#Featured: ImpactAlpha Original
A private bond market emerges for low-income community development. If you need an example of how catalytic public and private impact capital can open private capital markets for low-income communities, consider the scene at The Reinvestment Fund in Philadelphia as bids came in last week for the organization’s $50 million in S&P-rated bonds, only the second such bond offering ever.
There were cheers and hugs as the issue was oversubscribed within minutes. That anonymous capital market investors would buy the bonds signals a new source of capital for childcare centers and charter schools, grocery stores and health clinics, energy efficiency upgrades and small businesses in low-income communities across the U.S.
Read about the market reaction to the new community development bonds, from Oscar Perry Abello on ImpactAlpha:
#Dealflow: Follow the Money
Acumen aims to bridge the pioneer gap for off-grid energy startups. Acumen launched its Pioneer Energy Investing Initiative with a $5 million grant from the IKEA Foundation. The initiative is seeking to catalyze private investment in off-grid energy by backing early-stage energy companies. “Ecosystem support” and technical assistance will help startups overcome the immaturity of the market and lack of access to resources. Acumen already has invested $20 million in 18 off-grid energy companies, including d.light and M-Kopa. More than 1.2 billion people worldwide live without access to electricity. Expanding often unreliable grids is expensive and slow, spurring an explosion of off-grid solutions. Acumen hopes the pioneer energy investment initiative will help eight million people get access to energy by 2026.
Sepalika raises seed funds to promote healthy lifestyles in India. Mumbai-based health portal Sepalika has raised $750,000 in seed funding from Accel Partners. Sepalika launched last March as a source of online help for Indians suffering chronic health conditions like diabetes, obesity and heart disease, as well as prescription drug abuse. Its focus is on helping people make lifestyle changes and healthy choices to curb dependence on drugs. India is grappling with a surge in non-communicable diseases, which account for 60 percent of deaths in the country and could have an economic impact in the trillions of dollars in the next decade. Sepalika’s early round of funding will be used to expand the platform’s content, which currently provides information on 11 illnesses for users in India. It is also available in the U.S.
SoftBank joins Alibaba to back One97’s digital payments platform in India. The Japanese telecom company is teeing up a $1.9 billion investment in Indian mobile services firm One97 Communications. The expansion of One97’s Paytm digital payments platform is part of the extension of financial services to India’s growing middle class. The cash deal would give SoftBank a 20 percent stake in the firm. China’s Alibaba owns a 36 percent share of One97. Paytm’s platform currently includes a mobile wallet and e-commerce market, both of which have benefited from the Indian government’s move away from cash notes last year according to Deal Street Asia. One97 aims to invest $1.5 billion over the next three years to expand its banking and financial services.
Change Catalyst launches accelerator to support minority tech entrepreneurs. Change Catalyst will support minority and women entrepreneurs with a new Startup Fellows Program. The Bay Area organization will go on the road this summer to Seattle, New York and Atlanta to recruit tech entrepreneurs in education, finance, health, social issues, as well as artificial intelligence and virtual reality. The top three ventures in each city will receive cash prizes and ongoing mentorship and investment facilitation. Online applications are open.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Blockchain startups make it cheaper to send money across borders. First came mobile phones and digital money. Now comes blockchain and digital-only currencies to further cut costs of cross-border remittances. A new crop of startups are taking aim at the $429 billion remittance market dominated by Western Union and MoneyGram, and in particular their high fees — an average of 7.45 percent per transaction (to be fair, those fees have dropped 2.5 percent in 10 years). Mobile and smartphone-based transfer services have cut costs, but most models still rely on banking networks. “This is where where the potential of [distributed ledger technology] and blockchain innovation is,” said Marco Nicoli of the World Bank. Blockchain-based transfer services can exchange digital-only currencies, which have not yet gained widespread adoption. Within five to 10 years “the whole idea of a remittance or cross-border payments will be gone,” Jeremy Allaire of Circle, a blockchain-based remittance service, told FastCompany. Remittances from family members in wealthy countries to relatives in poorer countries is more than triple the amount of global foreign aid.
Impact investment and philanthropy are no substitute for federal affordable-housing funds. Lack of affordable housing isn’t just a gripe among residents in hyper-expensive markets like San Francisco; it is a problem in every U.S. county, according to a report by the Urban Institute. A rise in private and philanthropic investment strategies targeting preservation and new construction of affordable housing is helping low and middle income families that earn too much to receive federal assistance. But federal assistance is still crucial to maintaining the overall stock of affordable housing. “Simply put, virtually no affordable housing units would be available to extremely low-income households absent continued investment in federally assisted rental housing,” warns the Urban Institute report.
Trade, private investment and technology will drive progress toward 2030 goals. Last week, we showcased inequality, climate change and demographics as potential obstacles to meeting the 2030 deadline for the U.N.’s global Sustainable Development Goals. Here come the rest of the six “megatrends” that will make or break achievement of its 17 SDGs. “Positive developments in these areas will radically enhance the prospects for achievements of the entire agenda,” according to the Global Trends report from the UN Development Program.
Warning: “Negative developments in some (or all) have the potential to derail the SDGs.” The report stresses the need for effective policymaking to:
Make open trade work for all. Global trade spurs investment and growth, which has positive macroeconomic impact — but it also affects, sometimes negatively, individual households, particularly food security and nutrition. Trade has been on a downward trajectory that “inward looking approaches and protectionist tendencies” could accelerate. Policies that support global growth should also drive positive impact at home.
Attract private investment to long-term sustainable development. Official development assistance, or foreign aid, from wealthy to less-wealthy countries currently makes up half of development finance. More needs to be done to effectively catalyze the $22 trillion in annual public and private savings and more than $250 trillion in total global financial assets for sustainable development. In developing countries, this includes more effectively collecting taxes. Advanced countries can facilitate and simplify access to climate-specific finance in countries that vulnerable to climate change.
Drive tech innovation in local context. The most effective technologies are developed with target beneficiaries as active stakeholders in problem-solving. “It is important to ensure that technologies are contextually appropriate, responsive to the needs of local people, inclusive in both their development and usage, and conforming to safety, security and privacy standards,” the report states. Though the private sector drives most tech development, the public sector can set expectations through regulation and R&D financing.
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