The Brief | April 2, 2020

The Brief: Carbon bubble RIP, women’s health access, favorable-term COVID loans, GPIF’s new investment chief, Amit Bouri reimagines capitalism

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Greetings, Agents of Impacts!

Hop on The Call today. Join Agents of Impact Call No. 14 to co-create a COVID recovery model for small and growing businesses in emerging markets. In addition to previously announced guests, ImpactAlpha’s David Bank and Jessica Pothering will be joined by local capital providers like Vox Capital’s Gilberto Ribeiro (São Paulo), Secha Capital’s Brendan Mullen (Johannesburg), Aruwa Capital Management’s Adesuwa Okunbo Rhodes (Lagos), iungo capital’s Roeland Donckers (Kampala), along with Drew von Glahn of the Collaborative for Frontier Finance. If you haven’t RSVP’d yet, just log in to Zoom at 11am PT / 2pm ET / 7pm London / 9pm Nairobi today.

Featured: ImpactAlpha Original

The carbon bubble has burst. Let’s not re-inflate it. The coronavirus likely jumped from animals to humans. Now it has leapt from humans to the fossil fuel industry. As oil prices sank to new lows this week, Goldman Sachs called the virus a game-changer that will “permanently alter the energy industry and its geopolitics.” It is the supply and demand of capital that matters, not the supply and demand of barrels, write Goldman’s Jeff Currie and a team of analysts. “As long as there is capital, companies can withstand difficult periods, and the barrels always come back.” This time around, things “will almost certainly take a different course when the global economy emerges from this and is faced with the prospect of having to make large-scale investments into carbon-based industries.” Concludes i(x) investments’ Trevor Neilson, “The oil industry as we know it is dead – a victim of math, the coronavirus and the world’s response to it.”

  • Accelerating the inevitable. The pandemic is accelerating trends already underway. Coal generation fell by 3% and power-sector emissions by 2% last year, the largest drops in three decades, according to climate think tank Ember. Half of coal plants operating today cost more to run than building new renewable generating capacity, according to Carbon Tracker, putting at risk as much as $600 billion in planned coal projects – and investor capital.
  • Debt load. More than 40 fracking companies filed for bankruptcy last year under a cumulative $26 billion in debt, according to the Institute for Energy Economics and Financial Analysis. “Expect continued oversupply and oil prices that are much lower for much longer,” warn IEEFA’s Tom Sanzillo and Kathy Hipple. “After the crisis passes – none too soon – there is little likelihood of a fast rebound for oil and gas.”
  • Flagging support. The top European funder of fossil fuels, Barclays, bent to investor pressure and committed to a goal of net-zero carbon emissions by 2050. Climate campaigns like Stop The Money Pipeline are targeting banks, asset managers and other financial enablers of fossil fuel production (see, Leaders and laggards in the race to net-zero).
  • Holding the line. COVID-19 has forced the postponement of the COP26 global climate summit scheduled for November in Glasgow, which was to mark a key milestone five years into the Paris Agreement: the ratcheting up of countries’ commitments to cut emissions. Climate concerns could go out the window as policy makers pour trillions into economic rescue packages. “How this money is used will mean the difference between seeing a big rebound in CO2 emissions, or setting the world on a more sustainable pathway through investing in renewables and low-carbon alternatives,” writes Ember’s Dave Jones.
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Dealflow: Follow the Money

Finnfund backs Kasha to expand women’s health access in East Africa. Rwanda-based Kasha, an East Africa e-commerce platform, provides mostly low-income women access to health and hygiene products, including menstrual care products, contraceptives and pharmaceuticals. Now it is playing an active role in protecting people from COVID-19. “Kasha’s role has become more relevant than ever,” said Finnfund’s Johanna Raehalme. The Finnish development finance institution invested $1 million in Kasha as part of its plan to invest €105 million ($115 million) in companies advancing gender equality by 2021.

Africa-focused Vital Capital launches $10 million debt fund for coronavirus relief. Vital Capital makes private equity investments in health, water, energy, agriculture and housing in across Africa. Its Vital Impact Relief Facility will make “favorable term” loans of up to $1 million, starting with businesses in Uganda and Kenya affected by COVID-related  business disruption. “It’s a fast-developing situation that demands immediate action,” said Vital Capital’s Nimrod Gerber.

Vericool clinches $19.1 million for eco-friendly packaging. The California-based company makes plant-based insulating materials to replace mainstream materials like polystyrene. Radicle Impact Partners, The Ecosystem Integrity Fund, ID8 Investments and AiiM Partners backed the round.

Podcast: Returns on Investment

Amit Bouri: How impact investors are stepping up to the challenges of COVID – and capitalism (podcast). The coronavirus crisis has laid bare issues of inequality that private investors – not just governments – must urgently address. In a podcast interview with ImpactAlpha’s David Bank, the CEO of the Global Impact Investing Network said the COVID crisis represents “a real moment of leadership,” notwithstanding an inevitable pause in impact investment activity as funds and enterprises focus on health, safety and business continuity. “Investors that do have capital to deploy, they want to be part of the response to the crisis, the recovery coming out of the crisis, and ultimately investing in a more resilient system that can better weather the shocks coming out of the crisis.” Read on and listen in.

Agents of Impact: Follow the Talent

Eiji Ueda, the co-head of Asia-Pacific Securities for Goldman Sachs, replaces Hiro Mizuno as chief investment officer of Japan’s Government Pension Investment Fund… Robert van Zwieten, founder of The Serendra Group, joins Convergence as managing director for the Asia-Pacific region… Confluence Philanthropy seeks a chief operating officer in Oakland or New York… URBAN-X is virtually hosting a Demo Day for its seventh cohort on Tuesday, April 21.

Thank you for reading. 

–Apr. 2, 2020