The Week in impact investing: Disrupting dysfunction

TGIF, Agents of Impact! 

🗣 Embedded resilience. Feeling deflated about the politicization of ESG, DEI and “woke” capitalism? Try this alternative narrative: Positive, tangible impact is an antidote to political dysfunction. When you build impact for hundreds of thousands of people, “it doesn’t really matter what the political condition is, it’s so resilient,” Jim Bildner of the Draper Richards Kaplan Foundation told me. After backing 200 social enterprises, the foundation has come to appreciate that strategies that tweak and improve – rather than disrupt – systems of health, education and criminal justice are better able to withstand political headwinds. Communities across the US, large and small, urban, rural and Tribal, are likewise banking local climate progress as a bulwark against political threats to historic federal climate funding. “We’re past the moment and we’re into the movement,” Briana Parker of Justice40 Accelerator told Amy Cortese and Andrea Riquier. “I’m from a frontline community and so this work is super, super personal.” 

The risks of climate inaction are starting to show up in muni bond ratings. “The adaptation responsibility is coming to state and local governments,” Tom Doe of Municipal Market Analytics told Andrea. The risks of egregious income inequality were starting to show up even at this week’s annual meeting of the World Economic Forum in Davos (see, “If every billionaire is a policy failure, what’s a trillionaire?“). We’re past the moment and into the movement of capital for better schools, lower-cost housing, quality jobs, cleaner energy and other positive social and environmental impacts. Let politicians fight over budgets and disgruntled hedge fund managers rant against wokeness. Agents of Impact are busy building solutions that last, as investor Chris Sacca likes to say, because they’re “cheaper, better, faster, stronger, simpler and just plain cooler.” – Dennis Price 

The Week’s Call

The Call: Moving from the ‘why’ to the ‘how’ of impact incentives. Impact investors have for years debated the need for embedded structures to incentivize impact outcomes. For the hundreds of Agents of Impact who registered for this week’s Call, the question now is how, not whether. Structures like impact-linked carried interest for managers can be complicated. “It doesn’t have to be perfect,” advised Aunnie Patton Power of The ImPact. “If we had waited to understand what the best practices of impact investing were in order to start impact investing, we wouldn’t have 10-year-old funds.” 

• Peer learning. Impact incentives are meant to spur the people in mission-driven organizations toward their collective mission (see, “From funds to managers to enterprises, some investors are aligning incentives for impact”). The European Investment Fund requires fund managers – including itself – to articulate their theory of change and track their progress. “That basically safeguards that the financial performance at the end of the investment period has been genuinely driven by an impact agenda,” said EIF’s Uli Grabenwarter. “Our remuneration is tied exactly the same way to the performance of our underlying products as we require from [our portfolio] managers.”
  
• Be flexible. Recalibrating and fine tuning impact incentive models is often necessary given how new many such approaches are (see, “Innovating to future-proof private equity for impact”). Santiago Alvarez of ALIVE Ventures in Colombia and Gilberto Ribeiro of Vox Capital in Brazil shared they had to revise their early incentive structures because the methodologies were too complicated, not reflective of the real impact investees were having, or were creating perverse incentives. “This flexibility is super important for you not to put yourself at risk – fiduciary risk or compensation risk,” said Ribeiro. Added Bjoern Struewer of Roots of Impact, “Even with the best of companies, there’s always something to improve.”
  
• Personal incentives. The Call was catnip to impact investing nerds looking for practical tips about impact incentives. More than 300 Agents of Impact registered; many shared their own incentivizes to do the work. Among them: PearlBridge Capital Managers’ Olufunmi Adepoju in Lagos, who is incentivized to see more women empowered in Africa. DisAbled Life Alliance founder Paul Kent in Boston is driven to facilitate meaningful change throughout the disabled community, “of which I am a proud member!” Zebras Unite and Armillaria founder Astrid Scholz in Portland, Ore. said her daughter, and the rest of the next generation, spur her “to keep at it.”
  
• Read the full recap and catch the replay. 

The Week’s Dealflow

Deal spotlight: Recycling heat waste from data centers. Amazon is doing it. So are Meta, Microsoft and Google. Tech giants have begun capturing excess heat generated from their vast network of data centers to power everything from homes to community pools. Recycled heat is emerging as an important strategy in the energy transition. As demand for energy intensive AI applications explodes, data centers could play a starring role. 

• Heating Europe. Communal “district heating” systems are common in the UK and Europe. Data center developer Deep Green this week secured £200 million ($254 million) from Octopus Energy, a London-based energy supplier and investor, to recapture heat emitted from data centers and supply it for free to local communities; Deep Green gets free cooling in return. A public swimming pool in Devon county is being warmed by Deep Green’s recycled data center heat, cutting the pool’s heating bill by more than half. “By using excess heat from data centers to slash energy bills for communities across the UK, Deep Green solves two problems with one solution,” said Zoisa North-Bond of Octopus Energy.
   
• AI infrastructure. Big tech companies, such as Microsoft, Google, Meta and Amazon are projected to spend close to a trillion dollars on data centers to meet surging demand for AI computing, which rivals Bitcoin mining for its prodigious use of energy. Supplying recycled heat to nearby communities could take some of the heat off, literally, and help Big Tech meet its climate pledges. In Finland, Microsoft formed a partnership with the Nordic utility Fortum to capture waste heat from the tech giant’s data centers.
  
• Dig deeper.

Climate finance. Blue Earth Capital closed its latest private equity climate impact fund, raising $308 million… Norwegian impact fund manager Sandwater raised $135 million to invest in early-stage climate, energy and health ventures in the Nordics and Northern Europe. 

Energy transition. Furbnow snagged $1.2 million to provide energy retrofits for homes in the UK… Tokamak Energy, which is looking to commercialize its nuclear fusion process that uses high-temperature superconducting magnets, secured $50 million… Cactos, a Finnish smart energy storage systems developer, scored $28.3 million… NineDot Energy raked in $225 million in equity financing for its pipeline of community-scale energy storage projects in New York…  Germany’s Ineratec raised over $129 million to make fuels from recycled CO2 and renewable energy.

Green infrastructure. BlackRock is acquiring Global Infrastructure Partners, an infrastructure investor in energy, transport, digital infrastructure and waste management… EAIF locked in $294 million in debt for infrastructure in Africa. 

Inclusive economy. A to Z Impact backed Project Equity’s Employee Ownership Catalyst Fund… Blue Earth Capital doubled down on Varthana for quality education access in India… Kisan Konnect’s raised $3.7 million to combat food waste and boost farmers’ resilience in India.

Investing in health. Côte d’Ivoire-based Lapaire, which offers free vision tests and low-cost eyeglasses, snagged $3 million… HCAP Partners will apply its “gainful jobs approach” to its newest portfolio company Apprio, a Black-led health tech company that connects uninsured patients to affordable medical coverage… Compass Diversified acquired a majority stake in Black woman-led feminine hygiene brand The Honey Pot Co. 

Low-carbon transition. Australia’s Element Zero snagged $10 million in seed financing to decarbonize iron, nickel and other critical metals production…Paris-based Electra raked in $331 million to expand its network of EV charging stations in Europe… UK-based Trojan Energy clinched $33 million to provide EV charging for UK households without access to driveway charging… Swedish battery maker Northvolt raised $5 billion for battery recycling. 

Returns on inclusion. TPG NEXT anchored Visualize Group, Black-led private equity investment firm. 

The Week’s Talent

Changing of the climate guards: John Kerry will step down as President Biden’s special climate envoy this spring. The news follows the retirement last week of his Chinese counterpart, Xie Zhenhua. Their close relationship was a stabilizing force in global climate negotiations, including COP28. Also departing: the UK’s chief climate advisor, Chris Stark, who will join advisory group Carbon Trust in April. 

Reinvestment Fund promoted Emily Dowdall to president of policy solutions and Tiffany Patterson to chief communications and mission officer. Caitlin Misiaszek, formerly of Johns Hopkins Center for a Livable Future, joined the organization as impact manager of its capacity building and capital access programs. 

Vladimir Savic, formerly with agtech investor Cibus, joined Blue Vision Capital as managing partner… US SIF named Envestnet’s Kiley Miller and Elizabeth Levy of Trillium Asset Management to its board of directors… Joohee Rand, former associate partner at Tideline, succeeded Diane Damskey as head of secretariat for the Impact Principles at the Global Impact Investing Network.

The Week’s Jobs

In the US

In Washington, DC: JPMorgan Chase seeks a vice president of impact finance and advisory equity fund investing; Accion is recruiting a vice president of practice area program management; and Boundary Stone Partners is hiring an associate.

In New York: Rockefeller Foundation seeks a regenerative agriculture manager and summer associates for its Economic Equity initiative and its Health Initiative team; Ford Foundation has an opening for an impact investing fellow; and Soros Fund Management is on the hunt for an impact strategy analyst.

Reinvestment Fund is recruiting a senior loan officer in Philadelphia… MCE Social Capital is on the hunt for a chief financial officer… Generate is looking for a portfolio finance associate in San Francisco… Raven Indigenous Capital Partners seeks a people and culture director… 

PayPal is hiring a director of ESG reporting and operations… Starbucks seeks a senior manager of global responsibility and social impact… Locus is hiring for a senior analyst for impact investment services and other roles.

International locations

In London: BlueMark has an opening for an impact investing analyst; British International Investment is hiring a portfolio associate; and the European Climate Foundation is looking for a senior associate.

Matrix Renewables is hiring a storage business development manager in Madrid… Oikocredit seeks a sustainable impact analyst in the Netherlands… The European Network Against Racism Foundation has an opening for a fund coordinator in Brussels… Propel Impact is recruiting 40 summer analyst interns in Canada… The Sustainable Finance Initiative is recruiting an events project manager in Hong Kong.

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That’s a wrap. Have a wonderful weekend. 

– Jan. 19, 2024