The Brief | March 5, 2019

Investing in China’s low-carbon transition, farmer financing in India, alt-consumer credit in Chile, six ideas for mobilizing climate finance

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Featured: ImpactAlpha Original

The next stage of the U.S.-China Green Fund’s investments in China’s low-carbon transformation. With a half-billion dollar fund and more than a dozen investments, the U.S.-China Green Fund has quietly executed the first stage in its strategy for accelerating China’s transition to a low-carbon economy. A first fund of 3.7 billion yuan ($550 million) opened channels into Chinese markets for agriculture, housing, building, manufacturing, transportation and small businesses. Stage two: The firm is raising a second, yuan-denominated fund of as much as $1 billion to invest in western firms with proven clean technologies. The distribution channels the Green Fund established through its first set of investments will help the foreign companies enter and navigate the Chinese economy, and plug their cleantech into the growing demand – and government mandates – for low-carbon solutions.

  • Low-carbon platform. The fund’s early investments have created distribution channels and platforms. Huitongda has built an online network of more than 100,000 shops that reach about one-third of China’s vast rural population. That creates a channel for safer fertilizers and pesticides as well as solar mini-grids, electric vehicles and other green products. The U.S-China Green Fund’s $70 million investment was quickly followed by a $717 million investment by Chinese ecommerce giant Alibaba. “This is private-equity-style nuts-and-bolts investing” in China’s green economy, the Green Fund’s Doug Cameron told ImpactAlpha.
  • Macro shifts. The global political environment is quite different than when the U.S.-China Green Fund was launched with high-level political support just a few years ago. Then, the U.S. helped pull China into the Paris climate accord. Now, China is forging new industries optimized for the low-carbon transition. National mandates around air and water pollution, sustainable agriculture and reforestation mean local officials are under pressure to meet environmental milestones. That’s an opportunity for U.S. firms, Cameron says.

Read, “U.S.-China Green Fund kicks off next stage of investments in China’s low-carbon transformation,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Jai Kisan raises seed funds to incentivize farmer financing in India. The Mumbai-based financial services firm aims to incentivize more lenders to offer services in India’s rural areas. Jai Kisan facilitates low-interest loans to Indian farmers to buy equipment and supplies, like seeds and fertilizer and also underwrites loans for other financial services firms. “We don’t believe economic and social impact can be achieved by displacing the traditional stakeholders,” Jai Kisan’s founder Arjun Ahluwalia said. The company’s $1.5 million seed round was backed by Blume Ventures, Astarc Ventures, Prophetic Ventures and U.K.-based Better Capital. Learn more.

Baseload Capital secures $12.5 million from Breakthrough Energy Ventures. Sweden-based Baseload Capital is a spinoff of Swedish energy technology company Climeon. Baseload raised $12.5 million from billionaire-backed Breakthrough Energy Ventures to invest in projects that use Climeon’s technology to convert geothermal energy into electricity. Baseload is the second geothermal investment from the $1 billion “de-carbonization” investment fund backed by Bill Gates, Jack Ma, Jeff Bezos and others. In all, the fund has invested in 10 companies with applications in energy generation and storage, food tech and agriculture. Read on.

Chile’s Destacame raises $3 million to boost consumer financial access. The Santiago-based financial services company uses alternative methods of credit-scoring to underwrite loans and offer basic financial products to underserved customers. Destacame offers products from more than two dozen financial services providers and serves 1.3 million customers in Chile and Mexico. Its Series A round was backed by Fen Ventures and existing investors Accion Venture Lab and Mountain Nazca. Dig in.

Signals: Ahead of the Curve

A half-dozen ways to accelerate capital for climate action. The ideas for climate-financing structures selected by the Global Innovation Lab for Climate Finance in San Francisco don’t have to be altogether new, just good. The Lab wants to “move the needle on climate change and shift global investment trends,” program manager Ben Broche told ImpactAlpha, “whether that happens through a complex wonky project or something that just hasn’t been tried before in a given sector or region.”

  • Sustainable cities. Credit enhancement from the International Finance Corp. would help cities in southeast Asia float Breathe Better Bonds to pay for air-pollution reducing projects…. To help cities replace air-conditioning cooling technologies that use climate-busing HFC gases, the Basel Agency for Sustainable Energy and the Kigali Cooling Efficiency Program would offer “Cooling as a Service” in which customers can pay per unit of cooling.
  • Blue Carbon. Conservation International’s Restoration Insurance Service Company for Coastal Risk Reduction, or RISCO, would help coastal property owners in the Philippines finance mangrove restoration through insurance-premium savings generated by reduced property risk. The idea borrows from a reef restoration project on the Mexican Riviera (see, “A reef off of Mexico is getting its own insurance policy).
  • Energy access. About $2 billion in U.S. solar project receivables were securitized last year, freeing up capital for further deployment, but only one securitization has been completed in Africa. The Development Bank of Rwanda is developing Solar Securitization for Rwanda to advance the country’s goal of 100% energy access by 2024.
  • Smallholder resilience. Farmers in West Africa would get automatic payouts when extreme weather events damage crops, through smart contracts developed by Blockchain Climate Risk Crop Insurance… Other West African farmers would get technical assistance and subsidized loans and guarantees under the The West African Initiative for Climate Smart Agriculture.

Since 2015, the 35 projects nurtured by The Lab have mobilized $1.4 billion in additional capital. This year’s call attracted more than 250 proposals, double last year’s response. The projects will be marched through a six-month process of analysis, stress-testing and development in order to launch later this year. “We want to know how they will take cheap money, phase it out, bring in commercial capital and reach scale,” Broche said. Share this post.

Agents of Impact: Follow the Talent

Todd Moss departs the Center for Global Development to lead the Energy for Growth Hub… Marland Buckner, Mike Davis and Vicki Lundy Wilbon join the board of Philadelphia-based Reinvestment Fund… WeWork is recruiting a New York-based manager for its public policy and veterans-related social impact initiatives… Capria seeks a Seattle-based manager to lead business operations… Vermont social enterprise center Black River Innovation Campus is hiring an executive director… ANDE’s Brazil chapter is looking for a full-time analyst… Oxfam is hiring in the Netherlands to support its innovation fund.

March 5, 2019.