TGIF, Agent of Impact!
New green deals suggest strategies for regenerating ecosystems and communities. Proponents (and opponents) of a Green New Deal-style mobilization around climate action might want to look at a some of ImpactAlpha’s dealflow this week. The theme is “regenerative finance” that marries meaningful climate action with the restoration of land and livelihoods. Ejido Verde, in the Mexican state of Michoacán, has loaned $10 million to indigenous communities to plant pine trees that produce valuable resins, and multi-generational wealth for Purhépecha families (see No. 3 below). In Florida, citrus farmers hit hard by Hurricane Irma in 2017 are growing high-protein legumes on fallow or abandoned land. California-based Terviva raised $20 million this week to help them plant more pongamia trees to produce more cooking oil, animal feed and biodiesel (see No. 5). In both cases, the regenerative model restores idle land, grows valuable commodities and generates additional income for farmers. Other financing structures are helping regenerate fisheries and ocean ecosystems in the emerging ‘blue economy’ (see No. 2).
Regeneration is attracting the attention of investors. GatherLabs has catalogued 44 funds and funders pursuing regenerative strategies that go beyond simple ‘sustainability,’ aiming not only to preserve, but to restore landscapes and communities. That kind of value-creation can be the basis for a whole series of new and very green deals.
– Dennis Price, editorial director
Featured: The Brief’s Big 7
1. The Rise Fund tries to get out front of the story. Our ‘Red Ferrari Syndrome’ podcast puts it in context. Members of the new (and old) leadership team at TPG Growth’s Rise Fund say they were “shocked and saddened” by recent events, namely the dramatic fall from grace of co-founder and former CEO Bill McGlashan after his indictment in the Varsity Blues college-admissions scandal. In a letter to “the Rise community,” new CEO Jim Coulter and a half-dozen colleagues say the firm is focused on its portfolio companies and on reassuring stakeholders “we remain committed to the highest standards.” An internal investigation is underway, after which it will be clear whether public pension funds or other investors are pulling back from Rise II, a new fund targeted at $3 billion. The Rise team affirmed their original vision “to harness commercial capital, at scale, to build successful businesses that drive meaningful and measurable positive change.”
In the latest Returns on Investment podcast, ImpactAlpha’s David Bank acknowledges The Rise Fund has indeed been successful in bringing pension funds and other first-time impact investors off the sidelines – in part by dangling sky-high private-equity returns. “It wasn’t only impact that brought them in, we should be clear,” Bank says. Imogen Rose-Smith, an investment fellow with the University of California (an investor in Rise I, it should be noted), says the scandal shines an unflattering light on fund managers with lifestyles very different from the pension beneficiaries whose money they’re managing. A bit of finance folk wisdom: “When your hedge fund manager shows up driving a red Ferrari, you knew they were no longer paying attention to your portfolio” Rose-Smith says. “Instead they had become a professional rich person.” Listen in.
- Running updates. Read excerpts from The Rise Fund’s letter at the top of “TPG Growth’s Rise Fund rocked by federal charges against CEO Bill McGlashan.”
- Catch up on all of ImpactAlpha’s Returns on Investment podcasts on iTunes, Spotify, SoundCloud or Stitcher.
2. With oceans in peril, investors find new ways to invest in the ‘blue economy.’ Ocean-themed impact funds have largely focused on sustainable seafood and fisheries. But opportunities in the blue economy are expanding, thanks to regulatory mandates and other imperatives to protect marine habitats and fight climate change. “There are companies that are positioned to perform well when governments, investors and other entities take meaningful action to combat climate change, and I think we’re starting to see that,” Rockefeller Capital Management’s Rolando Morillo, lead equity analyst for a $45 million public equities Ocean Strategy, told ImpactAlpha. Blue economy investment opportunities include green ports and ships; offshore wind, water and wastewater management; conservation and ecotourism; and waste management and recycling. Consumer demand, regulations and declining cost curves are driving “bluetech” growth. Dive in.
3. Ejido Verde’s forest finance is helping indigenous Mexicans’ rise to the middle class. Ejido Verde’s immediate business is pine-resin, the age-old industrial commodity used in shoe glue, tape, chewing gum and hundreds of other everyday products. But the decade-old company’s business model goes far beyond: it finances the replanting of thousands of hectares of pine trees, which can produce multi-generational wealth for indigenous Purhépecha families in the Mexican state of Michoacán. “The trees we plant today will create revenue and jobs for the next three generations,” Ejido Verde’s Shaun Paul told ImpactAlpha. The company is among a number of “regenerative” projects that are demonstrating how to finance environmental restoration, climate action and improved livelihoods for communities affected by economic and environmental injustices. Get the full story.
4. Agent of impact: Monty Hamilton, CEO of Rural Sourcing. There were two types of workers in the small Mississippi town where Monty Hamilton grew up: farmers and factory workers or doctors and lawyers. “There were not a lot of new economy jobs,” he told ImpactAlpha. Hamilton joined Rural Sourcing in 2009 and now leads the IT services firm’s efforts to bring the benefits of tech-fueled growth to places that don’t get a lot of action. Bain Capital’s Double Impact fund took a majority stake this week. Rural Sourcing hires community college, university and tech bootcamp graduates at its hubs in Mobile, Ala., Fort Wayne, Ind. and other small cities, then staffs out their skills to companies looking for more agile IT and software development than most off-shore companies can provide.
Tech jobs at Rural Sourcing pay 40% to 50% more than the median income in its hub cities. Employees get a full package of benefits, and the company helps employees keep their skills fresh in a fast-changing sector, Hamilton says. Rural Sourcing is “committed to democratizing software development,” Hamilton adds. “Not everyone is willing or wants to trade costs and quality of life for opportunities in coastal cities. I saw a need to create opportunities for people to be able to live where they want to.” Follow ImpactAlpha on Instagram.
- Read the full story: “Bain Capital’s Double Impact fund acquires tech employer Rural Sourcing.”
- Follow the talent with ImpactAlpha’s weekly report on career moves, job openings, events and opportunities.
5. Deals of the week. Stay on top of the dealflow all week long on ImpactAlpha.com. Deals that stood out:
- Innovative finance. i(x) raises $12 million to capitalize an impact holding company… Bamboo Finance, Moeda and the government of Togo launch a tech-driven impact fund for tech-driven companies.
- Health and housing. Unite Us secures $35 million to bridge health and social services… Haven Connect raises $2.4 million to streamline applications for affordable housing.
- Alternative proteins. NotCo raises $30 million to develop alternatives to animal-based food products… TerViva raises $20 million to expand production of high-protein legumes.
- Inclusive finance. Unitus Ventures backs New Street Technologies’ blockchain-based lending… Israel’s Rewire raises $12 million for digital banking for migrants.
6. What does “equitable edtech” look like? Making sure the benefits of edtech reach lower-income and disadvantaged students “might require considerable redesign of edtech products, services, and models of implementation to better meet the needs of diverse users,” say the authors of “Scaling Access & Impact: Realizing the Power of EdTech,” from the Omidyar Network. The study catalogs emerging themes across China, the U.S., Indonesia and Chile, with snapshots of “equitable edtech” in each market. In China, for example, the government promotes school equity, but a booming market in tech-enabled tutoring and test prep caters to a growing middle class. All four markets confront gaps in the understanding of edtech’s impact on student achievement gaps. Get the highlights.
7. Why Latin America is ready for more impact bonds. Experience in paying for outcomes, relatively good government data and a growing impact investing market have helped drive early adoption of social and development impact bonds in Latin America. Four of the 11 social impact bonds (which are paid off by government based on outcome) and development impact bonds (paid off by foundations or development agencies) in low- and middle-income countries have launched in Latin America. Ten more deals are in development in Chile, Brazil, Mexico and Peru. “Nevertheless, the region’s impact bond market hasn’t grown as quickly as many would have expected,” writes Brookings Institution’s Emily Gustafsson-Wright. Challenges remain, including legal straitjackets and political uncertainty. Get the primer.
— March 29, 2018.