The Brief | June 7, 2024

The Week in impact investing: Setting the agenda

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

TGIF, Agents of Impact! 

  • Setting the agenda for impact
  • Podcast: debt funds and funding droughts
  • Sam Polk puts healthy food on every table
  • Patient capital in emerging markets

🗣 Changing reality. Set your own agenda, or someone else will set it for you. The statement by Melinda French Gates in a New York Times op-ed last week became the mantra of the GLI Forum Latam in Buenos Aires this week. The gender-lens investing forum, hosted by Pro Mujer, attracted more than 1,200 attendees, double last year’s count, from Latin America, the US, Europe and Asia. The agenda: Full economic participation of women as catalysts for the region’s development. “Pro Mujer will not yield,” said Carmen Correa, who has lit the spark on gender-lens investing in Latin America since taking the helm of social enterprise in 2022. “I will personally not yield, either.” 

At the Sorenson Impact Summit In Park City, Utah, speakers keyed in on the opportunity to include broad-based ownership across the investment landscape. Firms like Homium are using  “shared-appreciation notes” to help first-time homebuyers with down payments. “I’m looking at the whole pyramid of passive wealth building that most people are left out of, and homeownership is increasingly becoming central to that,” Jim Sorenson, an investor in Homium, told Roody Senatus (disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha). Bank ownership is key to closing racial wealth gaps, Redemption Holding Co.’s Ashley Bell told the summit. Redemption earlier this year agreed to buy Holladay Bank and Trust and create the only Black-owned bank west of the Mississippi River. “Trust has to be on the balance sheet,” Bell said. “We can rebuild that trust together by creating institutions that are reflective of all of our values, and those institutions have to be serving us in a way that’s meaningful.”

Inside private equity firms like KKR and Blackstone, Agents of Impact are resetting the agenda to cut in workers at portfolio companies as owners. The welcome shift comes amid a broader recognition that quality jobs up and down the organization chart are a driver of financial value, as WORC’s Ellen Frank-Miller argued in a guest post, and HCAP’s Hope Mago articulated in a podcast. Fund managers on this month’s Liist, including Amazonia Impact Ventures and New Story Ventures in Latin America, are expanding the reach of private credit by channeling capital into niche and underinvested markets and communities. The European Union is raising the bar on climate and human rights regulations with its Corporate Sustainability Due Diligence Directive.

For ImpactAlpha, As You Sow’s Andrew Behar launched a counteroffensive to GOP-led legal attacks on climate change initiatives that have brought together investors, asset managers and shareholder advocacy groups. Behar is chronicling the action in Fiduciary Future, a series of dispatches from the front line. “Continuing business as usual and not coordinating our efforts to address this situation is the real violation of our fiduciary duty,” declared Behar. In a separate series, Lynne Hoey of Oakland-based Kataly Foundation chronicles the foundation’s quest to divest from Wall Street and design a non-extractive, racially just investment strategy. Across geographies and markets, Agents of Impact are setting a new agenda. – Dennis Price

The Week’s Podcasts

🎧 This Week in Impact. Host Brian Walsh takes up ImpactAlpha’s top stories with senior editor Jessica Pothering. Up this week: niche strategies of debt funds on this month’s Liist of impact funds actively raising capital, and how Africa’s funding drought has claimed several once-high flying startups. We also hear from this week’s Agent of Impact, Sam Polk, whose company Everytable is providing healthy fast food and uplifting communities. 

  • Impact(ed). Eric Horvath and Lucas Turner-Owens are out with the fifth episode of their Impact(ed) podcast. Westfuller Advisors’ Ellen Chiu joins Horvath to explore how investment advisors are adding social impact goals alongside financial ones. Listen to the latest Impact(ed) podcast on the ImpactAlpha Podcast Network.

The Week’s Agent of Impact

Sam Polk, Everytable: Bringing healthy fare to food deserts via franchises. Before Sam Polk discovered a passion for creating access to healthy food in “food deserts,” he was a Wall Street trader addicted to making money. A $3.6 million bonus during his final full year, which made him angry because “it wasn’t big enough,” was the moment he realized his life was all wrong. In a 2014 New York Times op-ed, he wrote that at the time, “I was 30 years old, had no children to raise, no debts to pay, no philanthropic goal in mind. I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted.”

More than a decade later, Polk tells ImpactAlpha, “I have two loves in my life, and it’s my family and Everytable – in that order.” Everytable, the Los Angeles-based healthy fast-food chain he co-founded in 2015 with entrepreneur David Foster, has served more than 10 million nutritious meals to customers in neighborhoods across southern California that lacked healthy food options. The company has raised more than $100 million from investors including Kaiser Permanente, Desert Bloom Food Ventures, South African chef Kimbal Musk (the brother of Tesla CEO Elon Musk), and the Dohmen Company Foundation’s impact fund. “We’re out of the crazy startup days where it feels like a single person quitting could wreck the whole thing,” Polk says. 

Polk is now focused on growing the Everytable Social Equity Franchise initiative, which pairs paid training programs with low-interest loans to convert the company’s 38 restaurants into franchises owned by people of color. The company also plans to expand to 300 franchise outlets over the next four years. Polk said that employees who have gone through the program can become franchise owners of multiple Everytable stores.

The Week’s Deal Spotlight

Copia’s struggles show the need for patient growth capital for emerging market startups. A wave of casualties among Kenyan logistics startups has been attributed, in large part, to a severe funding crunch. The real issue may be the type of capital they raised (or didn’t) during the venture capital boom years of 2021 and 2022. “You can build an e-commerce business for rural clients, but in order to build that, you need scale. It’s a matter of time and sufficient patient capital,” Nico Blaauw of Netherlands-based impact investor Goodwell Investments told ImpactAlpha this week. The problem, he says, is there is too little patient capital.

  • Growth-stage shutdown. Goodwell’s portfolio company Copia, the “rural” of Kenya, went into receivership in order to salvage its Kenyan operations. The development followed a turbulent year for the nine-year-old company that involved a restructuring, layoffs, the shuttering of its business in Uganda, and emergency fundraising. Another of Goodwell’s logistics investments, Sendy, shut down last year. iProcure, which connected a million rural farmers to seeds, fertilizers and other supplies through a network to small retailers, went into receivership last month. All had been in business for nine or more years. The pandemic disrupted companies’ growth trajectories, and the subsequent funding drought made it impossible to catch up (see, Downturn hits East African logistics disruptors“).
  • Profitability pragmatism. It took the real nearly a decade to reach profitability, as investors waited out heavy losses. Kenyan businesses operate in a very different market. When Copia started, rural customers placed orders through a network of agents using a catalog; many didn’t have cell phones, much less smartphones. The most popular products, like rice and legumes, were low-margin goods for which economies of scale could only kick in with a large customer base and mass orders that absorbed the company’s delivery costs. “The business model from the beginning was built to scale,” says Goodwell’s Lilian Oyando. “From the beginning it was very clear they needed a lot of capital and a long time to get to profitability.”
  • Serving the mass market. The scaling back of rural logistics is a blow to rural households – and to the entrepreneurs and impact investors that have committed a decade or more to reaching them. Such households and their lower-income urban peers spend trillions of dollars annually. For those committed to figuring out business models for the mass-market, the opportunity is enormous. African logistics companies likely still need a few years – and more patient growth capital to match, say Blaauw and Oyando. Goodwell has written down its investments in Copia and Sendy, but is hopeful its investment in Copia can still have impact. “It’s not a strategic issue, not a management issue, not an issue with the business model,” says Blaauw. “The time and capital they had was not enough to go through the full market-development cycle.”
  • Go with the dealflow. Share this post and check out the full roundup of ImpactAlpha’s deal reporting this week.

The Week’s Talent and Jobs

💼 See and share more than a dozen new impact jobs posted this week on ImpactAlpha’s Career Hub and view hundreds of more jobs in impact investing and sustainable finance. Have a job listing to post? Submit it here.

Dana Bezerra has started as president for the Americas region at the nonprofit CREO Syndicate… Sorenson Impact Institute named chief operating officer Katie Macc acting CEO, as Geoff Davis moves to a senior advisory role… Heather McGee took over as CEO at 17 Asset Management… Daniela Barone Soares joined the board of impact investing network Toniic.

Lois DeBacker will step down as Kresge Foundation’s environment program managing director in September… The Church Commissioners for England appointed Poppy Allonby, previously with T. Rowe Price, as chief investment officer… Matt Ripley will step down as head of impact of The Good Economy to join Impact Frontiers later this year.

That’s a wrap. Have a wonderful weekend. 

– June 7, 2024