The Brief: Better measurement and management to bend the impact curve

Greetings Agents of Impact! 

👋 Hop on today’s Call: Impact investing in water – let it flow. Municipal bonds. Green lending. Pre-development financing. The hundreds of Agents of Impact registered for today’s call want to know: How to identify high-impact water investment opportunities? Join North Star Strategy’s Radhika Fox, WaterFX’s Rogelio Rodriguez and Quantified Ventures’ Shaun O’Rourke, in conversation with ImpactAlpha’s Amy Cortese and David Bank, today, Aug. 29 at 10am PT / 1pm ET / 6pm London. Go with the flow. RSVP for the link.

🗞️ Call context. Get ready for today’s conversation:

• Impact opportunities. “Making impact investments to help communities maximize historic federal funding for water infrastructure.”
• Equity and inclusion. “Underserved communities get creative in financing to upgrade water infrastructure.”

In today’s Brief:

• Bending the impact curve with SJF Ventures
• Expanding women’s access to capital in Thailand and Chile
• FOAK financing for sustainable aviation fuel
• Renewable energy investment trends

Featured: Impact Management

How SJF Ventures seeks to bend the impact curve. The Durham, NC-based venture capital firm has been a leader of what might be called the “alpha in impact” wing of the impact investing market, or “how you can drive unique financial value that is driven by and integral to the impact of the companies,” as SJF’s Dave Kirkpatrick explains on the latest episode of ImpactAlpha’s Agents of Impact podcast. The firm, which invests across climate, education, health and the circular economy, has notched exits with portfolio companies such as the egg producer Vital Farms, and Nextracker, which helps solar developers optimize system performance. With mainstream VC firms increasingly crowding its space, Kirkpatrick says SJF is pushing to deliver additional value. “Our goal is to, say, if it was a 6x financial return, can we do more during that five-year holding period to make it a 12x impact return?” he asks. “Like having a deeper impact on low-income beneficiaries, or having a more substantial supply chain impact with our climate companies.”

• Metrics dashboard. SJF launched 25 years ago as the Sustainable Jobs Fund and still asks portfolio companies not only how many jobs are being created, but what kind of benefits they are providing and the ratio of pay between the highest and lowest-paid employees. The firm’s new impact website tallies 14,249 jobs created since SJF’s initial investment, 90% of which have retirement plans. SJF also asks portfolio companies to track three key impact indicators. Optoro, for example, diverted more than eight million tons of waste; SchooLinks served more than 872,000 students in free and reduced-price school lunch programs. “I think it’s important to help them track what’s actually actionable,” says Kelsey Jarrett, SJF’s director of impact. 

• Impact outperformance. The typical impact investment thesis posits that business and impact success are “collinear” and part of the DNA of a company. In a guest post on ImpactAlpha, Kirkpatrick and Jarret ask, “Can we drive deeper impact to ‘bend the curve?’” As a test case, the VC firm conducted a series of studies with impact measurement firm 60 Decibels to help portfolio companies establish a baseline, set benchmarks and augment impact over time. One study of portfolio company Posigen revealed that many customers had used savings generated by switching to their solar product to purchase daily basics like fuel and groceries. That “enabled SJF to proactively identify areas where portfolio companies may benefit from added support.” Read their full piece.
  
• Read on and listen to the Agents of Impact podcast, “How SJF Ventures seeks to bend the impact curve,” with SJF Ventures’ David Kirkpatrick and Kelsey Jarrett. And catch up on all of the podcasts on the ImpactAlpha Podcast Network.

Dealflow: Gender Smart

IFC backs bonds and mortgages to provide access to finance for women in Thailand and Chile. A pair of deals from the World Bank’s private investment arm will channel $250 million in business and mortgage lending to women. The IFC made a $50 million investment in a gender-lens bond issued by Thailand’s Muangthai Capital Public Company, or MTC, a non-banking financial institution that lends to women-owned enterprises. MTC started more than 30 years ago with motorcycle financing and has expanded into enterprise lending, personal loans, and land-title loans. The publicly-listed company serves more than three million borrowers, most of whom work in the microbusiness, informal and agriculture sectors. It’s valued at about $2.5 billion. MTC is among the first lenders in Thailand to issue a gender bond.

• Feminist finance. One-third of senior business leadership positions in Thailand are held by women. But women working in the microenterprise and informal sectors lack access to formal financing. “And women face a disproportionate burden of care work,” observed Kyoko Kusakabe of the Asian Institute of Technology. Valuing informal and care work in Asia was a central theme at the UN-hosted Feminist Finance Forum in Bangkok in May, which called for “channeling investment capital into transformative, gender-responsive solutions to climate change and economic disparities” (see, “Valuing the ‘invisible’ work of women to build resilient economies and fight climate change“).
  
• Women’s home-ownership. The IFC also made a $200 million loan to Banco BICE to drive home mortgages for women in Chile. Some 57% of Banco BICE’s mortgages go to women, compared to a national industry average 41%. “We hope that with this financing this percentage will increase even more,” the bank’s Alberto Schilling said in a statement. The IFC’s loan has a three-year grace period on repayments to help Banco BICE ramp up its mortgage lending capacity. In 2020, the IFC supported Global Bank in Panama in launching a women-focused mortgage loan product.
  
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Twelve secures $45 million in debt for its sustainable aviation fuel plant. Airlines are pouring money and resources into the development of sustainable aviation fuels to offset the 3% of global emissions (and 3.5% of global warming) generated by commercial aviation. Berkeley, Calif.-based Twelve converts CO2 into a greener form of jet fuel. A debt package from Fundamental Renewables and Sumitomo Mitsui Banking Corp. will support construction of a “first of a kind,” or FOAK, fuel production plant in Moses Lake, Wash., Axios reported. The funding will help the company, which spun out of the Lawrence Berkeley National Laboratory, begin producing its fuel next year. It counts Alaska Airlines as one of its early customers.

• FOAK familiarity. As much as 40% of carbon emission reductions rely on technologies, like most sustainable aviation fuels, that are not yet commercially available. Investors are leery of investing in FOAK deployments. Catalytic investors including Aegon Asset Management spinout Curvepoint Capital and Prime Coalition’s Trellis Climate are seizing the underinvested opportunity (see, “Flexible financing to bridge a ‘missing middle’ for commercial climate solutions”). Elemental Excelerator has adapted the simple agreement for equity, or SAFE, to spur project financing for climate tech startups’ pilot plants or first commercial facilities. Family office syndicate CREO has published a framework to help investors get comfortable with FOAK climate tech deployments.
  
• Fueling demand. A raft of startups is racing to get sustainable aviation fuels, or SAFs, into the commercial market. Chicago-based LanzaJet inked $30 million from Southwest Airlines in March to convert low-carbon ethanol into a SAF. Other players include United Airlines-backed OXCCU in the UK, Dimensional Energy in New York, and Lydian in Cambridge, Mass. Last year, United Airlines raised $100 million from Air Canada, Boeing, GE Aerospace and other investors for a SAF fund. The Inflation Reduction Act includes tax incentives for airlines to transition from kerosene-based jet fuel.
  
• Check it out. 

Dealflow overflow. Investment news crossing our desks:

• The Democratic Republic of the Congo is establishing a Carbon Credit Investment Bank as part of a partnership with BlueGrace Energy Bolivia, Mbombo Investment Group and Maximance 2030 to certify local forests for sustainable management (see, “Can’t we just pay the Democratic Republic of Congo to keep its oil in the ground?”) (BlueGrace Energy Bolivia)
  
• Las Vegas-based Moxy raised $11 million to convert farm waste and scrap wood into carbon sequestering siding, roofing, and other building materials. (Axios)
  
• Atta Impact Capital made the first investment from its Mesoamerican Catalytic Fund, backing El Salvador-based Vitrinnea, an e-commerce platform for second-hand clothing, furniture and electronics. (Atta Impact)

• Apricus Generation secured backing from Blue Marlin Partners and CYWP Fund for its Series A equity round to finance and provide business support to solar and battery storage developers. (Apricus Generation)
  
• Croatan Institute, Appalachian Carbon Exchange and Shelterwood Collective are among the small-acreage and underserved forest landowners sharing $15 million in US Forest Service grants to address climate change. (USDA)

Signals: Energy Transition

Solar still shines as wind power faces headwinds. Global investment in renewable energy projects hit its second-highest level ever in the first six months of this year, with solar leading the pack. The $313 billion in renewables in the first half of 2024 were 11% below record levels of the second half of last year, and just below those in the first six months of 2023, shows BloombergNEF’s Renewable Energy Investment Tracker, released Tuesday. 

• Sun power. Solar continues to drive the world’s transition to a green economy. Investment in utility- and small-scale solar projects rose 6% to $221 billion in the first half of 2024 compared to year-ago levels – their sixth consecutive half-year record. And that’s with plummeting solar costs. Small-scale solar investment spiked 34% to $127 billion compared to a year ago. It’s a different story for wind power. High interest rates and permitting challenges contributed to a 26% plunge in wind investments, which notched just under $91 billion. Offshore wind investment declined 56%.

• Green China. A separate BNEF report, “Power transition trends,” estimates that last year, for the first time, zero-carbon energy sources fueled more than 40% of global electricity generation. Some 14% came from wind and solar, a record high. China produced nearly one-third of all global renewable energy and accounted for much of its growth. Global additions of solar capacities spiked 96% from 2022 to 2023. With China excluded, the rate plunges to 4%. Back in the US, 142,000 new clean energy-related jobs were created in 2023, double the rate of overall job growth. 

• Read more.

Agents of Impact: Follow the Talent

Dave Zellner, who retired in August as chief investment officer of Wespath Benefits and Investments, is named executive chair of FaithInvest… Accelerator for Systemic Risk Assessment is hiring a remote director of nature-centric approaches… Social Finance seeks a communications intern. 

RSF Social Finance is looking for ​​a consultant to refine its impact framework, assessment and theory of change… The Center for Climate and Energy Solutions and the Pricing Carbon Initiative will present insights and policy implications from their recent polling on American views on climate and trade policy, Tuesday, Sept. 10. 

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

Thank you for your impact!

– Aug. 29, 2024