Oceans on deck, indoor farms in the Mideast, Asia’s hotspots, a merchant bank for social ventures?



Greetings, ImpactAlpha readers!

#Featured: ImpactAlpha Original

It’s all-oceans, all week at the Ocean Conference at the United Nations. The running list of 645 “commitments” in advance of the weeklong conference to clean up the seas, restore fisheries and slow coral bleaching and meet Sustainable Development Goal №14 now totals nearly $7 billion from governments. But where is the private sector?

Less than 50 pledges come from companies and private investors, and most of them are small-scale and aspirational. It’s not for lack of opportunities. ImpactAlpha has been tracking sustainable seafood entrepreneurs and impact investments in ocean restoration for several years. Among the opportunities: sustainable aquaculture (and sustainable fish feed), coastal fishery restoration, traceability tech to weed out illegal fishing and debt-for-nature swaps that help island states increase their climate resilience.

Check out ImpactAlpha’s #FinancingFish roundup:

Where are the private investors at the UN Ocean Conference?

#Sponsored: Wetherby Asset Management

Wetherby Asset Management is proud to sponsor ImpactAlpha as it redefines business media around social and environmental value. Learn more about Wetherby’s approach to impact investing and check out our latest industry brief on shareholder engagement on our website.

#Dealflow: Follow the Money

AeroFarms gets Dubai backing for indoor farming in the Middle East. AeroFarms is the latest indoor agriculture companies to gain attention for its potential in the Middle East. The U.S. based venture closed $34 million of a planned $40 million Series D round, backed by Meraas, the investment vehicle for Dubai’s leader Sheikh Mohammed bin Rashid, which will support its expansion in the Middle East. AeroFarms runs nine indoor aeroponics farms, which produce leafy greens nourished by LED lighting and mist. It employs 120 scientists and engineers on its team. Pegasus Agriculture Group owns indoor hydroponics farms in Abu Dhabi and regionally, while Indoor Farms of America recently expanded sales to the Middle East. AeroFarms’ has raised $130 million since 2014, with backing from other overseas investors, including U.K.-based Wheatsheaf Investments and China-based GSR Ventures.

Mera Gao Power raises $2.5 million to expand rural India reach. The capital will be used to expand solar power to 5,000 off-grid villages in Uttar Pradesh, a state in northern India with a mostly rural population of 200 million people. Mera Gao Power launched in 2010 offering low-cost solar microgrids to small, very remote villages for as little as $1,000 per installation. The company operates in markets where grid expansion is unlikely in the near future, in spite of a government goal to electrify every Indian village by 2019. Singapore-based Impact Investment Exchange (IIX) helped Mera Gao Power raise the capital from the Insitor Impact Fund, the ENGIE Rassembleurs d’Energies Initiative, and the Electrification Financing Initiative.

Amazon partners with Indian government on digital payments. Amazon’s digital wallet service, Amazon Pay, will allow users to make small transactions to pay for utility bills, insurance payments, education fees and local transit. Last year, Amazon invested $10.5 million in its distribution reach in Asia, with a big focus on the Indian market. The e-commerce giant’s big move in digital payments in partnership with government agencies will expand Amazon Pay beyond the online market and convenience services, like food delivery. Last year’s demonetization push in India has spurred growth among digital payment providers, including MobiKwik and Alibaba-backed Paytm, which is launching a digital bank. Hundreds of millions of India’s 1.2 billion citizens lack access to financial services. Digital payments and banking in India is “about new customers [and] showing that there’s a business model based on transactions, not just wealth management,” says Paytm’s Vijay Shekhar Sharma.

#Signals: Ahead of the Curve

Could an impact investing merchant bank fill the growth-stage capital gap? An impact investing merchant bank would arrange financing via share ownership instead of loans. The idea was floated at a recent workshop hosted by Echoing Green, the three-decade-old nonprofit fellowship program and accelerator. A study of 49 Echoing Green fellows running for-profit and hybrid startups* found impact ventures continue to need business support services at later stages, to scale their models. Particular areas of need include funding introductions, transactional support, and valuation assessment. The study spotlighted the fragmentation of the investment side of the impact sector, Echoing Green’s Min Pease told ImpactAlpha. “If [an investor] in Silicon Valley tells someone no, they’ll recommend five other potential investors. We don’t have that in impact investing,” Pease says. “A lot of money went into building the venture capital industry infrastructure. There has not been that kind of investment in impact infrastructure yet.” Enclude led the study, with support from the MacArthur and Kresge Foundations. The full findings are available online. *Footnote: Echoing Green used to cater to nonprofits but has seen a surge in for-profit social ventures applicants in recent years.

#2030: Long-Termism

Driving job growth in Asia with investments in global goal “hotspots.”Businesses serving Asian markets could capture more than 40 percent of the projected $12 trillion in new revenues and cost savings from solutions targeting the UN Sustainable Development Goals. The $5 trillion estimate for Asia’s chunk of the SDG booty comes in a follow-on report to January’s Better Business, Better World business case for the SDGs, in which the Business & Sustainable Development Commission laid out the original $12 trillion figure. Asia also stands to gain two-thirds of the estimated 320 million new jobs by 2030 in global goal “hotspot” industries of food and agriculture, energy, cities and health.

Affordable housing represents the biggest business opportunity in China and the rest of emerging and developing Asia (see, “KKR invests in affordable housing projects”). In India, where healthcare sector is undersupplied, risk-pooling in healthcare is the largest opportunity (see, “Toro Finance launches fund to expand healthcare in India”). In food and ag, a $1 trillion business opportunity overall, reducing food waste in food systems ($260 billion) and low-income food markets ($190 billion) represent the largest opportunities (see, “Startups raise seed capital to tackle food waste”).

Unlocking that SDG-aligned growth in Asia will require $1.7 trillion in investment each year through 2030. To attract more private capital, look to blended finance, says the report, where philanthropic and public funding can lower risks and increase returns. Says Paul Polman, CEO of Unilever and member of the Business Commission, “Strategies that sustainably meet the demands of the growing middle-class in the region, whilst at the same time tackling urgent environmental and social challenges will ultimately be successful in unlocking market value.”

Onward! Please send any news and comments to TheBrief@impactalpha.com.

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