The Brief | November 27, 2018

Climate-financing mismatch, Big Issue’s big exchange, sustainability startups in Chile, getting beyond tradeoffs

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Modest increase in global climate spending is no match for climate crises. There’s a mismatch between increasingly dire forecasts of catastrophic climate change and the sedate growth of climate financing. A few days after the #BlackFridayReport (aka the National Climate Assessment Report) comes an estimate that global climate-finance flows ticked up about 15% last year to between $510 and $530 billion. That’s an improvement from 2016, when climate financing actually fell from the previous year, reflecting the falling price of renewable energy – and fewer such projects. “While these increases are undoubtedly good news, we are still falling far short of what is needed to transition the overall economy to a low-carbon, climate-resilient future,” concludes the Climate Policy Initiative, which surveyed available data.

  • Financing gap. Last month’s report from the U.N.’s Intergovernmental Panel on Climate Change calculated the need for annual energy-system investment of between $1.6 and $3.8 trillion to keep global warming below 1.5 degrees Celsius.
  • Worst-case scenario. Last week’s 1,656-page report by scientists from 13 U.S. agencies painted a worst-case scenario for 2090, in which extreme heat causes losses of $155 billion per year, coastal property damage reaches nearly $120 billion per year and climate change shaves more than 10% from the U.S. economy. (Note to readers: We are on a worst-case trajectory.)
  • Bright spot. Investment in electric vehicles shows compounded annual growth of 54% since 2012, according to the Climate Policy Initiative report. A blinking red light: investments in fossil-fuel projects remain higher than investments in low-emission, climate-resilient infrastructure. Estimated financing for climate adaptation (rather than mitigation) was a paltry $22 billion.

The sluggish growth of climate financing will challenge delegates to the U.N. climate talks that begin Dec. 2 in Katowice, Poland. “Neither global efforts to mitigate the causes of climate change nor regional efforts to adapt to the impacts currently approach the scales needed to avoid substantial damages to the U.S. economy, environment, and human health and well-being over the coming decades,” concluded the #BlackFridayReport.

Share, “Modest increase in global climate spending is no match for climate crises,” by David Bank

Dealflow: Follow the Money

Big Issue launches blockchain-based Big Exchange for SDG investing. The London-based poverty alleviation organization is building an impact investing platform for everyday investors in the U.K. by giving anyone with savings or a pension access to large asset managers’ impact funds. The Big Exchange is expected to launch in 2019 with investment products aligned with the U.N.’s Sustainable Development Goals. Investors will be able to track their investments’ impact via the platform’s blockchain-based “social passport.” Partners in the Big Exchange include asset managers Aberdeen Standard, Columbia Threadneedle, Alliance Bernstein and Alquity. Here’s what we know.

Fundación Chile backs two Chilean sustainability startups. Santiago-based non-profit Fundación Chile invested $300,000 each in agtech startup Instacrops and logistics venture SimpliRoute. Instacrops alerts farmers to changes in agricultural and climate conditions. SimpliRoute reduces the delivery sector’s carbon footprint with a fleet of electric cars and software to optimize delivery routes. The two startups are the first investments from Fundación Chile’s $18 million venture fund CLIN, which seeks to “mobilize the entrepreneurial talent that is solving Chilean problems that have global relevance.” Learn more.

Inclusive fintech chatbot Charlie raises $9 million. The Bay Area-based company offers a personal finance service to make it easier for people to ask financial questions, budget, alleviate debt, and work towards savings goals. Rather than an app, Charlie uses text- and messenger-based chat to reach customers traditionally underserved by financial services. In three years, Charlie has attracted more than 250,000 users. Four out of five are women; the average age is 27. The company’s $9 million Series A financing was led by fintech venture firm Propel Venture Partners. Read on.

Signals: Ahead of the Curve

Omidyar Network pushes investors ‘Beyond Tradeoffs’ to scale capital for impact. Different parts of investment portfolios achieve different types of impact with varying degrees of risk and return. That is true of all investing, not just impact investing. A new series of 10 essays sponsored by the Omidyar Network makes that point repeatedly in an effort to move the discussion of impact investing “beyond tradeoffs.” The tired debate about whether or not impact investments require tradeoffs between impact and returns misses a key market development: The range of investment strategies that already exist all along the spectrum of risks and returns. On display in the series are investors arrayed on a spectrum from “market-validated” to simple capital preservation. ImpactAlpha has rounded up a first set of takeaways (stay tuned for Part 2):

  • Ford Foundation: Risk is as important as returns in risk-adjusted returns. Take real estate. An investment in affordable housing, where investors can be confident operators will be able to find renters, keep tenancy high and vacancies low, may be less risky than an investment in upscale rental housing. Pay attention to the fully risk-adjusted price of an investment, write Roy Swan, Christine Looney, and Darren Walker of the Ford Foundation. Ford has invested the first $40 million of the $1 billion endowment commitment to impact investments.
  • Elevar Equity and the Rise Fund: Growing businesses mean growing impact. The commercially minded investors often co-invest in “co-linear” business models in which drivers of business success also deliver impact. The bet from Elevar, an early-stage investor with $165 million under management in three funds, and TPG’s $2.1 billion Rise Fund: Alignment between impact and financial strategies will bring institutional investors off the sidelines.
  • Blue Haven Initiative: Find the right type of capital for the job. The $500 million family office of Liesel Pritzker Simmons and Ian Simmons plays across the returns continuum to expand its opportunities to have scalable impact. “We have experimented with and refined our rationale for when it makes sense to deploy what type of capital,” writes Pritzker Simmons.
  • Goldman Sachs: Use ESG to manage downside risks and ride upside trends. Goldman acquired San Francisco-based Imprint Capital and now claims supervision of more than $15 billion in targeted ESG (for environmental, social and governance) and impact investing assets (and an additional $70 billion in assets with ESG screens). Goldman’s John Goldstein and Megan Starr say a nuanced understanding of environmental, social, and governance issues “can augment our traditional ways of thinking about risk and return.”

Read, “Omidyar Network pushes investors ‘Beyond Tradeoffs’ to scale capital for impact, by Dennis Price on ImpactAlpha.

Agents of Impact: Follow the Talent

Incofin is looking for a senior debt investment manager in Phnom Penh… The Rise Fund’s Maya Chorengel, along with Mary Ellen Iskenderian of Women’s World Banking and Rockefeller Foundation’s Saadia Madsbjerg, will discuss innovative finance and the gender-lens opportunity at FT Investing for Good USA in New York  Dec. 4… Agriculture, livelihoods, clean energy, financial inclusion and health are on the agenda at the Sankalp Global Summit, Dec. 11-12 in Mumbai… SVT Group, Third Sector Capital and Social Value U.S. host an impact management skills training in San Francisco Dec. 12… Acumen is asking donors to fund #OneGreatIdea for #GivingTuesday.

November 27, 2018.