The Brief | December 19, 2023

The Brief: At Stake in 2024: Impact investing in emerging markets

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Greetings, Agents of Impact! 

Featured: At Stake in 2024

From financial inclusion to women to health, investing in emerging markets requires a climate lens. In Africa, fintech data is exposing climate vulnerabilities. In Latin America, investing in smallholder farmers means investing in regenerative agriculture. In Asia, social bonds target both gender and climate impacts. Climate risks and opportunities are now central to nearly every impact investment across emerging markets. Are investors doing enough to mitigate those risks and seize those opportunities? Certainly not. But a raft of new funds, initiatives and instruments are clearing obstacles to institutional, and increasingly local, capital. “We have an opportunity to unlock the renewable assets available on our continent, whether they are minerals, whether they are energy, whether it is our young people, whether it is smart agriculture,” President William Ruto of Kenya declared at September’s Africa Climate Summit in Nairobi. “We have an opportunity to turn the climate crisis into an opportunity for our continent.” In 2024, we’ll be watching for: 

  • Low-income inclusion. Strategies to serve low-income and emerging consumers increasingly run through climate. LeapFrog Investments, IIX, Mercy Corp Ventures and BFA Global’s Catalyst Fund all evaluate impact strategies for financial inclusion, healthcare and livelihoods through a climate lens. Off-grid energy providers like Zola, Sun King and M-Kopa are successfully raising capital on the momentum in the energy transition. In India, climate is at the top of the agenda for many impact investors. The Liist, ImpactAlpha’s monthly selection of impact funds actively raising capital, has featured dozens of first-time, emerging-market fund managers addressing the climate crisis along with gender equality, food security, economic inclusion, and preservation of life on land and in the seas.
  • Gender alpha. MCE Social Finance and EcoEnterprises Fund are among dozens of managers featured on ImpactAlpha’s database of fund managers pursuing investment strategies in climate + gender, developed with Heading for Change. Financial institutions and social enterprises, like Pro Mujer in Latin America and IIX in Asia, are issuing social and gender bonds to finance female business owners. “Adapting financial instruments to market conditions is essential for the growth of sustainable finance in emerging markets,” says Pro Mujer’s Carmen Correa.
  • Creatives and catalysts. Latin American entrepreneurs and fund managers are leading the way on biodiversity and land conservation and restoration investments. The $1.1 billion SDG Loan Fund blended philanthropic, development and commercial capital. Catalytic funders like the Visa Foundation, the Catalytic Climate Finance Facility, and the MDB Challenge Fund are spurring innovation in small business, climate and development finance. Local institutional investors and funds of funds are anchoring small business finance funds in Africa. Watching for: more offerings from local, women and especially Indigenous-led enterprises and funds.
  • (A few more) honest conversations about failure. This year’s venture capital shakeout made flops and setbacks a tough topic to avoid. Companies aiming to digitize marketplaces, supply chains, and business operations, including Twiga Foods, Copia, Sendy raised billions of dollars, before pivoting, downsizing and in some cases closing completely. Acumen is one of the few fund managers to air out its failures. “I believe that impact investors leave value on the table if we only share our successes,” said Acumen’s Amrita Bhandari. “In a world of dire problems and limited resources, the only real failure is to keep making the same mistakes.”
  • Keep reading, “From financial inclusion to women to health, investing in emerging markets requires a climate lens,” by Jessica Pothering on ImpactAlpha.
  • At Stake in 2024. Yesterday’s feature in ImpactAlpha’s series of end-of-year look-aheads:Expanded ownership and access to capital to build wealth and bridge divides.”

Dealflow: Sustainable Fuels

  • JetBlue, Tech Energy Ventures and Temasek’s Xora Innovation are among the backers of an $8.5 million investment in Aether Fuels, which produces low-carbon fuel for aviation and shipping. Switzerland’s Metafuels, which makes aviation fuel from green methanol, snagged $8 million.
  • Octopus Energy Group, a UK-based renewable energy supplier, raked in $800 million from the Canada Pension Plan Investment Board, Generation Investment Management and other investors. (Octopus)
  • Boston-based Bain Capital is selling Japan Wind Development, the Tokyo-based wind farm developer it acquired eight years ago, to Japanese infrastructure services company Infroneer for 203 billion yen ($1.4 billion). (WSJ)
  • MIT spinout Quaise Energy raised $13 million for its wave drilling system for accessing geothermal energy deep in the ground. (Quaise Energy)
  • Cambridge, Mass.-based Biorithm scored $3.5 million in Series A funding, led by Adaptive Capital Partners and SEEDS Capital, to deliver personalized, connected maternity care in Southeast Asia and the US. (Biorithm)

Impact Voices: Sustainable Bonds

Unleashing the spectrum of sustainable bonds to bridge the SDG funding gap. With less than seven years left to meet 2030 targets like ending hunger, achieving gender equality, and accelerating climate action, the gap in financing for the UN Sustainable Development Goals has widened to roughly $4 trillion a year. “Sustainable and green bonds provide investors with the opportunity to deploy capital at scale into impactful SDG investments in emerging markets,” writes Krisztina Tora of the Global Steering Group for Impact Investment in a guest post on ImpactAlpha. Sustainability-linked bonds and other innovative bond mechanisms have boosted annual issuances to $3.8 trillion, up from $202 billion in 2017. 

  • Investor demand. Uruguay last year issued a $1.5 billion sovereign sustainability-linked bond to finance its green transition; the interest rate is dependent on meeting emissions reduction and forest preservation targets. The oversubscribed offering drew institutions to invest in Uruguay’s debt for the first time. Jordan floated its first green bond in March. This month, IIX raised $100 million for its second “orange bond,” focused on gender and climate in Asia.
  • Barriers. The Impact Taskforce’sState of Play 2023” report highlights barriers to investment in emerging markets, including real and perceived investment risks, lack of scale, and thin pipelines. GSG’s “Financing SDGs in emerging markets” includes recommendations for issuers, investors, development finance institutions and policymakers to unlock this opportunity.
  • Read Tora’s full post. 

Agents of Impact: Follow the Talent

Plugged In: Investing in inclusion-focused entrepreneurs. Earlier guests on Plugged In with ImpactAlpha contributing editor Sherrell Dorsey include VertueLab’s Aina Abiodun and Black Farmer Fund’s Olivia Watkins. Next up in the series featuring inclusive economy innovators is Lenore Champagne Beirne of Bright Ventures, which has backed a dozen diverse-led ventures in digital health, fintech and the future of work. Join us on LinkedIn Live, Thursday, Dec. 21, at 9am PT / 12pm ET / 5pm London. RSVP today.

Founders First Capital Partners is looking for an investment manager in San Diego… The Elevate Prize Foundation seeks a program manager, chief of staff and creative and communications strategist in Miami… World Wildlife Fund is on the hunt for a private sector engagement manager in Washington, DC… The Miller Center for Social Entrepreneurship is looking for an impact investing senior manager.

Blue Forest is hiring a senior communications manager… New Spring Network is hiring a sustainable finance consultant in Amsterdam… Ubá Sustainability Institute is recruiting a blue carbon project officer in the Philippines… Triodos Bank is on the hunt for a fund accountant… Palladium has an opening for a nature associate director in London.

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

Thank you for your impact!

– Dec. 19, 2023