The Brief | June 27, 2019

Better blended finance, encouraging commercial solar in India, tech training co-op, financing inclusive growth

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Greetings, Agents of Impact!

Featured: Impact Voices

Three ways to get better outcomes from blended finance. The U.S. Agency for International Development launched USAID Invest two years ago to coordinate the development agency’s work with private investors. At least 13 deals are in progress, including investments in companies, infrastructure projects and funds. In Haiti and the Democratic Republic of Congo, nascent private capital markets meant fund managers and investable deals were in short supply. Instead, USAID Invest set up ‘investment facilitation platforms’ to identify deals, deploy advisors to connect firms with qualified investors, and provide the support needed to close the deals. In East Africa, USAID’s team has helped close 15 transactions, mobilizing over $96 million in investment.

In a guest post on ImpactAlpha, Lala Faiz and Vanessa Holcomb Mann of USAID’s Invest initiative, and Serena Guarnaschelli of KOIS, share lessons for getting better outcomes from the blend of development assistance, private capital and philanthropic grants. Recent studies suggest “blended finance” has not yet succeeded in crowding in the kind of capital once expected, with each dollar of public funding generating less than a dollar of private investment. Such leverage is even lower in low-income countries. “This statistic asks us to take a hard look at the state of blended finance – to ask when and how blended finance should be deployed and how we can get the best results,” write Faiz, Mann and Guarnaschelli. Among their prescriptions:  Start with the root cause of a development problem, with an eye toward the underlying financing issues. Then determine whether blended finance can bridge a capital gap. Finally, pay close attention to the local context to make sure the solution matches the maturity of the sector and local financial systems. “We must match the solutions we design carefully to the problems we need to solve,” say the trio, “and then execute them well.”

Keep reading, “Three ways to get better outcomes from blended finance,” by USAID Invest’s Lala Faiz and Vanessa Holcomb Mann, and Kois’ Serena Guarnaschelli, on ImpactAlpha.

Dealflow: Follow the Money

Encourage Capital raises $40 million to help small businesses in India switch to solar. The Indian government is a quarter of the way towards its goal of installing 100-gigawatts of solar energy capacity by 2022. New York-based Encourage Capital’s new fund to capitalize commercial rooftop solar aims to unlock an under-tapped segment of the market. “The mass market is small and mid-sized businesses, which pay very high power prices and face a real gap in financing to invest in clean energy solutions,” Encourage’s Ameya Bijoor told ImpactAlpha. The Encourage Solar Finance equity fund reached a $40 million first close to invest in financial institutions in India lending to small businesses for rooftop solar installations. The firm is pegging its own financial compensation – part of its carried interest – to the solar capacity its portfolio companies support and the number of small businesses they reach. German development finance institution KfW, Capricorn Investment Group, the MacArthur Foundation, the Grantham Environment Trust and the Sant Foundation backed the fund. Get the full story.

Climb Hire rakes in $2 million for tech-training cooperative. Climb Hire lets learners pay as they earn, like some of the other tech-training startups and coding bootcamps touting their digital era trade school programs. But the San Francisco-based startup goes further: giving its graduates a cut of the organization’s earnings. Climb Hire provides learners 200 hours of software training over 16 weeks. Students get a stipend for completing assignments. Graduates pay a flat $150-per-month for four years after securing a job paying $45,000 or more. They also become part-owners of Climb Hire’s planned for-profit staffing agency, which was designed to help students establish a professional network. “Social capital is an important avenue for wealth creation,” founder Nitzan Pelman told ImpactAlpha. “It’s very hard for people to create wealth just based on income alone.” A group of philanthropic backers including, former Google Chairman Eric Schmidt’s Schmidt Futures and the Charles and Lynn Schusterman Family Foundation provided $2 million in grants to help Climb Hire find its legs. Go deeper.

Dealflow overflow.

  • Real estate investor Community Development Trust raised $118.5 million to acquire, create and preserve affordable housing and charter school facilities.
  • MainVest, a crowdfunding platform that focuses on connecting brick-and-mortar businesses with local investors, closed a $3 million seed funding round.
  • Veteran-focused nonprofit PenFed Foundation is doubling down on female entrepreneurs through its Veteran Entrepreneur Investment Program, which provides founders with seed funding.
  • The Western New York Impact Investment Fund invested in Buffalo-based SomaDetect, a company that makes sensors for livestock farmers to monitor cow health and milk quality.
  • Dutch biotech startup Grassa secured €2 million from Brightlands Venture Partners, LIOF, and animal feed company Fransen Gerrits for its digestion-friendly cattle feed products and organic fertilizer.

Signals: Ahead of the Curve

Financing inclusive growth at Palladium’s Positive Impact Summit. Investors, executives and other industry experts gathered in New York this week at Palladium’s “impact at scale” summit. The international advisory firm last year unveiled its roadmap for inclusive growth. This year was all about implementation. “Impact needs to be measurable and intentional,” said Harvard’s George Serafeim in the keynote, where he made the case that social impact drives better business and financial returns (ImpactAlpha is a media sponsor of the Positive Impact Summit). Shamina Singh of Mastercard Center for Inclusive Growth said the firm’s full assets are needed to drive impact. “We show up with capital. We show up with data. And we show up with people,” she said. “We are digital foot soldiers.” Christina Cassotis, head of Allegheny County Airport Authority, talked about the importance of engaging local communities members in turning around Pittsburgh’s airport.

  • Community finance. Stable housing translates to better health, said Kaiser Permanente’s Bechara Choucair. Last year, the Oakland healthcare nonprofit launched a $200 million impact investing initiative to prevent homelessness prevention and promote affordable housing for low- and middle-income families. Kaiser partnered with Bay Area Community Services to house 515 homeless seniors. “We were successful to get 301 of those folks in the last six months off the streets,” Choucair said. “Ninety percent of these 301 people who are already housed out of that cohort have mental health issues and/or substance-abuse issues.”
  • Follow the money. Smallholder farmer finance in India is “the kind of service that can go a long way, especially given the context that the majority of the people depend on agriculture for their livelihoods,” said Hannah Schiff of TIIA’s Nuveen, which manages more than $1 trillion in assets. In May, Nuveen led the $55.6 million round of Chennai-based Sammunatti to provide farmers with financing, as well as agricultural products and services. Schiff says the global investment manager has invested $500 million in inclusive growth strategies over the past 10 years. “It’s about increasing the availability of basic services like financial services, healthcare and education.”
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Agents of Impact: Follow the Talent

Sheila Coronel, dean of academic affairs at Columbia University’s School of Journalism, is named board chair at Media Development Investment Fund, as Bernard Poulet steps down… Social Investment Scotland is looking for a head of market building in Edinburgh… Emerson Collective’s venture investing team is hiring a senior associate in Palo Alto.

June 27, 2019.