The Brief | May 10, 2023

The Brief: Carbon credits for social enterprises, accounting for nature, catalyzing women-led funds in Africa, bridging climate finance’s valley of death

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Greetings, Agents of Impact!

Featured: Carbon Markets

How carbon credits are driving down the costs of climate-friendly goods in Africa. African social enterprises including Ghana-based Burn Manufacturing and Kenya-based d.Light are turning carbon credits into lower cost clean energy products for last-mile consumers. Despite real concerns about transparency and accountability in the voluntary carbon markets, “carbon finance for social enterprises is playing a critical role in the just and equitable transition to a green global economy,” Dan Waldron of Acumen, an investor in both companies, writes in a guest post on ImpactAlpha. “For carbon markets to be sustainable and meaningful, those people and communities – who are generating the actual impact – need to share in the benefits.”

  • Multiplier effect. Acumen clean-cookstove investees Burn and Biolite use income generated by carbon credits to subsidize the cost of their products, bringing customers’ upfront costs down by 30% to 80% (for context, see, “Seven lessons from Acumen’s two decades of ‘patient capital’ investing”). “Carbon finance can have a multiplier effect – by not only reducing carbon emissions, but also by providing products and services to low-income people who need them most,” writes Waldron. Acumen’s five clean cookstove investees have sold 3.8 million stoves, saving customers hundreds of millions of dollars and mitigating 18 million tons of carbon dioxide.
  • Virtuous cycle. Pay-as-you-go solar companies d.light and Easy Solar receive carbon credits for selling solar home systems to low-income people who would otherwise be burning kerosine lamps for lighting. The companies use the capital brought in from the credits to offset some of the higher cost of installing solar in rural areas. The cycle “creates affordability by reducing prices to end users,” says Waldron, “and financial sustainability by allowing companies to cover their costs and grow.”
  • Keep reading,How carbon credits are driving down the costs of climate-friendly goods in Africa,” by Acumen’s Dan Waldron on ImpactAlpha.

It’s time to center nature in the carbon removal conversation. Carbon markets have put a price on atmospheric carbon, sparking a robust, if troubled, market for carbon offsets that could hit $1 trillion by the end of the decade. The highest quality credits come with co-benefits – positives such as clean air and water or improved livelihoods that are a byproduct of investing in carbon removal. But the value of the market for carbon pales compared to the value of nature, which underpins half of global GDP. One estimate pegs the global value of ecosystem services at $190 trillion annually in current dollars. “It’s time to flip the script and put nature at the center,” argues Thomas Morgan, the founder of regenerative finance startup Basin, in a guest post on ImpactAlpha. “Carbon removal is actually a co-benefit of nature.” 

  • Environmental economics. Progress is being made on valuing ecosystem services, says Morgan. New datasets take into account spatial and temporal aspects. The Ecosystem Services Valuation Database incorporates over 4,000 global studies across sixteen biomes. The Taskforce on Nature-related Financial Disclosures released a final draft of its nature disclosure framework in March, which incorporates common accounting and ESG frameworks. Says Morgan, “Accounting for what is truly valuable may be the solution we need.”
  • Keep reading, “It’s time to center nature in the carbon removal conversation,” by Basin’s Thomas Morgan.

Dealflow: Catalytic Capital

Visa provides catalytic ‘working capital grant’ to three women-led funds in Africa. Female fund managers control just a sliver of private equity and venture capital assets in Africa. Visa is supporting SME.NG in Nigeria, Altree Capital in Kenya and Maia Capital in South Africa with grant funding to cover operational costs and help the managers warehouse deals while they’re raising investment capital. “This funding is highly catalytic,” Altree’s Jenni Chamberlain told ImpactAlpha. “Warehouse funding is extremely important – in fact, essential – to prove our investment thesis and process and build a track record as a team.” (For context, see, “For female fund managers, catalytic grants are about more than money.”) Altree’s Kadzi Gender Climate Fund invests in women-led and -focused businesses in East Africa that support local climate adaptation and resilience. It’s using the Visa funding for early deals that will roll into the fund. “The capital we will deploy will have a multiplier effect on our ecosystem, not only supporting Altree but supporting women and small businesses in the greater value chain,” Chamberlain added. 

  • Inclusive economy. Women in Africa disproportionately rely on the informal economy to earn a living. Maia Capital invests in South African businesses that are led by women or promote greater gender inclusion and “make a positive and direct impact on low-to-middle income households in South Africa,” said Maia’s Dinao Lerutla. SME.NG is a blended-finance fund that invests in female entrepreneurs outside of Nigeria’s major economic hubs.
  • Gender smart. Visa did not disclose the size of the grant. The funding was directed through the African Women Impact Fund, a partnership fund of the Economic Commission for Africa and Standard Bank Group. The fund is looking to invest $1 billion in the continent’s female managers in the next 10 years. It has raised its first $60 million. At least 55 women-led managers have applied for funding.
  • Check it out

Catalytic Climate Finance Facility scores $12 million to test and launch new finance tools. Blended-finance network Convergence has for eight years supported financial innovation and experimentation in impact investing through its design funding grants. Climate Policy Initiative has mobilized more than $3.5 billion over the past nine years via its Global Innovation Lab for Climate Finance. The organizations are teaming up to help proven blended-finance climate funds scale up. Their focus: “severely under-financed sectors,” and agriculture in particular, in frontier and emerging markets, the partners said. The Catalytic Climate Finance Facility has secured $12 million of a $20 million target from the Gates Foundation, Global Affairs Canada, and Australia’s Department of Foreign Affairs and Trade

  • Valley of death. The facility arose out of a noticeable market need, CPI’s spokesperson said. “There were some very innovative blended finance vehicles that were successfully securing grants and concessional finance to launch pilots but were having trouble scaling to commercial – the blended finance equivalent to the VC ‘valley of death.’” The intention is “to create an investable deal pipeline for mainstream investors by supporting concepts at the acceleration stage,” added Convergence’s Joan Larrea.
  • Deadline to apply. The facility will provide $500,000 in grants and technical assistance to managers of eligible funds and instruments. It is accepting applications from climate fund managers and other capital providers until Friday, June 9.
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UK-based Actis launches $500 million Japan-focused clean energy arm. The London-based global sustainable infrastructure investor launched the unit out of its fifth energy infrastructure fund, a $6 billion global-focused fund seeking to expand access to power in markets comprising over 80% of the world’s population. Called Nozomi Energy, it will buy onshore wind and solar energy generating assets and companies to support Japan’s 2030 target to slash emissions nearly in half from 2013 levels. “Japan has challenging but critical emission reduction targets and Nozomi will play an important role in enabling the country to achieve them,” said Actis’ Jun Ohashi. Nozomi (Japanese for “hope”) is targeting 1.1 gigawatts in power generation from onshore wind and solar by 2027.

  • Clean energy portfolio. Nozomi’s first investment is the acquisition of renewable energy developer Hergo Japan Energy Corp., which has a portfolio of solar and onshore wind projects totaling roughly 230 megawatts.
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Dealflow overflow. Other investment news crossing our desks:

  • Inter-American Development Bank is providing an $85 million guarantee for Ecuador’s planned $800 million debt-for-nature swap to finance conservation in the Galapagos Islands. The US International Development Finance Corp. is providing a “political risk guarantee.” (Bloomberg)
  • Pharmaceutical company Eli Lilly backed LeapFrog Investments’ Emerging Consumer Fund IV via its $300 million Social Impact Venture Capital Portfolio, which invests in healthcare providers, drugs and resources in low- and middle-income countries. (Eli Lilly)
  • Nigeria’s JEAY Healthcare raised pre-seed funding to provide telemedicine services covering primary, reproductive and mental healthcare. (Afridigest)

Agents of Impact: Follow the Talent

Matthew Cohen, ex- of TrueTag Technologies, joins Clean Energy Ventures as an investment principal… Amy Seusing, a former senior director of corporate and foundation relations at the Obama Foundation, is named chief development officer of Jobs for the Future… Impax Asset Management promotes Leah Wood to global head of marketing and client experience… Arclight Capital Partners appoints Leo Denault, former chairman and CEO of Entergy, as a senior advisor and board member.

Spearmint Energy hires Gina Wolf, ex- of Meta Platforms, as senior vice president of strategy and project development, and Jake Dahm, ex- of Avantus, as senior director of development… CarterPierce seeks an impact fund investing associate in Chicago… Minderoo Foundation is looking for a blue economy officer in Sydney.

Prime Capital is recruiting a sustainability management associate in Frankfurt… Symbiotics is on the hunt for an Africa-focused investment analyst in Cape Town… Truist Foundation, in collaboration with MIT Solve, launches its second Inspire Awards Challenge, which will provide grants to nonprofit organizations supporting entrepreneurs from underserved communities. 

Thank you for your impact.

– May 10, 2023