TGIF, Agents of Impact!
Restructuring finance. What kind of financial system are Agents of Impact building? One that values diversity, rewards sustainability, centers communities – and is kind and usable by all. This week, Kind Capital’s John Duong made the case on The Reconstruction podcast that entrepreneur-friendly “kinder capital” can outperform, while CapEQ’s Tynesia Boyea-Robinson argued in a guest post for “usable capital” to unlock Black businesses’ under-tapped economic potential (see No. 2, below). The restructuring of finance and investing can’t come soon enough, as the climate emergency and an unequal economic recovery unfold around us. Generation Investment Management charted the shift to sustainability in its annual trends report (No. 1). Investors are linking debt terms to improved ESG performance (No. 4). Europe and China are doubling down on carbon markets (No. 5). And Zeal Capital’s Nasir Qadree is proving that an inclusive investment strategy can not only attract limited partner capital, but drive greater impact (Agent of Impact). Want even more signals that Agents of Impact are restructuring finance? Keep reading ImpactAlpha. – Dennis Price
🎧 Impact Briefing. On this week’s podcast, Monique Aiken and Dennis Price check in with Illumen Capital’s Daryn Dodson about bias in asset management and what the new era of diversity disclosure could mean. Plus, the headlines. Tune in, share and follow us on Apple, Spotify or wherever you listen.
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The Week’s Agent of Impact
Nasir Qadree, Zeal Capital Partners. As a first-time manager of an impact venture fund – and a Black man – Qadree defied the odds when he completed Zeal’s $62 million raise this week. First-time and emerging fund managers attracted just over 11% of venture capital last year, despite growing evidence that, on average, they outperform managers with longer track records. “Raising a first-time fund is incredibly hard,” he tells ImpactAlpha. “Raising a first-time fund as a diverse fund manager in Washington, D.C. is even harder.” Qadree, 34 years old, defied convention as well by opting not to go to business school after being accepted at Yale, the University of Michigan and elsewhere. Instead, he opened a coffee shop in New York City. The business shared space with an incubator where impact and other investors, including Josh Cohen at City Light Capital and Matt Greenfield from Rethink Education, introduced him to private markets and venture capital. Qadree began to make investments for his personal portfolio, and built a track record heading education investments at Village Capital. After moving to AT&T as associate director of social investments, Qadree realized it was time to launch an impact fund. “Two of my biggest mentors sat me down over dinner and said, ‘You talk a lot about democratizing entrepreneurship and leveling the playing field. Why don’t you start your own fund?’”
The market he spotted: early-stage ventures in workforce development, education and financial services with potential to narrow wealth and skills gaps. Qadree launched Zeal in February 2020. By November, Qadree had raised more than $22 million from PayPal and from his alma mater, Hampton University, a historically Black research university in Virginia. The commitment that pushed the fund past its goals came from Truist Ventures, part of Truist Financial Corp. in Charlotte, N.C. “We would not be where we’re at if it wasn’t for that unfortunate moment in May” of last year, Qadree said, referring to the murder of George Floyd and the social movement that followed. “We probably would be a $25 million fund, and that’s being generous.” (See, “Seven ways finance has changed in the year since George Floyd’s murder.”) Zeal’s first fund has made five investments, including in Black-led fintech Esusu, which aims to help low-to-middle income renters save money and build credit; Latinx-led Kanarys, which is helping employers address diversity and inclusion issues; and YearOne, a Black-led startup helping engineers transition from coding school to the workplace. With the final close behind him, he says Zeal is ready to have even greater impact. “We pledged to turbocharge economic mobility, and now the engines are running.” – Roodgally Senatus
The Week’s Big 5
1. Charting the sustainability revolution. Carbon emissions in the U.K. are back to the level of the 1880s. Interest in used cars, clothes and other goods is taking off. Electrification is driving demand for minerals and reshaping commodity markets. ImpactAlpha dug through this year’s sustainability trends report from Generation Investment Management to showcase two dozen charts that map the sustainability revolution. Wonk out.
2. Restructuring finance for the third Reconstruction. Investors and community lenders are rewriting the rules of finance to counter systemic flaws that have limited access to capital and wealth for Black and other founders of color. Policymakers are moving to build inclusion into the economic recovery.
- Kinder venture capital. Kind Capital’s John Duong explained on The Reconstruction podcast how his experience as a Cambodian refugee in the U.S. shaped his approach to venture capital. “When we see a very promising entrepreneur who might be facing a negative bias,” he said, “we see it as an opportunity for us to invest.” Read on and listen in.
- Making finance ‘usable’. The “barrier to capital for Black-owned businesses hurts us all,” writes CapEQ’s Tynesia Boyea-Robinson. The kind of no-collateral loans and flexible terms offered by lenders like Mission Driven Finance can unlock the economic potential of Black-led businesses. Dive in.
- Diversity in asset management. Less than 1% of the $70 trillion allocated to asset managers is in the hands of female or minority-led firms. Diversity disclosures under review by the SEC and state regulators are a start, but structural reform is needed: screens that exclude smaller and newer managers all but eliminate asset management firms owned by women and people of color. Keep reading.
- Centering marginalized communities. The crisis for small businesses and communities is “far from over,” says Ellis Carr of Capital Impact Partners, which this week made its first loans from a new $20 million lending initiative for developers of color in Washington, D.C. The Biden administration’s economic policies, like the child tax credit, have the potential to lift not just the least well-off but the entire economy, says White House National Economic Council director Brian Deese. Go deeper.
- Investing in place. “To avoid repeating the same mistakes of the Great Recession and its uneven recovery, we need the private and public sectors to work together – alongside community leaders,” argues U.S. Impact Investing Alliance’s Fran Seegull in a guest post. Examples: Google’s partnership with Opportunity Finance Network to finance diverse-owned small businesses, and investments of corporate cash by PayPal and Netflix in community development financial institutions like LISC. Dive in.
3. Deaflow spotlight: Electrify everything. Transportation is responsible for 24% of global greenhouse gas emissions. India’s Ola secured a $100 million loan to build a manufacturing hub for two-wheel electric vehicles, as emerging markets embrace e-mobility. The race for better lithium batteries to power electric vehicles accelerated with two big raises; California-based SES’s plans to go public via a special purpose acquisition company.
- Taking flight. Heart Aerospace is the latest low-carbon aircraft developer to raise investor capital and secure orders from commercial airlines. It is racing ZeroAvia, Universal Hydrogen and others to deliver electric airplanes within five years.
4. Rewarding sustainable business. Green and sustainable bond issuances are expected to top $1 trillion in 2021. A growing sub-category: sustainability-linked debt that ties interest payments directly to environmental, social and governance targets. Greek utility Public Power Corp. committed to cut carbon emissions or pay higher interest on a €500 million bond. “What began with ‘Why should I issue?’ is now ‘Why aren’t you?’” says Marilyn Ceci of JPMorgan Chase. “Your absence in the market says something now.” Do the math.
- Weighing the pros and cons. In a guest post, Lori Shapiro of S&P Global Ratings applauds sustainability-linked debt’s potential to drive better business and expand sustainable finance, but cautions of “distinct risk of ‘ESG-washing’.” Hear her out.
5. COVID and climate dominate the G20. There was no shortage of urgent messaging at the weeklong G20 meeting in Venice. But a $50 billion plan to speed the global COVID vaccine rollout and accelerate the global recovery remains an aspiration. Share this.
- Europe and China double-down on carbon markets. The price of carbon shot up to €55 ($65) after Europe announced the expansion of its Emissions Trading System in a bid to aggressively slash greenhouse gas emissions by 2030. China today launched a carbon trading scheme that could cover 10,000 companies within five years. It’s on.
The Week’s Dealflow
Agrifood investing. Colorado’s fungi-based alt-protein company Meati secures $50 million… Agrando raises $12 million from Munich-based Yabeo Impact AG, Sony Innovation Fund and Investbridge… Aqua-Spark leads a $9 million round for India-based seaweed producer Sea6 Energy… Brazil’s A de Agro partners with investment bank BTG Pactual to lend 1.8 billion reais to rural growers… Botswana’s Kalahari Honey, Zambia’s Wuchi Wami and Malawi’s EcoGen will use U.N.-backed SEED grants to help smallholder farmers adapt to climate change… Indian agtech startups attract global investors.
Inclusive economy. Kenya’s MarketForce raises $2 million to digitize small businesses and streamline supply chains… Accion Venture Lab invests in Brazilian fintech Dinie’s $23.8 million debt and equity funding round… Nigeria’s GetEquity raises pre-seed funding for its equity crowdfunding platform for African startups… Clearco secures $215 million from SoftBank to finance online businesses… MPOWER scores $100 million to help international students finance university studies in the U.S. and Canada.
Clean energy. International Finance Corp.’s $20 million loan to Daystar Power in Nigeria includes local-currency debt… Germany’s Enpal raises €100 million to expand its solar system leasing and subscription service… Woman-led blank check company Athena Technology will take public solar tech venture Heliogen.
Impact tech. LGT’s Lightrock closes $900 million fund for tech-driven impact… Eka Ventures raises £68 million to cut early-stage checks to impact tech ventures… Ecosystem Integrity Fund closes $250 million sustainability tech fund… Acumen’s ALIVE backs Chilean edtech company uPlanner.
Low-carbon transition. Atlanta’s Cloverly raises $2.1 million to help companies measure and offset emissions… Paris-based Tikehau Capital launches a €30 million impact credit fund focused on climate solutions… Wood building fund aims to cut construction carbon in Europe… Vaayu secures $1.6 million to help the fashion industry manage its carbon footprint.
Climate tech. London’s FabricNano raises $12.5 million for fossil-fuel free bio-manufacturing… California-based Twelve (formerly Opus12) scores $57 million to convert CO2 into fuels, textiles and other products.
The Week’s Talent
Joseph Scantlebury, ex- of the W.K. Kellogg Foundation, is the new CEO of Living Cities… Ying Lucy Fan, ex- of Peak Power, joins North Sky Capital as vice president… Former U.K. civil society minister Nick Hurd, Ronald Cohen of the Global Steering Group for Impact Investment, former CEO of Allianz Global Investors Elizabeth Corley, and Douglas Peterson of S&P Global join the Impact Taskforce to push impact investing during the U.K.’s G7 presidency. The GSG and the U.K.’s Impact Investing Institute will lead the taskforce.
Mark Friedland, ex- of K Road DG, joins Orion Energy Partners as partner and chief legal and compliance officer. Karen Vejseli, ex- of Carlyle Group, joins Orion as partner and group chief financial officer… Alan Halfenger, ex- of Bain Capital, joins Arctaris Impact Investors as general counsel and chief compliance officer… Melody Hahm, ex- of Yahoo Finance, joins Harlem Capital as community and platform manager.
Bridges Fund Management names Christoph Evain, ex- of Intermediate Capital Group, as chairman, and Clive Sherling, ex- of Apax Partners, as non-executive director… The Beeck Center for Social Impact and Innovation adds to its advisory board Phaedra Chrousos of Libra Group, Tara McGuinness of New America, David Park of National League of Cities, Eric Pallotta of Netflix, and Christina Martinez-Pinto of PIT Policy Lab. Shannon Felton Spence, ex- of Opportunity Insights, joins the center as director of communications and marketing.
The Week’s Jobs
StepStone Group is looking for an ESG senior analyst in New York… Renewable Resources Group is hiring a sustainability/impact analyst in Los Angeles… Atlanta Wealth Building Initiative seeks a director of strategic programs in Atlanta… The Food Research & Action Center has an opening for a short-term impact investing fellowship in Washington, D.C… Kiva is looking for a social enterprise investment manager in Colombia, Kenya or the U.S… Kapor Capital is hiring an investment associate… Stanford University’s undergraduate program seeks a director of equity and inclusion.
CITI Impact Fund is hiring a vice president for its spread products investment technologies (“SPRINT”) group… Circulate Capital is looking for a partner for Latin America and the Caribbean… Solstice is recruiting a director of operations… Spring Point Partners seeks a program officer for social justice in Philadelphia… Acumen is hiring a business development associate in New York… Emerson Collective is looking for a portfolio manager for its Culture Council in Palo Alto, Calif… Women of the World Endowment is recruiting a senior analyst in Washington, D.C… Global X ETFs seeks a director of sustainable investing in New York.
That’s a wrap. Have a wonderful weekend.
– July 16, 2021