☎️ Agents of Impact Call: Building an investment portfolio that makes aging an asset. We’re all getting older, creating compelling investment opportunities in companies and funds that expand opportunity, ensure health and promote social inclusion with and for older adults. Denver-based Next50 is aligning its approximately $265 million foundation endowment around an “aging investment framework” that steps up from age-friendly to age-inclusive to age-centered. What’s in and what’s out? Next50’s Peter Kaldes and Preeti Bhattacharji, head of sustainable investing for J.P. Morgan’s US Private Bank, will join other Agents of Impact to share tips for the construction of investment portfolios across asset classes that value and support aging, on Call No. 79, Wednesday, March 11 at 10am PT / 1pm ET.RSVP today.
Trusts that give business owners an exit to stakeholders and to purpose
Regenerative agriculture exporting in Latin America
Bringing insurers into blended finance
Featured: Ownership Economy
‘Purpose trusts’ power a business movement toward broader ownership and stakeholder governance. Values-led founders are rethinking their exit options and broadening the ownership of the businesses they’ve built. In Anchorage, Kirk Hoessle of Alaska Wildland Adventures is searching for an exit strategy that preserves the values of the tour company he’s led for five decades. In California’s Sonoma County, Michael Stusser, founder of Osmosis Day Spa Sanctuary, is facing a similar choice. And from Missoula, Montana, Laura Joukovski, who leads the ecommerce platform Good Store and its parent DFTBA (“Don't Forget To Be Awesome”), is seeking to give employees an edge over a potential private equity buyer. All three are considering “perpetual purpose trusts,” a flexible legal structure that embeds governance rights and economic benefits for employees, communities or other stakeholders, along with shareholders. There are now enough of such mission-driven business leaders that they gathered in Austin last week for the launch of the Purpose Trust Ownership Network, a nonprofit aimed at accelerating adoption of the trusts in the US (ImpactAlpha was the media partner for the conference). “Perpetual purpose trusts can help mission-driven organizations stay mission-driven forever,” RSF’s Dana Stranz and Issie Corvi of Purpose Trust Ownership Network, or PTON, wrote earlier on ImpactAlpha. Unlike other ownership models that remain vulnerable to takeovers, they argue, purpose trusts “weave impact into the fabric of the organization.”
Exit to purpose. Some 75 US companies have adopted forms of perpetual purpose trusts, including employee ownership trusts. That’s more than double the number that PTON co-founder Mark Hand counted when he began tracking such conversions in 2022. The most visible so far has been Patagonia’s move in 2022 to transfer ownership to two nonprofits dedicated to fighting climate change. At the gathering in Austin, Everet Chenevert of Organically Grown Company, Brad Hermann of Text-Em-All, Rick Plympton of Optimax Systems, Kevin Clegg of Clegg Auto and other leaders of established trust-owned firms shared lessons with founders considering the transition (see, “A Utah auto shop demonstrates a pathway to worker ownership via a perpetual purpose trust”). Clegg is now building a cooperative to provide shared services to independent auto shops that meet employee ownership thresholds. “Some of the hardest parts of a transition aren’t the deal itself,” Clegg tells ImpactAlpha, but culture, governance and best practices.
Transition financing. Purpose trusts, along with employee ownership trusts, both differ from employee stock ownership plans, or ESOPs, in that shares are held by the trust, not directly by employees (workers get payouts in the form of dividends or profit-sharing). In a typical transaction, an owner sells shares to a trust financed by bank debt or a seller loan. The trust repays the financing over time using the company’s cash flows. Employees, or other stakeholders, gain access to a share of future profits without capital or financial risk. Barriers to financing such conversions are beginning to fall. Common Trust has helped at least 18 companies, valued at nearly $600 million, convert to employee ownership trusts. Chicago-based Torana Group’s $18 million Essential Owners Fund invests in middle-market companies and transitions them to employee ownership, including through PPTs. “We are really focused on those huge parts of the economy, those huge swaths, where humans still drive a large part of value for companies given the critical nature of their work,” Torana’s Malini Ramanarayanan Moraghan said on an Agents of Impact Call last year. In Philadelphia, AllHold Capital is raising a $10 million fund to transition profitable businesses, and their real estate, into a single employee owned trust.
Scaling up. Established impact lenders, including RSF Social Finance and Mission Driven Finance, are moving into the growing market for post-transition capital. Massachusetts-based Local Enterprise Assistance Fund, or LEAF, last month, financed its first employee ownership trust conversion, expanding beyond its traditional focus on worker cooperatives. The next level of scale requires more than impact-oriented investors, says Matthias Pries of World Education Services, an investor in Mission Driven Finance’s Capital Partners Fund. “Our job as catalytic capital providers is to unlock the big banks.” JPMorgan Chase already banks more than 1,200 ESOP companies and maintains lending relationships with over 600. “We’re excited about employee ownership trusts as another model to expand employee ownership’s reach,” said JPMorgan Chase’s Gwyneth Galbraith.
ResponsAbility backs regenerative agricultural exporters in Chile, Peru and Mexico. Swiss impact asset manager responsAbility Investments is doubling – make that tripling – down on Latin America’s agricultural exports with three investments under its Sustainable Food Latin America strategy. The Zurich-based fund manager backedÁlamos Group, a Chilean producer of avocados, citrus and walnuts that employs regenerative agriculture practices to supply premium international markets. It also invested in Proserla, a Peruvian grower of table grapes and avocados, and Mega Greenhouses, a Mexican producer and distributor of tomatoes and peppers for North American buyers. Launched in early 2023, responsAbility’s Sustainable Food Latin America strategy has committed more than $110 million to export-oriented fruit and vegetable producers in Mexico, Peru and Chile. IDB Lab, the venture arm of the Inter-American Development Bank, is anchoring the fund with a $15 million allocation.
Nearshoring. Latin America's agrifood sector has benefited from the shift in supply chains spurred by the Covid-19 pandemic, when shipping costs surged and delivery timelines broke down. "The word everyone is talking about is nearshoring," says Álvaro Guerra of Alcasa, a Nicaragua-based sourcer and distributor of cassava (see, “Building a supply chain and boosting farmers’ incomes in Nicaragua”). "Most manufacturers in the US, Central America and Mexico are looking to move away from dependencies on Asia."
Honest Health, a Nashville-based company partnering with health systems and providers to expand access to value-based care, raised $140 million from NewSpring Healthcare, K2 HealthVentures, Rubicon Founders, Oak HC/FT and other investors. (Pulse 2.0)
Vantage Capital and Greenpoint Capital invested 635 million rand ($39 million) in SolarAfrica Energy, an owner and operator of commercial and industrial solar and battery storage assets. (Vantage Capital)
German foodtech startup Foodforecast, which uses AI to forecast food demand as a way to reduce waste, clinched €8 million ($9.4 million) in Series A funding, co-led by the European Circular Bioeconomy Fund and SHIF Invest. (EU-Startups)
UK-based ivee raised $1 million to upskill workers for the AI economy in a seed round backed by Social Impact Enterprises, Techstars and other investors. (ivee)
Impact Voices: Catalytic Capital
Blended finance can’t scale without insurance at the table. Blended finance transactions continue to be structured without the actors who understand risk most deeply. “Insurance sector involvement remains minimal even when risk issues sit at the center of transaction design,” write Andrew Apampa of Convergence Blended Finance and Min Hung Cheng of the Global Asia Insurance Partnership. The two organizations collaborated on a playbook to address constraints on private investment for climate and development challenges at a time when demand for such capital has never been greater. The authors say insurance industry players can strengthen blended finance in three distinct ways: as risk advisors; as providers of insurance and reinsurance; and as long-term investors. The advisory role, in particular, can impact whether deals are bankable and well structured, Apampa and Cheng write. Insurers, they say, provide a “long-term perspective on risk, grounded in data and modeling, that is essential for structuring transactions that are credible and investable.”
Early input. To engage insurers, catalytic capital providers can support early decision-making about risk allocation and design parameters. “Design-stage grants and technical assistance facilities should include dedicated allocations for early risk assessments, climate modeling, and data development,” the authors write. “These allocations are small relative to the cost of redesigns or the additional concessional capital required when insurance considerations surface later.”
ImpactGC welcomesCortney Mukushi, former associate general counsel to Calvert Impact’s Climate United Fund, as a partner… The Earthshot Prize appointsJesper Brodin, IKEA’s former CEO, as board chair… AGRI3 Fund addsIneke Keers, previously with Smallholder Agroforestry Finance, as managing director… Industrial decarbonization investor Ara Partners promotesJames Chiu to partner in its energy strategy… Giorgi Jebashviliis promoted to debt investment officer at responsAbility Investments.
Kristen Clements, former chair of the planning and transportation commission of the city of San Carlos, becomes Housing Trust Silicon Valley’s inaugural director of policy and advocacy… Capricorn Investment Group has an opening for a director of investments in New York… JPMorgan Chaseis on the hunt for an investment banking analyst for its Center for Carbon Transition.
The Nature Conservancyseeks a senior policy advisor on forests in Washington, DC… Conservation Internationalis recruiting an Africa-focused carbon finance origination and deal lead… SIMA Fundsis hiring a marketing executive in Kenya… CrossBoundary Grouphas an opening for a natural capital associate in Nairobi… Renew Capital is looking for investment and ecosystem development managers in Ethiopia and Ghana… The NYU Stern Center for Sustainable Business will host, “Value through volatility: How sustainability creates value in turbulent times,” on Tuesday, March 17.
