Greetings, Agents of Impact!
Featured: Blue Economy
OK Doomer: These young entrepreneurs aren’t giving up on the climate or the oceans. The increasingly apocalyptic tone of the climate conversation has spurred a counter-movement for a different message, lest the doom and gloom extinguish all hope, particularly among the young. But as many parents know, adults may not be the best messengers. The Youth and Innovation Forum, ahead of the United Nations’ World Oceans Conference next week in Lisbon, will lift the voices of young entrepreneurs, scientists and activists themselves to advance the five (positive) “tipping points” outlined by the conference. “We’re harnessing the talent and inspiring this next generation to not just be angry about the climate crisis, but to instead become change agents and entrepreneurs and use our talents for the good of our planet,” says Daniela Fernandez, who founded the Sustainable Ocean Alliance in 2014 in her first year at Georgetown.
- Ocean solutions. The alliance is bringing more than two dozen startup founders and social entrepreneurs to Lisbon, a subset of the 222 ocean solutions the alliance has supported. “I am passionate about promoting ocean health through research and education in The Gambia,” says Betty Jahateh, who is coordinating a research project to assess saltwater intrusion. In Mexico, Andrea Paz Lacavex founded SPORA to restore kelp as “green gravel.” Ailars David Lema helped build Arena Recycling in Tanzania to create bricks from recycled plastic and says he is “a living mermaid at all times in love with the ocean.”
- Blue portfolio. “The educational gap that we’re trying to bridge is that if you’re solving for climate, you’re solving for oceans; you solve for oceans, you solve for climate,” Fernandez told ImpactAlpha. In Lisbon, Bahamas-based Coral Vita will show off its methods for propagating climate-resilient coral, which won last year’s Earthshot Prize from Prince William and Kate Middleton (see, “New models for financing reef restoration in the Caribbean and beyond”). Other companies in the alliance’s portfolio include Brooklyn-based AKUA, which makes what it claims is the world’s first kelp burger. Ellipsis Earth, based in London, uses drones to map plastic pollution. Cruz Foam, based in Santa Cruz, Calif., has attracted celebrity investors Leonardo DiCaprio and Ashton Kutcher to its Styrofoam alternative made from shrimp shells.
- Keep reading, “OK Doomer: These young entrepreneurs aren’t giving up on the climate or the oceans,” by David Bank on ImpactAlpha.
Series: Seeding Impact
Setting targets for risks and returns to make our capital more catalytic. In chemistry, a catalyst is a substance that increases the rate and lowers the amount of energy needed for a chemical reaction. “When we strive to be catalytic in our impact investment strategies, we similarly aim to add something to the process that will accelerate the change we seek,” The Grove Foundation’s Rebekah Saul Butler writes as part of ImpactAlpha’s “Seeding Impact” series in partnership with the Catalytic Capital Consortium, or C3. The foundation’s most significant catalytic tool, Butler says, is a $15 million carveout within its broader mission-aligned portfolio that aims for the return of 80% of the capital invested. “That capital return target allows us to work along the continuum between grants and investments,” she writes, allowing the foundation to participate in junior tranches of blended finance vehicles, provide 1% loans to high-risk startups, and use recoverable grants for breakthrough strategies.
- Time is impact. “Being flexible and/or going first can be critical to being catalytic,” Butler writes. In its catalytic carveout, the foundation strives for tight collaboration with the program team and other investors; frequent investment committee meetings; email approval when appropriate; right-sized diligence efforts; and access to catalytic-minded lawyers who don’t feel the need to “over-mitigate downside risk.”
- Learning labs. Butler shares key dimensions of catalytic capital. Her post comes out of a series of learning labs last year supported by C3, an effort of the MacArthur and Rockefeller foundations and Omidyar Network (disclosure: C3 also sponsors ImpactAlpha’s Catalytic Capital coverage). MacArthur’s Debra Schwartz kicked off the series with some takeaways from the labs and Emily Duma rounded up answers to frequently asked questions about catalytic capital. Follow the series on our Seeding Impact landing page.
- Keep reading, “Setting targets for risks and returns to make our capital more catalytic,” by The Grove Foundation’s Rebekah Saul Butler on ImpactAlpha.
Dealflow: ReNewCos
Kellogg to spin off plant-based foods from cereal and snack units. The Battle Creek, Mich.-based food giant may be better known for Frosted Flakes, Pop Tarts and Cheez-Its, but since 1999 Kellogg has also sold plant-based sausage, patties and “chik’n” under the MorningStar Farms brand. The move to split the conglomerate into three companies focused on its faster-growing snacks and slower-growing cereal businesses, but the real secret may be its plant-based meat alternatives. If so, it will be the latest example of a ReNewCo, a corporate spinoff designed to take advantage of investor interest in – and higher multiples for – green and sustainable companies (for background, see, “Accelerating net-zero transition pushes incumbents to spin off green ‘ReNewCo’s’”).
- Brand leader. Plant-based products have been a bright spot in the sluggish food market. The growth of alt-meat sales has slowed in recent months, however, and hundreds of alt-protein startups are scrambling to survive. Shares of Beyond Meat are down more than 60% this year amid the broader sell-off. Kellogg’s MorningStar Farms unit has a plant-based leg up with its established brand, $340 million in sales and, unlike most of its competitors, profits. The new “PlantCo” has “a significant opportunity to capitalize on strong long-term category prospects,” said Kellogg, which is thought to be open to a sale of the unit.
- Chew it over.
Langdon Park pays $63.2 million for affordable apartments for Black and Latino D.C. residents. Former NFL wide receiver Malcolm Johnson left his job at JPMorgan last year to launch Langdon Park Capital, named after the Washington, D.C. neighborhood where he was born and raised in the 1980s. At the Langdon Park Recreation Center, he had access to “amazing mentors, coaches, volunteers and many strong Black men and women who helped us flourish,” Johnson told ImpactAlpha. “I wanted this company to be named after a place that reminds us of what true value in our communities looks like.” Johnson’s goal: to drive positive social impact in Black and Latino communities in D.C.-area housing markets. The real estate firm’s first investment is a 304-unit apartment building in Fort Washington, Md., a predominantly Black community, where most of the residents earn below 70% of the area’s median income.
- Real estate impact. Langdon Park plans to spend $5 million on improvements while preserving affordability for residents. It will work with local social service organizations to provide financial education and workforce development. Langdon Park will team up with Washington Jesuit Academy to create education opportunities for promising students, Employ Prince George’s for workforce development services, and Black-led fintech Esusu to help residents build credit scores by reporting their rental payments to credit bureaus.
- Dive in.
Dealflow overflow. Other investment news crossing our desks:
- France’s EcoVadis is a unicorn after raising $500 million in one of the largest raises for a sustainability data provider to date. The deal was led by General Atlantic’s BeyondNetZero fund and Europe’s Astorg.
- Bank of America committed $40 million in low-cost capital to CDFIs such as Capital Impact Partners and The Reinvestment Fund to finance the development of health care centers in U.S. underserved communities.
- Transfer VR secured $35 million in Series B funding to increase the use of virtual reality for on-the-job training in industries most impacted by skills gaps and unemployment, such as health care and construction.
- Ares Management Corp. purchased SLR Consulting, a global ESG and sustainability consultant company, from Charterhouse Capital Partners.
Signals: Pricing Carbon
Pricing carbon could succeed where Scope 3 falls short in accounting for emissions. As the Securities and Exchange Commission mulls new rules for climate disclosure, investors are weighing in on what could be a more simple and efficient solution to achieving net-zero emissions: carbon pricing. A group of 72 institutional investors is urging governments to institute carbon pricing policies to provide predictable price signals and ensure a just transition. “Carbon pricing provides a broad incentive for decarbonisation, driving emissions reductions where they are most cost-effective,” the Net Zero Asset Owners Alliance writes in a new paper. The group has laid out five principles to guide an overhaul of carbon-pricing mechanisms, which include cap-and-trade systems, carbon markets and carbon taxes. Among the recommendations: minimizing competitive distortions and carbon “leakage,” raising prices, and using proceeds from carbon pricing to ensure an equitable transition.
- Results. Europe’s emissions trading system has helped lower the bloc’s emissions by 35% between 2005 and 2019, and more so since then as carbon prices on the market have soared. In the U.K., carbon pricing helped cut power sector emissions almost in half between 2013 and 2017. Still, less than 5% of global greenhouse gas emissions in 2021 were covered by carbon pricing consistent with limiting warming to 1.5 degrees Celsius.
- Supply chain emissions. Investors are pushing carbon pricing in comments submitted to the S.E.C. Inclusive Capital’s Jeffrey Ubben, an ExxonMobil board director, urged the S.E.C. to mandate an “assumed price on carbon.” Stanford University’s Alicia Seiger, Marc Roston and Thomas Heller say carbon pricing is a simpler way to force a full accounting for carbon footprints than so-called Scope 3 reporting, which attempts to quantify companies’ downstream and upstream emissions. “Supply chain emissions are more effectively managed through carbon pricing, efficiency standards, and mandates,” they argue.
- More.
Agents of Impact: Follow the Talent
Collective Actionlaunched a six-month fellowship program to train a new generation of young leaders in impact private markets investing… The Global Impact Investing Networkseeks an associate director to work with institutional clients in New York… The California Endowment is looking for an impact investing portfolio manager in Fresno, Calif… Global Climate Rewardis looking for a (remote) volunteer writer/journalist (see, “Positive externalities: Carrots as well as sticks for the carbon era”).
Walton Enterprises seeks a senior investment analyst in Washington, D.C. (applicants should send their resumes and cover letters to [email protected] and reference Walton Enterprises)… RPCK Rastegar Panchalseeks a senior associate attorney for fund formation in New York… Global Partnershipsis recruiting a credit operations officer in Seattle or Bogotá, Colombia… Developing World Markets’ is looking for a debt portfolio manager and an investor relations associate in New York… ECMC Groupis hiring a senior director of impact investing in Minneapolis.
Thank you for your impact!
– June 22, 2022
