The Brief | April 24, 2019

Sustainability linked loans, alt-lending in India, Atlanta’s affordable housing startup, BlackRock’s sustainability scorecard, inclusive climate jobs

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

An incentive for companies that deliver on sustainability: lower-cost capital. A $3.5 billion line of credit this year for industrial real estate giant Prologis had a novel feature: the interest rate drops each year as long as the company achieves specific sustainability benchmarks. Last year, United Kingdom residential developer London & Quadrant closed a $132 million (100 million pound) loan that included an interest rate discount if the company met a target of helping 600 unemployed residents find work each year. And Olam, the Singapore-based food giant, last year closed a $500 million revolving credit facility with 15 major banks that lowers its interest payments if it hits sustainability targets. Such “sustainability-linked loans” represent a way to “pay” companies, with lower-cost capital, for boosting resource efficiency, mitigating climate risks or improving relations with local communities.

The new financial products are based on the proposition that sustainability improvements can reduce costs and risks enough to deliver an acceptable return to lenders even at a lower interest rate. “If you look at companies, they’re increasingly making public commitments on their sustainability performance and financing is a logical follow on,” said Anne van Riel, who heads sustainable finance in the Americas for the Dutch bank ING. “Sustainability-linked loans are an engagement product, whereby banks engage with their clients on what the main risks are and how they go about mitigating those.” Globally, sustainability-linked loans totaled more than $36 billion last year. A new set of global principles for sustainability-linked loans could expand the market. “We just want to do our part in helping break this market open,” said Prologis’ Tim Arndt. “We think this is the next important wave in all this green financing.”

Read, “An incentive for companies that deliver on sustainability: lower-cost capital,” by Liz Enochs on ImpactAlpha.

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Dealflow: Follow the Money

PadSplit raises $4.6 million to match tenants with affordable housing. The Atlanta-based company matches prospective tenants with rooms close to where they work, and charges them a weekly rental fee, which includes utilities, laundry and internet. PadSplit launched in 2017 with a goal of improving low-income individuals’ access to affordable housing by managing single-family rentals. The company manages 200 units in 30 houses in Atlanta and plans to launch in other cities this year, Hypeopotamus reports. Backers of PadSplit’s seed funding round included Core Innovation Capital, which led the round, Enterprise Community Partners, The Impact Engine, Kapor Capital, Techstars Ventures, Cox Enterprises, 1984 Ventures and Metaprop. “We were very focused on investors that we thought could add either significant value or credibility,” said PadSplit’s Atticus LeBlanc. “We didn’t want to sacrifice quality of our mission here.” More.

ZestMoney secures $20 million to lend to India customers with no borrowing history. The three founders of the Bangalore-based fintech firm had worked at a payday lender and wanted to create a better experience for consumers with few borrowing options. “Zest is India’s first completely automated lending platform designed for underserved consumers,” according to Omidyar Network, which re-upped its investment in the company. ZestMoney approves customers for lines of credit, which it pairs with voucher codes for shopping at partner merchants like Amazon. Its customers repay at a fixed monthly rate, with no penalties for prepayment (the company doesn’t disclose its interest rates). The Series B round was led by emerging market fintech investor Quona Capital, joined by Reinventure, Ribbit Capital, and PayU. Read on.

Tencent backs another Latin America neo-bank, taking a stake in Ualá. Argentina-based Ualá offers mobile deposit accounts and prepaid credit cards to the majority of Argentines without bank accounts. The three-year-old-company has issued more than 500,000 prepaid credit cards, Bloomberg reports. Chinese internet giant Tencent has acquired an undisclosed stake in the company. The deal with Tencent comes six months after Tencent made a $90 million investment in Nubank, which provides similar services in Brazil. It’s the latest in a series of funding rounds for Latin American alternative finance companies. Goldman Sachs led Ualá’s $34 million Series A round last October. Dig in.

Signals: Ahead of the Curve

Sustainability eludes BlackRock’s core business. A year after CEO Larry Fink signaled BlackRock’s shift towards sustainability, the World Resources Institute gave the asset-management giant a mixed report card. BlackRock is expanding its offering of sustainable investment products and capacity, but falling short on its climate-disclosure voting record and exposure to fossil fuel development. More from WRI.

How to get more impact capital to more local entrepreneurs. The majority of donor and impact capital meant for social entrepreneurs in Africa is flowing to expat-led companies, FarmDrive’s Peris Bosire told Devex at the Skoll World Forum. To overcome implicit bias, investors need new sourcing strategies, more flexible capital and more ways to meet African entrepreneurs. More from Devex.

Driving inclusion through clean energy jobs. Workers in clean energy in the U.S. earn higher and more equitable wages than most workers nationally, with lower educational requirements. But clean-energy workers are older, mostly male, and mostly white. Advancing inclusion through the expansion of clean energy will require new curricula, on-the-job training opportunities, and new talent pipelines. More from Brookings.

Agents of Impact: Follow the Talent

Kale United is hiring a chief financial officer in Stockholm, Sweden… Terra Alpha Investments seeks a research analyst in Washington D.C…. Also in D.C., Illumen Capital is looking for a summer intern (see, “Tackling investors’ racial and gender biases to unlock hidden value).

April 24, 2019.