The Brief | November 9, 2022

The Brief: Bond banks vs. the Black Tax, Quona’s financial inclusion, Norwegian offshore wind, electric buses in emerging markets, finance day at COP27

The team at


Greetings, Agents of Impact! 

Featured: Muni Impact

Many small cities pay a ‘Black Tax.’ Can bond banks help? An old idea is finding new life in the municipal bond market. Smaller, poorer, public entities – often in communities of color – have long faced hurdles when they try to borrow in the municipal bond market. The so-called “Black Tax” can add nearly half a percentage point to borrowing costs for Black communities, recent research shows. Bond banks that bundle deals from multiple municipalities through state agencies are a time-tested way of achieving economies of scale, with benefits for both issuers and investors. Now, bond banks are getting a new look as a tool for mitigating inequities and tackling them proactively. Bond banks could enable borrowing with a social lens and “pass on the lower cost of capital to communities that would otherwise pay more,” Public Finance Initiative’s Lourdes Germán tells ImpactAlpha. Public Finance Initiative is working with the National League of Cities to identify ways to leverage the bond market to disrupt racial inequities. 

  • The economics. For small municipalities, bringing a bond to the muni market can be costly and time consuming. For muni investors or market makers, the lower dollar amounts needed by smaller communities make issues less attractive. Bond banks, started in Maine, Alaska and other states in the 1970s, now have a track record for extending better credit profiles to the communities that rely on them and professionalizing underwriting processes. That has made local bonds more attractive to a wider investor audience.
  • The mechanics. Politics loom large in muni finance. “To the extent that market personalities discriminate against Black towns, a bond bank could help, but it won’t mitigate state discrimination,” Matt Fabian of Municipal Market Analytics tells ImpactAlpha. Fabian has been vocal about the tension between some Republican-leaning state legislatures and those states’ Democratic, often majority-minority cities, calling it an “under-appreciated risk” to muni markets. He points to the water crisis in Jackson, Miss., and to the neglected sewer system in Jefferson County, Ala., that resulted in municipal bankruptcy in 2011. “In general, when cities default, it’s less about finances and more about what the state does to not help the city navigate a situation.”
  • The market. The muni market is getting a fresh look from investors seeking investment opportunities to redress racial inequities. Adasina Social Capital, which calls itself “a bridge between social justice movements and financial markets,” invested $60 million in mostly-Black cities, water districts, school districts and some historically Black colleges and universities. “We found it was very difficult, very opaque, very hard to trade. It was hard to do racial screening,” says Adasina’s Maya Philipson. Philipson adds that the additional oversight and transparency of a bond bank could help. “I would feel better as an investor putting more money in this market with more oversight.”
  • Keep reading, “The ‘Black Tax’ plagues small municipalities. Can bond banks help?,” by Andrea Riquier on ImpactAlpha. Follow all of our Muni Impact coverage, made possible with support from the Robert Wood Johnson Foundation.
  • Answer The Call. Join Public Finance Initiative’s Lourdes Germán, Marjorie Henning of New York City Comptroller’s Office, Rob Fernandez of Breckinridge Capital Advisors, and Kimberlee Cornett of the Robert Wood Johnson Foundation for “Optimizing muni bonds for racial equity,” Wednesday, Nov. 16 at 10am PT / 1pm ET / 6pm London. RSVP today.

Dealflow: Financial Inclusion

Quona Capital raises $332 million for its third financial inclusion fund. The emerging markets impact investor exceeded its $250 million target for its latest fund, raising $332 million to back ventures expanding access to financial services in emerging markets. The Washington, D.C.-based firm has raised more than $745 million across three funds since 2015 and provided financial services for 8.8 million businesses and more than 30 million underserved retail customers. “We have expanded – adding new verticals like challenger banking and embedded finance, and incorporating new partners in promising geographies like Jakarta and Mexico,” Quona’s Monica Brand Engel told ImpactAlpha. “The basic formula has worked, so we’ve doubled down.”

  • Impact footprint. Quona invested in more than 35 companies, including Khazna, an Egyptian lender to underbanked earners. Kenya’s Wasoko supports informal retailers with online inventory, logistics and financing. Brazil’s Neon is a neobank that provides credit and other digital financial services to individuals and small businesses. India’s Arya, an agtech startups offering crop warehousing, financing and market-access for smallholder farmers.
  • Dive in

Havfram secures $250 million from Sandbrook Capital to finance offshore wind projects. Engineering and technological advances are pushing down the costs of offshore wind power. Stamford, Conn.-based climate infrastructure investor Sandbrook Capital took a majority stake in Norway-based Havfram’s wind business, which works with developers to install wind turbines at sea. Havfram will use the equity investment from Sandbrook to build a fleet of vessels to support offshore wind farms.

  • Winds of change. The Inflation Reduction Act includes $100 million for offshore wind (for context, see “Speeding the energy transition: A seven-point action plan”). Globally, government incentives and participation from private investors are projected to increase offshore wind capacity almost 16-fold, to 630 gigawatts by 2050, up from 40 gigawatts in 2020. President Biden’s executive order last year called for 30 gigawatts of offshore wind capacity by 2030 (currently the entire Americas region hosts just three gigawatts of offshore wind capacity).
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Dealflow overflow. Other investment news crossing our desks:

  • Asian Development Bank’s blended-finance vehicle, the Climate Innovation and Development Fund, invested in GreenCell in India and Vinfast in Vietnam to expand electric bus fleets in emerging markets.
  • French battery startup Verkor raised €250 million ($248 million) from investors including Societe Generale, Siemens and the European Investment Bank to finance a battery “megafactory.”
  • Sustainability data provider Util raised $6 million from Eldridge, Luxembourg Stock Exchange, the Chicago Board Options Exchange and Oxford Science Enterprises.

Signals: COP Watch

It’s Finance Day at COP27: Here’s what’s on tap. Wealthy nations are under pressure to provide more capital to help low- and middle-income countries adapt to the increasingly destructive impacts of global warming. Soaring energy costs, the war in Ukraine, and domestic concerns are complicating those efforts (for context, see, “Creative finance is needed to plug gaps in global climate funding – and to rescue COP27”). COP27’s “Finance Day” will focus on innovative models to deliver the projected $1 trillion per year in climate finance that low- and middle-income countries need by 2030. Among the highlights: U.S. special climate envoy John Kerry will float a plan to use voluntary carbon markets to help finance emerging markets’ transition from fossil fuels. Low- and middle-income countries would be able to issue carbon credits for decommissioning coal plants or generating more renewable power to sell to corporations from wealthy nations.

  • Contingency plan. President Biden in the U.S. has doubled climate funding to emerging markets to $11.4 billion in this year’s budget, but if Republicans take control of Congress, the funds are unlikely to be approved. “If what I think will happen in today’s elections happens and the House is gone, you’re not going to see that money,” Kerry told Bloomberg as Americans went to the polls on Tuesday. The carbon scheme is modeled on the Lowering Emissions by Accelerating Forest Finance, or LEAF, coalition which has mobilized $1.5 billion to pay state and national governments to preserve forests that sequester carbon (for context, see, “With progress on ‘loss and damages,’ COP27 may exceed low expectations”).
  • Catalytic capital. Convergence plans to preview an action plan for scaling up climate finance for emerging and frontier markets. The idea is to more strategically deploy the roughly $15 billion per year that government-backed development finance and multilateral development banks have at their disposal. Such institutions account for just $240 billion in annual climate and sustainable development finance in emerging markets – 5% of what is needed. Convergence and partners USAID and Propser Africa hope to boost the total to $530 billion by crowding in private capital.  
  • Dive in.

Agents of Impact: Follow the Talent

Georgia Levenson Keohane, ex- of New York City Impact Partnership, will join the Soros Economic Development Fund as CEO… Olga Breyburg, ex- of Personal Capital, joins Candide Group as a portfolio operations manager. James Pippim, ex- of Skoll Foundation, joins the firm’s climate justice fund… Avery Bang, ex- of Bridges to Prosperity, joins Mulago Foundation as senior principal. 

Closed Loop Partners is hiring a program manager of strategy and engagement in New York… Also in New York, Echoing Green is looking for a director… Founders First Capital Partners seeks a remote director of business development… The Global Development Incubator is recruiting a senior associate in Mumbai.

Harvard Business School’s International Foundation for Valuing Impacts is hiring a chief research officer and a director of market developmentToniic is looking for a relationship manager for the Americas… BlocPower’s Donnel Baird and ChargerHelp’s Kameale Terry of will join a virtual panel of speakers to discuss accelerating Black leadership in climate tech, Wednesday, Nov. 16.

Thank you for your impact!

– Nov. 9, 2022