Greetings, Agents of Impact!
Featured: Energy Transition
How Biden’s climate policies are driving a clean energy transformation. The trio of climate and economic legislation signed into law by President Biden in the first two years of his presidency will be central to his re-election campaign, which he kicked off this week. Eight months after the passage of the Inflation Reduction Act, the sweeping climate and industrial policy law is reshaping the U.S. economy and speeding the low-carbon transition. Some 600 gigawatts of new solar, wind and storage are expected to come online in the U.S. by 2030, enough to power more than 100 million homes, BloombergNEF forecasts. BNEF analysts have twice revised their numbers upward to reflect the rapid uptake. The IRA will lift solar installations by 30 gigawatts by 2023 compared to the firm’s pre-IRA forecast. Wind capacity is set to nearly double. Energy storage will grow nine-fold. Since the legislation passed, corporations have announced $52 billion in electric vehicle and battery investments.
Projects, please. The momentum comes despite challenges, such as permitting and grid interconnection for new renewable energy capacity. “The economic argument has been won,” BNEF’s Pol Lezcano said on the sidelines of BNEF conference this week in New York. Corporations, utilities and individuals want to buy clean power. The challenge, he said, is “ensuring that we invest in grid infrastructure and reform permitting to allow the sector to scale up and meet the demand.”
- Investment grade. The Department of Energy’s Loan Programs Office is playing a crucial role underwriting loans and guarantees for projects where commercial lenders won’t step in (listen to the podcast, “Jigar Shah on building a $140 billion ‘bridge to bankability’ for the energy transition”). The IRA provided additional funding for the office, which has about 135 active applications seeking more than $120 billion in loans; three projects have drawn funds. In a portfolio review, the LPO grades its loan book BBB-, the first time it has reached investment grade. “It really goes to show the role of the loan programs office,” said its head, Jigar Shah. “Over time, as the marketplace catches up, the portfolio actually reaches investment grade. That is the underlying thesis and it has proven itself out.”
- New-age nukes. The climate crisis has changed the politics of nuclear energy. A new generation of small, modular nuclear reactors could drive large-scale carbon reduction and replace coal and other fossil fuel plants around the world. “The legacy of this office is going to be small modular reactors,” said Shah. The office has around $14 billion in loan applications for nuclear-related projects. Between 2014 and 2019, LPO issued loans of nearly $12 billion to Vogtle Electric Generating Plant, a nuclear reactor nearing completion in eastern Georgia. Advanced nuclear is a crucial gigaton-scale solution that the U.S. can commercialize and export, said Shah. “I do think we’re right at the center of it.”
- Keep reading, “How Biden’s climate policies are driving a clean energy transformation,” by Amy Cortese on ImpactAlpha.
Dealflow: Emerging Markets
Capria scores backing from Gates Ventures and others to invest in the Global South. The emerging markets-focused venture investor closed its first, $57 million fund in June 2020. “It was a lousy time to raise and a great time to deploy,” Capria’s Will Poole told ImpactAlpha. Now amid a venture slump and recession warnings, the firm is in the market with a second fund for early-stage tech ventures. Capria is looking to raise $100 million to cut equity checks of $2 million to $3 million. “The case for investing in the Global South is as strong or stronger than ever,” said Poole. Despite economic headwinds and debt and currency crises, the International Monetary Fund predicts that one-third of global GDP growth this year will come from the Global South, not including China, he added. “If you’re on the ground in these economies, you’re used to dealing with the vagaries of everything from the macro environment to currency devaluations. Some of these businesses are anti-cyclical.” Capria has reached a first close of an undisclosed amount with backing from Gates Ventures, OIP Investment Trust, Crystal Springs Foundation, the Sall Family Foundation, the Brakeman Family Trust and others.
- AI and climate. Climate and generative AI are key themes for Capria’s second fund. One portfolio company, an Asia-based agtech venture using AI-based chat to engage farmers, has cut customer service costs by 35%, said Poole. Another, a health tech company, is using AI to simplify complex medical explanations for patients. Capria looks for narrowly constrained AI applications and “guardrails,” explained Poole, who spent a dozen years at Microsoft. “As a technologist in the world we live in, I have concerns about AI for sure,” he said. “Having more constrained domain utilization means we have much less risk of problems.”
- Impactful sectors. Capria resists the term “impact investor,” but it often walks and talks like one. Its second fund is focused on companies that “contribute to the GDP dividend, use applied generative AI to create rather than destroy jobs, and find asset-light solutions that help mitigate the disproportionate impact of climate change,” a spokesperson told ImpactAlpha. “We invest in impactful sectors and apply the best strategies in ESG,” said Poole. “We think that’s a profit-maximizing decision to do that.” In fintech, Capria insists on board-adopted ethical lending practices in place before the firm invests.
- Keep reading.
Dealflow overflow. Other investment news crossing our desks:
- Launch Africa, which is raising its second fund, is the most active investor on the continent, cutting 133 early-stage checks—most below $300,000—in the past 2.5 years. (Africa: The Big Deal)
- Legal & General Investment Management and renewable energy company NTR raised €390 million ($431 million) to invest in clean power infrastructure in Europe. (Legal & General)
- Bangalore-based Lokal raised a Series B equity round to expand access to local-language job and business ads and other local information to communities across India. (YourStory)
- Ghana’s Chekkit secured fresh funding for its blockchain platform that verifies the authenticity of pharmaceuticals and consumer goods. (Disrupt Africa)
- Elleve in Brazil raised debt capital to extend credit to lower-income students seeking online vocational training in high-demand fields. (Startups.BR)
- Chargel in Senegal clinched $2.5 million in seed funding to match small and mid-sized truckers with companies needing transport and delivery services for their goods. (TechCrunch)
Impact Voices: Energy Transition
Flouting climate commitments, the world’s biggest banks are pouring billions into fossil fuels. Climate activists swarmed Chase, Bank of America, Citi and Wells Fargo locations this week to protest their ongoing financing of fossil fuels. Shareholders mustered votes for proposals urging emissions reductions, disclosure of transition plans, and a timed phase-out of fossil fuels funding, though they fell short of majorities. The actions underscored what environmental groups say is a continued disconnect between the rhetoric and action of big banks. “Banks have mostly stalled on climate action, preferring instead to carry on financing the fossil fuel industry,” writes Adele Shraiman of the Sierra Club in a guest post on ImpactAlpha. Big banks poured $673 billion into the fossil fuels sector last year, according to this year’s “Banking on Climate Chaos“ report, prepared by the Sierra Club along with the Rainforest Action Network, BankTrack and other environmental groups. Since the 2015 Paris Agreement, and despite pledges from most banks to reach net-zero financed emissions by 2050, “the world’s 60 largest banks have poured over $5.5 trillion into the same fossil fuels that are making it impossible for us to reach our collective climate goals,” Shraiman writes.
- Transition financing. The banks insist oil majors “are essential for supporting the clean energy transition,” writes Shraiman. Major energy companies, however, are losing steam on their own sustainability initiatives. Shell announced it will not increase spending on renewable energy. Exxon abandoned a much-touted biofuel project. BP rolled back a pledge to slash greenhouse gas emissions. Interactive infographics map the flow of capital from banks to fossil fuel projects, and a searchable index tracks banks’ decarbonization policies.
- Methane gas. The liquified natural gas, or LNG, industry in particular has seen a massive increase in funding. In 2022, the top six banks funding LNG, including JPMorgan Chase and Morgan Stanley, increased their financing for the sector by 60%, totaling $8.8 billion. Banks, politicians, and the fossil fuel industry have argued that the energy crisis sparked by the war in Ukraine makes it necessary to expand LNG facilities. Shraiman argues that financing new gas export facilities “will only lock in decades of fossil fuel production at a time when experts have made clear that this expansion must stop immediately.”
- Shareholder engagement. Major investors have filed shareholder resolutions at many Wall Street banks, “calling on them to phase out financing for companies expanding fossil fuels, publish public transition plans, and improve their emissions reduction targets,” writes Shraiman. Over the next few weeks climate-concerned investors “will be watching to see how these big US banks plan to reconcile their climate commitments with their continued support for fossil fuel expansion.”
- Keep reading, “Despite their climate commitments, the world’s biggest banks are still pouring billions into fossil fuels,” by Adele Shraiman on ImpactAlpha.
Agents of Impact: Follow the Talent
Clarence Edwards, ex- of the Friends Committee on National Legislation, will join independent climate think tank E3G as executive director starting in May… ISF Advisors seeks a remote strategy associate… The Strada Education Foundation is hiring a strategic investments platform manager in Washington, DC.
State Street Global Advisors has an opening for a senior ESG quantitative and data analyst in Boston… World Impact Foundation is looking for a remote investment officer… ResponsAbility is recruiting a payment and administration officer in Mumbai.
“Financing the fight on lead in drinking water,” hosted by the Accelerator for America Action takes place in Washington, DC, Tuesday, May 16… New Markets Support Company and Rhia Ventures will co-host, “Narrowing the Black-White health gap: Opportunities for private investment to drive progress in the United States,” Wednesday, May 10… ReFED’s Food Waste Solutions Summit takes place May 16-18 in St. Louis.
Thank you for your impact.
– April 26, 2023