The Brief | March 28, 2024

The Brief: Assembling partners for the US’s green bank

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact!

In today’s Brief:

  • Partner preview for the US’s green bank
  • Pediatric mental health solutions 
  • Financial inclusion in the Global South
  • ‘Basket bond’ for green lending in Africa and Asia

Featured: Deploy!

EPA’s new partners plot a $27 billion path to a US green bank. The announcement of the winners of “green bank” funding under the Inflation Reduction Act is so close at hand that the Environmental Protection Agency has imposed a 48-hour press blackout. Even if they’re not saying anything publicly, the lineup of nonprofit housing developers, state-level green banks, local community development financial institutions, and other networks seeking mandates under the Greenhouse Gas Reduction Fund already know who they are. The three coalitions that are widely expected to be chosen to manage the largest part of the fund, the $14 billion National Clean Investment Fund, include Power Forward, Climate United and the Coalition for Green Capital. The capital infusion is expected to accelerate not only the low-carbon transition, but access to capital in low-, middle-income and other communities that have borne the brunt of environmental pollution (see our recent Agents of Impact Call). Another $6 billion for the Clean Communities Investment Accelerator will be distributed through a half-dozen nonprofit hubs to provide technical assistance to community lenders; and $7 billion in Solar for All grants is expected to soon go out to states, territories, tribal governments, municipalities and nonprofits. 

  • Coalition building. Instead of a single national bank, the National Clean Investment Fund instead will create a distributed network of local lenders. The coalitions trumpeted their applications to the EPA last year but this week laid low or declined comment. The coalition-builders include Shaun Donovan, former US secretary of Housing and Urban Development, who now leads Enterprise Community Partners. Former Obama aide Ari Matusiak leads Rewiring America, the consumer-focused “electrify everything” advocate, as well as the social impact incubator Purpose Venture Group. At Calvert Impact Capital and Self-Help, Beth Bafford and Martin Eakes have helped mobilize billions to finance community needs. Reed Hundt, the former chairman of the Federal Communications Commission, is a longtime champion of a national green bank.
  • Powerhouses. The coalitions will facilitate funding through their hundreds of overlapping local financing partners. Power Forward assembled a “Who’s Who” of nonprofit affordable and green housing specialists, including Enterprise Community Partners and Local Initiatives Support Corp., as well as United Way, Habitat for Humanity International and Rewiring America. The coalition pitched a “community-driven, national-scale housing decarbonization program” to electrify and weatherize single and multi-family homes, install solar panels and EV charging infrastructure, and help communities prepare for increased flooding, storms, heatwaves and other climate-driven weather extremes. The Coalition for Green Capital formed the new American Green Bank Coalition, which includes green banks in Connecticut, California, New York, Minnesota and other states. Other coalition partners include Elemental Excelerator, which last year received $1 million from the Rockefeller Foundation to identify ways to unlock 10x the federal dollars in follow-on funding, and Florida-based Solar and Energy Loan Fund.
  • Low-carbon buildings. Climate United includes Calvert Impact, Self-Help – the credit union and community development institution – and the Community Preservation Corp., which finances multifamily affordable housing. Climate United’s proposal spans multi-family housing, community infrastructure, small businesses, schools, EV charging and consumer applications. It is looking to tap private capital markets, such as the mortgage market for green home loans and the muni bond market to support energy retrofits for K-12 schools. “While $27 billion is a lot of money, it’s not nearly enough to decarbonize every K-12 school building in the country,” Calvert Impact’s Bafford said on a recent ImpactAlpha Agents of Impact Call. Climate United’s close to 60 community partners include the Reinvestment Fund, Beneficial State Bank and TruFund Financial Services. 

Sponsored by Heading for Change

Private investing and blended capital with a climate + gender lens. Partners Invest for Better and Heading for Change are offering a five-part virtual course on investing at the nexus of climate and gender. Heading for Change, established by Suzanne Biegel and Daniel Maskit, makes catalytic investments and grants to accelerate climate solutions and advance gender equity. Producer and host Tuti Scott, author of “Moving Money for Impact: A Guide to Gender Lens Investing,” designed the 90-minute sessions to move participants from interest to knowledge to action. The weekly program kicks off Wednesday, April 17.  Whether you’re a seasoned investor or new to private equity and debt, this course promises valuable insights and a supportive community eager to help you make a difference.

Dealflow: Investing in Health

InStride Health raises $30 million for pediatric mental health services. About one-third of young people will struggle with anxiety disorder or obsessive compulsive disorders by the age of 18. Boston-based InStride launched in 2021 to provide affordable specialty outpatient care for young patients. The company uses evidence-based treatments  such as cognitive behavioral therapy and exposure and response prevention. InStride says 90% of its nearly 1,000 patients experienced a reduction in anxiety after two months. InStride’s digital platform offers care “at a lower cost than inpatient care, making it easier for underserved populations to access care,” said Erin Sietstra of San Francisco-based Hopelab, founded by the Omidyar Group, which backed InStride’s Series B round. Other investors in the round include General Catalyst, Mass General Brigham Ventures and .406 Ventures.

Capria Ventures backs fintechs in Nigeria and Bangladesh. The Seattle-based emerging markets venture investor led the $23 million round for Bangladeshi startup Wagely, which raised a mix of debt and equity to expand financial services, including financial literacy, salary tracking and advances for employees. The startup has disbursed $25 million to over 500,000 users. Separately, Capria led a $3 million round for BFREE, an ethical credit manager in Nigeria. GreenHouse Capital, Angaza Capital and Launch Africa also joined the round for BFREE, which leverages AI to minimize non-performing loans for lenders and structure the purchase of distressed assets. “Financial inclusion and wellness aren’t just about access,” Capria said in an email. “It’s about fostering trust, empowering individuals, and turning hope into tangible progress.”

Dealflow overflow. Investment news crossing our desks:

  • The African Development Bank approved a $50 million loan for Nigeria’s Yobe State Environmental and Climate Change Action Project to improve climate resilience and food security for 3.5 million people. (AfDB)
  • Indonesia’s Qoala raised $47 million from Omidyar Network, Paypal, MassMutual and Flourish Ventures to make insurance more affordable and accessible in Southeast Asia. (TechCrunch)
  • California-based Evoloh scored $20 million from Engine Ventures, NextEra Energy and other investors to manufacture electrolyzers for low-cost green hydrogen production. (FinSMEs)
  • Aye Finance snagged €15 million ($16.2 million) in debt funding from German impact investor Invest in Visions to on-lend to underserved micro enterprises in India. (YourStory) 

Signals: Catalytic Climate Finance

How a $75 million ‘basket bond’ is catalyzing climate lending to small businesses in emerging markets. Local and community lenders in the US are preparing for a windfall of financing from the federal government to advance climate resilience and the green transition in underinvested communities (see above). There isn’t yet a comparable pot of capital for lenders in underinvested and climate-vulnerable countries. Investors are designing instruments to prepare and capitalize local financial institutions for green lending to small businesses at scale. “There’s a real need for this type of smaller-ticket climate lending,” says Jo Fry of British International Investment. The UK development finance institution partnered in 2022 Symbiotics on a “basket bond” to spur green lending among small business lenders in Africa and Asia. 

  • Fully deployed. The task: Find 10 to 15 local lenders and deploy $75 million with specified green-lending requirements to see if and how they put that capital to work. In just under two years, Symbiotics has invested the full amount in 11 organizations in eight countries. Samunnati in India is providing loans to smallholder farmers to adopt climate smart technologies; it’s now funding the distributors of those technologies as well. Middle East Bank Kenya is lending to commercial and industrial solar providers so businesses can shift to lower-cost renewable energy. Portfolio organizations are also lending in Nepal, Bangladesh, Cambodia, Vietnam, Tunisia and Southern Africa.
  • Learning curve. Markets have varying levels of maturity in green lending. “Africa is less developed than Asia in terms of green lending,” acknowledges Symbiotics’ Daniel Schriber. Capacity building for local lenders is a significant obstacle; BII is focusing in particular on reporting rigor with $520,000 in technical assistance funding. But BII’s capital has catalyzed new commercial backers for four of the 11 institutions. The partners say the mechanism is proving both an appetite for small-ticket green lending and simple financial mechanisms to support it. “We knew there was a risk that we would not be able to deploy the entire basket bond,” Schriber tells ImpactAlpha. “And it happened, so it means that it’s possible.”
  • Keep reading, “How a $75 million ‘basket bond’ is catalyzing climate lending to small businesses in emerging markets,” by Jessica Pothering on ImpactAlpha. 

Agents of Impact: Follow the Talent

Bala Nagarajan, formerly of NextEra Energy, joins S2G Ventures as managing director of its energy team… The Climate and Clean Energy Equity Fund and the Climate Equity Action Fund seek a president and chief executive officer… Blue Earth Capital is recruiting a private equity analyst or associate in New York… Blackrock is hiring a climate finance partnership director in New York or London… Black Farmer Fund seeks a development and investor relations director and a business support director. 

Transform Finance will host, “Investing in alternative ownership enterprise funds: Insights from investors,” with Demetric Duckett of Known, Humaira Faiz of the W.K. Kellogg Foundation, Thomas Knowles of Gratitude Railroad, and Ishita Shah of Align Impact, on Wednesday, April 3… Climate Tech Finance is hosting, “Leveraging government-backed guarantees for financial success in climate tech,” Monday, April 8… Institute at Brown for Environment and Society is hosting its Carbon Offsets conference Saturday, April 13.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– March 28, 2024