Greetings, ImpactAlpha readers! We hope you’re rested and ready from the long (U.S.) weekend and your summer adventures. It’s back to school and back to work. Here’s to a high-impact fall season.
Signals: Ahead of the Curve
Monetizing impact to finance green small businesses in South Africa. The risks, real and perceived, and high-costs of investing in early-stage businesses in emerging markets have starved many enterprises of capital to grow. The capital gap is even wider when those businesses are using innovative green business models and technologies targeted at climate action and resource constraints. A unit of the World Bank that has designed a fund to address this “missing middle” green financing gap in South Africa reports, “By monetizing impact, the Green Outcomes Fund is able to mitigate the disproportionately high costs and risks associated with these investments, thereby developing the green finance sector.”
The Green Outcomes Fund is part of a new category of financial instruments that directly reward social impact in order to draw commercial capital to impact investments. The World Bank Group’s Climate Technology program led the design of the Green Outcomes Fund, which will pay local fund managers for delivering impacts such as green sector jobs created, tons of carbon sequestered, access to renewable energy for people without electricity and improved water and waste management. The bank, along with the University of Cape Town’s Bertha Centre, GreenCape and WWF-South Africa, is raising up to 50 million rand ($3.4 million) to incentivize fund managers to make such investments by reducing risks and raising returns. A half-dozen fund managers that have agreed to make investments into green enterprises will receive payments from the Green Outcomes when the enterprises achieve the agreed-upon outcomes. Others efforts to monetize impact include:
- Social Impact Incentives. An early test of direct payments to ventures with verifiable impact, at a string of diabetes clinics in Mexico, suggests that social impact incentives can nudge companies towards greater impact and help them attract financing.
- Social Success Note. Interest payments on the UBS Optimus Foundation’s loan to Impact Water will be reduced if the organization hits targets for installation of water purification systems in Ugandan schools.
- Payment waivers. Beneficial Returns has agreed to waive the final payments on loans to Sistema Biobolsa and Iluméxico in Mexico if the firms achieve their stated impact goals.
- Impact carry. Bamboo Capital’s Arun Asok (in ImpactAlpha) proposed an “impact carry” as a way to incentivize fund managers for generating social returns.
Share, “Monetizing impact to finance green small businesses in South Africa,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
Dealflow editor Jessica Pothering is reporting this month from ImpactAlpha’s Madrid bureau:
Swedish investors back first World Bank oceans bond. Only a handful of impact funds are focused on water and ocean sustainability. Now the World Bank has launched a one billion Swedish krona ($110 million) bond to finance initiatives related to Sustainable Development Goal No. 6 (clean water and sanitation) and No. 14 (life below water). Swedish pension fund AP1, asset manager Storebrand, and bond funds from Nordic banks SEB and Swedbank are backing the bond, the first to come out of World Bank’s $3 billion bond initiative to crowd in private capital to support the water goals. Dive in.
AgDevCo secures £55 million to expand small farmer support in Africa. The U.K.-based agribusiness impact investor has secured funding from the U.K.’s Department for International Development (DFID) to expand operations to Kenya and the Ivory Coast. DFID has a £98 million initiative to boost Africa’s agricultural sector. Read on.
Social Impact Ventures backs We aRe SpinDye’s water-friendly textile tech. The textile industry causes nearly 20% of industrial water pollution. We aRe SpinDye has devised a water- and toxin-free textile dyeing process. Dutch impact fund Social Impact Ventures invested an undisclosed amount in the Swedish startup. Learn more.
Agents of Impact: Follow the Talent
Good Capital Project and the UN Jordan team launched 17Jordan to direct capital to investments that advance the Sustainable Development Goals in Jordan (where ImpactAlpha’s Zuleyma Bebell last week helped launch ImpACT Amman)… Fresh Coast Capital is now Greenprint Partners. The firm is hiring a project manager for green infrastructure projects in Chicago… The Latin American Private Equity & Venture Capital Association wants nominations for its list of top women investors in Latin American tech. Last year, impact investors made up nearly one-quarter of the 43 winners (see, Impact investors shine on list of women venture capitalists in Latin America).
— September 4, 2018.