ImpactAlpha, Dec. 27 – Impact investing funds are sitting on some $200 billion in dry powder, according to Pitchbook.
To get a sense of where that capital might flow, check out our weekly Dealflow Spotlight. Curated from our daily dealflow coverage, we highlight a category, sector, technology or geography attracting capital and dig deeper into trends. Geothermal heat pumps, India’s EV startups, and women-led funds were among the high-impact opportunities we called out this year.
Investors in both public and private markets increasingly are finding alpha in impact, as we highlighted in our year-end look-ahead.
Here are some of the places they’ll be looking in 2024:
Blending global insurance assets for impact
Allianz, the rare insurance company with a dedicated development-finance team, took the initiative to create a new $1.1 billion SDG Loan Fund, backed by a $25 million guarantee from the MacArthur Foundation and a $111 million first-loss reserve from the Dutch development bank FMO. Global insurance companies with over $41 trillion in assets are increasing their allocations to impact investing, with a compound annual growth rate of 32% between 2017 to 2022, according to the Global Impact Investing Network. Keep reading.
Progress and gaps in global climate finance
Global climate finance flows reached an annual average of $1.3 trillion in 2021 and 2022, double the amount in 2019 and 2020, according to Climate Policy Initiative’s biannual tally. The gains were propelled by strong investment in solar and wind power and electric vehicles. China accounted for just over half of all climate finance investment. Brookfield Asset Management raised a fresh $6 billion green infrastructure debt fund, and TPG is eyeing a follow-on to its $7 billion Rise Climate fund and is. As large as they are, private funds are just a tiny sliver of overall climate finance, which is dominated by development finance agencies, banks, corporations and households. More.
Equipping frontline communities for the climate transition
Low-income communities that bear the brunt of climate change also hold the key to many climate solutions. Elemental Excelerator, a nonprofit climate tech investor known for spotting and nurturing climate tech talent working on community-centric solutions in frontline communities, secured a $1 million grant from the Rockefeller Foundation to demonstrate how philanthropic capital can unlock 10x the amount in follow-on funding from green banks and community lenders, and prepare startups to tap federal climate resilience funds. Elemental alumni companies include BlocPower, ChargerHelp and DollarRide. Dive in.
Commercializing geothermal heat pumps
Obstacles that have kept geothermal heat pumps — which draw heat from the earth’s core to provide low-carbon heating in the winter and transfer hot air underground for cooling in the summer — are falling away. A wave of cleantech ventures, including Bedrock Energy and Dandelion Energy, are promising less drilling and less cost for access to draw heat from the earth’s core. In New York, Dandelion is installing geothermal heat pumps for single-family residential homeowners. LA-based Bedrock is piloting a technology that taps into the earth’s upper layers to power geothermal heat pumps in commercial and industrial buildings. Keep reading.
Employee ownership as a competitive advantage
When Jonathan Karp, the CEO of book publishing giant Simon & Schuster, explained to staff why KKR had won the $1.6 billion auction for the New York-based publisher, he touted the private equity firm’s pledge to let employees participate in the benefits of ownership. Investors with employee-ownership strategies are gaining a competitive advantage over their competitors on deals. KKR last year helped launch Ownership Works, enlisting TPG, Apollo and dozens of other private equity investors to pledge to give equity shares to employees at some portfolio firms. Check it out.
Asia’s appetite for impact
Asia’s growing wealth, and with it, private and institutional investors’ capital, is driving more Asian asset owners into impact investing. “These are not your 100% impact investors,” says Yalin Karadogan of impact fund management firm LeapFrog Investments. “They’re very experienced commercial investors, and they’re very much focused on returns.” Dig in.
Catalyzing women-led funds
For first-time fund managers—particularly women—catalyzing often goes beyond the capital. A grant from Comcast will help New Mexico’s Native Women Lead cover infrastructure costs for a new debt fund looking to back 200 Indigenous women-led businesses. In South Africa, Linea Capital, which provides revenue-based financing to local women-led and -centered businesses, secured a grant from USAID to cover operating expenses for a fund. More.
India’s EV startups
Electric two- and three-wheelers make up the large majority of EV sales in India, where the government wants to get more EVs on the road and install the charging infrastructure to support them. Ola Electric, a Bangalore-based e-scooter maker, is looking to raise 55 billion rupees ($662 million) in an initial public offering, or IPO, the first by an EV maker in India. Ola Electric raked in $584 million in debt and equity investments this year. EV startups raised nearly $1.7 billion last year, a 117% increase from 2021. Check it out.
Battery innovation speeds the energy transition
Nearly 200 nations agreed to triple global renewable energy by the end of the decade at COP28. “Batteries are a huge part of that story,” says Daan Walter of research firm RMI. Whether for energy storage or electric vehicles, battery tech battery tech is on a tear, and investors are keying in. Boston-based AM Batteries raised $30 million in a Series B round, backed by Toyota and Porsche, for its dry electrodes for lithium-ion batteries. Ion Storage Systems, in Maryland, raised $15 million for solid-stage lithium-ion batteries. The battery ramp-up is “set to enable the phaseout of half of global fossil fuel demand,” says RMI. More.
Global corporations push for recycled plastic
More than 500 companies, including large brands such as The Coca-Cola Company, Unilever and L’ Oreal, have committed to using recycled plastic in their packaging, and are backing funds to increase the supply of recycled plastic. Circulate Capital’s Ocean Fund, which invests at the intersection of climate tech, plastic recycling and the circular economy, raised $73 million earlier this month from LPs including PepsiCo, Coca-Cola, Unilever and Chevron Phillips. Earlier this year, Circulate raised $65 million from the same group of corporate partners, alongside other investors, to invest in recycled plastic businesses in Latin America and the Caribbean. Share.