Greetings, Agents of Impact!
📞 Hop on today’s call: Good green jobs. Join ImpactAlpha and Jobs for the Future on LinkedIn Live to kickoff JFF’s Quality Green Jobs Regional Challenge. JFF’s Taj Ahmad Eldridge will interview JFF’s Sara Vander Zanden and Lucy Fernandez, today at 2pm PT / 5pm ET. (RSVP).
Featured: Impact Operators
On the minds of impact CEOs: Opportunity, scale and succession. “Deliver impact, drive sales” was the mantra of executives of high-performing impact companies at Big Path Capital’s MO Summit in Austin, Texas this week. The gathering celebrated Big Path’s MO100 Impact Rankings. “We are in the early stages of the largest, fastest transformation in human behavior that we’ve ever seen,” Aspiration’s Andrei Cherny told Texas Tribune’s Sonal Shah in a keynote interview. Cherny, who recently announced a congressional run in Arizona, added, “That is a huge opportunity for entrepreneurs who can help drive that change and to make a positive impact, and by doing so, can create enormous enterprise value.”
- Force for good. Big Path ranks companies based on their “force for good” score, the product of a company’s annual revenues, revenue growth rate, and B Impact assessment (see, “At these companies, CEOs focus on stakeholders to drive growth”). Entrepreneurs topping the chart: Steve McDougal of 3Degrees, Scott Jacobs of Generate Capital, and Russell Diez-Canseco of Vital Farms. Others on the list include Amy King of Pallet, Joseph Kenner of Greyston Bakery, and Stuart Landesberg of Grove Collaborative.
- Leadership change. Succession isn’t just for Waystar Royco, the stand-in for News Corp. in the HBO series. At off-grid solar company d.light, an early impact darling, co-founder Ned Tozun six months ago passed the CEO torch to Nick Imudia, a Nigerian entrepreneur with experience scaling up businesses in Africa. Imudia’s “done an amazing job,” said Tozun, who emphasized the importance of bringing in a successor with “values alignment.”
- Purpose trusts. Mike Bloomberg this week sent a signal boost to another form of succession planning when the Financial Times reported that the billionaire is considering moving Bloomberg LP into a trust to finance Bloomberg Philanthropies in perpetuity. Patagonia’s founder Yvon Chouinard chose a perpetual purpose trust last year as part of his own succession plan, an option some exiting founders are adopting to enshrine values and reward employees, said Zoe Schlag of Common Trust (see, “Through ‘ownership trusts,’ investors can help employees become owners and owners retire”).
- Risk diversification. The success of high-impact companies is attracting more investors to “impact alpha,” the financial edge that comes from investing in social innovation, said Elise Liberto of Brown Advisory. Willis Davis of Burbank Group said product diversification is driving capital into the space. “We don’t think about it from a returns perspective, but more from a risk perspective,” Davis said, “and managing a portfolio of assets for someone that’s interested in having an impact lens across all aspects of their portfolio.”
- Share, “On the minds of impact CEOs: Opportunity, scale and succession,” by ImpactAlpha’s Dennis Price.
Dealflow: Muni Impact
Impact muni bond: Sustainable academic facilities at Arizona State University. The Arizona Board of Regents is issuing a $75.5 million green bond for Arizona State University’s “on-campus immersion,” serving students learning in person. The bond, highlighted as part of ImpactAlpha’s collaboration with HIP Investor on upcoming bond issues with social and/or environmental significance, will fund the construction of a new academic building and a mixed-use academic-and-office building for the Tempe campus. Both buildings will be designed to meet LEED “silver” certification criteria. HIP Investor rates the issuer a 77%, connoting “net positive” impact.
- Inclusive procurement. “ASU continues to be a leader in sustainability, not just within its academic offering but also in its operations,” wrote HIP’s Srdana Pokrajac. The university provides fair opportunities for small businesses owned by women and minorities to compete against large national businesses to as suppliers of its products and services.
- Bond bonanza. Global issuance of green bonds reached a record $163.9 billion in the first quarter of 2023, up 32% year-over-year, according to Bloomberg. Citigroup’s Philip Brown called bond market conditions “terrific,” noting a “consistent interest from sovereign and corporate issuers in the sustainability-linked bond format.”
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Brazil’s Arado raises $12 million to give smallholder farmers a tech edge. In one of Latin America’s most industrialized agriculture markets, Arado is doubling down on its support for small producers. The company provides a marketplace and logistics to link smallholder farmers to city restaurants and other buyers. It secured backing for its Series A round from Acre Venture Partners, Globo Ventures, SP Ventures, and the venture arm of agrichemicals giant Syngenta. Early investors Valor Capital and Maya Capital reupped in the round.
- Growth by acquisition. Arado launched in 2021 (then as Clicampo) and raised a seed round last year. The company is looking to acquire additional platforms and technologies that can streamline supply chain issues for farmers. Its first acquisition is Pin.go, a fresh food delivery venture that will help Arado expand in São Paulo, Startup.BR reported.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- L’Oréal backed three companies from its Fund for Nature Regeneration: French biochar producer NetZero, Amazon reforestation venture ReforesTerra, and Mangroves.Now, which is restoring mangroves in South Asia. (L’Oréal)
- Nigerian plastic waste collection and recycling venture Wecyclers raised $2 million from Unilever Nigeria and Bridges Outcomes Partnerships. (Wecyclers)
- Oxygen Conservation secured a £20.1 million ($25 million) loan from Triodos Bank UK to acquire, restore and conserve 23,000 acres of peatland and woodlands in Scotland. (Triodos UK)
- Altech in the Democratic Republic of the Congo raised $18 million in debt and grants to provide off-grid solar and clean cookstoves to Congolese households. (Disrupt Africa)
Impact Voices: Financing Small Businesses
Small and growing businesses are the key to inclusive development. Let’s get them the capital they need to thrive. Development finance has been a key enabler of inclusive access to microfinance, helping to build the $30 billion finance sector. The next phase of enterprise development – growing small and medium-sized businesses into larger companies – requires similar strategic thinking from development finance institutions, or DFIs, and impact investors. “Most are unable to meet small businesses where they are, with the financial tools they need, because they are stuck in obsolete funding models,” Drew von Glahn of the Collaborative for Frontier Finance argues in a guest post. “There needs to be a complete rethink among DFIs and impact investors about how and through whom they’re channeling capital to such enterprises.” One pathway: investing in local fund managers and other capital providers, like the dozens of members of CFF’s network.
- Emerging asset class. Von Glahn calls on DFIs and institutional and impact investors to think of local capital providers, while small and disparate in nature, as an emerging asset class that investors can build into their portfolios. CFF estimates that with better support, there could be 300 such funds in Africa managing $4.5 billion to $6 billion in assets. These aren’t infrastructure, large private equity or venture funds, von Glahn says. They’re funds cutting checks of $500,000 or less to “missing middle” small businesses that don’t fit microfinance or commercial lending criteria.
- Six suggestions. “Local capital providers haven’t shown up on investors’ radar because the “science” of finance has traditionally steered capital to large institutions that operate highly-centralized but efficient decision-making and underwriting processes,” writes von Glahn. He offers six suggestions for how investors can shift their thinking and capital deployment. Among them: Take a “field building” approach by looking at risk versus impact-adjusted returns at a portfolio level, rather than a transactional level. Also: Work to meet the market where it is. Local capital providers are often raising funds of less than $30 million and need smaller check sizes than DFIs tend to write.
- Impact opportunity. The advantages of directing capital through such providers, says von Glahn: They have deep local-market knowledge and provide tailored capital. “They’re impact-oriented, focusing on job creation and the SDGs,” he adds. Institutional investors that truly wish to unlock the economic and impact potential of small businesses need to rethink the most effective ways to reach them. “Local capital providers are the bridge to doing that,” von Glahn writes, “and a potentially huge, if overlooked, investment opportunity for these investors.”
- Keep reading, “Small and growing businesses are the key to inclusive development. Let’s get them the capital they need to thrive,” by CFF’s Drew von Glahn on ImpactAlpha.
Agents of Impact: Follow the Talent
New Forests makes four appointments to its Africa team: Eva Warigia, ex- of the East Africa Private Equity and Venture Capital Association, joins as associate director of investor relations; Kuda Phairah, ex- of York Timbers, joins as associate director of operations; Moses Kimani, ex- of Phatisa Group, joins as associate director of investments; Stephanie Bishop, ex- of Miro Forestry and Timber Products, joins as environmental and social associate director; and Sean Lloyd, moving from New Forests’ Singapore team, becomes manager of operations.
The Great Lakes Protection Fund seeks a vice president of programs in Evanston, Ill… Kiva is hiring a remote impact content manager… Quona Capital has an opening for a head of fundraising and investor relations in New York… Also in New York, Morgan Stanley’s Next Level Fund is recruiting a vice president… Tides is looking for a temporary and remote development manager for its Advancing Girls Fund… PitchBook seeks participation in its 2023 sustainable investment survey… The UK’s Lloyds Bank Foundation is accepting grant applications from small local charities and companies working to solve complex social issues.
Thank you for your impact.
– April 27, 2023