The Brief: Stewarding purpose through a perpetual trust

The team at

ImpactAlpha

Greetings, Agents of Impact! In today’s Brief:

  • Natural Investments’ perpetual purpose trust
  • Secondary market for impact funds
  • India embraces (small) EVs
  • Green guarantees on the London Stock Exchange 

Featured: Ownership Economy

This sustainable investing firm is stewarding its purpose with a perpetual trust. Natural Investments started out nearly four decades ago as one of the few wealth management firms helping its clients invest sustainably. The firm was a founding B Corp in 2007 and later became a Delaware public benefit corporation as well. But the San Francisco-based financial advisory firm could not escape the awkward fact that it was owned exclusively by white men for more than 20 years and, since 2009, 80% by white men. “We were long aware that the firm’s ownership didn’t match its values,” Natural Investments’ Michael Kramer explains in a guest post on ImpactAlpha. When Kramer and his partners were looking to retire, they helped make Natural Investments one of the first financial firms to follow the lead of Patagonia and other mission-driven companies, and transfer their ownership to a perpetual purpose trust (see, “A Utah auto shop demonstrates a pathway to worker ownership”). The Natural Investments Purpose Trust enables any of the firm’s 20 or so advisors “to steward it as a strategic leader without going into substantial debt to purchase an ownership stake,” writes Kramer, now a manager and “trust steward” for the firm. 

  • Ownership alternatives. Natural Investments’ partners had long sold ownership shares to younger advisors. But as the firm neared $2 billion in assets under management, many new advisors could not afford the higher valuation and share price. “We needed to create an exit strategy for the founders and partners and facilitate governance succession, all while increasing the diversity of leadership to match its values and investment commitments,” Kramer writes. Natural Investments had helped clients invest in Organically Grown Company to support the wholesale grocer’s transition to its own perpetual purpose trust (see, “This is what stakeholder capitalism looks like”). It consulted with Organically Grown’s spin-off consultancy, Purpose Owned, to facilitate its own conversion.
  • G for governance. “E” for environmental and “S” for social command the most attention from ESG investors. But “G” for governance is “the realm where the rights, influence, power and payment of workers, management and ownership intersect,” says Kramer. More firms are investing in entities owned, managed by and benefiting employees and people of color. But there is “little attention paid by investment firms to their own governance and ownership.” he writes. “We hope other firms will adopt this important ownership structure.”
  • Keep reading,This sustainable investing firm is stewarding its purpose with a perpetual trust,” by Michael Kramer of Natural Investments on ImpactAlpha.

Dealflow: Catalytic Capital

British International Investment sells stakes to seed impact secondaries market. How to exit impact investments is always a hot topic among emerging market investors. IPOs are uncommon. Private equity is often unavailable. And secondary markets, in which investors can sell their stakes directly to other investors, are undeveloped. British International Investment wants to seed a secondary market for impact funds in order to recycle capital to new fund managers and derisk fund investments. The UK development finance institution sold its stakes in funds run by Aavishkaar, Novastar Ventures and Adenia Capital to Swiss impact investment firm Blue Earth Capital. “We view this transaction as an innovative approach for blended finance,” said Blue Earth’s Nicolas Muller.

  • First secondaries. The portfolio sale includes BII’s stake in a joint project of India-based Aavishkaar Group and Netherlands-based Goodwell investments. Aavishkaar Goodwell India Microfinance Development Company II makes small equity investments and provides technical assistance to microfinance institutions in India. BII invested $15 million in 2012. BII also invested in Adenia Capital’s fourth private equity fund for mid-sized African businesses in 2016. African impact tech venture fund Novastar Ventures Africa Fund II has been part of BII’s fund portfolio since 2018.
  • Catalytic capital. Development finance institutions are coming under increased pressure to be more catalytic and risk-taking with their capital. “Mobilization is a key part of our strategy,” said BII’s John Owers. He said BII wants to encourage fund investments by “providing visibility of the underlying investments in the funds, shorter hold periods, and access to a diverse fund portfolio for potential new investors.”
  • Check it out

Dealflow overflow. Investment news crossing our desks:

  • The Green Guarantee Company provides guarantees for private green loans and green bonds listed on the London Stock Exchange in order to catalyze climate investments in emerging markets. It raised $100 million from the Green Climate Fund, the UK’s Foreign Commonwealth and Development Office, the Nigeria Sovereign Investment Authority, Norfund and USAID. (Green Climate Fund)
  • Ghana-based Injaro Investment Advisors closed its first fund to make local currency investments in small and mid-sized companies. It raised 216 million Ghanaian cedis ($17.4 million) with backing from local pension funds. (Africa Private Equity News)
  • Health in Her Hue closed $3 million for its digital health app designed for Black women’s healthcare needs. (AfroTech)
  • Indian solar finance company Metafin raised $5 million in equity, with backing from Prime Venture Partners and Varanium Capital. (The Economic Times)

Signals: Electric Mobility

India’s growing appetite for electric vehicles. The US is sending mixed signals about consumer EV adoption (see, “Is the EV glass half-full or half-empty?”). In India, where most vehicle sales are two- and three-wheelers, rather than sedans and SUVs, EV sales were up 50% in 2023 and now account for more than 6% of total vehicle sales. Bangalore-based electric motorbike maker River newly raised an additional $25 million for its Series B equity round after raising $15 million last year. Yamaha Motor Co. joined the round, which also includes Lowercarbon Capital, Toyota Ventures and other automotive companies. River’s first bike – a large, rugged vehicle that it calls the “SUV of scooters” – sells for 125,000 rupees, or about $1,500.

  • Small is beautiful. More than 80% of vehicles on India’s roadways are two- and three-wheelers, which can skirt congested city traffic and support livelihoods for taxi drivers and delivery people. “We are rooted in two-wheelers and three-wheelers,” Anup Jain of Mumbai-based Orios Venture Partners told ImpactAlpha. “These are the two ways in which India really commutes.” (See, “Small vehicles have investors thinking big about India’s e-mobility transition.”)
  • EV finance. Mufin Green Finance provides consumer financing for two-, three- and four-wheelers and expansion capital for EV-charging and battery-swapping network operators. The company raised $17 million in Series B equity with plans to expand into commercial vehicles like buses and trucks. Also in Bangalore, OTO secured $10 million for its lease-to-own motorbike finance model. It’s increasing its EV offerings through partnerships with electric motorbike maker Ather Energy and others.
  • Power up.

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

MCE Social Capital promotes Christina Lukeman to business development and communications senior director, and Maria Raurell to investments and risk senior director (see, “Doubling down on guarantees, MCE Social Capital is unlocking capital for climate + gender)… ImpactAssets promotes Sally Boulter to senior director of engagement and client experience, and Kavita Vijayan to head of marketing. 

Rally Assets seeks an impact manager… Catalyze Group is on the hunt for a green and sustainable innovations investment advisor… Mastercard Foundation is recruiting a Nairobi-based senior investment director for its Africa Catalytic Impact Fund… The Sabin Center for Climate Change Law at Columbia University is recruiting a climate law fellow to support developing policies at the intersection of climate change and racial equity.

rePLANET is looking for a financial analyst intern in the UK… Tikehau Capital has an opening for an ESG analyst in London… British International Investment seeks an investment executive for its infrastructure and climate investing group… Developing World Markets is hiring an impact consultant intern to focus on an emerging markets project.

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

Thank you for your impact!

– Feb. 13, 2024