The Brief: Tapping institutional capital to enable home ownership

Greetings Agents of Impact!

In today’s Brief:

• A new twist on shared-appreciation
• A(nother) African startup is shuttered 
• The EU’s corporate due diligence directive 

Featured: Inclusive Economy

With shared-appreciation notes, Homium aims to help home buyers overcome the down-payment hurdle. A few Colorado home buyers are testing a new approach to making down payments in a state where the average price of a new home has soared to more than $550,000. If the pilot project proves successful, buyers – as well as existing owners looking to gain access to their homes’ equity – will be able to tap large pools of institutional capital to get into the housing market, finance home improvements like solar panels, and use the appreciation in housing values to meet their expenses. All without the need to make the monthly payments that are required for home-equity loans or other forms of second mortgages. The catch: They will give up a portion of their upside gains if their homes increase in value. “We want to put a billion dollars towards homeownership in the next 12 months and we can unlock that billion with just around $300 million of capital,” says David Jette of Homium, the New York-based company that devised the new twist on “shared-appreciation” loans. 

• Wealth building. Homium and its backers see an opportunity to drive sustainable homeownership and build wealth for the middle class, without burdensome payments or community displacement. “Homeownership is the foundation of financial security for most Americans,” says Jim Sorenson of Sorenson Impact Group, which backed Homium’s $10 million Series A raise in April. Homium, he tells ImpactAlpha, “is really an important development [in] the whole pyramid of passive wealth building that most people are left out of.” Caveat emptor: Shared-appreciation notes can trade immediate benefits for long-term costs. As property values rise, so does the value of the equity slice that homeowners have sold. Considered as a whole, the cost of that capital can be so high that issuers of such home-equity loans risk running afoul of state anti-usury laws. (Disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha.)
  
• Institutional investors. Homium works with traditional loan originators like Guild Mortgage and community development financial institutions, as well as down-payment assistance and government housing programs, to offer its shared-appreciation note to homeowners. The company’s goal is to securitize the shared-appreciation loans and sell the bundles to public and corporate pensions, insurance companies, banks and asset managers, and to other institutional investors that have CRA credit requirements and a focus on ESG. “For the first-time, institutions can invest side-by-side with homeowners, doing well while doing good,” says Homium’s Tommy Mercein. 

• Keep reading, “With shared-appreciation notes, Homium aims to help home buyers overcome the down-payment hurdle,” by Roodgally Senatus on ImpactAlpha.

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Dealflow: Agrifood Investing

Kenyan agri-data provider Gro Intelligence shuts down. Nairobi-based Gro Intelligence has spent the last 12 years analyzing and delivering predictive farm data in order to improve the resilience of global agri-food chains. But the company, once named a Time100 influential business, is shutting down after a string of layoffs and challenges fundraising. The demise follows a shake-up in March, when Gro laid off 60% of its workers and CTO James Cariello replaced founder Sara Menker as CEO. It’s the latest setback for Africa’s startup scene: Kenyan logistics provider Copia and agri-logistics firm iProcure have recently gone into receivership following fundraising difficulties. 

• Illuminating food risk. Menker, an Ethiopia-born Wall Street commodities trader, said she founded Gro “in order to get people to pay attention to food system risk.” The agricultural commodity market, she added, “needs to be able to articulate risks more clearly.” Gro was an early mover in providing agricultural insights to global companies like Unilever, Yum!, BNP Paribas and Wells Fargo. It culled data from thousands of government sites, as well as satellite imagery and trade organizations and other sources, then forecast trends in supplies, crop yields, product demand, and more recently, climate risk.

• Finding the market. Gro’s demise may have stemmed from a potential business strength: “Gro’s use cases are endless,” argued EchoVC, a venture fund for underrepresented founders that backed Gro’s $85 million Series B round alongside TPG Growth, Rethink Food and others in 2021. But market observers say the company was never able to build a sticky or scalable product around the data it collected. “Without a single killer core use-case, achieving and maintaining product-market fit can be challenging,” commented Emeka Ajene of African tech newsletter Africadigest.
  
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Dealflow overflow. Investment news crossing our desks:

• L Squared Capital Partners is acquiring Bain Capital Double Impact’s stake in TeachTown, a K-12 special education provider. (L Capital Partners)
  
• Parametric weather insurance provider Understory raised $15 million to expand its coverage to help renewable energy developers prepare for extreme weather events. (TechCrunch)
  
• France’s Nova Carbon inked €1.4 million ($1.8 million) to rescue and recycle carbon fiber, which is used in industrial and heavy-duty structural materials. (TechEU)
  
• India’s e-motorbike maker Ather Energy raised $34.5 million in a mix of debt and equity as the company prepares for an IPO. (YourStory)

Signals: Policy Corner

Investors and corporations prepare for Europe’s supply chain due diligence directive. The clock is ticking on a far-reaching European corporate due diligence regime that will impact thousands of companies doing business in the bloc. The Corporate Sustainability Due Diligence Directive, or CSDDD, was adopted last month after a long and fractious process. The directive goes beyond disclosure to compel thousands of large companies in the EU to identify – and take action to remedy – negative environmental and human rights impacts across their value chains. The regulations go into effect in 2027, with more firms, including non-EU companies with revenues of at least $490 million within the bloc, to be added in 2028 and 2029. “The directive ushers in a new era of corporate due diligence – one that could unlock a wealth of sustainability and human rights data on companies’ supply chains,” writes ImpactAlpha contributor Louie Woodall.

• Trade-offs. The final directive disappointed some advocates. In particular, financial institutions were all but carved out of the regime. Banks and asset managers will have to conduct due diligence only on their own operations, excusing them from vetting the social and environmental performance of their borrowers and investees. “Financial institutions should be meaningfully included,” says Isabella Ritter of shareholder advocacy group ShareAction. 

• Alphabet soup. The CSDDD adds to the growing alphabet soup of sometimes diverging social, sustainability and disclosure rules, including the EU’s Corporate Sustainability Reporting Directive, or CSRD. The US Securities and Exchange Commission has hit pause on its own climate disclosure laws amid legal threats, and has yet to propose a long-awaited human capital rule. California, meanwhile, passed a law mandating climate disclosure for some 5,000 large public and private companies doing business in the state.
  
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Agents of Impact: Follow the Talent

Daniela Barone Soares joins the board of impact investing network Toniic… Heather McGee takes over as CEO at 17 Asset Management… Dana Bezerra starts as president for the Americas region at the nonprofit CREO Syndicate… Robert Wood Johnson Foundation is hiring an impact investment officer at its Princeton, NJ, headquarters… Ares Management is recruiting an ESG credit analyst. 

CalPERS is seeking a sustainable investment portfolio manager… BCG is hiring a senior practice area coordinator for its climate and sustainability practice in Boston or Chicago… Savia Ventures in Mexico City is seeking a remote venture capital intern to focus on climate tech startups in Latin America… Impax Asset Management is looking for a sustainability reporting associate. 

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

Thank you for your impact!

– June 6, 2024