The Brief | April 28, 2021

The Brief: $100 carbon, solar access in Madagascar, health-based affordable housing, Chinese agricultural drones, off-take agreements in conservation finance

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Greetings, Agents of Impact! 

Featured: ImpactAlpha Original

TFW investors realize carbon is going to $100 a ton, sooner than they expected. Carbon hasn’t attracted as much attention as GameStop or Bitcoin, but the price of a ton of CO2 topped €45 ($54) in Europe’s emissions-trading scheme this month, nearly double the price at the beginning of the year. By region, country and state, the emergence of a global carbon market is making emissions, or rather emissions avoidance, just another commodity on the world market. Traders and investors who watch such markets are positioning themselves for a price that once seemed years or even decades away: $100 a ton. Global commodity traders like Singapore-based Trafigura and Netherlands-based Vitol are standing up carbon trading desks. Hedge funds are busy raising funds to try to corner carbon while prices are low. Andurand Capital Management’s Casey Dwyer told Bloomberg he expects the European carbon price to reach €100 this year. “We’re very confident the price-path forward is up,” he says.

A carbon price of $100 a ton will drive a disruption of massive proportions, from the fate of ExxonMobil to the profits of Midwest farmers. The shock of the price rise may be cushioned for hundreds of companies already internalizing the price on carbon in corporate decision-making. A carbon price is “a critical planning tool and companies are increasingly using it is an indication of their need to plan for climate change,” CDP’s Paula DiPerna told ImpactAlpha. The prices companies adopt, however, are all over the map, CDP reports. The U.K.’s Schroders sets its internal price at $128. Citigroup is at $68, Wells Fargo at $36 and BlackRock at $18. At Credit Suisse: $1. In Iowa, Illinois and elsewhere, soybean and corn farmers already have planted this year’s crop of carbon. “They view carbon as another crop, a commodity, another derivative of farming, like grain,” says Jason Weller of Truterra, a unit of the Land O’Lakes cooperative. Truterra has contracted to deliver 100,000 tons of carbon to Microsoft in June at $20 a ton. “Farmers are asking, ‘Why should I sell today if the price of carbon is going up 2x or 3x?’” Weller tells ImpactAlpha. Truterra enlists farmers in a 20-year improvement plan that lets them sell their carbon each year at current prices.  

Keep reading, “TFW investors realize carbon is going to $100 a ton, sooner than they expected” by David Bank and Amy Cortese on ImpactAlpha. 

Sponsored by BlueMark: Impact Verification

Why independent verification should be part of every investor’s impact management journey. A good financial audit can help firms spot unknown risks, identify areas for improvement, and strengthen systems and processes for the future. The same is true for impact assurance. BlueMark, an impact assurance company founded in January 2020, has completed more than 30 impact verifications across investor types and asset classes. A well-designed impact verification exercise can help investors understand how their impact management processes “are contributing strategically to impactful work and point to where and how these processes can be strengthened,” writes BlueMark’s Sarah Gelfand. Added benefit: “Those who embrace independent verification will undoubtedly be better positioned to address concerns about greenwashing.”

Keep reading, “Why independent verification should be part of every investor’s impact management journey,” by Sarah Gelfand on ImpactAlpha.

Dealflow: Follow the Money

Off-Grid Market Development Fund offers results-based financing for solar access in Madagascar. The Antananarivo-based fund is providing subsidies to a dozen companies to deliver solar power in Madagascar. Only 14% of Madagascar’s 25.7 million people (and 5% of rural Malagasy) have access to the electricity grid. The $40 million fund, backed by the World Bank and government of Madagascar, incentivizes solar distributors to test models to improve affordability for customers, like pay-as-you-go and equipment rentals. The fund also offers lines of credit to cover consumer financing, working capital and inventory costs.

  • Catalytic capital. The 12 companies will collectively receive $2.5 million upfront. They can achieve outcome payments of up to $28 million in 2024 if they distribute 900,000 solar products and home systems, including 30% distribution in high-poverty areas. Société Générale Madagasikara is providing the up-front capital. Bamboo Capital is managing the fund.
  • Check it out

Volunteers of America raises $6 million for health-based affordable housing fund. The housing and healthcare arm of nonprofit Volunteers of America is raising $25 million to create and rehabilitate more than 2,000 affordable housing units with amenities for the homeless, the elderly, the disabled and other vulnerable populations in the U.S. and Puerto Rico. “The time is now to use housing as a platform for better health outcomes, particularly in underserved communities,” said VOA’s Sharon Wilson Geno.

  • First in. VOA National Services has secured a $6 million allocation from Capital Magnet Fund. It will also leverage its own equity “to raise mission-driven debt from financial institutions and impact investors, as well as philanthropic capital from foundations and corporations,” the nonprofit’s Stephen Samuels told ImpactAlpha.
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Dealflow overflow. Other investment news crossing our desks:

  • New York-based Neuberger Berman closes on $280 million for its NB Private Equity Impact Fund to invest in alignment with the U.N.’s Sustainable Development Goals.
  • Chinese agtech EAVision Technologies raises $30 million in Series C financing to expand its autonomous drone crop protection technology.
  • Denmark’s Investment Fund for Developing Countries is teaming up with Symbiotics on a $22.5 million impact bond for financial institutions supporting Africa’s small businesses.
  • New Jersey’s Sigo secures $1.5 million in seed funding to provide low-cost auto insurance for underserved immigrants and Latinx customers.

Impact Voices: Pass the Mic

Who’s going to pay? Due diligence in conservation finance starts with the off-take agreement. An additional $824 billion per year is needed to meet the Biden Administration’s ambitious 30×30 challenge or to reverse the decline of global biodiversity by 2030. Conservation finance has emerged to address this gap. Sean Penrith of Gordian Knot Strategies, Daniel Pike of The Climate Map, and Leigh Whelpton at The Conservation Finance Network reviewed more than two dozen innovative conservation finance projects funded by the USDA’s Conservation Innovation Grants program. The biggest risk: immature markets for conservation outcomes. Because many markets for such payments are immature, “false assumptions about payors’ willingness or ability to pay can jeopardize otherwise effective efforts to protect biodiversity, restore landscapes and enhance livelihoods in fragile ecosystems,” write Penrith, Pike and Whelpton in a guest post on ImpactAlpha.

  • Willingness to pay. Successful programs demonstrated that they understood the decision-making processes and needs of different types of payors, and structured their value propositions, marketing and overall strategy accordingly. The National Audubon Society’s Bird-Friendly Beef certification program rewards ranchers for conservation measures and outcomes that benefit birdlife. The Nature Conservancy identified county drain commission offices as an overlooked payor for water-quality solutions.
  • Keep reading, “Who’s going to pay? Due diligence in conservation finance starts with the off-take agreement,” by Sean Penrith, Daniel Pike and Leigh Whelpton on ImpactAlpha.

Agents of Impact: Follow the Talent

Erika Seth Davies, founder of the Racial Equity Asset Lab, becomes CEO of Rhia Ventures… Blackstone promotes Rita Mangalick to head of global ESG in the hedge fund and credit business lines, and brings on ESG professionals Elizabeth Lewis, ex- of the International Finance Corp., James Mandel, ex- of Rocky Mountain Institute, Caroline Hill, ex- of Lloyds Banking Group, and Nina James, ex- of Investa Property Group… Jade Floyd, ex- of the Case Foundation, joins Global Strategy Group as senior vice president of communications and public affairs.

Prime Coalition is recruiting a director of impact and an entrepreneur-in-residence open to Black, Indigenous, or people of color candidates… Candide Group seeks a part-time executive assistant and an operations and client services associate in Oakland… Santa Clara University’s Miller Center is looking for an impact investing program manager… The Good Food Institute Europe is hiring a head of policy, location flexible… Catalyst2030’s Catalyzing Change Week takes place May 3-7.

Thank you for your impact.

– Apr. 28, 2021