The Brief: Stakeholder capitalism as an antidote to grocery price-gouging

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In today’s Brief:

• Corporate governance as a response to grocery price-gouging
• Energy flexibility on the grid 
• Revenue-based finance for cross-border companies
• DNC dispatches from Chicago

Featured: G is for Governance

Consumers, groceries, price-gouging and stakeholder capitalism. Vice President Kamala Harris’s support for controls on price-gouging has sparked a debate on how best to address the high cost of food and other essential goods. Is government policy a necessary and appropriate response to increasing consumer prices? Or will such policies distort the market, prevent competition and ultimately backfire? “A missing link here is the role of corporate governance in determining how to balance benefit to shareholders with benefits to consumers, workers, suppliers and the environment,” writes the Ford Foundation’s Margot Brandenburg (disclosure: Ford Foundation is an investor in ImpactAlpha). In a guest post, Brandenburg argues that at the root of the problem is modern corporate law and custom. Corporate directors, she says, generally understand their fiduciary duty to be to manage the corporation in the best interests of shareholders. That includes compliance with applicable laws and regulations, but not explicit or affirmative obligations to consider the needs of other stakeholders, such as employees, suppliers, the environment – or customers. “If we want companies to do more than maximize profits for investors, we need to give them that mandate,” Brandenburg argues.

• Benefit corporations. The past decade has seen significant innovations in corporate governance, says Brandenburg. Thousands of US companies (including nearly two-dozen publicly traded corporations) are incorporated under state laws as benefit or public benefit corporations. That means they must be “managed in a manner that balances the stockholders’ pecuniary interests [with] the best interests of those materially affected by the corporation’s conduct” (for context see, “A stock market test for stakeholder capitalism as public benefit corporations go public.”) There is growing interest in purpose trusts and other corporate governance structures that expand fiduciary responsibilities beyond pure profit maximization. If corporate law is at the root of the problem, says Brandenburg, policymakers should “look there for corresponding solutions.”
  
• Price of eggs. Take Vital Farms, the Austin-based egg and food company that incorporated as a Delaware public benefit corporation in 2017 and went public in 2020. The company, also a certified B Corp, did raise prices on its eggs in 2022, as a result of increasing diesel and grain prices. But the percentage increase was less than the industry-average price hike for eggs (Vital Farms’ eggs were $6.43 per dozen at Walmart this week). “Our approach to price increases has been to take them reluctantly in small amounts,” Vital Farms’s Russell Diez-Canseco said last year. “We don’t see a short-term supply and demand shock as an opportunity to goose our profits, and that’s not how we’re operating.”
  
• Keep reading, “Consumers, groceries, price-gouging and stakeholder capitalism,” by Ford Foundation’s Margot Brandenburg.

Dealflow: Energy Transition

London’s Piclo raises fresh capital from energy customers for its power marketplace. British startup Piclo operates a marketplace that helps electricity system operators, which balance supply and demand on local electricity grids, buy power from clean energy providers. Portuguese electric utility Energias de Portugal, a Piclo customer, made a strategic investment in the company via its venture arm, EDP Ventures. Clean Growth Fund and Future Energy Ventures also invested in Piclo’s latest equity round. The amount of the investments was not disclosed.

• Grid flexibility. Piclo’s software enables greater usage of renewable energy by helping grid operators improve “energy flexibility” and balance variable renewable energy sources, like rooftop solar and EV batteries. About 20% of energy in the EU comes from renewable sources. Digital technologies that support the use of variable clean energy supplies are key to reaching the EU’s goal of 40% renewable power by 2030. Software like Piclo’s will also play a role in quickly delivering new renewables capacity funded by the Inflation Reduction Act into US grid systems, argues Piclo’s John Greene.
  
• Geographic expansion. Piclo’s software is available in the UK, Portugal, Ireland, Italy, Australia and the US. It facilitates energy trading from more than 300,000 flexible energy assets with a total capacity of 22 gigawatts. The company is focused on expansion to Asia and in the US.
  
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Efficient Capital Labs secures $11 million to provide revenue-based financing for cross-border software innovators. Contraction in the venture capital markets has spurred tech startup founders to look for alternative funding sources, including non-dilutive revenue-based financing. New York-based Efficient Capital Labs launched in 2022 to fill a financing gap for tech startups that are based in one country and have a significant market presence and customer base in another. Efficient Capital Labs finances businesses headquartered in India with operations in the US and plans to expand its lending to Singapore-based startups. “The South Asia-US corridor is highly devoid of funding for the simple reason that any cross-border company is never evaluated as a global organization, only as a series of siloed companies in each country,” explained ECL’s Kaustav Das in a statement. That affects how startups are valued and the venture capital available to them.

• Responsible fintech. In the past year, Efficient Capital Labs has provided $70 million in financing to more than 100 companies. Responsible fintech lender Community Investment Management provided the company with $100 million to on-lend to startups shortly after it launched. Efficient Capital’s Series A equity round was led by QED Investors and 645 Ventures.
  
• Check it out. 

Dealflow overflow. Investment news crossing our desks:

• Chicago-based Grid Status raised $8 million from Energize Capital, NFDG Ventures, Rayburn Electric Cooperative, Evergreen Climate Innovations to provide better analytics and data insights to grid operators and other energy professionals. (Grid Status)
  
• The Native CDFI Network, Chehalis Tribal Loan Fund and the Institute for Native Pacific Education and Culture secured a combined $780,000 in grants from the US Small Business Administration to facilitate access to capital and technical assistance for Native-led microenterprises. (Tribal Business News)
  
• Estonia’s UP Catalyst secured €2.3 million ($2.6 million) to build a facility to convert CO2 into graphite and carbon nanotubes that can be used in battery production. (Tech.eu)
  
• London-based M&G Investments’ £5 billion ($6.5 billion) sustainable investment group Catalyst backed Livpure, an Indian company whose products include subscription-based water purifiers. M&G backed the company for its efforts to “reduce the cost of access to clean water.” (Mint)

Signals: Impact Forward

Talk of the Town: Live updates from outside the Democratic National Convention. In Chicago on Wednesday, ImpactAlpha’s Sherrell Dorsey stumbled upon underground meetings on climate, chatted up sodium-ion battery entrepreneur Spencer Gore, and shared her DNC takeaways live on Plugged In, the ImpactAlpha series she hosts on LinkedIn (watch the replay). “Ensuring that people have access to resources, and innovation to ensure that access– that really is the theme here in Chicago,” Dorsey says. Other updates from Chicago:

• Tech economy. Tech founders and investors continue to come out for Kamala (see, “VCs embrace Kamala Harris’s vision for an economy that works for all”). “It’s on us to make the world a bit fairer — to expand opportunity for those who don’t have it, whether that’s in tech or policy,” said Amazon’s Charlotte Newman. Newman, who works to accelerate underrepresented founders and investors, was at the Tech4Kamala confab, which drew more than 400 RSVPs (see Dorsey’s video). Shila Nieves Burney of Zane Venture Fund in Atlanta added that the endorsement of former President Donald Trump by prominent venture capitalists Marc Andreessen and Ben Horowitz “left a chill to a lot of us who are in the VC community who care about underrepresented founders and believe our democracy is at stake.” Andreessen Horowitz represents about $42 billion in assets. By contrast, “the folks that back VCs for Kamala are about $400 billion. That matters,” Burney said, adding, “I love competition.” 

• Climate underground. Climate so far has not been prominently featured on stage at the national event. But at side events and private gatherings, climate investors and entrepreneurs are buzzing, Dorsey reports. Family offices gathered in a private conference room at mHub, a Chicago-based incubator for manufacturing startups, to discuss impact investing strategies. Similar “underground tech planning meetings” are taking place in New York and San Francisco, Dorsey says, including the formation of “a major climate tech association” to bring together policymakers, investors and innovators to shape an inclusive energy transition.
  
• Battery tech. Battery prices have fallen more than 90% in the past 15 years and are set for additional dramatic declines. Sodium ion is “a better technology than lithium ion” for electric and hybrid vehicle batteries, in large part because it’s cheaper, Spencer Gore, the CEO of Bedrock Materials told Dorsey (for background see, “Peak Energy scores $55 million for up-and-coming sodium ion battery storage”). The Chicago-based startup develops materials and manufacturing technology for low-cost sodium-ion batteries. Battery manufacturing has attracted the largest share of private investment spurred by the Biden-Harris administration’s historic Inflation Reduction Act. According to Goldman Sachs, falling battery prices are expected to make electric vehicles cost-competitive with gas-powered vehicles by next year – without subsidies.
  
• Follow the latest updates.

Agents of Impact: Follow the Talent

Stax promotes Tyler Viet to managing director… The California Coalition for Community Investment taps Nate Schaffran, previously with Community Vision CA, as its inaugural executive director… Roy Messing joins the Michigan Center for Employee Ownership as a part-time program coordinator… Blueprint Local is recruiting an operations director in Washington, DC. 

Sustainable Capital Advisors has an opening for a sustainable finance vice president in Washington, DC… Builders Vision is hiring a food and agriculture investment associate in Chicago… Quantified Ventures is looking for a climate finance senior associate or associate director… Tapestry Community Capital seeks an impact investment manager in Toronto.

Capital One Financial Corp. is on the hunt for a climate strategy senior manager… Candide Group’s Jasmine Rashid will join Bia Vieira of Women’s Foundation California and Kimberly Alvarenga of California Domestic Workers Coalition on a webinar to talk about her new book, The Financial Activist Playbook, Tuesday, Sept. 10.

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

Thank you for your impact!

– August 22, 2024