The Brief | May 4, 2022

The Brief: Ventures at the helm of impact management, carbon accounting in community lending, inclusive fintech in Mexico, access to transport in the U.K.

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Greetings, Agents of Impact!

Answer The Call: Start up financing for the rest of us. Flexible debt and equitable growth capital can build businesses without the baggage that comes with venture capital. Join Kim Folsom of Founders First Capital, Wefunder’s Jonny Price and other Agents of Impact to explore how new terms and tools are changing who and what gets funded, Tuesday, May 10 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Impact Management

How impact investors can maximize the value of impact management – for their portfolio ventures. Even experienced impact investors struggle with impact management and measurement within their portfolios. The challenges of IMM are even tougher for the companies they invest in. By putting ventures at the helm, investors can realize the untapped value of IMM for their portfolio companies – and themselves. “Ventures are the most critical actors in how impact is generated and delivered (or not) for stakeholders,” write Karim Harji and Laura Budzyna, authors of the guidebook, Ventures at the Helm.” In a follow-up to their earlier guest post on ImpactAlpha, they identify ways that investors can support the impact management and measurement efforts of their portfolio ventures with financial and non-financial contributions.

  • Gear and guides. Some investors directly bolster the IMM capacity of their ventures with financial allocations for technical assistance, data platforms and training. Foundations in particular have gone further to procure IMM expertise on behalf of ventures or collaboratives, from updating a theory of change to co-funding a developmental evaluation.
  • Impact anchors. “Investors can work with venture teams to ensure that impact is enhanced and preserved to counter pressures that ventures may face in using financial metrics as a proxy for impact,” Harji and Budzyna write. “This can be particularly helpful when commercially oriented capital imposes new demands on growth.” (See, for example, “Can off-grid solar keep focus on energy access for the poor as commercial capital arrives?”)
  • Know thyself. Investors face reporting demands from their limited partners, pressure to validate impact claims, and their own capacity constraints, while lacking clear “rules of the road,” the authors write. To be effective advocates of good IMM practices, investors must identify their own needs, including what they want to prove and measure and how impact data will be used in investment decision-making.
  • Keep reading, “How impact investors can maximize the value of impact management – for their portfolio ventures,” by Laura Budzyna and Karim Harji on ImpactAlpha.

Community lenders start to account for the carbon in their loan portfolios. Know what you own. Community development financial institutions Coastal Enterprises Inc., Partner Community Capital and Self-Help Credit Union last year collaborated to calculate and disclose the greenhouse gas emissions associated with their loan portfolios. One takeaway: The emission intensity of the CDFI portfolios is modest compared to large, commercial banks. CDFIs generally do not invest in heavily polluting sectors like oil, gas and mining. Still, by bolstering their carbon accounting, CEI’s Linnea Patterson writes in a guest post, community development lenders can demonstrate to investors that they are “first-movers” on climate-positive investment and disclosure practices.

  • Underwriting carbon. Integrating carbon accounting leads to better underwriting and asset management, says Patterson. The three community lenders used a methodology developed by the Partnership for Carbon Accounting Financials, founded by Dutch financial institutions. More data on portfolio climate emissions can help CDFIs provide patient capital to support local businesses in reducing their carbon footprints and incentives, such as interest rate deductions for responsible business practices.
  • Keep reading, “How CDFIs can adopt carbon accounting to lead on climate disclosure,” by CEI’s Linnea Patterson on ImpactAlpha.

Dealflow: Financial Inclusion

Xepelin rakes in $111 million for financial services for small businesses in Latin America. Small and mid-sized businesses in Latin America fail more frequently than similar businesses in other regions. Santiago, Chile-based Xepelin aims to streamline day-to-day financial tasks for small businesses such as paying bills, collecting payments and securing working capital. More than 15,000 businesses in Chile and Mexico use Xepelin’s app. The company will use the Series B financing to reach more of Mexico’s four million small businesses without access to financial services. Mexico’s small and medium businesses, said Xepelin’s Sebastian Kreis, “not only represent the most important economic sector in the country, but they also represent the largest percentage of the workforce.”

  • Financial inclusion. Xepelin secured an $80 million debt investment from Community Investment Management earlier this year. Equity investors in the latest round include PayPal Ventures, Battery Ventures, Endeavor Catalyst, DST Global Partners and others. Xepelin raised $30 million in a Series A equity round and $200 million in debt funding less than a year ago.
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RideTandem scores $2.2 million to alleviate ‘transport poverty’ for blue-collar workers. Public transportation is increasingly inaccessible for low-income workers in the U.K., particularly in rural areas. “Half of the lowest-earning 20% don’t own a vehicle and can’t afford to commute by cab,” said RideTandem’s Alex Shapland-Howes. Nearly 5,000 bus routes, or more than one in four, have been axed since 2012, he says. In outside cities and larger towns, services “remain are often prohibitively expensive, infrequent and unreliable.” The London-based startup works with employers and local transportation providers to offer low-cost and sustainable commuting as a benefit for employees.

  • Low-carbon transport. RideTandem says trips on its platform reduce carbon emissions by 1,000 metric tons a year versus the same trips made by car. Employers can purchase carbon credits to offset the remaining emissions. The company says it has helped workers save more than $12.5 million on transportation. 1818 Venture Capital, Ascension Ventures, Seedrs, Sustainable Ventures and Low Carbon Innovation Fund invested in RideTandem’s round.
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Dealflow overflow. Other investment news crossing our desks:

  • Stellantis will spend $2.8 billion to increase production of electric vehicles in Canada. The automaker formed a joint venture with LG Energy Solution in March to invest $4.1 billion in EV batteries.
  • WILE, a hormonal wellness brand for women, raised $3 million in a pre-seed financing round backed by Serena Ventures.
  • Shell agreed to purchase Indian renewable energy producer Sprng Energy from Actis for $1.5 billion.

Agents of Impact: Follow the Talent

Hillbilly Elegy author and former Rise of the Rest investor J.D. Vance won Tuesday’s Republican primary for Ohio’s U.S. Senate seat (see, “JD Vance, the impact fund manager his partners would rather forget“). Rise of the Rest’s Steve Case has yet to comment on Vance’s Senate run… Lavonya Jones of Morehouse College is named director of the Georgia Social Impact Collaborative… Advocates for reform of the Community Reinvestment Act are watching the Federal Deposit Insurance Corp.’s vote Thursday on whether to propose changes in the anti-redlining banking policy dating to 1977.

Croatan Institute is hiring a remote analyst and associate… The Predistribution Initiative seeks a development consultant… Sorenson Impact is looking for a senior associate for impact measurement and evaluation in Salt Lake City… Acumen America is hiring an investment manager in San Francisco… Nuveen seeks a vice president of ESG compliance in New York… Ford Foundation is looking for a program assistant in Beijing… New Markets Support Company is hiring a fund modeler and analyst to join its fund management team.

Thank you for your impact!

– May 4, 2022