TGIF, Agents of Impact!
Setting sail. An index of Agent of Impact confidence would surely show an uptick, judging from the accelerating pace of deals, fund raises and feverish murmurings (on Clubhouse!) that the tipping point is nigh. Jigar Shah’s move from Generate, which last year raised $1 billion to finance sustainable infrastructure, to the Department of Energy, where he could have $40 billion to lend (see No. 3, below), prompted BlocPower’s Donnel Baird to tweet, “No exaggeration: this will go down in the history books as an inflection point on the human race slowing down the speed of the climate crises.” From Apollo Global Management (No. 1) to Goldman Sachs (No. 2) to the investment advisory firms consolidating around impact (No. 7), we see teams staffing up and strategies rolling out. Indie.vc pulled the plug, but that seems unlikely to cool the expansion of revenue-based financing structures that put, as Kim Folsom says, founders first (see Agent of Impact). The movement of talent into impact investing is creating its own kind of sustainable infrastructure for a growing marketplace. As Shah said on ImpactAlpha’s Agents of Impact podcast earlier this year, “You have a lot of tailwind from political leadership saying, ‘It’s the right thing to do, and it’s the right time to do it.’” – David Bank
Impact Briefing. On this week’s podcast, host Brian Walsh discusses the big private equity funds looking to make a splash in impact with roundtable regulars Imogen Rose-Smith and David Bank. Plus, the headlines. Listen in, share, and follow us on Apple, Spotify or wherever you get your podcasts.
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The Week’s Big 9
1. Agents of Impact infiltrate Apollo Global. Impact investing veteran Lisa Hall is bringing in nearly a dozen impact practitioners to help her drive impact investing deeper into the $455 billion asset manager. Maurice Jones, ex- of LISC and now head of the OneTen coalition, brings community development expertise, for example, while Robert Wood Johnson Foundation’s Kimberlee Cornett is a longtime practitioner of blended finance. “There is an expectation, more and more, that impact approaches will infiltrate the firm,” Hall tells ImpactAlpha. Dig in.
2. Net-zero means water, too. Investors and customers are pushing food, apparel, energy, chemicals, pharmaceuticals and mining companies to address water security along with greenhouse gas emissions in their strategies for a net-zero economy. “Companies need to invest to address these risks,” writes Cate Lamb of CDP, which analyzed the water-related disclosures of nearly 3,000 companies. Did you know? Water use is responsible for 10% of global emissions and those major industries account for 70% of the world’s usage. More.
- NEW: Inching toward net-zero banking. Goldman Sachs is the latest big bank to commit to net-zero emissions by 2050 across its financing activity. New Citibank chief Jane Fraser has made a similar pledge. Both banks will set interim goals.
3. Jigar Shah’s $40 billion mandate. Clean energy proponents felt tailwinds this week with the appointment of sustainable infrastructure pioneer Jigar Shah to lead the Department of Energy’s $40 billion loan programs to speed the low-carbon transition. “He’s going to help us put together an indomitable portfolio of investments” to tackle climate change and create jobs, declared Energy Secretary Jennifer Granholm. Keep reading.
- Follow the talent. “Biden is stocking his administration with climate heavyweights like Jigar who would not be giving up their big day jobs if they didn’t think they were going to be able to do big things,” tweeted Politico’s Michael Grunwald.
4. Institutional investors balk at alternative capital. Indie.vc launched six years ago as a strategy of O’Reilly AlphaTech Ventures with an image of a burning unicorn head. The fresh thesis: investments in operating businesses focus on raising revenues, not the next VC round. Limited partners weren’t sold on the revenue-sharing model. “As we’ve sought to lean more aggressively into scaling our investments and ideas behind an ‘Indie Economy,’ we’ve not found that same level of enthusiasm from the institutional LP market,” writes Bryce Roberts. Go deeper.
- Counterpoint. Founders First scores $9 million to deploy revenue-based finance to diverse founders (see Agent of Impact, below). “Indie.vc did not fail. Investors failed Indie.vc,” write Zebras Unite’s Jennifer Brandel, Mara Zepeda, Astrid Scholz and Aniyia Williams.
5. The Reconstruction: The political power of women of color (podcast). In the latest episode in ImpactAlpha’s new podcast series, host Monique Aiken sits down with Frontline Solutions’ Jessica Barron and Marion Johnson to discuss how women of color have mobilized to protect and expand the right to vote and become key players in the future of democratic rule. One insight: Women of color, who have been forced to deal with systems in a way that others haven’t, have insights, strategies and solutions that can benefit all. Read on and listen in.
- The series. The Reconstruction is chronicling the people and projects centering Blackness in the service of economic liberation for all. Catch up on earlier podcast episodes on Spotify, Apple or Anchor.
- On the beat. Scan The Reconstruction’s landing page for podcast summaries and original coverage, including dealflow, features and Agents of Impact.
6. The Call: Opportunities at the intersection of climate and gender-lens investing. “We need the climate investors and the climate business actors to up their game on gender as much as we need the gender actors to up the game on climate,” said GenderSmart’s Suzanne Biegel, who joined hundreds of other Agents of Impact on The Call last week. “Companies with better gender diversity are more likely to establish climate goals, they are more likely to avoid environmental litigation and sanctions from regulatory authorities, they are more likely to avoid fraud, and they are more innovative,” said Pax World Funds’ Julie Gorte. We rounded up more than a dozen resources shared on The Call. The recap.
7. Investment advisory firms consolidate around impact. Abacus’ Brent Kessel and Rachel Robasciotti of Robasciotti & Philipson collaborated on Due Diligence 2.0 (see, “The Reconstruction: How unlikely partners came together to fight racial bias in asset allocation”). Now they are merging their California-based advisory firms. The partnership will “further advance our clients’ social justice-driven investment strategies,” Kessel says. Read on.
- M&A. Cornerstone Capital, with $1.3 billion in assets under management, was acquired by Pathstone, a multifamily office that manages nearly $25 billion. “We could not have found a better partner to do impact at scale,” said Erika Karp, the former UBS research chief who founded Cornerstone in 2014.
8. Greening sovereign debt. A Nature and Climate Sovereign Bond Facility, proposed by Finance for Biodiversity, aims to create nature-performance bonds and other instruments that align payments with environmental outcomes. A majority of low-income countries may need to restructure their loans or seek fresh ones in a brewing sovereign debt crisis stemming from the COVID pandemic. Check it out.
9. Proxy voting on principle. “We know that some investors have joined the PRI, not out of any desire to incorporate sustainability into their investment practices, but to win mandates,” writes Principles for Responsible Investing’s Fiona Reynolds. PRI will beef up minimum standards for its 3,700 signatories in the wake of a study that found that PRI signatories voted for ESG shareholder proposals less often than non-signatories. Keep reading.
The Week’s Agent of Impact
Kim Folsom, Founders First. The seven-time entrepreneur-turned-investor is seeking to bridge a massive gap: financing for the millions of U.S. businesses that don’t meet banks’ collateral requirements or venture capitalists’ demands for exponential growth. Most such businesses are far from coastal tech hubs; many are led by women, military veterans and founders of color. Folsom’s financing is revenue-based, letting founders repay with a portion of revenues up to a predetermined cap. Revenue-based financing requires enterprises to have customers, rather than collateral, and lets founders retain ownership and build wealth. “The business owner and the investor of revenue-based investment are aligned,” Folsom told ImpactAlpha in an earlier interview. Folsom this week raised $9 million to expand from San Diego, Dallas, Austin and Chicago to other diverse cities. The equity capital will help Folsom deploy the $100 million credit facility she secured from Community Investment Management in 2019. “Revenue-based financing is here to stay, and growing,” says CIM’s Jacob Haar.
That proposition was tested this week with news of the shuttering of Indie.vc, an early and visible proponent of such alternative capital structures, after institutional investors accustomed to VC business-as-usual declined to participate. In contrast, Folsom has lined up debt and equity investors that recognize an opportunity to provide the right kind of capital for often overlooked founders. Founders First gives businesses pre-funding support through a nonprofit accelerator, as well as post-funding advisory services. The playbook of most tech accelerators is aimed at raising venture funding; Founders First helps founders land contracts and build recurring revenues. Since 2017, Folsom has funded and supported more than 400 companies and aims to back hundreds more. The approach has the potential to demonstrate an asset class to meet the pervasive challenge of capital access, says Thomas Belazis of Rockefeller Foundation, which led Founders First’s raise. And do so in a way that generates wealth and jobs in communities of color across the country. – Dennis Price
The Week’s Dealflow
Low-carbon transition. Therma secures $10.2 million to cut carbon in the cold chain… Dandelion Energy clinches $30 million for home-based geothermal energy systems… South Africa-based Metier takes a stake in Energy Vision… EDF takes equity stake in BBOXX’s Kenya operations… Chevron’s venture arm stands up a $300 million low-carbon tech fund.
Fund news. South Africa’s Hlayisani Growth Fund secures 350 million rand… Joint SDG fund allocates $41 million to catalyze financing for the global goals… Washington, D.C. workforce housing fund closes at $114.5 million… Vector Innovation Fund is looking to back advanced health technologies curbing pandemic impacts.
Returns on inclusion. Singapore’s Her Capital backs Neufast as its first women-focused investment… Women-led Backstartup secures $1.2 million to support Colombia’s small businesses… ImpactAssets and The Clio Fund back The 22 Fund.
Inclusive economy. Apna secures $12.5 million for recruitment platform supporting India’s gig workers… Powered by People secures $1.5 million to connect artisans to markets… Mobility Capital Finance raises $12 million to improve banking in underserved communities.
Locavesting. Chicago-based venture funds aim to bridge funding gaps for overlooked founders… Living Cities invests $2 million in Mission Driven Finance’s San Diego-focused fund… Southern Opportunity and Resilience Fund to back small businesses in COVID recovery.
Agrifood investing. Startups in Singapore, the U.S. and Nigeria attract capital for animal-free products… Mosa Meat closes $85 million to scale lab-grown beef production.
Skills and education. Newsela raises $100 million to bring daily news to K-12 classrooms.
The Week’s Talent
Michael Herskovich is named global head of stewardship at BNP Paribas Asset Management… Margaret Chinwe Anadu becomes global head of sustainability and impact and chair of the urban investment group at Goldman Sachs Asset Management… Greg Konieczny and Kunal Desai, both ex- of Mobius Capital Partners, join GIB Asset Management as head of global emerging markets equities and portfolio manager, respectively.
Inclusive Capital Partners’ Jeffrey Ubben and Michael Angelakis of Atairos join the board of ExxonMobil, which is under pressure from investors to improve its climate and financial performance… New Citigroup CEO Jane Fraser pledged to zero out the bank’s greenhouse gas emissions across its portfolio by 2050… Katharine Haydoe is named chief scientist at The Nature Conservancy… Olivia Rebanal, ex- of Capital Impact Partners, joins Ecotrust as chief impact officer.
The Week’s Jobs
Carbon Removal Advocacy Europe is recruiting an executive director… J.P. Morgan is looking for a vice president of its impact venture equity fund in New York… Also in New York, Rockefeller Foundation is hiring an associate of innovative finance, and World Education Services is on the hunt for an associate director of impact investing… Hope is recruiting a credit officer and senior credit officer for its commercial lending team… Common Future seeks a digital content producer in Oakland… Open Road Alliance is looking for a data and Salesforce manager.
The Impact Management Project is hiring a communications associate in London… The Sobrato Organization has an opening for a director of impact investments in Mountain View, Calif… The Marguerite Casey Foundation is hiring an investment officer in Seattle… Refugee Investment Network is recruiting a senior researcher in Amman, Jordan… 60 Decibels is hiring a marketing intern… Prime Coalition is hiring a director of impact in Cambridge and a partnerships associate in San Francisco… UN Women is hiring a strategic partnership specialist in New York.
That’s a wrap. Have a wonderful weekend.
–Mar. 5, 2021