The Brief: Fires in Los Angeles burn California’s ‘insurer of last resort’

In today’s Brief:

• Marching toward an uninsurable future
• Investments in five gender + climate funds
• Sustainable businesses in South Africa
• Outcomes-based education financing

Featured: Climate Insurance

LA wildfires push California’s insurance market to the brink. The Los Angeles fires that have been burning for 10 days threaten to burn down California’s insurance market as well, Climate Proof’s Louie Woodall reports for ImpactAlpha. Insurance coverage in the state was already buckling in the wake of the flight of private carriers and the vast increase in the wildfire exposure of the FAIR plan, the state’s insurer of last resort. JP Morgan estimates insured losses from the fire will top $20 billion. For now, it appears property owners will be paid for their losses – this time. But the scope of the expected claims means policyholders across the state may for the first time be assessed a surcharge, making coverage even more expensive for hundreds of thousands of policyholders, even those untouched by the fires. “That’s going to be a seminal event in California economic history, because that hasn’t happened before,” says Dave Jones, the state’s insurance commissioner from 2011 to 2019 (see ImpactAlpha’s Q&A with Jones, “Our march ‘toward an uninsurable future’”). 

• Strained safety net. Already, insurance rate hikes are starting to have an impact on mortgage foreclosures across the country, as premiums become unaffordable, particularly for low-income homeowners. The inability to get insurance at all would have even more dramatic effects, as homeowner’s insurance is required for nearly all mortgages. Many households, including thousands in Los Angeles County, rely on the state’s backstop insurance pool, known as the FAIR Plan, for Fair Access to Insurance Requirements. About three dozen states have such pools to cover homeowners that might otherwise be unable to obtain policies. The state’s FAIR Plan has only about $377 million in capital and had $2.5 billion in reinsurance capacity as of last year; its exposure to losses in the Pacific Palisades alone is at least $5.89 billion. If the FAIR plan exhausts its available resources, it can impose an assessment on private carriers – and ultimately on policyholders across the state. Under new rules enacted last September, insurance companies can charge existing policyholders for 50% of the first $1 billion of a FAIR Plan assessment, and for 100% of any amounts in excess of that.
  
• Resilience efforts. Spiralling rates are spurring efforts to make insurers factor homeowners efforts to mitigate wildfire risk in setting premiums (for background, see, “In the age of fire, tech solutions can help but not heal”). Advocates say California’s new rules requiring insurers to account for resilience efforts by homeowners, businesses, and communities don’t go far enough. “We need clear guidance from insurers on what investments are needed right now to make sure rebuilding is done in a way that reflects our climate future and better protects residents,” says the Environmental Defense Fund’s Carolyn Kousky, founder of the nonprofit Insurance for Good.
  
• New models. The challenges of higher rates and spreading insurance “deserts” opens space for bolder solutions, Woodall writes (for background, see, “After Helene, climate insurance models look to close the ‘disaster protection gap’”). Jones favors a nonprofit federal reinsurance program to backstop state-level FAIR plans, along with premium subsidies to help out poorer households using the state-organized insurance pools. Andrew Salkin of the nonprofit Resilient Cities Catalyst calls for forest management practices that could make losses more predictable so insurers can price their risk more accurately. “When insurers can’t really figure out the models,” he says, “the easiest thing for them to do is get up and leave.”
  
• Keep reading, “LA wildfires push California’s insurance market to the brink,” by Louie Woodall on ImpactAlpha. Follow Woodall’s coverage and sign up for his newsletter, Climate Proof.

Dealflow: Climate + Gender

Heading for Change backs five fund managers that put a gender lens on climate investing. The donor-advised fund launched by the late Suzanne Biegel expanded its portfolio with five fund investments in Asia, Africa and Latin America, bringing its total number of investments to 12 (see, “How Heading for Change invests in climate solutions with a gender lens“). The latest deals include the second fund by Acumen’s KawiSafi Ventures, which is expanding its clean energy focus to green mobility, logistics and other climate technologies. Embedded in KawiSafi’s strategy is “a clear awareness and understanding of the unique barriers and vulnerabilities women face in the fund’s core markets,” the Heading for Change team wrote. The firm offers technical assistance to build a bigger pipeline of investable women-owned green businesses and support green jobs and skills training for women (see, “Upskilling Africa’s workforce for green jobs”). Also in Africa, Heading for Change is investing in women-led Catalyst Fund, a new climate tech venture fund incubated by BFA Global that focuses on African entrepreneurs and just invested in South Africa-based The Awareness Company (see below). Catalyst fund is aiming for 40% of its portfolio companies to be women-led, and the majority to be led by local entrepreneurs (see, The Liist).

• Climate impact in LatAm. Women-led EcoEnterprises Fund, in Bogota and Washington, DC, secured backing from Heading for Change for its fourth fund. The firm invests in sustainable agroforestry, tourism and biodiversity; through its work in rural and agricultural communities, it also aims to advance women’s economic participation. Heading for Change also backed Singapore-based Circulate Capital, which is in the market with a Latin America-focused strategy that invests in opportunities to improve waste management and curb plastic waste. Its gender-strategy includes addressing pay gaps and providing training to women in its portfolio companies’ supply chains.
  
• Resilient agriculture. Acumen’s Climate Action Pakistan Fund is investing in companies supporting the adoption of climate-smart technology and climate resilience in Pakistan’s agriculture sector. The woman-led fund is Acumen’s first dedicated fund in the country. Heading for Change aims to have a mix of new managers building gender-relevant climate strategies and established managers that are integrating a climate lens in their work. “This demonstration portfolio is working towards being well diversified and illustrative of the rich and growing set of climate and gender investing opportunities,” the team wrote.
  
• Share this post. And check out ImpactAlpha’s searchable database of more than three dozen Climate + Gender funds.

South African startup lands $1.6 million to help businesses manage energy and water usage. The Awareness Company, or TACo, wants to make sustainability accessible and actionable for businesses. The South Africa-based startup’s Internet-connected data collection and analysis software helps businesses measure, monitor and optimize their energy and water usage in real-time. Early-stage climate tech investors Catalyst Fund and South Africa’s Holocene, alongside NEXT176, E Squared, Aions and Jozi Angels, invested $1.6 million in TACo’s seed round. “The growth potential for TACo is substantial, given the expanding global focus on sustainability and climate resilience,” said Catalyst Fund in a statement. The funding will help boost TACo’s AI capabilities, strengthen its sales and marketing and venture into new markets. 

• Smart resource management. In a survey of businesses, TACo found that 90% struggle with monitoring and reporting their sustainability performance. Software company Sage says just 4% of 16,000 small to medium-sized South African businesses are able to report such performance. TACo’s Hydra platform collates data from sensors, drones and other sources to deliver AI-based insights to businesses. In farming, for instance, Hydra monitors crop growth, pesticide and fertilizer application, identifies pests and diseases, and maintains financial data. TACo claims its energy and water monitoring tools helped a hospital save around 950,000 rand ($50,000) per month in utility costs. 
  
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Dealflow overflow. Investment news crossing our desks:

• Zurich-based responsAbility secured $350 million for its Asia-focused climate fund that invests renewable energy and energy efficiency, battery storage, green mobility and the circular economy. The fund is targeting a $500 million final close by year’s end. (responsAbility)

• Harbinger, a Los Angeles-based manufacturer of medium-duty electric vehicles, raised $100 million in Series B funding, backed by Capricorn’s Technology Impact Fund, Overture Climate, The Coca-Cola Company’s sustainability fund, ArcTern Ventures and other investors. (Harbinger)

• Waste-to-energy startup Sistema.bio scooped up $7.75 million from African venture fund Novastar to help meet demand for renewable energy and regenerative agricultural solutions. (TechBuild Africa)
  
• Investor network Resilient Earth Capital backed Climate First Bank, a Florida-based community bank. Resilient Earth didn’t disclose the size of its investment. (Resilient Earth Capital)

Impact Voices: Innovative Finance

How outcomes-based financing can drive systemic change in education. Outcomes-based financing has a reputation as being a cumbersome way to engage private capital in what are typically publicly-funded social interventions, like healthcare, housing, employment and education. But in a number of cases, the innovative form of evidence-based financing has not only had immediate impacts on local communities but could spur durable systemic change. “Its true potential is in creating pathways to lasting improvements within complex systems with entrenched challenges,” Jenny Berg and Inês Charro of Education Finance Network write in a guest post on ImpactAlpha. “Outcomes-based finance can shape a more resilient social sector where organizations build sustainable capacity and continue to deliver impact long after the funding ends.”

• Data, collaboration, acceleration. Data is foundational for effective social services. The Empleando Futuro social impact bond in Colombia financed skills training for more than 760 unemployed individuals in Bogotá, Cali, and Pereira. Linking outcome payments to job placement and retention required reliable labor market data that wasn’t readily available. The project instead leveraged public data to verify outcomes, laying the groundwork for more effective labor policies as well as for future outcomes-based financing in Colombia. A social impact bond for secondary education in Argentina appointed an outcomes negotiation “ambassador.” In India, a successful pilot for girls’ education proved the scalability of an intervention and increased involvement of government actors.
  
• Ripple effects. Impact investors are learning what outcomes-based financing models are working and how to scale capital for social interventions. Maycomb Capital in the US raised its first outcomes-based finance fund and is in the market with a second fund to provide working capital for early childhood development, workforce training and health equity interventions. Raven Group is investing from its Indigenous Outcomes Fund, which partners with Indigenous communities on climate and health-focused projects (see, “How fund managers are rebooting outcomes-based finance“). In education, where increased spending has often failed to deliver better outcomes, successes from outcomes-based finance “can create ripple effects,” write Berg and Charro, “enabling investments that drive efficiency, accountability and systemic improvements.”
  
• Keep reading, “How outcomes-based financing can drive systemic change in education,” by Jenny Berg and Inês Charro of Education Finance Network on ImpactAlpha.

Agents of Impact: Follow the Talent

Beatrice Advisors, an independent, woman- and minority-owned multi-family office, taps Peter Lupoff, previously with Lupoff/Stevens Family Office and Net Impact as a partner. Merv Burton, a former managing director at Carnegie Corporation of New York, is also joining the firm as a partner… Co-Impact adds Saadia Madsbjerg, Flagship Pioneering’s Raj Panjabi and Ford Foundation’s Hilary Pennington to its board of directors… Conscious Investment Management recruits Laurie Berrange, previously a responsible investing director with Inspire Impact, as a Sydney-based director. 

Cooperative Development Foundation welcomes Michelle Schry of the National Co-op Grocers and Spartan Housing Cooperative’s Holly Jo Sparks as board members… Nonprofit Finance Fund adds Neha Shah, head of community development lending at Charles Schwab, as a board member… Adebayo Ogunlesi, who joined BlackRock last year after the private equity giant acquired his firm Global Infrastructure Partners, is joining OpenAI’s board of directors… Tom Adlam joins Investisseurs & Parternaires’ Financing for Agri-SMEs in Africa, or FASA, as an investment committee member. 

Tracker Group appoints Christine Chow, a former UBS managing director, as its inaugural CEO… The Workforce & Organizational Research Center, or WORC, taps Ruth Turoff, previously with Primary Maternity Care, as project director… Climate Policy Initiative is looking for a development finance associate director in Washington, DC… Bloomberg Philanthropies is hiring a program manager for its Greenwood Initiative in New York… Climate United is recruiting a climate impact associate… Blue Forest has an opening for a grants development associate. 

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Jan. 15, 2025