The Week in Impact Investing: Battle-Tested

The team at

ImpactAlpha

TGIF, Agents of Impact! 

🗣 Chill in the air. US Rep. Jim Jordan and other Republicans are engaging in very public saber-rattling over “ESG cartels,” issuing subpoenas to expose the “collusion” among shareholder activists pressing companies on climate risk, as ImpactAlpha’s David Bank reports. Privately, some conservatives fear Jordan and Co. are meddling too far in private market activity, ImpactAlpha is learning. The intended effect: Pressure investors and activist networks to pull back, quiet down, swallow the truth, and bear the mounting investment risks stemming from climate and inequality. Asset managers spooked by the political firestorm this year scaled back their support for shareholder resolutions related to corporate action on climate and ESG, as David and Amy Cortese reported earlier. That doesn’t make the risks go away. Impact investors on the fall conference circuit hit back against the political attacks, as ImpactAlpha reported from Copenhagen, San Francisco, New York and elsewhere. California, under Gov. Gavin Newsom, and the European Union are moving ahead with mandatory climate (and diversity in venture capital) disclosure rules, as Amy reports. 

Agents of Impact don’t run from a fight. More precisely, they stay on task and strategies for the long term, like financing hard climate solutions and moving capital into overlooked markets. Patient capital investor Acumen offered up lessons in failures from investments in more than 165 companies over two decades. “We cannot let a fear of failure stop us from taking the necessary risks,” Acumen’s Amrita Bhandari writes in a guest post (Jessica Pothering dives into Acumen’s lessons in “Deal Spotlight,” below). Tough challenges require creative solutions. As Jessica reports, MCE Social Capital tapped catalytic investors including ImpactAssets and Heading for Change, the legacy fund of Suzanne Biegel and her husband, Daniel Maskit, to de-risk climate and gender investments in Africa, Asia and Latin America (disclosure: Heading for Change is a sponsor of ImpactAlpha’s Climate + Gender coverage). The fall weather may be putting a chill in the air. But Agents of Impact are marching forward, calm, cool and confident. – Dennis Price

Don’t miss these upcoming ImpactAlpha calls:

⚡ Plugged In: Local climate innovation. Join host Sherrell Dorsey in conversation with VertueLab’s Aina Abiodun live on LinkedIn, Wednesday, Nov. 8 at 10am PT / 1pm ET / 6pm London. RSVP today.

📞 Agents of Impact Call: Women as agents of change for climate resilience. Join Camilla Nestor of MCE Social Capital, Shally Shankar of AiiM Partners, Noramay Cadena of Supply Change Capital, and Samantha Anderson and Rose Maizner from Heading for Change, Wednesday, Nov. 15 at 10am PT / 1pm ET / 6pm London. RSVP today.

The Week’s Podcast

🎧 Impact Briefing. ImpactAlpha’s Dennis Price catches up with María Hollan, a second-generation steward of her family’s assets at Timke Ventures in Mexico City. Hollan was in Medellín at the GLI Forum Latam looking for opportunities to invest with a gender lens across asset classes. Host Monique Aiken has the headlines. 

  • Listen to this week’s episode, or watch it on Youtube, and follow all of ImpactAlpha’s podcasts on Apple, Spotify or wherever you listen.

The Week’s Agent of Impact

Andrea Armeni, NYU: On a quest to transform finance. Sustainable development? “More of the same.” Forest carbon credits? “Outside-imposed extraction.” Impact investing? “Are we really going far enough? Or are we just tweaking at the margins?” For Andrea Armeni, co-founder of the nonprofit Transform Finance, it’s not enough to interrogate the practices of legacy finance. He’s built a reputation for making impact investors uncomfortable as well. “At the root of all things is, ‘Who makes the decisions?’” Armeni tells ImpactAlpha. “Where does the wealth end up being built?”

Armeni has been trying to shake things up at least since he was elected head of his high school class in Trento, Italy, and organized a general strike to institute student-led programming. His credentials from Columbia, Harvard and Yale universities and legal expertise have given him access to rooms where critics are rarely welcome. It was when he began to work in sustainable development that he found his contrarian voice. As head of the Gaia Amazon Fund in Colombia, he saw the negative impact of outsider-led projects on Indigenous communities. “There was a real criticism that came from the ground of being, once again, the target of somebody else’s aspirations,” he says. “First it was gold, then it was rubber, and now it’s carbon.”

Transform Finance, founded with Morgan Simon, presses investors to ensure they’re adding more value than they’re extracting, and that risk is allocated to those best able to bear it. A recent paper on alternative ownership structures focuses as much on stakeholders’ decision-making power as wealth transfer. “If you asked a kid, ‘Who should make decisions about a company that has employees, suppliers, customers?’ Or, ‘Who should get the upside of the economic activity?’ They wouldn’t say ‘Obviously, the equity holders.’” Armeni says. “So it’s really [about] recognizing who is contributing to value creation and who bears the burden of economic activity.”

Armeni has moved to NYU’s Wagner School as a professor of social finance and public service and director of the school’s Social Impact, Innovation and Investment Specialization program. His students are not only looking to make finance better or less unjust. They’re looking at social change, public service and policy, he says. “Finance is just one of the arenas where you can drive that change.” Armeni is gratified that once-fringe ideas, like impact-linked compensation, are being increasingly recognized among impact investors. “The field is bending in the right direction,” he says, “but there’s still a lot to be done.”

The Week’s Dealflow

Deal spotlight: Acumen breaks the ice on failures in impact investing. Impact investors deserve credit for pushing business and finance to be more mindful, accountable and transparent. Acumen this week gets bonus points for sharing what most other impact fund managers will only whisper in private or off the record: their failures. “Investors often accentuate the victories, but we all know failures occur just as frequently, if not more so, than successes,” Acumen’s Amrita Bhandari wrote in a guest post on ImpactAlpha. “We need real conversations about where we struggle, what we have learned, and what we need more of.” In a new report, the impact fund manager spotlights examples of the quarter of its portfolio company that has failed from both a financial and impact standpoint, and the additional half that has fallen short either financially or impactfully (the firm considers one-quarter of the portfolio to be “home runs.”)

  • Scale fail. The private equity and venture capital world is feeling the fallout of the market highs of 2020 and 2021. A lot of startups are failing, including in the impact world (see, “Trouble at Twiga… and Copia… and Sendy”). Investor pressure for fast growth, sometimes at the expense of solid business models and unit economics, is one reason. Agri-processing company GrainCo’s targets depended on an ever-growing network of farming partners. “The company repeatedly missed its projections,” Acumen wrote, “and ended up scaling a growing deficit.” Solar ag-equipment seller S4S has been more successful by taking a measured approach and having a clear focus on operational drivers.
  • Sharing is caring. India-based SELCO Foundation celebrates failure stories and lessons through events, videos, podcasts and blogs. Other examples get reported in ImpactAlpha and elsewhere (see: Bitwise’s blowup, the Riker’s Island social impact bond, E+Co’s restructuring, the Abraaj scandal, Mobisol’s distressed sale, South Pole’s carbon project collapse.) Bhandari calls on the impact community to share hard lessons more openly for the sake of the field’s collective impact and financial objectives. “Risk is inherent in the work that Acumen and many of our peers take on… and greater risk means a greater chance of failure,” she wrote. “In a world of dire problems and limited resources, the only real failure is to keep making the same mistakes.”
  • Share this post. And share your own failures. ImpactAlpha is rounding up lessons from impact fund managers’ portfolio. Have a good example? Get in touch

Agrifood investing. Brazil’s b4waste raised $400,000 to partner with food retailers to curb food waste… France’s Amatera raised €1.5 million to breed climate-smart perennial crops, starting with a new coffee variety… France’s CarbonFarm raised $2.6 million to use satellites to verify carbon credits for sustainable rice farming. 

Climate tech. Algenesis Corp. clinched $5 million to make biodegradable and compostable shoes and other products… Finland’s Kausal raised €880,000 to help municipal government agencies “plan, track and coordinate” sustainability initiatives… Woman-led Gozen scored $3.3 million to make lab-grown leather with no added plastic materials.

Corporate impact. Northwestern Mutual allocated an additional $75 million to back Black fund managers… Two Sigma Investments is spinning out its impact investing unit, Two Sigma Impact. 

Energy transition. Burn Manufacturing issued a $10 million green bond for clean cooking in Africa… Canada’s Eavor Technologies raked in $182 million from Microsoft’s Climate Innovation Fund, Temasek, Japan Energy Fund and other investors for a patented process for producing geothermal energy… South Africa’s Standard Bank and Liberty Group invested $160 million in a fixed-income fund for Africa’s clean energy transition… Tenaska and Copenhagen Infrastructure Partners will partner on green hydrogen projects in the US.

Financial inclusion. Goodwell Investments backed “embedded insurance” venture Inclusivity Solutions… Fincare Small Finance Bank is merging with AU Small Finance Bank to provide essential financial services in India. 

Impact tech. TELUS’ Pollinator Fund for Good backed three impact tech ventures… Incision raised $7 million to provide online training to global surgical teams.

Inclusive economy. Colorado foundations backed Social Finance’s fund to upskill local workers… Verqor scored $11 million to provide digital credit to Mexico’s farmers… Twinco Capital secured €50 million from BBVA to provide trade financing for emerging market suppliers.  

Low-carbon transition. Indian electric motorbike manufacturer Ola Electric raked in $384 million… Just Climate led a $185 million equity round for Infinitum to develop less carbon-intensive motors for the industrial sector.

Sustainable bonds. Mauritius-based Envolt is issuing $45 million in green bonds to develop 13 solar plants across the island… EAIF committed $48 million to ‘social bonds’ for rural electrification in Côte d’Ivoire. 

The Week’s Talent

Aaron Hay, ex- of Federated Hermes, and Phil Cliff, ex- of M&G Investments, joined UK-based Fidelity International as sustainable investing directors… Claudia Da Conceicao, ex- of Standard Chartered Bank, joined the IFC as Southern Africa regional director.

The Nature Conservancy named Neel Broker, former CEO of Laureate Education, chief operating officer… Equitable Facilities Fund appointed Jon Rybka, ex- of RePublic Schools, as chief program officer… Meghan McCormick, ex- of MDRC, joined Overdeck Family Foundation as a research and impact officer. 

Charlie Macdonald, ex- of Giant Leap Fund, joined Rubio Impact Ventures as an investment manager on the climate team… Patrick Rose of Corridor Title joined the board of Austin Community Foundation… The Ewing Marion Kauffman Foundation appointed W.K. Kellogg Foundation’s Carlos Rangel to its board of trustees.

The Week’s Jobs

💼Share the week’s impact jobs. View dozens of other jobs on our new job board. Want to post a listing? Submit it here.

US East Coast

Nuveen is hiring a renewable energy investment associate in Charlotte, NC… Social Finance is looking for a policy writer in Washington, DC, or Boston… Arup is hiring a climate and sustainability leader in Boston. 

In New York: Low Income Investment Fund is hiring a racial equity and impact lending officer; Energy Impact Partners seeks a recruiter; Bank of America is recruiting a global renewable energy credit risk officer; and NY Green Bank is recruiting for several roles…

In Washington, DC: the IFC is looking for a short-term consultant for its sustainable finance initiative; Pollination is recruiting an executive director for environmental markets; Jobs for the Future has an opening for a senior manager; Opportunity Finance Network is on the hunt for a senior associate of development services; and Calvert Impact seeks a technical services and impact officer.

US West Coast

Founders First Capital Partners is looking for a chief financial officer in San Diego… The Miller Center for Entrepreneurship is looking for a senior manager of impact investing in Santa Clara.

Global locations

BlueMark has an opening for an impact investing business development analyst in London… Schneider Electric seeks an impact and ESG analyst in Singapore… BlueOrchard is looking for an associate impact manager in Peru… Mastercard Foundation is hiring an access to finance and financial inclusion lead in Lagos… The Investment Management Corp. of Ontario seeks a principal for sustainability policy and innovation in Toronto.

That’s a wrap. Have a wonderful weekend. 

– Nov. 3, 2023