TGIF, Agents of Impact!
Design matters. Agents of impact are transforming finance and reshaping the economy through intentional design for inclusion, climate action and positive impact. Heather Fleming’s Change Labs is among a group of Native organizations joining forces to support entrepreneurs and economic sovereignty on tribal lands across the U.S. (see Agent of Impact, below). Policymaking, of course, is the design of our common project (No. 7). But the designs of private capital can also promote the public good. Breakthrough Energy Ventures is blending philanthropic, private and public capital to scale next-gen climate solutions with guaranteed off-take agreements (No. 3). Aunnie Patton Power has rounded up designs for financing structures that give businesses incentives to drive impact (No. 5). The growing global flow of capital (No. 2) is evident in the increasing number of megafunds and megadeals to redesign, for example, food production (No. 4). Even old-schoolers like TPG’s Jim Coulter (No. 1) and corporate chief financial officers (No. 6) have designs on impact and ESG. Human-centered design has been all the rage. Next up: Humanity-centered design. – Dennis Price
🎧 Impact Briefing. On this week’s podcast, Brian Walsh hosts roundtable regulars Imogen Rose-Smith and David Bank to discuss Imogen’s latest column, “How private equity learned to stop worrying and love ESG” (No. 1, below). And we meet Cooper Connelly, a character on the Netflix series Sex/Life: “nice guy,” loyal husband – and impact investor. Plus, the headlines. Tune in, share and follow us on Apple, Spotify or wherever you listen.
The Week’s Agent of Impact
Heather Fleming, Change Labs. Heather Fleming started an industrial design firm to do thoughtful, community-centered design. Several years ago, she brought her skills back to her hometown of Tuba City, population 8,609, the largest community on the Navajo Nation (see, “Bringing global social innovation home to the Navajo Nation“). Change Labs’ entrepreneurship incubator has supported hundreds Navajo and Hopi-run businesses across the largest tribal community in the U.S. Building Change Labs into a full-fledged business support organization has taken painstaking effort. The organization has been trying for four years to secure a physical site on the reservation. Internet connectivity is “atrociously slow and unstable on a good day,” Fleming says. Funders have more than once expressed impatience to see results. “There is no ‘plug and play’ for anything on the reservation. Someone has to bulldoze a path for how to do this,” Fleming tells ImpactAlpha. “We’re literally building the infrastructure for our business ecosystem. And we’re doing it on a shoestring.”
Change Labs wasn’t alone in confronting the myriad challenges to doing business on tribal lands. Then came the pandemic, which hit tribal nations hard and drove the infection rate on the Navajo Nation higher than any U.S. state. The silver lining: billions in federal funding for economic relief and recovery. “Suddenly tribal leaders are talking about business and entrepreneurship in a way they haven’t before,” says Fleming. Change Labs has joined forces with New Mexico Community Capital, Native Community Capital and Native Women Lead to share critical functions and attract resources to scale their impact in the Southwest. The bigger goal: building an umbrella organization to help Native-led entities support entrepreneurs from their communities. “None of our organizations can effectively tackle the systemic challenges alone,” said Native Community Capital’s Dave Castillo. Change Labs and its partners are clearing a path for a Native-led economic revival. “It won’t be a pretty story,” Fleming cautions. “But if we are able to lay the foundation, then eventually other organizations and businesses will just be able to ‘plug in’.” – Jessica Pothering
- Share Heather Fleming’s Agent of Impact story and like it on Instagram.
- The news. See, “Native-led organizations join forces to accelerate entrepreneurship.”
The Week’s Big 7
1. Private equity pitches ESG. Private equity investors have found a reason to love ESG: the money. For her latest Institutional Impact column, contributing editor Imogen-Rose Smith pored over minutes of public pension fund meetings to find what private equity bigshots like TPG’s Jim Coulter are telling their biggest clients. Their pitch: Climate investing and ESG are the new new thing. Singing a new song.
2. Focus on the trends, not the totals. Sustainable investing grew to $35 trillion globally by early 2020, a 15% increase from 2018, and now makes up 36% of all professionally managed assets. Subcategories are harder to parse, as the five regions reporting to the Global Sustainable Investment Alliance used different methodologies, but it’s clear impact investing remains small in comparison to the broad categories of ESG integration and negative screening. And changes in the U.S. survey mean 2020 data can’t be directly compared to earlier tallies. Check it out.
3. Climate financing accelerates, as does the crisis. Raging wildfires in the western U.S. and deadly floods in Germany and China make stark the need for urgent climate action. Net-zero commitments, tech breakthroughs and innovative finance are unlocking opportunities, from seed to growth stage. Needed now: political leadership. “Cooperation is the only way to break free from the world’s current mutual suicide pact,” said U.S. climate envoy John Kerry. Dive in.
- Scaling next-gen tech. Breakthrough Energy Ventures will stack concessionary and commercial capital to line up off-take agreements for next-generation climate solutions. Go deeper.
- Climate fundraisers. Already this year, investors have closed as many climate-focused funds as were raised during the previous five years combined, according to Pitchbook. Generate Capital raised $2 billion to develop green projects; Denham Capital secured $2.1 billion from Aflac to expand its sustainable infrastructure business.
- Tech breakthroughs. Form Energy announced a breakthrough in iron-air batteries to “cheaply store large amounts of electricity to power grids when the sun isn’t shining and wind isn’t blowing.” Steelmaker ArcelorMittal, Breakthrough Energy Ventures and Capricorn’s Technology Impact Fund are among Form’s backers.
4. Deaflow spotlight: Agrifood megadeals. Breakthrough biotech research is driving eight- and nine-digit investments in alternatives to high-carbon food production. Plant-based cheesemaker Nobell Foods, an early portfolio company of Fifty Years VC, came out of stealth mode with a $75 million round led by Breakthrough Energy Ventures. Also participating: A16z, Chinese private equity giant Hillhouse Capital Group and Robert Downey Jr.’s Footprint Coalition.
- Breakthrough and Generation Investment Management, among others, participated in Berkeley, Calif.-based biotech company Pivot Bio’s $430 million raise (led by DCVC and Temasek) to replace synthetic nitrogen in agriculture; and in fungi-based protein company Nature’s Fynd $350 million round (led by SoftBank).
5. Incentivizing impact. Impact-linked financing structures can be powerful tools for aligning impact and financial incentives, Aunnie Patton Power argues in a guest post. Investors can choose from a range of tools, including social impact incentives, impact tranches, and impact-based equity earn-backs and recoverable grants. Keep reading.
6. Bringing sustainability to the CFOs. Chief financial officers see value in bringing environmental, social and governance issues into strategic and operational decision-making, but have yet to “execute on this vision,” writes Luka Mucic of software giant SAP, which has added a sustainability “control tower” to its enterprise software. Dig in.
7. Policy corner. “We believe the most durable change will happen at the intersection of government action and private sector partnership,” says Fran Seegull of the U.S. Impact Investing Alliance, which is working with ImpactAlpha to keep Agents of Impact apprised of policy developments. Among this week’s crop:
- Reforming the Community Reinvestment Act. The Office of the Comptroller of Currency will rescind the Trump-era rule altering the Community Reinvestment Act regulations. The earlier changes were widely criticized by investors, financial institutions and community advocates.
- Worker power. President Biden’s executive order earlier this month directs more than a dozen agencies to promote competition across labor markets, tech and healthcare industries, banking and consumer finance, and more. On the agenda: a consumer-friendly banking initiative to address racial biases and improve access to credit for underserved communities.
- Sustainability standards. Organizations including the U.S. Impact Investing Alliance, Ceres and the Impact Investing Institute supported efforts to promote consistent corporate reporting on key sustainability issues. The IFRS Foundation consultation period on the International Sustainability Standards Board proposal closes July 29.
The Week’s Dealflow
Agri-finance. Vietnam’s Kamereo raises $4.6 million to connect farmers with food and beverage businesses… Oikocredit offers $9.3 million in credit to Unitas Kenya to help Kenya’s small agribusinesses recover from the pandemic… AgDevCo extends mezzanine debt to Kenyan aquaculture company Victory Farms… ACDI/VOCA invests in Ghana-based agribusiness Maphlix Trust Ghana via its impact investing arm, AV Ventures.
Catalytic capital. Guarantee from Kresge Foundation catalyzes $30 million for Memphis fund… CDC Group commits $50 million in trade financing to Ecobank to provide COVID-relief financing to small businesses in vulnerable countries… Morgan Stanley awards $21.7 million to Opportunity Finance Network to make grants to CDFIs with less than $25 million in assets.
Health and wellbeing. South Africa-based iNNOHEALTH secures seed funds to launch mobile-based digital health services… Achieve Partners acquires Optimum Healthcare IT to fill healthcare labor gaps… LeapFrog leads $75 million raise for India-focused health app HealthifyMe… Medical Credit Fund’s digital finance fund secures $8.3 million to support Africa’s health clinics.
Financial inclusion. India’s Light Microfinance secures $10 million in equity funding from Incofin, Nordic Microfinance Initiative and Triple Jump… DigiKhata raises $2 million to help Pakistani retailers with digital bookkeeping.
Fund news. American South Fund Management raises $28 million to invest in underserved communities of color in the U.S. South… Vantage Capital raises $207 million in mezzanine debt for African businesses.
Low-carbon transition. Camus Energy secures $16 million to help utilities manage low-carbon electric grids… SK Materials invests $52 million in a lithium-ion battery manufacturing joint venture with Group14 Technologies.
Sustainable investing. Mighty Buildings secures $22 million to make low-carbon, 3D printed homes from sustainable materials… New Forests expands sustainable forestry portfolio in California and Oregon.
The Week’s Talent
Adam Jagelewski and Ilse Treurnicht, ex- of MaRS Discovery District, and Eric Wetlaufer, ex- of Canada Pension Plan Investment Board, are launching TwinRiver Capital in Toronto and Boston (and building out a team)… PCI Media Impact’s Meesha Brown, Catalyze Global Impact’s Jennifer Isern, NYU Law School professor Deborah Burand, and Fern Thomas, ex- of Cornerstone Capital Group, join the board of Calvert Impact Capital.
SLC Management appoints Anna Murray as managing director and global head of ESG… Kartik Desai, formerly with Asha Impact, joins Kois as partner… Guillaume Mascotto, ex- of American Century Investments, joins Jennison Associates as managing director and head of ESG strategy.
The Week’s Jobs
J.P. Morgan’s Private Bank is hiring a head of ESG Integration and a U.S. head of sustainable investing… Manchester Capital is hiring a director of impact investing in Santa Barbara, Calif… Beyond Capital Ventures is looking for an investment fellow… Common Impact seeks a senior consultant in New York… Also in New York, Upstart Co-Lab is hiring a program coordinator… BlackRock is recruiting a vice president for its alternatives-focused impact opportunities fund in Los Angeles… The Sustainable Business Network of Greater Philadelphia is on the lookout for an executive director.
Techstars Sustainability Accelerator is hiring a senior operations associate in Boulder, Colo… Principles for Responsible Investment is looking for a senior policy analyst in Toronto or Montreal… The American Heart Association seeks a managing director for its social impact fund in Jacksonville, Fla… ImpactPHL is looking for a director of community and content… Boston Impact Initiative is recruiting a director of finance and administration.
Atlanta Wealth Building Initiative seeks a director of strategic programs… Calvert Impact Capital is also hiring a client service associate in Bethesda, Md… Y Analytics seeks an impact associate and a climate associate in Washington, D.C. or San Francisco… Common Future seeks a manager of capital strategies in Oakland… Aligned Climate Capital is recruiting an associate in Los Angeles… BSR has a New York-based opening for a director of sustainability consulting for the EMEA region… Moody’s is hiring an ESG product specialist in San Francisco.
That’s a wrap. Have a wonderful weekend.
– July 23, 2021