2030 Finance | December 7, 2017

Why Rise of the Rest should own impact, Propel Capital’s civic tech fund, cleantech investing 2.0,

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Greetings, ImpactAlpha readers!

#Featured: Impact Voices

Yes, Steve Case, there is impact alpha. As more money folks embrace impact investing, it seems some impact folks are running away. The latest case in point, so to speak, is Steve Case, who took pains to make clear to The New York Times that his new Rise of the Rest Fund (currently at $150 million and counting) is not an impact fund. That despite investor and fellow tech titan Eric Schmidt’s hopes that the effort “creates more jobs, more wealth, better products, and helps society deal with a lot of jarring employment changes,” and another investor, fashion designer Tory Burch’s interest “as an investor and as a citizen who cares about the future of our country.” Case himself emphasized, “We actually didn’t position this as an impact fund. First and foremost, our goal was to generate top returns.”

Much like Bono’s comment last year that impact investing has become “a lot of bad deals done by good people,” Case’s binary framework struck a discordant note. “You may disavow this as an impact investment, but we see you,” Nonprofit Finance Fund’s Antony Bugg-Levine, told Case on LinkedIn. “Seeking potential financial return in parts of the economy neglected by biases of mainstream investors is a common theme for impact investors from those who began investing in US inner cities in the 1970s, to microfinance lenders in rural India, to VCs backing off-grid solar in East Africa today.”

Case doesn’t have to look far for a champion of the view that impact can drive returns. Jean Case, Steve’s wife and CEO of the Case Foundation, says the notion profit must be sacrificed for purpose is Myth №1 about impact investing. “It’s a common refrain I hear from skeptics who believe that impact investing can’t deliver strong financial returns, but increasingly reports are proving otherwise,” Jean Case writes. “Impact companies are increasingly taking a place among the world’s most iconic brands — driven by both their financial performance and social impact.”

Ben Thornley, a managing director of Tideline, an impact investing consultancy, writes on ImpactAlpha, that Steve Case “missed an opportunity to educate a tremendously influential group of business leaders.” Making the extra effort to generate and report measurable impact does not dim the financial prospects of an investment, Thornley writes. “In many cases it is simply a more disciplined, accountable, and truly empowering way of investing, period. Otherwise, how will Case and his co-investors know The Rest are actually Rising?”

Read Ben Thornley’s hot take, “Rise of the Rest should take pride in impact — not run from it,” on ImpactAlpha:

Rise of the Rest should take pride in impact — not run from it

#Dealflow: Follow the Money

Propel Capital launches fund for civic tech and political engagement. Civic tech — from promoting awareness and transparency to straight-up political campaign tools — is a growing impact investment theme. The 2016 U.S. election was particularly catalytic for the left-leaning bunch. Propel Capital is launching a $5 million Democracy Fund for startups working to “build progressive political power in states of critical electoral importance.” The fund is supporting efforts to boost Democrats, not civic engagement in general. Sister District, for example, which got a a $50,000 commitment, aims to build “the long-term infrastructure we need to ensure fair redistricting, and build Democratic power.” The fund committed $1 million this year, and aims to allocate another $2 million before next year’s midterm elections. Other civic tech funds active this year include: Higher Ground Labs, started by President Obama’s former staffers; New Media Ventures, backed by Propel Democracy; and Omidyar Network, which is focused on government responsiveness and transparency, rather than a particular political party.

Springworks raises $1.6 million for aquaponics greenhouse. The Maine-based startup runs a 6,000-square-foot greenhouse where it grows greens and tilapia. The undisclosed investors are supporting a new 8,000-square-foot facility that will grow crops with 90% to 95% less water than conventional agriculture, Springworks says. Investors are backing ventures in both indoor agriculture and sustainable fisheries as ways to secure the global food supply. One of the biggest vertical farming raises this year went to Plenty. ImpactAlphahas been all over deals in sustainable aquaculture by funds and initiatives like Aqua-Spark, Fish 2.0, and the Meloy Fund.

Rimonim Fund backs Skyx’s agricultural drone software. The Israeli agtech venture capital firm made an undisclosed investment in Skyx. The startup’s software helps agricultural drone users to operate a “fleet” of drones, rather than one at a time. Drones can allow for more controlled and precise pesticide and chemical application than planes, tractors or handheld sprayers. A limitation is that most drones are too small to efficiently cover larger plots of land. A fleet could cover up to 150 acres per day. “With a swarm, you can achieve a competitive price point,” Skyx’s Eylon Sorek told AgFunderNews.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to [email protected].

#Signals: Ahead of the Curve

New funding mechanisms for Cleantech 2.0 bridge venture capital gap. VC funding has proved a poor fit for the high risks, modest returns and long holding periods associated with cleantech investing. After a boom in the 2000s, venture capital funding for cleantech dropped 30 percent between 2011 and 2016. Last year only 7.6% of VC deals went into clean technologies. A report from the Climate Solutions Collaborative, a partnership between Confluence Philanthropy and CREO Syndicate, profiles the new crop of innovative investors stepping up to fill the gap. Spring Lane Capital accelerates the rollout of distributed-scale sustainable technologies with third-party ownership structures for smaller-scale systems across energy, water, food, and waste markets and investments in the vendors and developers who are actually deploying these systems. Congruent Ventures has set up an early-stage cleantech fund with a co-investment mechanism that allows its limited partners to take advantage of later stage follow-on opportunities in successful companies. To bridge the “commercialization valley of death,” MNL Partners, a family office-backed holding company, creates joint ventures between technology developers in the U.S. and commercial partners in China, where many technologies are first deployed. PRIME Coalition mobilizes program-related investments and recoverable grants from foundations and wealthy families to back the testing of idea-phase climate solutions.

#2030: Long-Termism

Cities race to build plyscrapers to save forests and carbon. Improvements in land use — protecting forests, restoring marshlands, managing farms and grazing lands — could deliver 37% of the carbon savings needed by 2030 if the world is to keep temperature rise to less than 2°C, as agreed to in the Paris climate accords. Turns out cities have a big role to play in sustaining the natural world and that, perhaps counterintuitively, using more wood could cut more carbon. More demand for wood can mean more investment in rural landscapes, more forest cover and more carbon dioxide sequestered from the atmosphere.

As cities make commitments and swap ideas on how to achieve carbon neutrality over the coming decades, architecture firms see timber as a solution to one of the top carbon culprits in urban infrastructure: buildings. A four-story “plyscraper” made with cross-laminated timber that consumes less energy than concrete and steel could reduce carbon emissions by the same amount as taking 500 cars off the road for a year. Swapping in sustainable wood for materials like steel and concrete could slash CO2 emissions by up to 31% worldwide. A growing number of cities are making serious plans to build them. In Bourdeaux, France, the 18-story Hypérion tower, could be one of the tallest timber structures in the world when completed in 2020. A 24-story wooden structure is set to go up in Vienna next year. Lever Architecture, which already has a four-story building underway, is proposing a 12-story mixed-use building in the Pearl District of Portland, Ore. When it’s finished, The Atlantic reports, the building would the “tallest human-occupied all-wooden structure” in the U.S.

Onward! Please send news and comments to [email protected].