The Brief | March 29, 2023

The Brief: Today’s Call: Metrics Madness, strengthening community finance, carbon-negative concrete, bonds for independent media and gender and racial equity

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Greetings, Agents of Impact!

👋 Hop on The Call: Metrics Madness. The Southern Reconstruction Fund’s Napoleon Wallace put out a call for universal metrics for impact investors in racial equity and wealth-building. Agents of Impact have answered with dozens of submissions. Call No. 50 will continue the search for what Wallace calls “a distilled singular indicator on improvement towards racial justice.” Join Wallace and his colleague Dorian Burton, along with Kellogg Foundation’s Cynthia Muller, Rhia Ventures’ Erika Seth Davies, Partners in Equity’s Wilson Lester, and Mike McCreless of Impact Frontiers, in conversation with ImpactAlpha’s David Bank. Zoom right in to today’s subscriber-only call at 10am PT / 1pm ET / 6pm London (no RSVP required, but be prepared to sign in or create a Zoom account).

🗞️ Call context. Get ready for the Metrics Madness finale:

Featured: Community Finance

How the U.S. can boost community financial institutions to counter bank consolidation and bridge racial wealth gaps. The collapse of Silicon Valley and Signature banks sent customers fleeing to banks that are “too big to fail.” Further market concentration could have devastating effects on low-income families, small businesses and communities of color that big banks don’t serve, Calvert Impact’s Beth Bafford and Pacific Community Ventures’ Bulbul Gupta warn in a guest post on ImpactAlpha. Minority depository institutions, community development financial institutions, and credit unions have been a lifeline to underserved groups. Bafford and Gupta call for government investment in market infrastructure for community finance. “Hundreds of private sector organizations are working hard to support community finance and improve economic outcomes for un- and under-banked communities and communities of color across the U.S.,” they write. “Smart government policies focused on market development for the common good can amplify and multiply these efforts, build wealth, and create jobs in our communities.”

  • Secondary markets. As pandemic shutdowns hit small businesses, Calvert Impact, Pacific Community Ventures and other CDFIs created loan-purchase vehicles for CDFI-originated loans (see, “10x’ing community capital”). The secondary vehicles have purchased more than 5,500 small business loans totaling $350 million. Bafford and Gupta are working with the State Small Business Credit Initiative to warehouse and securitize small business loans. “The federal government is uniquely positioned to help foster a robust secondary market for these assets by creating programs that provide credit enhancement or risk capital to securities backed by CDFI- or MDI-originated loans,” write Bafford and Gupta. Other areas for improvement: market data and analysis, and lender and market-level technology. 
  • Low risk. Community finance entities do not share the risk factors that led to the bank collapses. The sector emerged from the pandemic in its strongest position in decades, thanks in part to the pandemic-era Emergency Capital Investment Program and corporate support for Black-owned banks after the murder of George Floyd (see, “Treasury investments in CDFIs pave the way for strong impact and financial returns”). Still, the spillover effects of the banking crisis could hurt community financial institutions. “Instead of leveraging this strong position to grow in activities and assets, they are – once again – being set back by risks in the system that they cannot control,” the authors say.
  • Participatory investment. Concentration in the banking industry has contributed to economic displacement and racial wealth gaps. The Community Reinvestment Act is at best a partial response. Banks have an opportunity to advance impact goals and benefit communities by bringing community members into the investment and governance process, according to Transform Finance and Beneficial State Foundation. “Participatory investment” goes beyond simple community engagement to enable ownership in real estate, business and housing. 

Dealflow: Press Freedom

MDIF and partners democratize impact investing in independent media. Media Development Investment Fund has for 23 years invested in independent media outlets in places where a free press is challenged or threatened (see, “How impact investors embrace political risk to keep progress flowing”). A new bond issue from MDIF, Germany-based GLS Bank and its crowdfunding platform, GLS Crowd, is opening the investment opportunity to anyone in Germany. Proceeds from the bond will support media companies in Central, Eastern and Southeastern Europe where there are too few independent media voices, opinions and news sources.

  • How it works. The investments will be made through Pluralis, a Netherlands-based investment entity managed by the nonprofit MDIF. Pluralis takes ownership stakes in media organizations in markets “where media pluralism is at risk.” It has so far invested in Petit Press in Slovakia and Gremi in Poland. Noteholders of the new bond will get a 5% return.
  • Check it out

Carbonaide secures €1.8 million to ramp up production of carbon-negative concrete. A raft of startups are developing lower-carbon construction materials for buildings, which are responsible for 40% of global carbon emissions (see, “New incentives spur building industry to take concrete steps to decarbonize cement“). Carbonaide wants to go beyond low-carbon to carbon-negative. The Finnish startup’s process for making precast concrete products (think concrete blocks) binds CO2 into the products as they cure (watch this quick explainer video). “Our mission is to turn concrete from a large emission source into a carbon sink,” the company says. Carbonaide, a spin-out from Finland’s VTT Technical Research Centre, raised €1.8 million for a pilot factory.

  • Green manufacturing. One of the main ingredients in concrete—cement—is responsible for roughly one-tenth of all carbon emissions. Carbonaide is aiming to integrate its technology into precast concrete manufacturers’ production lines. With conventional cement, the technology lowers final products’ carbon footprint; with other inputs, including industrial waste and bio-ash, final products can become carbon-negative. The latter approach “had a negative calculated carbon footprint of -60 kilograms per cubic meter of concrete,” compared to 250–300 kilograms per cubic meters with the conventional process, the company says.
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Dealflow overflow. Other investment news crossing our desks:

  • Edtech venture Almentor in the UAE raised $10 million to deliver online lessons to underserved Arabic-speaking students. (Wamda)
  • Berlin-based scored €5 million ($5.4 million) for software that helps renewable energy plant owners and operators manage their operations. (Silicon Canals)
  • Also in Berlin, Atlas Metrics secured €5.2 million ($5.6 million) to help European companies track and manage environmental, social and governance metrics in line with new reporting requirements. (EU Startups)
  • Kenya’s TIBU Health raised an undisclosed amount of funding from Health54 for its virtual healthcare service for chronic disease patients. (Disrupt Africa)

Impact Voices: Social Bonds

Using social bonds to address gender and racial inequities (podcast). Corporate, nonprofit and municipal bond issuers are designating bond proceeds to support organizations that increase access to finance for women and people of color. Such issuance “could be increased in the market,” says SMBC Nikko Securities’ Philip Watkins, who hosted the latest social bond podcast from International Capital Market Association. Guests on the podcast included Anna Smukowski of Enterprise Community Loan Fund and Natasha Garcha of IIX.

  • Social issuance. Gender-focused bonds such as IIX’s Orange Bond Initiative, IDB Invest’s gender bonds in Latin America, and QBE’s Gender Equality Bond in Australia are moving capital to enterprises that empower women. In the U.S., the Enterprise Community Loan Fund in 2021 issued the first Racial Equity Bond, with all $30 million in proceeds used to provide loans to housing developers led by Black, Indigenous and people of color. Says Smukowski, “Social bonds have proved a powerful way to tell our story to new parties looking to align their capital with purpose.”
  • Read on and listen in.

Agents of Impact: Follow the Talent

LeapFrog Investments names Rob Leary, ex- of Nuveen and Olayan Group, as senior advisor to Leapfrog’s leadership team… Alex Bell, formerly with Tikehau Capital, becomes a partner at J.P. Morgan Private Capital to focus on sustainable growth equity… Enterprise Community Partners seeks a manager for investment communications in Atlanta.  

In New York, the Ford Foundation seeks a mission investments technology fellow, and LISC is recruiting a portfolio reporting and impact management analyst. LISC also seeks for a remote impact measurement and communications intern… Norrsken is looking for an ecosystem manager in Barcelona… Sonder Collective is hiring a Finland-based impact finance director. 

Tikehau Capital has an opening for an ESG manager in Paris… Finance in Motion is looking for an impact equity investing analyst in Frankfurt and a senior equity investment officer in Cairo… IIX seeks a credit portfolio management associate in Singapore… Swedfund is on the hunt for an impact analyst in Stockholm… Sagana is looking for a remote investment manager. 

Pacifica Continental seeks an energy transition investment expert in the Philippines… AlphaMundi has an opening for a sales officer in Geneva… Ocean Outcomes is looking for a remote program assistant… Sitawi Finance for Good is hiring an impact investing intern in Rio de Janeiro… CommonShare is recruiting for a sustainability intern in Morocco. 

Thank you for your impact.

– March 29, 2023