It's Friday, April 10th. I'm Brian Walsh and welcome back to This Week in Impact, where I talk with Impact Alpha journalists and editors about some of the most interesting impact investing stories we've been covering. We've been off for a few weeks, but I'm back with editor David Bank. This week we'll discuss War and Markets, how the conflict in Iran and the closure of the Strait of Hormuz is rippling through energy, fertilizer, and food systems and what it means for people, businesses, and investors in emerging markets. Plus, Impact Alpha launches Impact Alpha Edge, a new intelligence platform designed to help impact investors move faster, invest smarter, and find each other. And finally, a reckoning and an aquaculture investment gone wrong. The founders of AquaSpark share for the first time about their funds exposure to the fraudulent company E-Fissurey. That's all coming up on This Week in Impact. Hi, David. Welcome back to the podcast. We've been off for several weeks. How are you doing? I'm doing fine, Brian. I've missed you. A lot's happened since we've been gone. Yeah, you don't say. Well, let's get into it. As we record, there is a tenuous ceasefire in the conflict in Iran, but the Strait of Hormuz still remains largely closed. That has triggered a cascade of disruptions in energy, food systems, and in emerging markets that affects many agents of Impact. David, we've been covering this from different impact investing angles. Let's start with one that surprised me the most, fertilizer, because the Gulf region accounts for as much as a third of global fertilizer supply. Yeah, people have been focused on oil, obviously, but in percentage terms, the chokehold on fertilizer has been great. Something like, as you said, a third. And it's driven up prices for farmers just as the spring planting season, at least in the Northern Hemisphere, is getting underway. And what's interesting, also as in the case of oil, is that that makes the alternatives, and particularly the kind of local, and now what we're thinking of as more secure alternatives, more appealing. We've been watching a company out here in California called Nitricity. They're able to make fertilizer from, essentially, air, water, renewable energy, and agricultural waste, such as almond shells and walnut shells. And you can create these modular fertilizer factories close to the farmers, again, without any fossil fuels. And their bookings are off the charts. Their supply is fully accounted for through at least 2028. What's interesting about that company and some of the other companies that have been making the case for local bio-based production of fertilizer, they've been making the case for years on climate grounds, but the strait of removes closure is making the case on resiliency grounds. So what's the distinction between those two framings? And does that even matter? Well, resiliency, and then people are talking about security, food security, energy security, and the Europeans in particular have kind of rechristened many of their climate investments, the European pension funds at least, as energy security investments. And I think people might know that Spain, which has a relatively high percentage of renewable energy, was able to be somewhat more, let's say, autonomous in regards to the war than some of its European neighbors, precisely because it was less dependent on those oil shipments through the strait. So as you say, resilience is a key word now, but so is security. All right, let's shift to energy. And also in India, our Shafali Aran had a remarkable story about what happens when millions of gallons of liquefied petroleum gas suddenly can't get to their customers. So what's happening there? And what are the ripple effects that we're seeing in emerging markets? Yeah, it's another case where the local alternatives now are more appealing because of the lack of the foreign-based alternatives. So Indian households have been cooking on what they call liquefied petroleum gas. I think we'd call it propane and get their canisters filled up and refilled. And that mostly, 90% of it comes through the strain of Hormuz. So there's been a huge run on induction cookstuffs, which is one of the things that in this country was part of electrifying everything, electrifying your household. They're a very interesting, good technology, but had been slow to pick up. Now again, sales are going through the roof in India and folks are switching over to electric, some of which can be actually powered by solar. So then you get even a bigger win. And it's just another example where it may not have been the climate impacts that are driving the adoption of these new technologies. It's going to be much more like local security, sovereignty, and resilience. So is this the clean cooking transition that people have been arguing about for decades? Or is this a kind of a response to an immediate crisis that will kind of snap back when supplies normalize? Well, it remains to be seen. I think people think that some of these technologies are, as they say, faster, better, cheaper, and will stick around as long as people get over that kind of inertia or that hurdle of adoption. And so when folks see their neighbors cooking and they like it, then they'll adopt it as well. If costs are lower, if it's just easier, not to have to go down to the supplier and get your gas refilled even when you can. I mean, there have been lines around the block to get your LPG canisters refilled in India. So there's going to be lots of advantages of the transition. And this is just kind of the disruptive event that gets people over the hump. It'll be interesting to see how many indoor health effects of indoor pollution from propane gas or LPG, those kind of harmful negative health impacts will not be experienced in the decades to come because of this transition to induction cooking. Yeah, it should be said that the LPG transition from things like firewood, which is still used in a lot in Africa, that was one of the supposed clean cook stoves transition. So you go from firewood to LPG now to electric. All right, well, you can read more on impactalpha.com. We'll also have a few links in our show notes about some of these topics. Later, we're going to talk about the failure of E-Fishery and what the fund manager, AquaSparks, learned from that. But up next, we're going to talk about impactalpha edge. Sign up for impactalpha's free weekly newsletter, Impactalpha Open, a crisp, expert curated investment briefing that lifts up people, data, tools, trends, and job opportunities to help you stay ahead of the curve. Find the alpha impact. Visit impactalpha.com forward slash open to learn more. Next up, something a little closer to home, David. Impactalpha has been covering the impact investing market for more than a decade. This week, the team launched something new, Impactalpha Edge, a market intelligence platform designed to help investors act on what they read. David, what's the thinking behind Impactalpha Edge? It's one of the bigger product launches in our history, maybe back from when we launched the brief a number of years ago. We've rolled out essentially a data platform that takes the reporting we do, the editorial and the other sources, and creates a kind of real time. Real time is a little bit in quotes because there's lag from when things are announced and whatnot. Basically, let folks track the flow of capital from the allocators, the LPs, the family offices, the pension funds, to fund managers who are allocating to ventures and entrepreneurs, and to see who is investing in what, not just from what they say, but from what they actually do. All of the deals and fundraisers that people read about in Impactalpha quickly go into Impactalpha Edge. Let's folks sort out. If you're a GP, let's you qualify the LPs you might try to raise money for. If you're an LP, you can see what other LPs are investing in, what managers you might take a look at. Generally speaking, try to speed up the decision-making process and raise the visibility of all the stakeholders in the ecosystem. It's quite an impressive effort that our developers have put together. We encourage folks to sign up for a demo. Walk us through an example of how this actually works. What kind of data do you have and how do Impactalpha Edge users use that data? One of our early adopters, TrimTab, we've written about them in Impactalpha. It's not quite a fun to fund. It's actually a holding company, an Impact first holding company. They logged in and they saw another LP that they respected, a European foundation. Notice that that investor was prospecting an African fund of funds. I won't name it, but we've also covered it in Impactalpha. Said, ah, if they're in it, we're interested. They proceeded to do diligence on that fund of funds. We understand that they now have greenlighted it to go to the investment committee. There's real action that takes place as a result of this. It's an example of this kind of trust. If you see folks that you respect their due diligence and their investment thesis, you can follow along with it. One of the things that's super interesting is that some of the LPs and allocators are sharing not only their portfolio, like the funds that they've already invested in and those funds may have been closed, but they're actually their pipeline. The you can see what they're looking at next and you can essentially follow along with them and co-invest. Again, it's making visible a lot of things that people might know if they had a bunch of conversations with their buddies, but now it's much more widely accessible. LPs are sharing their pipelines, their active due diligence, and then fund managers are sharing their strategies that make it easier for LPs to find them. It makes visible some of these ecosystems, these investment ecosystems that we talked about. For example, the ownership economy, which we've been covering now for a number of years, we've identified something like 100 general partners, fund managers with home, community, employee ownership strategies, and then maybe more interestingly, an even larger number of LPs who have invested in one or more of those opportunities and at least have some passing familiarity with this whole concept of shared or broad ownership. If you are now a GP with something that qualifies as an ownership strategy, you have a much broader sense of who the potential LPs that might be receptive to your message. It also speaks to the moment where we are in the life cycle of the impact investing market, that it's mature to a point where there is somewhat of an information gap and that can be a real friction point so that people might read about a fund closing in Impact Alpha, but how will they know about the fund manager before they close? How do you connect to those LPs who are actively looking for possibly to invest in your strategy for your fund manager? You and I have been around in this long enough to remember when folks wondered whether there was really enough deal flow or activity in the whole marketplace to support a publication like Impact Alpha. Now we've got thousands of fund managers of asset allocators of LPs and many times the allocations themselves tracked again in real time so you can see what's been happening recently in the fields you're interested in. You can read more about Impact Alpha Edge and demo it for yourself at impactalpha.com. We'll also have a link in the show notes. Coming up after our next break, a reckoning in aquaculture. The founders of AquaSpark break their silence on the E-Fishery fraud and make the case that the sector can't afford to lose faith. Finally this week, the founders of AquaSpark, the impact investor in sustainable aquaculture, published a guest post in Impact Alpha breaking their public silence on the E-Fishery fraud. It's been more than a year since that scandal broke David. What do you make of them speaking about it now? We've often noted folks are much more willing to speak about their triumphs than their tribulations. It did take a little bit of while but Amy Novigratz and Mike Vellings, the founders of AquaSpark, published a letter to the community on Impact Alpha. It was both a little bit of me a copa in terms of missing the fraud at E-Fishery which we can get into. Also just as you said, a plea that sustainable aquaculture which has really got some promise for providing the protein needs for a hungry planet should not be tarred by the brush of this one company that didn't fail because of any problems in aquaculture or possibly even in its own operations. It failed because it essentially inflated its revenues and its profits in a good old fashioned accounting. Tell us a little bit about that fraud and give us a little backstory on the E-Fishery story. Yeah, E-Fishery is based in Indonesia. It was touted as the first aquaculture or sustainable aquaculture unicorn. It attracted investors like SoftBank and Tomasek and of course AquaSpark and they were proving out that you could take fish farming essentially to scale. By all accounts, the operations were solid. What they did was inflate their revenues to give themselves a better valuation and be able to raise more money. Again, that's something that we've seen before even in the impact world. Bitwise, people might remember or all hear. Of course, it's not limited to the impact world. Think of FTX and Theranos and Ozzy and Wirecard. Fraud is kind of impact agnostic. Of course, when it's an impact play, it has wider ramifications because it might confirm folks' misimpressions somehow that these are not real businesses or something. That did actually shut down a lot of the deal flow and the investment in the sector for a year. That's what Amy and Mike are trying to argue against. The basic impact thesis stands up and what you really need is better due diligence. By all accounts, it would have been very hard to detect. It did take in these quite sophisticated investors. It's not necessarily that they missed something. It's that you just need to know who you're dealing with. Right. It's worth to note that E-Fishery was a real company with real technology and they connected smart holder fish farmers to markets and financing. There was something there there. It's just that it was fraudulent in some way about how it was inflated and how the numbers were cooked and all of that. People get ahead of themselves in this swashbuckling, sort of Silicon Valley type image of founders that go to the moon. People just don't want to necessarily do the hard work of building a company much more slowly. It did really take a bite out of Aquasparx's own assets. They're an evergreen fund. They lost about half, I think almost half of their assets under management. They've spent the year licking their own wounds and talking to their investors and trying to rebuild their own operations. We've just had a story on the new fund they raised to do tilapia farming in Africa. They've got a very interesting strategy to knit together the food suppliers and obviously the operations, but then the distributors and the offtakers to build a whole supply chain around tilapia, which they call aquatic chicken. Aquatic chicken, is that the chicken of the sea? It would be, except actually this is land-based agriculture. All right, well you can read Amy Novogratz and Mike Vellings' guest essay on impactalpha.com. We also have a link in our show notes, but that's going to do it for this episode of This Week in Impact. Thank you, David. Thank you, Brian. And thank you all for listening. This Week in Impact is a production of Impact Alpha and part of the Impact Alpha podcast network. Smart conversations by and for impact investing professionals. For exclusive stories and insights about the world of impact investing and sustainable finance, join thousands of other agents of impact by subscribing. Just go to impactalpha.com slash subscribe for full access. Thanks as always to our producer extraordinaire, back from his honeymoon, Isaac Silk. For David Bank, I'm Brian Walsh, managing director of the Impact Advisory firm Human Nature. We'll see you next week for more Impact.
