The Brief

The Brief: A bridge fund to fill in the holes in US national forests

ImpactAlpha · October 8, 2024

Greetings Agents of Impact!

📣 Agents of Impact Call No. 65: Preserving affordable housing. The number of times “housing” was mentioned in the recent US vice presidential debate: 32. That’s 32 more than the number of “housing” mentions in the last three VP debates combined. Housing is top of mind for many Americans, from first-time home buyers to renters to retirees, and especially for residents of “affordable housing.” Rent restrictions are expiring on more than 325,000 units of affordable housing that were built with federal tax credits. As commercial developers snap up such properties, longtime residents are at risk of losing their homes. This month’s Agents of Impact Call takes up investment strategies to preserve affordable housing stock, with Impact Community Capital’s Michael Lohmeier, ROC USA’s Paul Bradley, and other special guests, in conversation with ImpactAlpha’s David Bank. Join hundreds of other Agents of Impact, Wednesday, Oct. 16, at 10am PT / 1pm ET / 6pm London. RSVP today.

👋 Meet the ImpactAlpha editorial team. You are part of an incredible community of professionals that is putting finance to work for good. We know, because we engage the community every day. Meet other Agents of Impact and chat with editor David Bank and ImpactAlpha’s hard working team of editors and reporters in a lively online session, Friday, Oct. 18, at 10am PT / 1pm ET / 6pm London. Register today.

In today’s Brief:

A revolving fund to fill in forests
Sustainable – and submersible – data centers
Lowering the cost of remittances

Featured: Conservation Finance

A $160 million revolving loan fund to support conservation and public access in national forests. The US’s 154 public national forests play a crucial role in the preservation of biodiversity, clean water and public access to nature. Scattered within 193 million acres of national forestland are privately-owned parcels totaling 30 million acres. The US Forest Service acquires these privately-held parcels to increase the connectivity and contiguity of national forests, but the process can take as long as a decade. “Important conservation lands are lost to development,” Kavita Kapur Macleod and Phoebe Higgins of the Environmental Policy Innovation Center and Lyme Timber’s Liz Adams and Peter Stein write in a guest post. “The extensive waiting period often leads to missed opportunities, as landowners may not be able to wait on federal bureaucracy.” Their solution: Bridge financing to help conservation groups acquire large tracts of land from private owners and sell them to the Forest Service.

Pilot fund. Land trusts have helped protect crucial properties for decades. The National Park Foundation piloted a financing model to increase their capacity. Charitable donors backed a loan to the Cuyahoga Conservancy that allowed the organization to buy a critical parcel in the Cuyahoga Valley National Park that was under threat of development. The National Park Foundation has recruited LegacyWorks Group to now administer a revolving loan fund and provide technical assistance to borrowers.
Low cost capital. In a feasibility report, the authors propose an initial fund of $160 million with recyclable capital. The cost of the debt is key. The Forest Service has more than $120 million available annually through the Land and Water Conservation Fund to acquire privately-held parcels. Conservation organizations that have to borrow to acquire the land can’t afford market-rate debt if they have to wait for years to close a sale to the agency.

Critical actors. Western Rivers Conservancy secured a program-related investment from the David and Lucile Packard Foundation to buy more than 500 acres of private land within the Beaverhead-Deerlodge National Forest in Montana. The parcels support important wetland and stream habitat; acquiring irrigation rights was a key part of the deal. Many such cases highlight the importance of affordable financing in protecting land and water within the National Forest system, the authors write. By scaling up the available capital, a revolving loan fund “has the potential to catalyze a broader movement toward more efficient and effective conservation finance.”
Keep reading, “A $160 million revolving loan fund to support conservation and public access in national forests,” by Kavita Kapur Macleod, Phoebe Higgins, Liz Adams and Peter Stein on ImpactAlpha.

Dealflow: Greening Data Centers

Sustainable data center ventures in Brazil and Spain land funding to scale. Data centers are hot – and getting hotter. The bigger, more powerful facilities being built to support artificial intelligence require a lot of energy and water to cool their computer servers. Among those racing to make the resource guzzlers more climate friendly are startups Scala Data Centers of Brazil and Spain’s Submer. Sao Paulo-based Scala snagged $550 million from New York-based Coatue Management’s Tactical Solutions Fund and the Investment Management Corp. of Ontario. In Barcelona, Submer raised $55.5 million in Series C financing to develop what it calls “waterless data centers.” The deal was led by London-based investment manager M&G, alongside Mundi Ventures of Madrid and prior backers Planet First Partners and Norrsken VC.

Brazil’s AI play. Scala’s fundraise comes after it announced a partnership with the government of Rio Grande do Sul, Brazil’s fifth most populous state, to build Scala AI City, a data center hub that aims to make Brazil a global hotspot of artificial intelligence. The company is one of the first Latin American data center companies to use 100% renewable energy through power purchase agreements backed by renewable energy certificates. It is also involved in efforts to conserve Brazil’s forests, and in recent years it issued green bonds that raised more than $803 million to finance its expansion in Brazil. Scala “is at the forefront of the digital revolution in Latin America,” said Coatue’s Malachi Price.

‘Waterless’ data centers. Submer aims to build greener data centers using single-phase “immersion cooling,” a process in which computer components are submerged in a non-conductive liquid to transfer heat. Submer, which has labs and R&D facilities in Houston, Taipei and Sausalito, Calif., says its process is a sustainable alternative to water-based cooling systems. Last month, Google was forced to halt a $200 million data center plan in Chile over water concerns in the parched region. “We see Submer’s technology as a critical solution to alleviate the intensive energy and water requirements of digital infrastructure,” M&G’s Global Niranjan Sirdeshpande said.
Read more.

UK-based digital remittance payments startup Zepz rakes in $267 million. Ismail Ahmed, a Somali refugee, launched Zepz in 2010 amid frustrations with the high cost of transferring money back to his family in East Africa. Remittances are a key source of income and emergency cash for many emerging market households. London-based Zepz, which touts itself as a lower-cost money transfer alternative, was on its way to a planned IPO in 2021 after hauling in $292 million in Series E equity at a valuation of $5 billion. But the company isn’t yet ready to join the public markets, according to one of its investors. Zepz last year laid off more than a quarter of its workforce last year. It also made a profit for the first time. The new Series F round, led by Accel, was also backed by existing investors LeapFrog Investments, TCV and Coller Capital also participated. The International Finance Corp. has committed to invest up to $20 million.

Digitalization. Zepz facilitates more than $1.3 billion in online money transfers monthly across at least 130 countries. The digital platform enables recipients to receive money via bank deposit, cash collection, mobile airtime top-ups and mobile money. Three years ago, the company, then known as WorldRemit, acquired cross-border payments platform Sendwave in a $500 million deal.

Check it out.

Catalytic fund for African social development aims to close financing gaps. The investor network African Venture Philanthropy Alliance, or AVPA, launched the Catalytic Pooled Fund on the sidelines of the recent UN General Assembly meeting in New York. The fund of funds, which aims to raise $200 million over five years, is backed by the Children’s Investment Fund Foundation in London and USAID’s Prosper Africa. The Catalytic Pooled Fund will back fund managers, impact bonds and projects with grants and concessional capital for renewable energy, agribusiness, education and healthcare. “We’re short of risk capital,” AVPA’s Frank Aswani told ImpactAlpha. Upping that financing means that “we can derisk social investments, and in the process, crowd private capital into the impact space.”

Social investments. The Catalytic Pooled Fund is looking for foundations and government donors to help lower the risk of high-impact social development projects that support job creation, women and youth empowerment, and climate and supply chain resilience. One big target: the $1.8 trillion of dormant private capital in African insurers, pension funds and forgotten bank accounts. Aswani tells ImpactAlpha that the fund’s soft commitments will close after a formal launch next month.

Existential risk. African pension funds “are starting to realize that some of these social issues are not just someone else’s problem,” Aswani said. “They’re also becoming business risks for them.” High youth employment in Africa could mean “very soon pension funds will cease to exist, because there’s no one to contribute to pension funds.” The Catalytic Pooled Fund wants to unlock $2 billion in private capital for social investments on the continent.

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Dealflow overflow. Investment news crossing our desks:

British International Investment launched a $25 million risk-sharing facility with Ecobank Sierra Leone to spur local currency lending to small businesses. (BII)

Berlin-based Atlas secured €12.2 million ($13.1 million) to expand the market for its ESG reporting software. Its Berlin peer, Briink, raised a €3.8 million ($4.2 million) seed round to develop its AI-powered sustainability data analysis offerings. (Silicon Canals and TechEU)

New York-based investment firm KKR will provide $450 million in debt to Powin and Peregrine Energy Solutions to bolster their energy storage projects. (Energy Storage)

Agents of Impact: Follow the Talent

British International Investment appoints Leslie Maasdorp, formerly with the New Development Bank, as its new CEO. The UK development finance institution’s current CEO, Nick O’Donohoe, is retiring after seven years in the role (listen to ImpactAlpha’s podcast interview with Nick O’Donohoe on risk, liquidity and catalytic capital in emerging markets)… Justice Climate Fund taps Shiva Patel, previously with DC Green Bank, to lead the design and implementation of its Clean Communities Investment Accelerator initiative, which is backed with nearly $1 billion from the US’s Greenhouse Gas Reduction Fund.

BlueHub names Monica Sevy, previously with Earthjustice, as chief information officer… Reinvestment Fund welcomes Zoe Millstein, a former sustainability intern with Contour Housing Partners, as a two-year policy fellow… Ownership Works adds Sofia Soto, previously with McKinsey, as a principal on its client advisory services team… Diego Torres, previously with Goldman Sachs, joins Accion Venture Lab as an investment and portfolio associate.

Echoing Green is recruiting a capital associate in New York… Advance Consulting seeks a senior impact investment advisor… Global Partnerships is hiring a global portfolio impact associate… CapShift has an opening for a managing director of marketing and growth… Coalition for Green Capital is on the hunt for a CEO… Stanford Sustainable Investment Group, a student-run investment advisory group, selects 19 students for its 2024-2025 cohort to work with Elemental Impact, Lowercarbon Capital and other climate tech investment firms.