The Brief: Systemic risks of concentrated ownership in food

Greetings Agents of Impact! SOCAP24 opens today in San Francisco, including three sessions in the “ImpactAlpha track.” Amy Cortese opens the climate discussion, Dennis Price leads the AI panel, and I’ll help kick off the ownership and inclusion track. Tomorrow, we’ll premiere ImpactAlpha’s documentary, “Equity and ownership: Napoleon Wallace and the Reconstruction of Black wealth” (watch the trailer). And we look forward to seeing many of you at our SOCAP reception Tuesday evening. We’ve opened up additional space, so please register your interest. – David Bank

In today’s Brief:

• The ABCDs of food system risk 
• Pacific Fusion’s $900 million haul
• Helping utilities respond to extreme weather  
• Overheard at the GIIN Impact Forum

Featured: Fiduciary Future

How concentrated ownership in the food system increases risk – and what we can do about it. Georgia peaches. Florida oranges. Ecuadorian chocolate. Many food staples are threatened by increasing weather extremes and a shifting climate (see, “How climate change is making your groceries more expensive”). Another risk: The consolidation of power within the food system by vertically integrated agribusiness giants. ADM, Bunge, Cargill, COFCO and Louis Dreyfus – collectively known as the “ABCDs” – control a significant portion of the food value chain, as Arianna Muirow of RE.Leverage Consulting and As You Sow’s Andrew Behar explain in the latest Fiduciary Future column on ImpactAlpha. These firms grow crops using fertilizer and pesticides they produce, feed those crops to livestock they own, and process the livestock in their own plants. In some cases they even own the storage facilities where these products await distribution on ships and through ports that they also own. “In short, they control the market,” write Muirow and Behar.

• Commodity speculation. That vertical integration extends to the financial world. Agrifood giants own financial firms that trade commodity futures, all while having “access to global information about crop shortages or trade interruptions, and the ability to store or release products as the market prices change.” The speculative trades are leading to record profits for the ABCDs. “Yet, they are regulated like food manufacturers,” not financial firms, note Muirow and Behar. “Speculative profiteering in our food supply chain will only increase as severe weather events and climate change creates instability in crop yields, resulting in danger to our entire food economy,” they write. “It’s a systemic risk and should be viewed that way.”

• Investor action. Muirow and Behar argue that financial engagement is underutilized by the food activist community as a tool for systems change. They call on investors, consumers and regulators to take action. For the agri-giants that are publicly traded, they suggest diverting funds. One resource: Adasina Social Capital’s Extractive Agriculture Campaign, which demands an end to extractive agricultural practices. And as shareholders in companies that are part of this value chain, Muirow and Behar warn, investors must “understand that their investments may fluctuate at the whim of these major players.”
  
• Keep reading, “How concentrated ownership in the food system increases risk – and what we can do about it,” by Arianna Muirow and Andrew Behar on ImpactAlpha. 

Dealflow: Energy Transition

Pacific Fusion bursts from stealth mode with $900 million to produce fusion energy. Rumors have been swirling for weeks about a new fusion startup backed by hundreds of billions of dollars from some of Silicon Valley’s biggest names. The big reveal: Fremont, Calif.-based Pacific Fusion has raised a whopping $900 million to develop affordable commercial energy using “pulsed magnetic fusion,” which has received less funding than other fusion methods. The Who’s Who list of investors includes Hemant Taneja of General Catalyst, who led the Series A round, along with Eric Schmidt, John Doerr, Ken Griffin, Reid Hoffman and others. Breakthrough Energy Ventures, Lightspeed and Lowercarbon Capital also participated. Pacific Fusion’s founders hail from the Human Genome Project, ARP-E, Lawrence Livermore National Laboratory and the National Nuclear Security Administration. 

• Breakthroughs. Long in the making, fusion energy promises abundant, cheap, zero-carbon energy. Pacific Fusion is building on recent advancements, including the achievement of “net energy” by Lawrence Livermore Labs’ National Ignition Facility in 2022, and the high performance results using pulsed magnets by Sandia National Laboratories. Pacific Fusion is building a compact, efficient system akin to Sandia’s Z Machine, using rapid magnetic pulses to fuse plasma. “In the last two years, breakthroughs in inertial fusion and pulsed power have opened a path to affordable fusion power,” Pacific Fusion’s Eric Landler said. The company says its model can be mass manufactured and built from readily available materials that cost little to maintain. It aims to produce commercial fusion energy within a decade.

• Capital commitment. The $900 million Series A round – large even by fusion standards – could still grow. The funds will be allocated in phases based upon milestones. The approach allows investors and the company to “fully lock arms, and importantly, aligns capital with risk, which we think is so often lacking in long-duration, capital-intensive projects in this space and often deters venture capital investment,” explained General Catalyst in a blog post. Pacific Fusion joins dozens of other fusion hopefuls racing to provide commercial, grid-connected power (see “Fusion is heating up”). Zap Energy raised a fresh $130 million for its “Z-pinch” fusion system from Breakthrough, Lowercarbon and Energy Impact Partners. Commonwealth Fusion, which is pursuing a traditional “tokamak” design, hauled in $1.8 billion in 2021, led by Tiger Global Management. 

• Feel the heat. 

S2G leads Urbint’s $35 million investment to help utilities respond to storms. Miami-based Urbint develops AI-powered software to help utilities and grid operators forecast damages to critical infrastructure and keep workers safe as they fix them. Hurricanes Helene and Milton left millions of homes and businesses without power; utilities were slow to respond. The company’s software helps utility partners such as National Grid, Exelon and Southern Company improve their responses to storm emergencies by securing contractors, managing crew lodging, and allocating resources to where they’re most needed. 

• Climate resilience. Climate change-driven heat and flooding is taxing aging infrastructure. Asheville, NC, and surrounding areas struck by Helene were without clean water for weeks after pipes burst and wastewater treatment plants shut down. “Resilience against extreme weather events is of the utmost importance for utilities and there is a strong urgency to invest in mitigation and adaptation measures,” said S2G Ventures’ Bala Nagarajan. Other investors include Energize Capital, Blue Bear Capital, National Grid Partners, Zoma Capital and Climate Investment.
  
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Dealflow overflow. Investment news crossing our desks:

• Boston-based Transaera snagged $8.2 million in seed funding and a $2.3 million US Department of Energy grant for commercial deployment of its efficient cooling systems, which cut energy use by 40%. (Transaera)
  
• Rutopía, which links Indigenous communities in Latin America to the sustainable tourism market, raised seed funding from Elea Foundation, ATTA Impact Capital and Boosting Opportunities Fund. (Atta Impact Capital)

• Salt Capital raised $83 million with backing from the Dutch Good Growth Fund to invest in small and mid-sized enterprises in Africa. (APEN)

• Bangalore-based Healthify, which makes a health and wellness app, raised $45 million from  Khosla Ventures, LeapFrog Investments and others to expand to the US. (YourStory)

• Planetary Technologies snagged $11.3 million in Series A funding from Amplify, Iconiq Capital and other investors for ocean-based carbon removal and storage. (Planetary Technologies)

Overheard: GIIN Impact Forum 

Impact investors gather to shift minds, drive decisions, steer growth – and try to accelerate results. It’s a sign of the times: Impact investors are anxious about the progress of the market (and the state of the world), but bullish on their own projects and those of their peers. Evidence of progress, albeit incremental, was abundant at the Global Impact Investing Network’s impact forum in Amsterdam last week, where the theme was “shift minds, drive decisions, steer growth, accelerate results.” A few takeaways: 

• Shift minds. “The biggest obstacle in the financial sector is how we approach growth and profit maximization,” said Tania Rodriguez Riestra of Mexico-based CO_, an impact-first family office that focuses on poverty and climate change. The finance sector is avoiding tough conversations about what financial returns really look like in a healthy planet and in healthy communities, she said. CO is seeking to enlist other family offices to invest at the nexus of climate change and food security. “We need to shift to thinking about what it looks like to operate within planetary boundaries,” Rodriguez said.
  
• Drive decisions. A handful of highly motivated family offices are using their wealth to push the boundaries of impact finance. Azarine, a new multi-family office led by Lauren Cochran, is directing capital to land restoration and rewilding projects. Ceniarth is helping new fund managers in emerging markets prove their investment theses. Family offices are backing BlueOrchard’s second InsuResilience Investment Fund, which invests in insurance tech and providers for climate vulnerable communities in emerging markets. Blue Haven Initiative’s Liesel Pritzker Simmons called on the impact community to “stand up” to political attacks on diversity, equity and inclusion, and environmental, social and governance-based investing.
  
• Steer growth. Pension funds and insurance companies are contributing the bulk of growth in impact assets under management. “This year I keenly observed how several of major institutional managers are projecting forward-looking impact strategies as a way of market differentiation and positioning,” recounted climate impact advisor Ashish Kumar. The UK’s South Yorkshire Pensions Authority touted the impressive returns of its place-based portfolio. Dutch pension fund PFZW affirmed its goal of aligning 30% of its €238 billion ($257 billion) portfolio with the Sustainable Development Goals by 2030. Fund managers like BlueOrchard are getting ready: InsuResilience is reliant on catalytic capital for now but, like the firm’s $2.7 billion flagship microfinance strategy, aims to be an institutional vehicle within a decade.
  
• Keep reading. What stood out for you at the GIIN Impact Forum? Drop us a line.  

Agents of Impact: Follow the Talent

The Department of Energy recognized nine women for their contributions to clean energy: Linette Casey of Siemens Energy, Jennifer Simmons at CREATE, Andi Kleissner of Amped Innovations, Amy Duffuor of Azolla Ventures, Johanna Matthieu of the University of Michigan, Kim Smaczniak of FERC, Gina Cady of USAID, Christina Angelides of Elemental Impact, and clean energy advocate Rose McKinney-James. 

Opportunity Finance Network adds four new board members: Rochdale Capital’s John Holdsclaw, Nelly Rojas-Moreno of the National Association for Latino Community Asset Builders, People Trust Community Federal Credit Union’s Arlo Washington, and Akiptan’s Skya Ducheneaux.  

OFN also honored five leaders in community development finance: New York-based Community Preservation Corp., Los Angeles-based Inclusive Action for the City, Austin-based Gustavo Lasala, Elissa Sangalli of Northern Initiatives in Marquette, Mich, and Coastal Enterprises in Brunswick, Maine. Adina Abramowitz, formerly at OFN, was posthumously awarded the Ned Gramlich Lifetime Achievement Award for Responsible Finance, the CDFI industry’s highest individual honor. 

Acre is hiring a remote director of climate investments… Google seeks an ESG reporting lead in Chicago.

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

Thank you for your impact!

– Oct. 28, 2024