Greetings, ImpactAlpha readers!
#Featured: Open Mic
‘Future of impact’ requires investment, philanthropy — and business as a force for good. As Bill Gates says, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” For its 10th anniversary last month, Liquidnet For Good hosted “The Future of Impact” forum to explore the next 10 years of effective philanthropy, impact investing, and business as a force for good.
What will the next ten years of impact look like? How might we generate impact using the tools of philanthropy, investing, and traditional companies? How can we learn from others who are also working to generate impact in very different (yet adjacent) organizations and fields? “Over the years, the impact that we’ve had has been incredible for this company,” Liquidnet CEO Seth Merrin said at the event. “Those are the returns that we have to talk about — the ability that it has given us to attract the right people, retain the right people, to give our people a higher purpose to what they do.”
Read (and listen to!) the full recap from ‘The Future of Impact’ from Brian Walsh of Liquidnet For Good:
(Full disclosure: Brian is a longtime advisor to ImpactAlpha and host of our Returns on Investment podcast; Liquidnet is an investor in ImpactAlpha through the Liquidnet For Good Fund.)
#Dealflow: Follow the Money
Climate Investor One raises $412 million for wind and solar project financing. Climate Investor One was conceived in 2014 and incubated by the Global Innovation Lab for Climate Finance. The fund is looking to back twenty 30- to 60-megawatt projects in Africa, Latin America and Asia with up to $100 million each. What’s new is a 20-year blended fund to finance the full cycle of renewable energy projects: from “first-loss” donor-based project development fund to scope projects with renewable developers; to an institutional capital-backed construction equity fund; through a debt fund to refinance operational projects based on yield and cash flows. The intent is to provide start-to-finish financing in markets where coordinating financial structures is inefficient or impossible, Climate One’s Andrew Johnstone told ImpactAlpha. The partnership between Dutch development bank FMO and South African fund manager Phoenix Infraworks closed on $412 million of a targeted $500 million, from Norwegian, South African and U.K. pension funds, Dutch public agencies and donors from the U.S. and Netherlands. “The consistent response we got during the fundraise was ‘this doesn’t quite fit the box,’” Johnstone said. “That’s by design; nothing in climate change mitigation fits the box.”
Tizeti raises $2.1 million to spread solar-powered wifi in Nigeria. Nigeria has the largest number of internet users in Africa, but fragile internet infrastructure. Tizeti founder Kendall Ananyi launched out of Y Combinator in 2012 to deliver faster, cheaper wi-fi for Nigeria’s urban residents. The company capitalizes on the falling cost of solar panels to build solar-powered mini-network towers across Lagos. Using solar, rather than diesel generators, reduces costs as well as carbon emissions. Tizeti, with 3,000 public hotspots in Lagos, plans to expand across Nigeria and then Africa. Investment came from Western Technology Investment, Social Capital, Vy Capital, and Picus Capital as well as Michael Seibel and Gabriel Hammond of Y Combinator.
C4Q investors will get paid for success in workforce training in Queens. New York angel investor Tony Davis invested $750,000 in a bond to retrain low-income, low-skilled workers for tech jobs in the borough of New York. The non-profit C4Q has enrolled 200 students from New York in its 10-month program since 2013. On average, students more than quadruple their incoming salaries of $18,000 per year. Now, C4Q is asking students to donate 12% of their salaries back to the program for two years. “It’s not a loan, and it’s not a debt,” founder Jukay Hsu says, but it will enable C4Q to repay Davis at a 6.6% rate of return. Other organizations are testing a similar approaches. Microsoft is backing a similar initiative in Colorado with a $25 million grant. “We need new approaches, or we’re going to leave more and more people behind in our economy,” Microsoft’s Brad Smith told the New York Times.
Follow the people. Asset manager Barrow Hanley in Dallas, with more than $91 billion in assets, hired Ross M. Campbell as director of responsible investing. Campbell comes from the SRI Research Group and will integrate environmental, social, and governance (ESG) factors into Barrow Hanley’s investment processes. Giselle Leung was promoted to managing director at the Global Impact Investing Network. Leung joined the GIIN in 2010 and said there is still “much more work to do to ensure impact investing reaches its potential.”
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Development impact bond in India delivers positive results for girls and investors. The Educate Girls development impact bond is at risk of validating its premise. With the bond, Educate Girls aims to improve education for 15,000 children, 9,000 of them girls, in 166 schools in 140 villages in Rajasthan, India. Two years into the three-year program, Educate Girls has achieved 87.7% of the 3-year enrollment target and 50.3% of the 3-year learning target. Reaching those goals next year would strengthen the notion that aligning incentives between partners and linking them to increased learning in the classroom yields better outcomes. UBS Optimus Foundation provided a modest $238,000 in upfront working capital, is on track to recoup is initial investment (plus interest) from the Children’s Investment Fund Foundation (CIFF), which backed the bond. Educate Girls trains young volunteers to go door-to-door to encourage families to enroll their girls in school and provide learning support. Says Dr. Neil Buddy Shah, CEO of IDinsight, which is conducting a clustered randomized control trial to evaluate the program, “This is the gold standard of scientific evidence, giving the funders a high degree of certainty on whether the program works.” The World Bank is tip-toeing towards an expanded use of development impact bonds. Colombia recently launched one to boost employment.
Big Renewables. Come 2030, the big names in renewable energy could be corporations we used to call “oil companies.” The French oil giant Total invested $4.7 billion in solar, biofuels and batteries (along with gas) last year, the Guardian reports. Norway’s Statoil is building the first-ever floating offshore windfarm. Shell is pledging to commit $1 billion per year to biofuels, hydrogen, and renewables by 2020. In all, today’s big oil and gas producers could spend 20% of their capital investment dollars on renewables in the next 10 years.
Critics scoff that unless renewables become core to the oil giants’ business, the impact of these investments will do little more than dress up their corporate income statements. “Twenty percent of capex doesn’t even come close” to fulfilling the goals of the Paris climate agreement, said Greg Mutitt of Oil Change International, an advocacy group. “That 80% of capex is still causing the problem.”
But a tipping point could be near, research group Wood Mackenzie notes in a new report (paywall). Renewables is the fastest growing energy sector, and is on track to grow to 21% to 36% of the world’s energy mix by 2030, from 18% in 2010. To seize a renewables market share similar to their current oil and gas share, major oil producers need to invest $350 billion on wind and solar power by 2035. “They are recognizing it is a megatrend; it’s not a fad, it’s not going away,” said Wood Mackenzie’s Valentina Kretzschmar. “There is definitely a risk to their core business.”
Onward! Please send any news and comments to [email protected].