The Brief | April 8, 2021

The Brief: Structural reform agenda, North African tech innovation, Reinventure’s catalytic capital, battery tech, Jamie Dimon’s wish list

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Greetings, Agents of Impact! 

Tune into the finals of the Kellogg-Morgan Stanley Sustainable Investing Challenge, where four teams of students will pitch creative financing approaches for tackling social and environmental challenges, this Friday, Apr. 9.

Featured: Policy Corner

Stakeholder-economy coalition presses White House for ‘new rules’ for American capitalism. More than 50 business leaders and investor groups are calling on the Biden-Harris administration to implement new rules and incentives to reform American capitalism for the long term. The effort, led by B Lab and the U.S. Impact Investing Alliance, is seeking structural reforms in the capital markets and expanded community investing to complement the administration’s already ambitious efforts to address the economic recovery, racial equity and climate change. 

  • Policy coordination. The new coalition is calling for the creation of a White House Initiative on Inclusive Economic Growth to be housed within the National Economic Council. They may be knocking on an open door: heading the council is Brian Deese, the former Obama advisor who led sustainable investing at BlackRock (see, “Agent of Impact: Brian Deese”).
  • Systemic changes. The coordinated policy advocacy represents a new front for business leaders and investors who have tried – largely by necessity – to practice voluntary action to drive positive social and environmental change. “What has shifted is a recognition that some of the challenges that we face are systemic in nature and therefore they require a change in the rules of the game for everybody,” said B Lab’s Andrew Kassoy at the launch of the White House campaign.
  • Auspicious timing. Business leaders increasingly show willingness, if not readiness, to take into account the interests of employees, communities and other stakeholders. JPMorgan Chase’s Jamie Dimon yesterday sounded the alarm on the future of American prosperity. “We prioritized shareholder interests and sometimes narrow self-interests over creating broader opportunity for all in America,” Dimon said. “Good government and the guardrails of properly designed laws and regulation have always been necessary for the process to work fairly and efficiently.” (See “Signals” below.)
  • Rules of the road. Impact investors stepped up to help finance small businesses hit by COVID-19, says the Alliance’s Fran Seegull. “We must do more. And we need leadership from Washington to get there.” The coalition wants to see change in corporate and capital markets disclosure and governance; climate finance; and support for community-based lending institutions, including the modernization of the Community Reinvestment Act.
  • Stakeholder governance. “B Corps and businesses like them, and the impact investors that invest in them, can’t create an inclusive economy in a system where the norms and the rules of shareholder primacy work against them,” Kassoy said. “You can’t have stakeholder capitalism if you don’t have stakeholder governance.”
  • Keep reading, “Stakeholder-economy coalition presses White House for ‘new rules’ for American capitalism,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Egyptian startup funds put North African tech innovation on the map. A pair of Cairo-based venture capital funds are supporting entrepreneurs tackling transportation, financial services, market inefficiencies and other challenges across North Africa. Sawari Ventures closed its $71 million first fund with commitments from European development finance institutions and regional banks, including Banque du Caire, National Bank of Egypt and Suez Canal Bank. Separately, Algebra Ventures launched its second fund, setting a target of $90 million. Egypt is the fourth largest VC market in Africa, taking in 9% of the continent’s venture dollars.

  • Seed to growth. Sawari has backed nine companies since launching its fund in 2018, including Almentor, an online education platform for Arabic speakers; logistics and delivery company Elves; and communal ride-hailing app SWVL. Sawari’s second fund will focus on growth-stage investments in Egypt, Tunisia and Morocco. Its seed-stage investment arm, Flat6Labs, will allocate 10% of the capital to earlier-stage companies.
  • Early checks. Algebra Ventures cuts checks of up to $2 million in early-stage tech companies. The firm backed 21 startups in Egypt and the broader Middle East and North Africa from its $54 million first fund, TechCrunch reports. The portfolio includes ride-hailing and delivery app Halan, which specializes in two- and three-wheel vehicles; and online learning company Little Thinking Minds, which offers programs for refugee children.
  • Dive in

MassMutual backs Reinventure Capital fund for diverse founders. The Boston-based impact venture fund, founded by Edward Dugger III, received a “catalytic commitment” of $5 million from the insurance giant. The fund could receive an additional $5 million if other limited partners match MassMutual’s allocation. The Black and women-led firm has raised about $16 million toward a planned $50 million fund to invest in U.S.-based companies led and owned by women and Black, Indigenous and other founders of color.

  • Returns on inclusion. Reinventure has backed New York-based Canela Media, a Latina-owned digital media company; and Black-led OpConnect, a Seattle-based EV-charging management platform. Says Dugger, “We see tremendous entrepreneurial talent and abundant investment opportunity, which the mainstream venture community simply overlooks.”
  • Dig in.

Two battery tech startups secure seed funding from Clean Energy Ventures. The Boston-based venture capital firm invests in clean energy technologies that can eventually displace 100 million tons of CO2 emissions per year (see, “Clean Energy Ventures closes $110 million first fund for early energy tech”). Chicago-based Volexion has developed a protective coating for lithium-ion batteries that the company says can increase lithium-ion batteries’ energy by 30% and their power density by 40%. Clean Energy Ventures also backed Nth Cycle, a Beverly, Mass.-based company with a cleaner, lower-cost way to recover minerals from discarded batteries and electronics for reuse. More.

Dealflow overflow. Other investment news crossing our desks:

  • Horizons and Equinor Ventures back Syzygy Plasmonics’ $23 million round to advance its low-emission process for making fuel, fertilizer and plastics.
  • Pennsylvania-based Gathered Foods’ closes a $26.4 million bridge round to expand its plant-based seafood product line and launch in Europe.
  • Colorado-based Volo Earth Ventures raises $13.2 million for its impact fund to seed early-stage climate tech.
  • Bangalore-based inclusive fintech Avanti Finance secures $26 million in equity and debt from Oikocredit, Nomura and the Gates Foundation.

Signals: Ahead of the Curve

Jamie Dimon calls for a carbon tax, the end of the carried interest loophole and a modern-day Marshall Plan. In his 66-page annual shareholder letter, the JPMorgan chief lays out his views on the economy (get ready for a boom), the role of corporations (social engagement), and the divisive nature of politics (enough already). Buried in the document: Dimon’s view on the preferential tax treatment of “carried interest,” the share of fund profits taken by private equity and hedge fund general partners. Current law taxes such compensation as capital gains, rather than ordinary income. The loophole should be axed, Dimon said, along with special tax breaks for race cars, private jets, horse racing and golf courses. “If the wealthy paid more in taxes and the money was put to good use, they would be the main beneficiaries of a stronger economy,” wrote Dimon. 

  • Carbon tax. JPMorgan cut its fossil fuels financing by 20% last year, to $51 billion, but remains the world’s largest funder of the sector (see, “With climate goals looming, gap grows between fossil fuel leaders and laggards”). Reducing greenhouse gas emissions will require “collective ambition and cooperation across the public and private sectors,” said Dimon. The bank will use carbon intensity as its “key metric” in evaluating clients’ climate performance. Dimon called for a tax on carbon with proceeds to be returned to the public via carbon dividends, and a “multi-year national Marshall Plan” to address structural challenges driving the country’s racial and economic crises. 
  • Read on.

Agents of Impact: Follow the Talent

Founding partners Suprotik Basu and Amer Baig are leaving Blue like an Orange to focus on health sector resilience and COVID recovery (see, “Blue Like an Orange offers a report card for the Sustainable Development Goals”)Tides is recruiting a senior advisor of strategic partnerships in the San Francisco Bay Area… UN Women is looking for a policy specialist for inclusive peace processes in New York. 

The Impact Challenge for Women and Girls is accepting applications for grants from organizations that are economically empowering women and girls… Resource Generation launches its “Transformative Investment Principles” to help young people with access to wealth redistribute and leverage their resources.

Thank you for your impact.

– April 8, 2021