The Brief | May 14, 2018

Catalytic capital, Social Finance India, global private equity, new pay-for-success fund

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Catalytic Capital: Impact investors unlock off-grid energy financing with first-loss guarantees. The increasingly robust off-grid solar market — off-grid solar ventures last year provided improved energy access to an estimated 73 million households — is looking like a textbook example of the impact of catalytic capital from foundations, wealthy individuals and even corporations in unlocking finance for market-based solutions to global challenges. In a key milestone of market development, debt capital for off-grid solar deployment last year exceeded more expensive equity financing for the first time.

“There is a lending gap especially, much more so than equity,” Susan Phinney Silver, the Packard Foundation’s director of mission investing, told ImpactAlpha. “It is clear to us that early-stage solar companies have a role to play in the fight against climate change, but are having trouble attracting capital to grow.” Solar-energy providers in emerging and frontier markets need working capital to finance inventories and extend credit to customers, but commercial banks still generally consider such loans too risky. A new crop of financial intermediaries is starting to fill that gap with capital that can satisfy a range of risk-return profiles.

Read, “Catalytic Capital: Impact investors unlock off-grid energy financing with first-loss guarantees,” by David Bank, on ImpactAlpha.

Signals: Ahead of the Curve

Global private equity: Closing the gap between “we already do it” and allocations to impact investing. There’s a 47 percentage point gap between private-equity limited partners who say they consider environmental and social impact when making investments and those who have dedicated allocations to impact investing, according the Emerging Markets Private Equity Association’s 2018 survey. How to close that gap will be a featured discussion at this week’s Global Private Equity Conference from the International Finance Corp. and EMPEA in Washington D.C. Among the headliners:

  • Mainstays… Bert van der Vaart, the CEO of the Small Enterprise Assistance Fund, will share lessons from the fund’s experience making impact investments such as that into the Phuong Chau hospital in Vietnam. Andrew Kuper of LeapFrog Investments has attracted top talent, raised over a billion for frontier market investments and backed companies that now reach more than 100 million people. Paul Sanford, the chief investment officer at Trilinc Global, will tout the firm’s nearly billion dollars in private debt investments to small and medium-sized businesses in Latin America, Southeast Asia and Sub-Saharan Africa.
  • Newcomers… Maya Chorengel of the $2 billion The Rise Fund will share the story of TPG Growth’s foray into emerging-market impact investing, including through the fund’s latest investment in African digital payments provider Cellulant (more on this in ImpactAlpha’sDealflow tomorrow).
  • Absent… Notably absent from the main stage of this year’s conference is The Abraaj Group, the growth-markets private equity firm struggling to right the ship after the Gates Foundation, the IFC and the CDC Group took the firm to task over allocations from its billion-dollar Growth Markets Health Fund. Last year at the conferenceSev Vettivetpillai, then head of impact investing at the Dubai-based firm, spoke to the role of the private sector in delivering the U.N. Sustainable Development Goals.

Agents of Impact: Follow the Talent

Social Finance India launched today to scale up outcome-focused and SDG-aligned impact programs in the country. SF-IND joins the Social Finance Global Network that includes affiliates in the U.K., U.S. and Israel. The nonprofit intermediary’s first task, according to a statement announcing the launch: build out the India Impact Fund of Funds and India Education Outcomes Fund, two billion-dollar efforts to be launched at the Global Steering Group’s 2018 Impact Summit in Delhi in October. Rajiv Lall, the head of IDFC Bank in Mumbai, will chair the board of the initiative. Ashish Dhawan of Central Square Foundation and Vikram Gandhi of ASHA Impact will also join the board.

Dealflow: Follow the Money

Prudential, Kresge and Steve Ballmer back Maycomb’s pay-for-success fund. The Community Outcomes Fund promises to help vet and structure pay-for-success deals to ensure “best practices from early-stage pay-for-success transactions are incorporated.” Get the details.

LITA raises €2.2 million for impact equity crowdfunding. The Paris-based startup has a platform to help European social impact startups crowdfund equity investments. Read more.

Argentine agtech startup Kilimo raises expansion capital. Kilimo uses satellite, climate and on-the-ground data to help farmers plan crop irrigation and conserve water. Dig in.

“Trash unicorn” Rubicon attracts $65 million from New Zealand Super Fund. Atlanta-based Rubicon connects trash collectors to cities and businesses looking for garbage and recycling services. Learn more.

— May 14, 2018