Impact investing trends in the USA
Predislava Derugin | August 30, 2019
Impact investing trends in the USA
Predislava Derugin
August 30, 2019

According to the US SIF, investments in the space of impact and sustainability in the United States reached $12 trillion in 2018 – a 38 percent increase from $8.7 trillion in 2016 (US SIF, 2018)
Thematic approach.
The current impact-investment trend is a "thematic" or industry approach, rather than general investment in small- and mid-sized businesses. The thematic approach focuses on urgent social problems that affect the U.S., such as accessible healthcare, educational programs, unemployment programs, loans for small businesses, and affordable housing. With respect to the later, nearly half of the renters in the U.S. pay over 30 percent of their income for housing costs, leaving less funds available for basic needs like food, healthcare, education, and transportation.

While a large portion of investments is directed toward real estate development, tech startups attract funding as well. As an example, in March 2019, the startup Point Digital Finance drew $22 million in Series B funding. The company offers capital for down-payment and housing costs in exchange for partial equity in the real estate.
Global approach.
Impact investments in the U.S. are also directed at solving broader global problems like access to clean water, carbon emissions reduction, renewable energy and energy efficiency. Dandelion Energy, for example, raised $16 million in Series A funding in February 2019. The startup installs geothermal pumps to capture energy from below the earth to heat and cool homes across all seasons and to heat water. Such installation is simpler and more accessible than getting expensive fuel delivered by vehicle transport.

In food industry we saw a lot of excitement around the startup Beyond Meat. Its meat alternative product "Beyond Burger" generates 90% less greenhouse gas emissions and requires 46% less energy, 99% less water and 93% less land compared to a quarter pound of U.S. beef. Beyond Meat raised about $240 million, and its IPO in May of 2019 landed the company at a valuation of $1.5 billion.

Plastic waste reduction is another hot area. In 2018, China decided to cease the importation of American plastic waste for recycling. This meant that the U.S. had to find new approaches to managing its plastic waste, and for investors, this was an opportunity. The startup TemperPack, which produces a line of compostable and recyclable packaging and insulation, raised $22.5 million in Series B funding.

Another popular theme in impact investing is women and minorities. The impact investing community reached the realization that investing in businesses owned or headed by women and minorities not only creates positive social impact but is also financially profitable. Rethink Impact, a venture fund that invests in women who use technology to solve global problems, recently became the lead investor in a $11.2 million Series A round for fintech startup FutureFuel.io. Under the leadership of general director Laurel Taylor, the startup built a Saas platform that allows companies to help their staff pay off their student debt – a problem that over 44 million Americans struggle with.
Alternative financing structures.
There is a new understanding that different segments require different models of capital. We observe a trend in the development of alternative deal financing structures, blended capital and layered funds structures, which better relate to the nuanced needs and risk profiles of different social enterprises. Such developments demonstrate the strong willingness of investors to seek creative ways of supporting – and benefiting from – impact ventures, and we expect the positive trend to continue into the next year.
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