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Featured: Policy Corner
Is Europe’s Sustainable Finance Disclosure Regulation delivering on its promise? It depends. The European Union’s regulations, known as SFDR, have been making waves in the investment industry since January, when SFDR-related disclosures became mandatory. The measures, first introduced in 2019, impose mandatory sustainability reporting obligations on asset managers and other financial market participants. The regulations are part of the EU’s Green New Deal, which aims to direct financial resources towards sustainable activities and to curb greenwashing. SFDR’s reach extends beyond Europe, to funds in the US and elsewhere that seek to raise capital from European limited partners. Is it working? The answer, from one Geneva-based impact fund advisor, is mixed. “Is it worth the effort? The short answer: Yes,” writes Pekka Halla of AlphaMundi Group in a guest post. “The long answer: It depends.”
- Impact integration. To comply with SFDR’s Article 9, which governs financial products with sustainable investments as their objective, AlphaMundi created a dedicated full-time role, committed a year to developing a framework, updated the company’s investment process, and trained up its staff. The positives: “SFDR has fostered a convergence of terms and language around sustainable finance,” writes Halla. For impact managers, SFDR “provides legitimization and a solid wall to lean against when they advocate for raising the bar on the integration of impact considerations into decision-making.”
- Capital allocation. At the end of the day, the regulation is about disclosure. “Its effectiveness in driving change hinges first and foremost on someone reading those disclosure documents and acting on that information,” says Halla. The ball is now in the court of asset owners, he says, “to sift through the disclosure documents, rewarding top performers and sanctioning those whose disclosures do not demonstrate a credible commitment to sustainability.”
- Return on investment. “At this point, we do not yet have concrete evidence that the feedback loop is working,” writes Halla. “At AlphaMundi, compliance with Article 9 of the regulation has not led to observable increase in the interest towards our investment products. This will hopefully change in the future. Until then, the question posed in this article’s title remains unanswered.”
- Keep reading, “Is Europe’s Sustainable Finance Disclosure Regulation delivering on its promise?” by AlphaMundi’s Pekka Halla on ImpactAlpha.
Dealflow: Circular Economy
Sortera secures $30.5 million to commercialize upcycled aluminum. Metals such as aluminum and copper are essential for renewable energy and electric vehicles. Sorting and recycling such metals at their end of life can increase supplies and reduce waste. Sortera Technologies (formerly Sortera Alloys) uses AI and advanced sensors to sort scraps of non-ferrous metals, or metals that don’t contain iron, from domestic feedstocks, which are often otherwise shipped overseas to be hand-sorted and recycled into lower-grade materials. It sells recycled metals back to automakers and other manufacturers. “When you look at non-ferrous metals, the biggest portion of that is aluminum, which is why we’re going after it first,” Sortera’s Michael Siemer told ImpactAlpha. “Copper, brass, stainless – we want to go after those next.” A facility in Indiana, expected to be operational this year, will let Sortera process and sort up to 220 million pounds of aluminum scrap annually.
- Commercial scale. Employee-owned Sortera will use the Series C financing to reach commercial viability. “This isn’t something we’re promising in five to 10 years,” Siemer says. “Investors are coming in, saying ‘We believe that you can do that, and we’re ready to help you build out.’” Investors include Breakthrough Energy Ventures, Chrysalix, T. Rowe Price, Macquarie GIG Energy Transition Solutions and others.
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Refiberd raises $3.4 million for AI-driven textile waste sorting. The Cupertino, Calif.-based company is looking to bring “true textile circularity” to the fashion industry. Refiberd’s AI-based imaging, which detects the composition of fiber and contaminants in textile waste, enables the sorting of fabrics like cotton and polyester. The company says it can help divert up to 70% of textile waste to recyclers. “If end-of-life collection and sorting is to be done at scale, technology needs to be part of the solution,” said Christiane Dolva of H&M Foundation, which backed Refiberd’s seed round with a $200,000 grant. “This will not only solve a waste problem, but reduce the [fashion] industry’s dependence on virgin materials, and by default, also the resources used and emissions released.”
- Waste to value. Less than 1% of textile waste is recycled into new clothing each year. Two women engineers launched Refiberd in 2020 to meet the need for recycling infrastructure in the fashion industry, “especially around the sorting and processing of textile waste,” said Refiberd’s Sarika Bajaj. Other investors in the round include True Wealth Ventures, Better Ventures, Schmidt Family Foundation, Fashion for Good, Carnegie Mellon University and the National Science Foundation.
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Dealflow overflow. Other news crossing our desks:
- Chile’s Botanical Solutions closed its $13 million Series A funding round to make green compounds for use in the agriculture and pharmaceuticals industry. (LatamList)
- Growth Partners Arizona, a community development financial institution, invested $100,000 in Community Investment Corporation’s BIPOC Community Managed Loan Fund to provide microloans to entrepreneurs of color in Southern Arizona. (Growth Partners Arizona)
- Women-led Greencode Ventures, based in Finland, reached a €40 million ($43.6 million) first close for its first fund, which invests in European startups focusing on the green transition. (Silicon Canals)
- Canada-based Kite Mobility secured $3.5 million for its shared electric vehicle subscription service, which it’s rolling out in multifamily residential buildings. (Kite Mobility)
Impact Voices: Good Jobs
Collaborating to create more dignified jobs in a warming world. The urgent need for good and dignified jobs in emerging economies spurred Sachi Shenoy to found Upaya Social Ventures more than a decade ago. On a day when the temperature soared past 110 degrees Fahrenheit, Roopa, a widowed mother of three living on a tiny plot of land in rural Jharkhand, India, told Shenoy that in past years, she could grow vegetables for a little income. “Now, she told me, all she wanted was to grow enough to eat,” Shenoy writes in a guest post for ImpactAlpha. The acceleration of climate change is creating new urgency for employment opportunities in places with rapid population growth and high numbers of financially and environmentally-vulnerable people. “Building economic resilience at the individual, household, and community level is a tough undertaking,” she writes. “But it is a prerequisite for addressing any and all of the Sustainable Development Goals.”
- Good jobs movement. Upaya is leading the Dignified Jobs Collaborative with Dalberg, 60 Decibels, Aspen Network of Development Entrepreneurs and Social Compact to drive more capital to organizations and enterprises creating good jobs in vulnerable communities. Upaya has invested in social enterprises supporting sustainable and dignified livelihoods for India’s poor, including sustainable textile maker Greenwear, artisan marketplace Lal10, and e-rickshaw financier SMV Green Solutions. “It will take more than one organization to be the vanguard of a good jobs movement,” Shenoy says.
- Keep reading, “Collaborating to create more dignified jobs in a warming world,” by Upaya Social Ventures’ Sachi Shenoy on ImpactAlpha.
Agents of Impact: Follow the Talent
RSF Social Finance promotes VP of operations Michelle Bruno to chief operating officer… Emily Zhen, ex- of New Enterprise Associates, joins Zeal Capital Partners as principal… Groyyo seeks an ESG management specialist or consultant in Bangladesh… Shell is recruiting a social investment advisor in The Hague, Netherlands… Bezos Earth Fund has an opening for a sustainable finance associate director in Washington, DC… Impactable Investment Group is looking for an impact investment analyst in the UK… The Aspen Institute will host its Aspen Latino Business Summit in Washington, DC, Sept. 6-7.
Thank you for your impact!
– Aug. 31, 2023
