The Week in Impact Investing: Tradeoffs

TGIF, Agents of Impact! 

🗣 Opportunity costs. The idea that impact investors must give up financial return in exchange for impact is a meme that has long dogged the industry. Rather, it’s a calculated choice, as we explored in “Beyond Tradeoffs.” The ability to manage tradeoffs between risk, return and impact is one of impact investing’s biggest contributions. “Accept that tradeoffs exist,” University of Oxford’s Bob Eccles advises in a post on ImpactAlpha, and “address these tradeoffs in a rational and constructive way.” To drive economic development through small businesses in emerging markets, for example, investors need to take on greater risk and invest in local, and often new, fund managers, reports ImpactAlpha’s Jessica Pothering. Sourcing food locally may be more climate-friendly, writes ReFED’s Alejandro Enamorado, “but if not readily available or financially feasible, companies like Misfits Market might just be the imperfect solution” to address the challenge of surplus food.

Tradeoffs are everywhere, if rarely acknowledged. The food industry, for example, produces about $1.7 trillion of revenues but offloads more than $2 trillion in healthcare and environmental costs. “We’re living at a moment in time where gargantuan costs are offloaded by corporations onto society and the planet,” New York University’s Hans Taparia said at the Financial Times’ Moral Money conference this week. Private equity investors with mostly white, male investment teams are making their own kind of tradeoff, suggests David Reuter of LLR Partners, who cites evidence of stronger performance from diverse teams and companies. That blended-finance deals for climate mitigation have fallen in recent years is, at first glance, alarming. But public and private investors that made intentional tradeoffs in the past have enabled more and more climate solutions to become “just plain old investable,” Convergence’s Joan Larrea told ImpactAlpha’s Dan Keeler. Lowercarbon Capital’s Chris Sacca, who raised a $250 million fund for fusion energy, acknowledged the role that public investment has played in paving the way for private investment in climate solutions. He told TechCrunch, “I actually think this is some of the easiest investing we’ve done.” – Dennis Price

🗞️ Elsewhere on ImpactAlpha:

• Private market impact. Private equity can bring oversight to smaller enterprises and unlock impact alpha with ESG data from portfolio companies, writes Dynamo Software’s Danielle Pepin in a guest post.
  
• Gender lens + climate finance. Investing at the intersection of climate and gender is key to meeting nearly all of the Sustainable Development Goals, report ImpactAlpha’s Amy Cortese and Jessica Pothering from the GenderSmart investing summit in London.
  
• Market watch. The loss of reproductive rights in the U.S. represents a political risk, Preventable Surprises’ Jerome Tagger and Christina Zausner of Reproductive Rights 360 write in a guest post.

🎧 Impact Briefing. Host Brian Walsh has the headlines and Amy Cortese chats with Oxford’s Bob Eccles about why distinguishing between ESG and impact investing matters more than ever.

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

The Week’s Agent of Impact

Blake Jones, Kachuwa Impact Fund: Making co-ops work for investors, too. Blake Jones is “a cooperative geek.” After co-founding four co-op enterprises, including Namaste Solar and Clean Energy Credit Union, he has brought the principles of cooperative ownership to impact investing. Boulder, Colo.-based impact fund Kachuwa has grown to more than 200 members and more than $30 million in assets. Some members have invested more than $1 million, others as little as $5,000. They each get one vote on governance matters (per co-op principles, net income is distributed via “patronage dividends”). The impetus for Kachuwa was Jones’ own experience raising capital to grow Namaste, a leading Colorado solar installer. “We were getting calls every week from VC funds and private equity funds,” Jones says. “With every single one of them we realized we would have lost control of the mission. We couldn’t run the company the way we wanted to, which was with employees in control of it.” Instead, Jones raised $4 million from 125 investors attracted to Namaste because it was employee-owned. “And then I thought, ‘I want to do that type of investing myself.’”

First friends and family, and then others wanted to tag along. Kachuwa holds an offering each summer, when as many as 35 non-accredited investors can join the fund (along with an unlimited number of accredited investors). The evergreen fund has stakes in many enterprises familiar to ImpactAlpha readers, including Uncommon Cacao, Meow Wolf, and Organically Grown Company; funds like Apis & Heritage and Harlem Capital; and financial institutions like Walden Mutual Bank and Climate First Bank – “things that have higher impact than what you can find on Wall Street,” Jones says. With no full-time employees, Kachuwa’s hands-on board meets monthly. That led to calls for compensation for board members as a way to promote diversity and inclusion. Members debated the issues for more than a year before voting, unanimously, to pay $100 per meeting. “The board just can’t can’t go and say ‘Hey, we’re going to pay ourselves these big salaries. The members had to democratically approve,’” Jones says. “I’m confident that in our democracy, we’re gonna have a bunch of folks holding us accountable.”

• Keep reading, “Blake Jones, Kachuwa Impact Fund: Making co-ops work for investors, too,” by David Bank on ImpactAlpha and share the story on Instagram.

The Week’s Dealflow

Deal spotlight: Green infrastructure. Expectations may be low for the COP27 global climate summit, which kicks off in Sharm El Sheikh, Egypt next month. But private climate fund managers continue to raise large funds. This week, Antin Infrastructure Partners closed on more than $5 billion for its fifth green infrastructure fund for investments in energy, telecom, transport and social infrastructure in Europe and North America. Separately, London-based Acre Impact Capital secured a $40 million commitment from the European Investment Bank toward its $200 million target for a climate debt fund for  green infrastructure in Africa. 

• Climate tech. One of the world’s most valuable companies, Saudi Aramco, announced a $1.5 billion venture fund to invest in carbon capture and storage, low-carbon fuels and other technologies. In the U.S., Lowercarbon Capital raised $250 million to double down on fusion energy. Boston-based Propeller Ventures raised $100 million for a climate tech fund that will invest in early-stage companies with ocean-based solutions. And Singapore and Paris-based Shift4Good’s global sustainable mobility impact fund secured $98 million from investors including European Investment Fund and Bpifrance.
  
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Agrifood investing. KKR Global Impact took a $300 million stake in seed platform Advanta Enterprises… Nitricity raised $20 million in Series A funding from Energy Impact Partners, Lowercarbon Capital and other investors to help farmers make their own fertilizer using air, water and electricity… Seattle-based carbon capture tech venture Lithos raised $6.3 million to help farmers reduce carbon by spreading the dust of crushed basalt rock on croplands. 

Clean energy. AktivCo scored $7 million to provide clean energy to telecom network operators in Chad, Niger, Cameroon, Côte d’Ivoire and Burkina Faso… CDPQ will invest up to $474 million to support Japan-based clean energy developer Shizen Energy’s growth… Kresge Foundation backed three community solar organizations with program-related investments… A $7.5 million green bond will help Namdev Finvest finance clean energy and energy efficiency projects for its customers in India… Nightpeak Energy secured $200 million to develop flexible, low-carbon power generation plants in the U.S.

Financial inclusion. Alami Group scored an undisclosed amount of pre-Series B financing to offer Shariah-compliant loans to small enterprises and consumers in Indonesia… New York-based Bags bagged $3 million in seed financing to connect underrepresented businesses to equitable lenders… Revfin scored $10 million in debt and equity to finance electric vehicles for last-mile delivery drivers in India.

Place-based investing. Trinity Church Wall Street committed $20 million to MSquared’s New York affordable housing fund… West Side United secured a $3 million investment from the American Medical Association to create access to affordable housing, healthy food options, jobs and educational programs in Chicago’s West Side. 

Economic inclusion. ALMA Sustainable Finance deployed $6 million in debt to Trella, secured by a $4.2 million guarantee from DFC, to digitalize small trucking businesses in Egypt and Pakistan. 

Impact tech. Flourish Ventures to invest $12 million in tech startups Made in Africa… Tunisia’s Sghartoon snagged $500,000 to help parents and teachers detect learning difficulties in children.

Investing in health. Soothe Healthcare scored $21.1 million in equity and debt to provide personal hygiene products to women in India’s second and third tier cities.

The Week’s Talent

Sonal Shah, the Obama White House aide who founded Georgetown’s Beeck Center for Social Impact and Innovation and the Asian American Foundation, is the new CEO of The Texas Tribune… Pamela Pavkov, ex- of Jasper Ridge Partners, joins TPG as a partner and head of TPG NEXT… Daniel Firger of Great Circle Capital Advisors, joins Prime Coalition as a Project Frame board member… Phil Sanders is promoted to partner at New Media Ventures.

Rohan Ganesh, ex- of Google spinout Verily Life Sciences, joins Obvious Ventures as partner… George Spencer becomes vice president and head of impact investing and ESG at BackBay Communications… Michael Campos, ex- of Azolla Ventures, will join the investment team at Energy Impact Partners… Dickon Pinner, ex- of McKinsey, joins BlackRock as head of its new transition capital unit.

The Week’s Jobs

The Impact Collective is hiring a facilitator for peer-to-peer workshops in Boston… The Nature Conservancy is looking for an aquaculture investment conservation manager and a grants specialist in Arlington, Va., and seeks a community-led economies director for its Africa offices… Capital One seeks a director of community finance in Chicago… Open Impact is hiring a consultant and engagement manager in San Mateo, Calif… Stanford’s School of Business seeks an associate director for co-curricular “ecopreneurship” programs.

In New York: Rockefeller Philanthropy Advisors is hiring an events and programs manager… Pelion Green Future seeks an investment associate… Impact Capital Managers is looking for an impact investing summer fellow for next year… Sumitomo Mitsui Banking Corp. seeks a sustainability manager… The Javits Center is recruiting a director of sustainability and energy… Root Capital is hiring a lending-focused monitoring, evaluation and learning manager… LISC seeks a manager of legal operations.

More in New York: Bitgreen is hiring a project finance specialist… Blue Signal Search is recruiting a managing director…The Rockefeller Foundation seeks a director of policy and coalitions for global economic resilience… The Global Impact Investing Network seeks a manager of training and accreditation… Atos is hiring a senior consultant for decarbonization strategies.

Additional Ventures is hiring a remote policy director for ocean CO2 removal… Williams-Sonoma seeks a content and communications manager for sustainability and ESG in San Francisco… Corus International is hiring a senior director… Urban Ocean Lab is recruiting a remote policy director… AquaSpark seeks a head of portfolio for investments… Investing for Good is recruiting a chair to support innovative finance, impact investing and impact management growth activities… Earthjustice is looking for a legislative director of climate and energy in Washington, D.C… BFA Global’s Catalyst Fund is looking for an investment principal in Africa, preferably in Nairobi and Lagos.

Spring Point Partners is recruiting an associate director of impact investments… Beneficial State Bank is hiring a chief impact officer in Oakland… The University of California, Berkeley’s School of Journalism is looking for a professor of disinformation, technology and/or climate change… UBS is recruiting a program director for social finance in London… Edward Jones is looking for a director of sustainable investing… UCLA is recruiting an associate director for its Benjamin Graham Value Investing Program… UpMetrics is looking for an impact data fellow in Kansas City, Mo.  

That’s a wrap. Have a wonderful weekend. 

– Oct 28, 2022