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Featured: Impact Voices
Sucking gigatons of carbon from the atmosphere is hard. Catalyzing capital for carbontech shouldn’t be. By mid-century, humanity will need to remove and sequester tens of gigatons of atmospheric carbon dioxide each year to mitigate existential risks of climate change. Even the rapid decarbonization of power generation and the electrification of buildings, transportation and industry won’t be enough. At even $50, much less $200 a ton, carbon capture, utilization and sequestration will be a multi-trillion dollar market. A growing portfolio of technologies and approaches are ramping up volumes and driving down costs. They include the “enhanced weathering” of rocks to form mineral carbonates, the biomodification of crops for greater carbon-uptake, and the creation of carbon-based products like fuels, building materials, plastics, chemicals and consumer goods that displace fossil fuels. What’s slowing progress: A glaring shortage of capital flexible enough to accommodate the long development timelines, capital intensity and political uncertainties of bringing CO₂ removal to scale.
“Carbontech” technologies are tough, risky, hardware-based solutions that are much more costly to validate than the software solutions familiar to conventional venture capitalists. Prime Coalition, the Cambridge climate-finance nonprofit, has backed two carbon-dioxide removal companies, including Berkeley, Calif.-based Opus 12, which converts CO₂ into profitable chemicals (see, “How negative can carbontech entrepreneurs go?”). With support from the Hewlett Foundation, Prime has evaluated carbon dioxide removal approaches and developed three tools to assist in due diligence. “To meet the remaining gap, we must support underexplored, underdeveloped, and nascent technological approaches to capture and store excess atmospheric carbon,” argue Prime Coalition’s James DeCunzo, Johanna Wolfson, Sarah Kearney and others in a guest post on ImpactAlpha. Catalytic capital with more patience and tolerance for policy uncertainty than market-rate sources of capital can support carbon-removal entrepreneurs on their journey to commercialization. Initiatives like the Terra Silva tropical forests fund backed by the Packard and MacArthur foundations, and Indigo Agriculture’s Terraton Initiative showcase the potential for natural climate-mitigation strategies, but we’ll need to sequester many gigatons beyond what such solutions alone can deliver, the Prime authors write. “With the scale of CO₂ removal required and the uncertainty of any one pathway’s success, public and private investors must adopt a ‘yes and’ approach to carbon dioxide removal.”
Keep reading, “Catalyzing capital to develop carbontech for gigaton-scale CO2 removal,” by Prime Coalition’s James DeCunzo, Johanna Wolfson, Sarah Kearney and others, on ImpactAlpha.
Dealflow: Follow the Money
LeapFrog and Goldman back African fintech Jumo’s $55 million raise. Cape Town-based Jumo makes software to help financial services firms and other companies expand lending, savings and insurance products to Africa’s rising consumer class. It raised a combination of debt and equity from impact investor LeapFrog Investments, Goldman Sachs and London-based Odey Asset Management. The company has partners in Ghana, Kenya, Tanzania, Uganda and Zambia and plans to expand into India, Nigeria and Cote d’Ivoire this year. Since launching in 2014, Jumo has scored nearly $150 million in debt and equity from investors.
- Fintech boom… Global venture capital investors are on an African fintech tear, pouring as much money into digital financial services companies in one week in 2019 as they did the entire year in 2018. Much of the capital is coming from China’s VC funds.
- …And bust. There is also increasing scrutiny of the sector and its true impact on financial inclusion as consumer debt levels and defaults rise (see, “Investors called to account for fintech lending practices as debt-traps emerge”). Jumo does not offer its own financial services, but is a signatory of the Responsible Finance Forum’s Guidelines for Responsible Investing in Digital Financial Services.
- Check it out.
African Export-Import Bank to invest $500 million in Africa’s creative economy. The capital will be deployed over the next two years via lines of credit to banks, direct financing to operators, and guarantees. “Creative industries can be potent vehicles for more equitable, sustainable and inclusive growth strategies for African economies,” said bank president Benedict Oramah.
The Facility for Energy Inclusion’s Off-Grid Energy Access Fund makes $10 million debt investment in d.light. The fund, managed by Lion’s Head Global Partners, will provide working capital to scale up the distributed solar energy company’s activities in Nigeria, Tanzania, Zambia and Ethiopia.
Signals: Ahead of the Curve
New U.S. Development Finance Corp. expands its Portfolio for Impact. The new institution, which replaced OPIC earlier this year, is adding new financing tools and increasing its ticket sizes of its small business-focused Portfolio for Impact. The lending program was launched in 2014 to invest in emerging markets social enterprises supporting local small businesses and access to basic services, like energy, healthcare and education. It reached $100 million last year and has invested in 22 projects and enterprises, including Kenya-based produce logistics company Twiga. The expanded initiative, renamed Portfolio for Impact and Innovation, or Pi2, gives DFC the flexibility to invest up to $900 million via debt, equity and other mechanisms, like insurance and technical assistance. The fund’s largest ticket size is doubling to $10 million.
- Early actions. Portfolio for Impact and Innovation is among the first of DFC’s impact initiatives since officially transitioning from OPIC. It is also expanding its women-focused 2X Challenge (see, “New U.S. development finance agency expands toolkit for female fund managers”). A $30 million loan to India’s Sitara will expand mortgage financing for low-income households. The new DFC also has made early commitments to gas projects in Latin America and Africa that may boost “development” but not always positive environmental impact.
- Read on.
Agents of Impact: Follow the Talent
Michael Fiebig is named chief operating officer at responsAbility… Pro Mujer appoints Carmen Correa as chief operating officer… David LeZaks, ex- of Delta Institute, joins Croatan Institute as a senior fellow… Flat World Partners seeks a business development analyst in New York… Endeavor is recruiting an associate of entrepreneur selection and growth in New York… Uber is hiring a San Francisco-based senior public policy associate for cities… Nike is searching for a global sustainability data analyst in Beaverton, Ore… Catholic Charities USA is looking for an impact investing summer intern in Alexandria, Va.
Thank you for reading.
–Mar. 2, 2020