mintik. The company is developing more sustainable train stations with Deutsche Bahn, Germany’s national railway. Teampact Ventures, Climate Insiders, CiRi Ventures, FINSA and other investors joined Strong by Form’s seed round.

  • Waste to value. Washington, DC-based Cambium Carbon is recycling fallen trees for use in wood products and using the proceeds to plant trees in local communities. The company’s $5.3 million seed round was led by LA-based venture firm MaC Venture Capital. Participating investors include Revolution’s Rise of the Rest seed fund, Alumni Ventures, Gaingels and Blue Pool Capital. “This funding enables us to scale up our production of carbon-negative wood, offering a sustainable alternative to traditional lumber,” said Cambium’s Ben Christensen.
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • EnergyRe, a developer of clean energy projects, raked in $1.2 billion for “decarbonizing US cities and hard-to-abate energy load centers with state-of-the-art electric grids that unlock new sources of clean power,” said CEO Miguel Prado. (EnergyRe)
  • Morgan Stanley closed its Next Level Fund, backed with $50 million from investors including Hearst, Microsoft and Walmart, to invest in early-stage tech companies led by underrepresented founders. (POCIT)
  • Cleantech investors including Breakthrough Energy, Siemens Energy and Chevron Technology Ventures joined the latest financing round of Malta Inc., a developer of long-duration storage for renewable energy. (Rigzone)
  • Private equity firm Ares Management acquired Burnham RNG, a developer and owner of anaerobic digestion facilities that convert wastewater and agricultural waste to renewable natural gas. (Burnham)

Podcast: Impact(ed)

Driving foundation endowments toward social justice. Friends of ImpactAlpha Eric Horvath and Lucas Turner-Owens are out with the second episode of Impact(ed), featuring interviews with BIPOC practitioners working to unlock the power of investing for good. Private foundations, with more than a trillion dollars in investable capital. In the episode, Horvath and Turner-Owens speak with Essma Bengabsia of the Annie E. Casey Foundation to explore the untapped potential of foundation investing.

Impact Voices: Due Diligence 

How institutional investors can up their sustainability game in private markets. Institutional investors have pushed private equity funds to adopt environmental, social and governance, or ESG, considerations. But they struggle to assess the depth of funds’ approaches and fall short on ESG in their due diligence, according to the Center for Sustainable Business at New York University’s Stern School of Business. “There is clearly an opportunity for improvement,” write NYU’s Tensie Whelan and Julien Marchese, and Arthur D. Little’s Jessica Weiss. In their latest guest post, they introduce a tool to help investors assess fund managers and “measure the actual impact and financial benefits of specific sustainability strategies, rather than the typical yes/no compliance exercise.”

  • Heat maps. Most US-based institutional investors use a version of the Institutional Limited Partners Association’s due diligence questionnaire to assess fund managers. The new tool supplements that questionnaire and scores responses to generate a “heat map” flagging the sustainability performance of general partners. Whelan and her team will be releasing the investor tool, along with one for general partners, at the Center’s conference next week on private equity and sustainability value-creation.
  • Impact management. Pension funds, family offices and other investors new to impact investing face particular challenges in evaluating private market funds and measuring their impact. BlueMark and CASE at Duke University interviewed more than 50 limited and general partners to produce a field guide to impact due diligence and showcase how leading asset allocators and managers are measuring and managing impact throughout the investment lifecycle.
  •  Go deeper

Agents of Impact: Follow the Talent

Macro, the film and production company, names Reena Singh, ex- of The Walt Disney Company, as executive vice president… John Guzek, ex- of SES ESOP Strategies, joins Ownership Works as business engagement manager… Antonia Chorschew, ex- of Ufenau Capital Partners, joins Blue Earth Capital as a fundraising and investor relations associate… The IFRS Foundation elected Emmanuel Faber to a second three-year term as chair of the International Sustainability Standards Board. 

Partech has an opening for an ESG and sustainability intern in Paris… World Resources Institute is looking for a carbon finance manager for its global restoration initiative in Washington, DC… Mana Impact is on the hunt for an impact investment manager in Singapore… The Aspen Institute’s Business Roundtable on Organized Labor is hosting “Reimagining the business-labor playbook for the 21st century,” this Friday, Dec. 8… Calvert Impact’s Anna Mabrey, Paul Hilton of Trillium Asset Management, and US SIF’s Rachel Curley and Michael Young will speak in a virtual class on the fundamentals of sustainable investing, Wednesday, Dec. 13.

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

Thank you for your impact!

– Dec. 6, 2023