TGIF, Agents of Impact!
Pa’rriba y pa’lante. The energy was palpable at this week’s Foro Latinoamericano de Inversión de Impacto, or FLII, in Mérida, where 1,000 Agents of Impact gathered to build the region’s impact investing ecosystem. As Dennis Price reports, impact assets under management and venture capital and other investments in the region have surged in the past decade. “It’s not the parties, it’s the people,” declared the FLII’s Carolina Puerta. “If someone tells you about some opportunity in Latin America, don’t dismiss it because you are not investing right now in Latin America. You will. Latin America is hip right now. Latin America is the present and the future.” ImpactAlpha agrees: This week we launched ImpactAlpha Latin America with guest posts from Alberto Gómez-Obregón of CO_Capital on catalytic loan products, Lucas Conrado of Estímulo on blending finance for Brazil’s small businesses and Carolina Suárez of Latimpacto on five reasons Latin America and the Caribbean are attracting impact investors. Opt in to receive the monthly newsletter.
Agents of Impact in other regions are rising up and moving onward as well. Dennis also made the scene in San Antonio, where the Neighborhood Economics conference addressed the social determinants of wealth (see Dealflow Spotlight, below). In Chicago, Impact Engine doubled down on “purpose built” private equity with an $85 million raise, as Amy Cortese reported. ImpactAlpha contributor Louie Woodall reported on the UK’s new “nature market” for trading credits to achieve “biodiversity net gain.” Our correspondent Lucy Ngige reported from the Africa Tech Summit in Nairobi on early-stage climate tech in Africa. And 60 Decibel’s Ellie Turner detailed how Mercy Corps Ventures, Acumen and Catalyst Fund are measuring their impact on climate resilience across emerging markets. ¡Adelante! – David Bank
The Week’s Call
Impact value-creation isn’t just for impact investors (but they’re better at it). Private equity fund managers looking for value-creation opportunities are finding their way to impact themes like climate-resilient and sustainable agriculture, employee engagement and ownership, and the growing market for goods and services for low-income countries and communities. But self-identified and committed impact investors remain better positioned to deliver the “alpha in impact,” Tideline’s Ben Thornley argued on this week’s Agents of Impact Call. A new report from Tideline and Impact Capital Managers, or ICM, provides a common language around such strategies, as well as a framework of value-creation levers, sources and modalities of impact value-creation. “There’s a special toolkit that impact investors and fund managers can use to squeeze extra impact that is financially material out of those investments,” explained ICM’s Marieke Spence.
- Launch velocity. S2G Ventures, part of Walmart heir Lukas Walton’s Builders Vision, didn’t just back Clear Frontier, a Nebraska-based farmland fund that helps farmers transition to sustainable farming practices. It launched the business. The $2 billion venture and growth equity firm, which recently added private credit and project finance capabilities, had relationships with major consumer packaged goods distributors. We said, ‘What are your problems?’” S2G’s Aaron Rudberg recounted. Sourcing organic grains for those new brands was proving an obstacle to the growth of the market. “And foolishly we said, ‘Well, what if we solve that problem for you?’”
- Retention and recruitment. Bain Capital’s Double Impact fund sees a clear correlation between impact initiatives and value-creation. It pulled the “growth” lever to help Excelsia Injury Care grow geographically to help more low-income and under-insured patients benefit from help in finding and funding medical care after auto accidents and workplace injuries. It also helped Excelsia boost its employee engagement and retention; skilled and reliable workers are a key growth factor in the healthcare industry. “This is a tough job. This is interacting with patients who are under a lot of stress. A lot of the hourly workers are really evaluating trade offs of staying in healthcare,” said Bain’s Larissa Quinn.
- Keep reading, “Impact value-creation isn’t just for impact investors,” by David Bank on ImpactAlpha and watch the video replay on Youtube.
The Week’s Short Signals
🪵 Greenwashers beware. New York’s attorney general, Letitia James, sued JBS, the Brazil-based meatpacking giant, including for misleadingly pledging to reach net-zero emissions by 2040. James doubts new agricultural practices can significantly dent JBS’ carbon emissions. The company “used greenwashing and misleading statements to capitalize on consumers’ increasing desire to make environmentally friendly choices,” James said. But will litigation risk make companies less likely to make any climate pledges at all? (New York State Attorney General’s Office)
🔤 Alpha in impact. Venture capital impact funds outperformed traditional ones over the past two decades while also lowering portfolio risk. Strong projected growth in industries like health care and clean climate tech are set to further boost impact-aligned investments. (Institutional Investor)
🌬️Think big. With just 5% of foundation investable assets allocated to impact — even less for larger endowments – the typical advice to “start small” needs an update. Small pipelines reduce chances for success, which can sour teams from doing more, according to Bridgespan Group. “Foundations should set ambitious goals for transitioning significant portions of the portfolio into impact investing,” Capricorn Investment Group advises in “Can foundation endowments achieve greater impact?” (Capricorn Investment Group)
🔌 Opportunity cost. UK households and government could have saved an estimated £56 billion over the past two two years had they adopted all available net-zero upgrades. Add in measures to climate-proof food production and the tab jumps to £73 billion. (Energy & Climate)
🏥 Automatic payouts? Healthcare systems face an additional climate-related burden estimated at $1.1 trillion, pressuring health and life insurers (see, “California’s climate-risk pioneer Dave Jones on our march ‘toward an uninsurable future’”). Parametric insurance that pays out automatically upon certain signals holds valuable lessons, but insurers must “decide whether shouldering the risk of a mass ‘trigger’ event is within their appetite, without making premiums unaffordable.” (The Geneva Association)
🧑🔬 Better living through biology. Bio-based materials promise green substitutes for plastics and other unsustainable materials. Key to scaling the synthetic biology market: large standardized fermentation facilities, or biofoundries, that can dramatically lower costs. (BCG)
The Week’s Dealflow
Deal spotlight: San Antonio’s ESTAR West targets $25 million for real estate fund. Entrepreneurs and Small Businesses Thriving Alongside Residents on the Westside, or ESTAR West, is revitalizing underserved neighborhoods with mixed-use real estate and small business support on San Antonio’s majority-Latino west side. Similar “corridor models” are emerging in US cities, including Baltimore, Los Angeles, Kansas City and Philadelphia, to drive community wealth through local small business and real estate ownership, with an emphasis on preventing the displacement of longtime residents and business owners as neighborhoods change and gentrify. “We’ve learned in Atlanta and in other places that unless you control the real estate, you’re not in charge of your own destiny,” said former San Antonio mayor Henry Cisneros, who served as Secretary of Housing and Urban Development in the Clinton administration and chairs the initiative’s advisory board. ESTAR West is seeking to raise an initial $25 million for a real estate fund to invest in the creation and preservation of affordable housing for local residents.
- Lived experience. ESTAR West is personal to Cisneros. “The neighborhood where I grew up is called the poorest census tract in the city,” Cisneros told ImpactAlpha. “I live in my grandfather’s house in that area. I inherited and renovated his old print shop into my office in this poorest neighborhood of the city.” He said the narrative of crime, drugs and poverty had deepened people’s fears about the west side of San Antonio. “It took us a long time to get here to this position of constant decline, of constant out-migration, of loss of business.” Come back in three to five years and things will be different, he says. “When you look around the neighborhood, you will see physical changes and improvements and they will be contagious.”
- Keep reading.
Catalytic climate capital. Soros Economic Development Fund, the impact investing arm of Open Society Foundations, committed $25 million to Allied Climate Partners to de-risk early-stage climate development projects in emerging markets and increase their bankability.
CDFIs. Charles Schwab Bank committed $10 million to Opportunity Finance Network’s Finance Justice Fund to provide loans and grants to community development financial institutions, or CDFIs, in underserved US communities… The Robert Wood Johnson Foundation provided a $5 million program-related investment loan to Four Bands Community Fund to expand access to capital in Indigenous communities in the Great Plains region.
Decarbonizing buildings. Apax Global Impact, the $900 million impact fund of Sir Ronald Cohen’s Apax Partners, will acquire a majority stake in Scotland’s Integrated Environmental Solutions, which provides decarbonization-focused stimulation tools and consulting to building project managers… Maine rolled out $5 million in green bond series for resilient and sustainable buildings.
Electric vehicles. SK Siltron CSS bagged $544 million from the Department of Energy’s Loan Programs Office, led by Jigar Shah, to make silicon-based semiconductors for electric vehicles and create local green jobs.
Energy transition. Arevon Energy secured over $1 billion in a tax equity and debt financing package, backed by Wells Fargo, BNP Paribas and other global banks, for a solar-plus-storage project in California… South Africa’s Hohm Energy netted $8 million to meet demand for solar power.
Fund news. Verdane raised €1.1 billion for sustainable European businesses… Women-led Halcyon spinoff, Halcyon Venture Partners, raised $5 million towards a $50 million-target fund that will invest in early-stage climate, health and equity tech startups.
Green batteries. Ascend Elements raked in $162 million from investors, including Just Climate, to upcycle used lithium-ion batteries into materials for new batteries… BlackRock-Temasek partnership Decarbonization Partners led a $150 million Series B round for thermal battery maker Antora Energy.
Inclusive finance. Blue like an Orange provided $18 million in financing to Mexican lender Fuentebuena… Teyliom Finance secured a $20 million loan from BluePeak Private Capital to increase lending to small and medium enterprises and microbusinesses in Senegal, Burkina Faso and other West African countries.
Low-carbon transition. India’s Varaha, which specializes in helping smallholder farmers generate nature-based carbon credits, secured $8.2 million in a Series A round backed by Norinchukin Bank, one of Japan’s largest institutional investors… Prime Coalition’s Trellis Climate backed Ample Carbon and Ebb Carbon.
M&A. Blue Earth Capital took a stake in Nepra to expand waste recycling in India… Lafayette Square provided debt financing for Houston-based waste manager Ironclad Environmental Solutions to complete the acquisition of DenBeste Water Solutions, an equipment rental company for liquid and solid waste.
Return on inclusion. Pittsburgh-based Black Tech Nation Ventures closed a $50 million inaugural fund to invest in Black-led and owned tech businesses in Pittsburgh and other cities, along with startups led by women, LGBTQ+ and other diverse founders… Sorenson Impact backed Redemption’s purchase of Holladay Bank to create a new Black-owned bank.
Sustainable packaging. San Francisco-based Sway snagged $5 million from seed investors including BAM Ventures, Alante Capital and Third Nature Investments for a seaweed-based, home-compostable alternative for plastic packaging.
The Week’s Talent and Jobs
Promotions: Veris Wealth Partners promoted Roraj Pradhananga to co-CIO and Jane Swan to head of advisory services… British International Investment promoted Maria Smith to managing director and chief impact officer and Samir Abhyankar to managing director and head of its financial services group… Mad Agriculture, which finances farmers transitioning to regenerative agriculture, promoted Elizabeth Candelario to chief strategy officer… Dalberg promoted Jagjeet Sareen to partner.
Silicon Valley Community Foundation appointed Greta Hansen, Santa Clara County’s chief operating officer, to board chair. The foundation also added David Chun of Equilar and Neythri Futures Fund’s Archana Sathaye as members of the board… Carlyle appointed Jeff Currie, a former global head of commodities research at Goldman Sachs, to chief strategy officer of Energy Pathways, the private equity firm’s energy investment platform.
Franz Hochstrasser is stepping down as CEO and board chair of climate crowdfunding site Raise Green and handing the reins to cofounder Jackie Logan… The Texas Center for Employee Ownership hired Taylor Knickel, a former adjunct professor at the University of Denver, as its new program director… Fareeda Abdulkareem, a former inclusive growth senior associate with Palladium, joined Mercy Corp Ventures as insights manager.
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That’s a wrap. Have a wonderful weekend.
– Mar. 1, 2024
