Hello ImpactAlpha readers! Our U.S. readers already are well into Memorial Day weekend, the semi-official kickoff of summer, when we also remember our war dead. We’ll be off on Monday, but back on Tuesday, with a kickoff of our own.
#Featured: Follow Friday
This is the 17th week and 89th issue of The Brief. Close followers of ImpactAlpha may notice that we’re building this proverbial plane while we’re flying it. Among the things we’re building are more robust channels for distributing impact investing news across business and finance. Our newest product is ImpactAlpha’s new home on Medium.com. You can follow us there, and also share, highlight, recommend, comment — and contribute to ImpactAlpha. While you’re at it, go ahead and follow us on Twitter and Facebook as well, and subscribe to our podcast. And we’re working with a growing network of events and partners to cover people and projects, companies and capital, so we’ll be seeing you around.
The Brief Quiz (№16)
This week in impact investing. What’s offering hope for rebuilding Syria? What’s helping the Indian affordable housing market take off? What’s wrong with impact investments in East Africa? And what did ImpactAlpha get down with this week?
Test your Impact IQ. Take this week’s Brief Quiz, from Jérôme Tagger:
#Dealflow: Follow the Money
Green Climate Fund dangles $500 million for climate mitigation and adaptation. The international fund’s new Private Sector Facility is looking for project proposals by August in energy, transport, forests and land use, and city infrastructure. Invited to “Pitch for the Planet” are “high impact projects and programs that mobilize private sector investment in climate change activity at scale.” The RFP says investments can come as equity, debt, grants or guarantees. The fund, established in 2010, has been criticized for being slow to disburse funding. Last year it ramped up its efforts and now says it has approved $2.2 billion in 60 countries. Green Climate Fund was a key part of the 2015 Paris Climate Agreement, with the U.S. pledging $3 billion to the planned $10 billion fund. Before leaving office, the Obama Administration expedited the first $1 billion.
A decent exit for early investors in India’s ItzCash. ItzCash targets India’s middle and lower classes, particularly small businesses and traders that run cash-based businesses. That was attractive to U.S.-based insurance software firm Ebix, which invested $123 million in ItzCash in exchange for an 80 percent stake; the deal values ItzCash at about $150 million. Indian conglomerate Essel Group will retain 20 percent while early investors Matrix Partners, Lightspeed Venture Partners and Intel Capital have exited with between 3X and 5X returns. One of India’s earliest digital payments companies, ItzCash launched in 2005, when more than 95 percent of financial transactions in India were cash-based. It recently crossed $2 billion in transactions, with average transaction sizes of 1,200 to 1,500 rupees ($18 to $25). ItzCash will expand outside of India, and add insurance and telehealth payments.
And an exit for Adobe Capital from Mexico’s NatGas Queretaro. Adobe, the venture fund of Mexican impact investing firm New Ventures, has exited its investment in NatGas Queretaro, New Ventures told ImpactAlpha. NatGas helps taxis and buses in Mexico convert to natural gas, cutting 30 percent of CO2 (and fuel costs by half). Details on the exit were not disclosed. NatGas was started in 2012; Adobe’s 2014 investment helped NatGas convert 2,500 vehicles and eliminate 150 tons of CO2. Mexico has pledged to cut its greenhouse emissions by 22 percent by 2030. The transport sector — mostly cars — is responsible for close to 40 percent of emissions. Mexico City is investing $150 million into greening its own transit infrastructure. Adobe aims to fill the “missing middle” gap in capital for Mexican small and growing businesses. It launched a second, $40 million mezzanine fund at the end of last year.
Salt Lake City launches pay-for-success bond to help ex-offenders stay out of prison. Salt Lake County is the home of one-quarter of all social impact bonds launched in the U.S. That’s only a dozen total, but SLC has three of them. The newest is the $5.95 million REACH program (which stands for Recovery, Engagement, Assessment, Career and Housing) to help the formerly incarcerated stay out of prison with help for mental health and substance abuse problems. The six-year program will work with 225 adults. Another “social impact bond,” launched last year, also helps people stay out of jail by providing housing assistance to 315 homeless individuals. The two programs are part of an $11.5 million initiative commissioned by Salt Lake County and backed by the Sorenson Impact Center and investors such as Northern Trust and Living Cities (read more from Living Cities on the REACH project). There have been four other homelessness and three other anti-recidivism pay-for-success efforts. One, on New York City’s Riker’s Island, was abandoned.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Which investors will get in on the explosion in sustainable food and agriculture? The more than $300 billion in annual investments needed to implement the 2030 global goals related to food will unlock more than $2.3 trillion in business opportunities each year. And sustainable food system investment opportunities are everywhere. In real estate investments in organic farmland and sustainable managed forests. In public and private equity in agtech and healthy food companies. And even in cash deposits in community banks that turn into debt for small farmers and grocery cooperatives. Financing Resilient Value Chains through Total Portfolio Activation from the Croatan Institute and a host of agriculture investors and networks compiles old and new research and case studies to show investors how to invest in sustainable food systems across common asset classes. The report dives deep into sustainable production and consumption, agtech, conservation and climate change, social equity and sustainable livelihoods. There’s still time to get in. The recent Global Impact Investing Network survey shows just six percent of impact assets are allocated to the food and ag sector.
The Future of Europe requires sustainable development. A spectre is haunting Europe…the spectre of stagnation. The most recent white paper on the Future of Europe outlined five scenarios in the face of Europe’s decreasing influence and economic power. Europe’s global economic contribution is expected to fall below 20 percent by 2030, compared to 22 percent today.
The scenarios, however, neglected Europe’s leadership in sustainable development. The 28 member countries of the EU are together the world’s largest aid donor, providing about half of all official development assistance, or foreign aid. True, Europe has a lot on its plate, from uncomfortable Brexit negotiations and resistance from the Trump administration on NATO, trade and climate change. In the face of these challenges, the EU has to redouble its efforts towards the Sustainable Development Goals, writes Luca Jahier of the European Economic and Social Committee.
The UK’s approach to the SDGs may serve as a warning (see: “Achieving the 2030 Global Goals Begins at Home”). “At precisely the time when others turn away from their commitments, it is imperative that the EU maintains the momentum, accelerating, investing in and embracing change,” Jahier writes. The European Commission needs to make sustainable development part of its “Future of Europe” vision, he says, and support “bottom-up initiatives” from local and regional players. “Business [also] has a pivotal role to play in leadership, innovation and investment in change,” he writes, but says, “The debates surrounding sustainable development are profoundly political and they must take centre-stage in our political reflections on the future of the EU.”
That’s a wrap for this week. Have a great weekend! Please send any news and comments to TheBrief@impactalpha.com.