Greetings, Agents of Impact!
Ownership investing has arrived. In this week’s edition of ImpactAlpha LP/GP, we’re taking a look at fund managers pursuing strategies to accelerate worker and community ownership. Since relaunching The Liist of actively raising funds early this month, we’ve identified multiple new funds with ownership economy themes (see below).
With support from Sorenson Impact Foundation, and partners including the Aspen Institute, Transform Finance and Ownership Capital Lab, ImpactAlpha is digging into the growing ecosystem of LPs, GPs, business owners and employee owners who are driving the ownership economy.
This week, ImpactAlpha’s Jessica Pothering, Lucy Ngige and I are at the Sankalp Africa Summit in Nairobi. Dennis Price is in Mérida for the Latin America Impact Investing Forum, where LPs and GPs will “Fliip the Pitch” with limited partners taking the stage to pitch their funds, strategies, and pipelines to an audience of impact-driven GPs. Say hi!
– David Bank
In this week’s LP/GP:
- GPs unveil new ownership strategies
- ESOP exit windfall in Vermont
- Residential energy retrofits in Germany
- Climate tech outlook brighter, GPs say
Featured: LP / GP
GPs deliver ownership investing strategies for LPs of all sizes. Interest in investments that foster worker and community ownership is accelerating with the wave of business ownership transitions as Baby Boomers retire. Private equity players like KKR, Blackstone, Goldman Sachs and TPG, all members of the Ownership Works initiative, point to evidence of improvements in financial performance and worker retention in companies that share a cut of their payouts with employees (see, “As private equity firms start to share the wealth, low-income workers get just a little bit”). Dozens of emerging fund managers are proving out investable and diverse opportunities in the ownership economy. Some of the smaller funds are incorporating decision making power as well as economic benefit from assets. “These models – and the specific businesses and projects that deploy them – serve a greater purpose,” says Transform Finance’s Curt Lyon. “They are an organizing concept for a new economy.”
- Actively raising funds. New ownership strategies are getting creative with the capital they offer. Case in point: The flurry of new funds we’ve added to The Liist. New York-based Seed Commons has since 2011 directed $70 million to worker-owned cooperatives through a network of nearly two dozen community lenders in the US and Canada. It’s in the market with its first fund to ramp up its revenue- and profit-based lending. In Canada, Regenerative Capital Group is helping diverse entrepreneurs build equity in small businesses in need of a succession plan or exit strategy. The firm provides technical assistance and capacity support to a cohort of five entrepreneurs as they identify and diligence promising local businesses to acquire. Candide Group is in the market with its $65 million Afterglow Climate Justice Fund, which will make debt investments to community-centered clean energy developers.
- Catalyzing the ownership economy. Fund managers are doing the hard work of designing ownership strategies and building a pipeline of opportunities. Ownership as an investment lens is still in its early days. Just a handful of managers are onto their second funds; none in Transform Finance’s survey are yet raising their third funds, “putting the space out of reach for many larger allocators,” the organization reports in its landscape survey with Ownership Capital Lab. Catalytic investors like Sorenson Impact Foundation and Gary Community Ventures are backing emerging managers to ensure promising models can successfully scale. Grants to support fund development and capacity building, and concessional financing and guarantees to anchor and derisk new funds, are still needed. “Investors can bring others to the table,” suggests Transform Finance. “By sharing due diligence, inviting their colleagues to invest alongside, or introducing funds to new investor audiences, they play critical roles in growing the employee ownership capital marketplace.”
- Fit for purpose. Non-profits. For-profits. Large firms and small. Debt, equity and everything in between. Together Transform Finance and ImpactAlpha have profiled more than 60 investment funds that are delivering returns to investors by sharing and growing wealth for workers, families and communities. Ownership Works, for now, has perhaps the greatest heft in moving capital into the ownership economy. The nonprofit, founded by KKR’s Pete Stavros in 2021, has signed up nearly three dozen private equity firms with over $1 trillion in assets under management to commit to creating $20 billion in working-class wealth by 2030. Most of the opportunities for a worker-ownership transition are too small for large private equity firms, however. That makes them a better fit for dozens of emerging fund managers, many of which are raising just a few million dollars for their first funds.
- Keep reading, “GPs deliver ownership investing strategies for LPs of all sizes,” by Jessica Pothering on ImpactAlpha. Know a fund that we should include on The Liist? Suggest additions here.
Dealflow: Ownership Economy
Some Vermont Information Processing employees will see up to $10 million each after exit to Warburg Pincus. About 600 employee owners of Vermont Information Processing, or VIP, a maker of software for beverage manufacturers and distributors such as Guinness and Heineken, are set to receive payouts following its $1 billion sale to global private equity firm Warburg Pincus. The transaction, which includes debt, brings to an end the company’s 20-year stretch as a 100% employee-owned business under an employee stock ownership plan, or ESOP, VIP announced. VIP founder Howard Aiken sold the company to employees in 2001. Aiken, a retired electrical engineer, still serves on the company’s board. The sale to Warburg Pincus presented the opportunity “to invest more in our growth—whether through acquisitions that were out of our reach, expanding our product offerings, enhancing our software, and improving our customer experience,” the company said. Warburg Pincus, with over $86 billion in assets under management, is a founding partner of Ownership Works, a nonprofit coalition of private equity firms that have pledged to create $20 billion in wealth for workers by 2030 through employee ownership.
- Making millionaires. Starting next month, around 50 of VIP’s longest-tenured employees, who have accumulated shares through the ESOP over two decades, will receive payouts of about $10 million each, an employee shared anonymously with a local Vermont publication. About 300 employees will reportedly receive more than $1 million each. VIP employees start accumulating shares through the ESOP after one year with the company. Warburg Pincus, which did not respond to a request for comment, is said to be offering one-on-one consultations with investment and financial advisors to help employees manage their new wealth. The PE firm will retain the company’s current leadership team, including CEO Dan Byrnes, and will not be involved in VIP’s day-to-day operations.
- Strategic growth. As an employee-owned business, VIP made several strategic acquisitions, including the 2022 purchases of eoStar (formerly Rutherford & Associates), a Michigan warehouse management software maker, and BizStride Logistics, a supply chain logistics services company, both focused on the food and beverage industries. The acquisitions, coupled with future projections, “meant that we had a considerable repurchase obligation to the vested employees when they leave or retire,” VIP wrote. In the near future, the repurchase obligation — the buy back of shares from exiting employee owners by an ESOP — “would have consumed all of our cash and limited our ability to continue expanding.”
- Check it out.
Reneo snags $619 million to green Germany’s housing stock. More than half of all residential buildings in Germany are rated “poor” when it comes to energy efficiency. Hamburg-based startup Reneo has landed €600 million ($619 million) to decarbonize these “stranded real estate assets.” The capital infusion came from German family-owned real estate businesses Goldbeck and Bauwens, German real estate investor Peakside Capital and European private equity and VC firms Foundamental and Lakestar. France’s Eurazio also participated via its €400 million second impact Smart City Fund, which backs climatetech and sustainability solutions, while American investment banking group Goldman Sachs provided a senior asset-backed financing facility.
- Sustainable housing. Reneo’s Core System uses AI to analyze data and optimize resources and government subsidies to cut construction costs and reduce energy consumption by up to 60%. “Real estate is one of the few remaining sectors where the challenge of decarbonization and meeting net zero targets is yet to be fully addressed,” Peakside’s Boris Schran said. Reneo invested €200 million last year to acquire over 600 residential units in Berlin and Hamburg that will undergo energy-efficiency retrofitting to meet the demand for sustainable housing. Separately, the company set up a joint venture with Peakside that will invest around €500 million in debt and equity to upgrade the energy efficiency of multi-family houses.
Dealflow overflow. Investment news crossing our desks:
- Golden, CO-based Terra CO2 raised $82 million to commercialize its low-carbon cement technology. Investors in the Series B round include Just Climate, Eagle Materials, GenZero and Breakthrough EnergyVentures. (FinSME)
- UK-based National Grid has agreed to sell its US onshore renewables business, which develops, owns and operates utility-scale, solar, onshore wind and battery storage assets, to investment Brookfield Asset Management. The deal is valued at $1.74 billion, including debt. (National Grid)
- American Beacon Advisors, an Irving, Tex.-based investment advisor, will assume management of the Ninety One Emerging Markets Equity Fund. Current manager Ninety One will serve as sub-advisor to the renamed American Beacon Ninety One Emerging Markets Equity Fund. (Ninety One)
- New York-based Floodbase secured a $5 million investment from Ecosystem Integrity Fund and Pulse Fund to monitor floods in real time using satellites and AI, and develop flood insurance programs for reinsurers such as AXA Climate and Liberty Mutual Re. (Floodbase)
Signals: Climate Tech
Climate fund managers see brighter outlook – and new uncertainties. Climate-focused fund managers worry about a continued lack of liquidity in the market, policy uncertainty and the politicization of ESG and climate issues. But they believe market economics, state-led action and an emphasis on energy security will propel the market forward, according to a survey of 127 fund managers by CREO, a nonprofit that mobilizes capital from family offices for climate impact. After nursing their portfolio companies in 2024 amid the funding squeeze, GPs are looking forward to deploying more capital into new opportunities this year. Over two-thirds of the managers plan to increase capital deployment in 2025. Their top sectors include energy storage, generations and distribution, agriculture, advanced materials and land conservation and restoration. Out of favor: food and beverages, autos, and charging infrastructure, reflecting the new political headwinds for EVs.
- All in the family. Fundraising sentiment is still largely pessimistic, and average fundraising times have stretched up to 24 months. But patience is paying off. Some 80% of fund managers have closed or expect to close their funds at or close to their targets. 70% of infrastructure managers reported hitting their fund targets, while private equity managers were more likely to exceed their funding goals. Climate-focused fund managers have become more reliant on family offices and high net worth individuals. Such investors were the most active investor category, cited by 30% of fund managers. More than one-third of GPs surveyed said these wealthy families comprise more than half of their committed capital.
- More.
Agents of Impact: Follow the Talent
Schroders Capital Solutions names Vikram Bhandari, previously with BlackRock, as head and chief investment officer … S2G Investments welcomes Mary DaSilva, formerly with The Vistria Group, as chief people officer, and Kevin Vincent, previously with US Securities and Exchange Commission, as chief compliance officer… Tyler Hartsock, formerly a partner with Peakview Capital, joins the Packard Foundation as managing director of venture capital and growth investments.
Mika Kania, previously with the US Green Building Council, joins Cushman & Wakefield as head of sustainability advisory for Asia Pacific… Common Trust seeks a transaction advisory associate for a remote role… Schmidt Family Foundation is hiring an impact investing portfolio manager in San Francisco… Morgan Stanley’s Global Sustainable Finance has an opening for a products and solutions analyst in New York.
ICA Fund is recruiting a chief investment officer… BFA Global is looking for a venture builder in Nigeria… Roots of Impact has launched a funding opportunity for an ‘impact-linked fund for education’… The NYC Commission on Racial Equity and the Institute on Race, Power and Political Economy are co-hosting Investing in Equity for All, Thursday, Mar. 6… Applications are open for the blue tech launchpad of the Israeli National Center of Blue Economy.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– Feb. 25, 2025
