The Brief | February 17, 2021

The Brief: Soil-carbon markets, edtech startups, reduce and recycle, expanding EV charging, Goldman’s sustainability bond, pay for success

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Greetings, Agents of Impact! 

Agents of Impact Call No. 27: Opportunities at the intersection of gender and climate. GenderSmart’s Suzanne Biegel joins ImpactAlpha’s Jessica Pothering, along with entrepreneurs, investors and other special guests on The Call, Tuesday, Feb. 23, at 9am PT / 12pm ET / 5pm London / 8pm Nairobi. RSVP today

Featured: ImpactAlpha Original

Farmers harvest ‘soil carbon’ to meet rising corporate demand for emission offsets. Candidates in last year’s U.S. Senate race in Iowa were asked in a televised debate to cite the clearing price for bushels of corn and soybeans (Sen. Joni Ernst muffed her answer). In the next election, they may well be asked the going price for a ton of carbon. Farmers in Iowa are getting up to $20 a ton for carbon they sequester in their soil with cover crops, no-till  and other sustainable-agriculture techniques, and can fetch additional payments for water-quality credits. That can mean payments to farmers of up to $50 an acre. More than 1,500 corporations have made ‘net-zero’ pledges to phase out greenhouse gas emissions by 2050 or sooner. IBM this week raised the stakes, committing to reach net-zero by 2030. That has set off a scramble by companies to lock in long-term carbon credits at current low prices. “Just like a farmer goes to sell their corn or their beans to an intermediary or grain buyer, we want to create a market where they’re thinking about these environmental outcomes as commodities, right alongside those more traditional crops, and create new revenue streams in the very same way,” says Mark Lambert of ReHarvest Partners, which last year made such payments for 10,000 acres of Iowa farmland and expects to cover more than 100,000 acres this year.

Microsoft’s recent purchase of 1.3 million tons of carbon removal “opened the floodgates,” says Regen Network’s Gregory Landua. The software maker purchased the first carbon credits available on Regen’s blockchain-based carbon registry, which are generated by four ranchland grazing projects in Australia. Widespread adoption of regenerative practices could cut the U.S. agriculture sector’s greenhouse gas emissions down from around 10% of total U.S. greenhouse gas emissions to under 4% by 2025, says a new report. A corollary of the long-term contracts by which corporations are locking in today’s artificially low prices is that early-adopter farmers may miss out on the coming boom in carbon. Carbon credits could shoot to $100 per ton within a few years, Landua predicts. The emerging soil-carbon markets “will have to be equitable for farmers,” says Croatan Institute’s David LeZaks, an author of the report. “If they get in now and prices go up, it’s the traders and not the farmers that make the money.”

Keep reading, “Farmers harvest ‘soil carbon’ to meet rising corporate demand for emission offsets,” by David Bank and Amy Cortese on ImpactAlpha.  

Dealflow: Follow the Money

Reach Capital closes $165 million fund for edtech startups. “There are still barriers that keep kids – especially Black, Latinx, those from under-resourced communities and those with disabilities – away from intriguing, exciting, joyful educational experiences,” writes Reach’s Jennifer Carolan. Reach has raised $311 million and backed 90 edtech startups. Investors in the women-led firm’s third fund include the Ford and Kaiser foundations, Goldman Sachs’ AIMS Imprint, Sesame Workshop, National Geographic Society, Caprock Group and Hall Capital.

  • Edtech opportunities. Reach’s portfolio includes Ellevation Education, which offers English-as-a-second-language software for immigrant students; Demos, an app offering math learning for vision-impaired students; and Springboard, which helps low-income students launch tech careers. Other investments include Epic, ClassDojo, Gradescope, Outschool and Lovevery.
  • Dig in.

Rheaply scores $8 million to help companies recycle and reduce waste. The Chicago-based company helps organizations track and recycle unused items to reduce their carbon footprints. Its Series A round was led by High Alpha, with 100 Black Angels & Allies Fund, Concrete Rose Capital, Hyde Park Angels, M25 MCJ Collective, Morgan Stanley Innovation Lab, Salesforce Ventures and Revolution’s Rise of the Rest (see, “Rise of the Rest backs Black-led startups”). “This funding demonstrates a commitment from the venture community to fighting climate change and actively supporting Black-led and founded companies,” said Rheaply’s Garry Cooper

Dealflow overflow. Other investment news crossing our desks:

  • Goldman Sachs issues $800 million sustainability bond. Proceeds from the bank’s first such bond will finance green and low-carbon initiatives in energy, water, materials, transport and agrifood, as well as financial inclusion and access to healthcare and education. 
  • Protix raises capital to farm insects for protein. Protix raises insects as a sustainable source of animal feed. The company secured €15.5 million ($18.8 million) in a round led by aquaculture impact investor Aqua-Spark. Dutch impact investor Invest-NL invested €7.5 million to support the Dutch government’s ‘National Protein Strategy’ to accelerate alternative, plant-based and sustainable protein production. 
  • Energy Impact Partners backs EV infrastructure venture. The Microsoft-backed clean energy investment firm participated in AddEnergie Technologies’ $42 million Series C round to enable the Canadian venture to expand its electric vehicle charging network to the U.S. (see, “Corporate collaboration: Microsoft backs Energy Impact Partners to speed the low-carbon transition”).
  • Motley Fool Ventures backs women’s healthcare fund SteelSky Ventures. Steelsky’s portfolio includes Twentyeight Health, which offers telehealth to low-income patients, and Rwanda-based medical drone delivery venture Zipline, as well as DNA testing company 23andMe. Terms of the deal were not disclosed.
  • Redefine Meat raises $29 million for 3D-printed meatless steaks. A global group of investors backed the Israeli company’s Series A round, including Hong Kong’s Happiness Capital, Israel’s Hanaco Ventures, the U.K.’s CPT Capital, Guatemala’s Losa Group, Singapore’s K3 Ventures, and Sake Bosch, founder of Netherlands’ Prime Ventures.

Impact Voices: Pass the Mic

Pay-for-success can help the Biden administration build back better. The pandemic has decimated state budgets and increased the demand for social services, forcing public officials to explore ways to raise capital and allocate funds towards projects that are cost-effective and impactful. Pay-for-success contracts, also known as social impact bonds, tap private investors for up-front capital to scale evidence-based social programs. Investors get paid back, with interest, by government agencies if the programs generate the targeted outcomes.

“For the government, the model shifts the cost of spending and risk of failure towards the private sector,” Ibrahim Rashid, a graduate student at the University of Chicago’s Harris School of Public Policy, writes in a guest post on ImpactAlpha. “If the project fails, the government doesn’t owe a dime.” 

  • Catalytic government. Pay-for-success can be used to address some of the ruptures caused by the COVID-19 pandemic, as well as to construct affordable housing, connect those at risk of homelessness with resources, and help immigrants and laid-off workers prepare for a post-COVID economy. Such projects can provide employment opportunities to past offenders to reduce recidivism and the transmission of COVID in prisons. 
  • Legislative action. Congress should allocate funding to states and nonprofits for pay-for-success projects in the next economic recovery package, Rashid says. Lawmakers also can update the Social Impact Partnerships to Pay for Results Act, which created a $100 million standing fund in 2018.
  • Keep reading, “‘Pay for success’ can help the Biden administration build back better,” by Ibrahim Rashid on ImpactAlpha.

Agents of Impact: Follow the Talent

Nigeria’s Ngozi Okonjo-Iweala is appointed to lead the World Trade Organization (see, “Agent of Impact: Ngozi Okonjo-Iweala“)… Treasury Secretary Janet Yellen is considering Sarah Bloom Raskin, former chair of i(x) Investments, to lead the department’s climate efforts… Halcyon Angels’ Dahna Goldstein is appointed director of impact investing at Halcyon Incubator… Amir Kirkwood of Opportunity Finance Network, CJ Callen of Chan Zuckerberg Initiative, David McClean of DMA Consulting Group and Lee Merkle-Raymond of Hercules Capital join the board of RSF Social Finance… B3am’s David Bosun-Arebuwa, Black’s Adam Taylor and Film3D’s Abdou Sarr join the inaugural cohort of Apple’s Entrepreneur Camp for Black Founders and Developers.

Purpose Foundation is scheduling strategy calls with founders ahead of its AltCap Fundraising Accelerator… VC Include’s Bahiyah Yasmeen Robinson and LACI’s Taj Ahmad Eldridge are hosting “Black Voices in Sustainable Investing” with Christian Okoye of Emerson Collective, Amberjae Freeman of Etho Capital, and Nneka Uzoh of GreenTech Noir, Monday, Feb. 22… ANDE issues a call for applications for the second round of the Advancing Women’s Empowerment Fund.

Thank you for your impact.

– Feb. 17, 2021