Greetings, Agents of Impact!
Featured: ESG and Impact
CEOs are signaling their corporate impact – with their political contributions. Some people decry corporate money in politics. Others use it to guide their investments. In a guest post on ImpactAlpha, Abigail Wuest of the research group Goods Unite Us argues that tracking the political contribution of companies and their top executives is one of the best indicators of corporate impact – and of financial performance. “Ignoring a company’s politics ignores one of the most important ways a company can impact our society,” Wuest writes. “That’s why I believe ESG should become ESG-P, for politics.” In a 2020 study, Goods Unite Us and CSRHub found a correlation between companies that contribute to Democrats and higher ESG scores. Financially, the Democratic-supporting companies outperformed the Republican-backing companies in four out of the five years, sometimes by a wide margin. Goods Unite Us supplies the political contribution data behind the Democratic Large-Cap Core ETF (DEMZ), which includes S&P 500 companies that, together with their senior executives, make 75% or more of their contributions to Democratic politicians and PACs.
- Strange bedfellows. Failing to consider companies’ politics when constructing an impact or ESG fund can undermine the thesis. Take the NAACP’s Minority Empowerment ETF (NACP), which seeks to provide exposure to U.S. companies with strong racial and ethnic diversity policies. NACP includes Devon Energy, which over the last three election cycles has given the most support to Oklahoma Sen. Markwayne Mullin. As a congressman, Mullin did not support and stayed silent during 2020 voting on the Emmett Till Anti-Lynching Act, which became law last year. “If you dig down and look at the companies included in many of the largest ESG funds, you’ll find many companies that have been bankrolling Republican politicians and PACs – the same politicians and PACs who are undermining ESG ideals by pushing tax breaks for fossil-fuel companies and working to weaken the rights of women and minorities,” Wuest writes. That cuts both ways: The American Conservative Values Fund (ACVF), promises to “align your investments with your conservative values” and to “stop investing in the liberal agenda.” Four of the fund’s top five holdings – Microsoft, Tesla, Costco and Nvidia – overwhelmingly contribute to Democratic politicians and PACs.
- Corporate impact. S&P 500 companies and their senior executives alone have given billions to politicians and PACs over the last decade, Wuest writes. “Yet almost no thematic ETFs or mutual funds – or even self-managed accounts – consider a company’s politics.” After pausing donations in the aftermath of the January 6 attack on the Capitol, corporations including AT&T, Koch industries, Home Depot and UPSand industry groups have steered more than $66 million to election objectors, according to OpenSecrets. If top executives contribute heavily to conservative politicians and political action committees, “Don’t you think it’s much less likely that they are implementing company policies to curb climate change and/or adopt fair labor practices?” Wuest says. “In fact, the data bears this out.”
- Keep reading, “CEOs are signaling their corporate impact – with their political contributions,” by Abigail Wuest on ImpactAlpha.
Dealflow: Low-carbon Transition
Sublime Systems secures $40 million to commercialize electrified zero-carbon cement. Mining, grinding and heating limestone to make cement, the main binding agent for concrete, releases an enormous amount of carbon dioxide (see, “New incentives spur building industry to take concrete steps to decarbonize cement”). Sublime, a Somerville, Mass.-based spinout from MIT, claims to have a process that eliminates the use of fossil fuels and the release of CO2 from limestone. Sublime replaces kilns, the most energy- and fossil fuel-intensive part of the process, with an electrolyzer that makes cement from calcium at ambient temperature. “Sublime’s technology has cracked the code for low-carbon cement,” said Clay Dumas of Lowercarbon Capital, which invested in the Series A round.
- Low-carbon tech. Brimstone Energy, CarbonCure and Terra CO2 also are working to decarbonize cement. Tim McCaffery of Siam Cement Group, the largest cement producer in Southeast Asia, said “Sublime is the first company we’ve seen whose approach has the potential to decarbonize the entire process of creating cement.” Siam joined the round as a strategic investor; other investors include The Engine and Energy Impact Partners. Sublime will use the capital to scale production from 100 tons today to up to 40,000 tons annually by 2025, and to secure advance offtake commitments. “We are able to produce cement with the same or better strength, slump, and durability than today’s Portland cement,” said Sublime’s Leah Ellis.
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Komunal raises $8.5 million to digitalize financial services in rural Indonesia. Surabaya-based fintech startup Komunal launched in 2019 with a two-fold mission: digitalize Indonesia’s rural banking ecosystem and expand access to financing for the country’s micro, small and medium enterprises. Most of Indonesia’s “inclusive fintech” startups are in Jakarta, the country’s capital, and are missing out on customers in tier 2 and 3 cities with low digital and financial literacy rates. Komunal has partnered with more than 220 banks to allow customers to make deposits and apply for loans online. Komunal’s peer-to-peer lending platform helps those banks offer loans to small enterprises.
- Financial inclusion. Last year, Komunal said it facilitated $230 million in deposits and loans between the banks in its network and their rural customers. In 2023, the startup is looking to expand its customer base and facilitate more than $500 million in banking transactions. “We are optimistic that the collaboration between fintech and incumbent banks, including rural banks, will create a very strong synergy,” said Komunal’s Hendry Lieviant. Investors in the round include East Ventures Growth Fund, AlphaTrio Sustainable Technology Fund, Skystar Capital, Sovereign’s Capital, Ozara and Gobi Partners.
- Check it out.
Dealflow overflow. Other investment news crossing our desks:
- Latvia’s Aerones raised $30 million for its wind turbine maintenance and inspection robots in a growth equity round co-led by Lightrock and family-owned investor Haniel.
- Mongolia’s Bogd Bank secured $15 million in debt financing from the U.S. Development Finance Corp. for lending to women-led small and medium enterprises in rural areas.
- Mumbai-based NeoGrowth snagged $10 million from MicroVest Capital Management to finance small businesses in India.
- Australian fintech startup Bloom raised $525,000 in a seed investment round to democratize climate investing for retail investors.
Signals: E-Mobility
Electrifying heavy-duty drayage trucks at California’s ports. The approximately 30,000 heavy-duty trucks that transport containers and bulk freight between ships and rail facilities at California’s 40 ports consume 138 million gallons of diesel yearly and release over 3 billion pounds of carbon emissions into the atmosphere. The state government’s California Air Resources Board is looking to require such “drayage” trucks to fully decarbonize by 2035. The proposed regulation, which could be approved this spring, would allow only zero-emission trucks to register for operations along California’s ports starting next year. That’s an opportunity for companies like Oakland-based Forum Mobility, which is building out a network of charging depots for heavy-duty electric trucks at Long Beach, Los Angeles and other ports in the state. The company has 21 charging depots under development to accommodate upwards of 2,000 drayage e-trucks, Forum Mobility’s Adam Browning told ImpactAlpha.
- Subscription trucking. For a monthly rate, Forum Mobility will offer independent drivers and fleet owners the option to lease a Class 8 electric truck, or bring their own electric trucks to Forum’s charging depots for overnight charging. The monthly rate is “competitive with diesel,” Browning says, but “without the emissions.” Browning said. The subscription model could accelerate electrification of the drayage fleet “without all of the upfront capital costs that many fleet owners and operators, and definitely independent drivers, aren’t prepared to take on,” said Browning. “We take that high capital cost and turn it into a manageable operational expense.”
- Strategic partners. A $400 million joint venture partnership, which includes $300 million from CBRE Investment Management and $100 million from Homecoming Capital, will finance the charging depots. CBRE and Homecoming also invested in Forum Mobility’s Series A round alongside investors, including Elemental Excelerator, Amazon’s Climate Pledge Fund, Edison International and Obvious Ventures. “The transportation sector is the largest contributor to GHG emissions, and heavy-duty transportation in particular has long been considered one the hardest to decarbonize,” said CBRE’s Robert Shaw.
- Charging infrastructure. The California Energy Commission estimates California will need 157,000 medium and heavy-duty chargers by 2030. TeraWatt Infrastructure raised more than $1 billion last year to provide outsourced charging for heavy-duty commercial EV fleet operators. A joint venture between BlackRock, German commercial vehicle manufacturer Daimler Truck and U.S. electric utility NextEra Energy will start construction this year on a network of charging stations on freight routes along the U.S. east and west coasts, and in Texas. H2 Mobilityraised $122 million last year to build hydrogen fueling stations for commercial heavy-duty vehicles in Europe.
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Agents of Impact: Follow the Talent
Peter Cashion, ex-of International Finance Corp., will join CalPERS as managing investment director for sustainable investments… Catherine Soler, ex- of Vista Equity Partners, joins Patient Square Capital’s transformation and growth team… Zohra Zori, ex- of Candid, joins global humanitarian organization Alight as chief marketing and engagement officer… Tim Lord, ex- of Phoenix Group, is named head of climate change at HSBC.
Bain Capital is hiring an ESG manager of sustainability in Boston… Also in Boston, CapShift is looking for a director of marketing… BlueMarkseeks an analyst for impact investing & verification in New York… BerlinRosen is hiringa senior vice president of ESG, philanthropy and impact investing in New York… Accionseeks a director of public relations in the Washington D.C.-Baltimore area.
Thank you for your impact.
– Jan. 18, 2023
