Greetings, Agents of Impact!
Signals: Ahead of the curve
Accelerating climate emergency spurs innovative financing for adaptation. Investments aimed at mitigating greenhouse gas emissions have long overshadowed financing for efforts to help communities adapt to climate change. That is changing, as droughts, floods, storms and wildfires disrupt livelihoods, exacerbate food and water insecurity, and widen the economic divide. Investments in green infrastructure, soil health, water conservation, and digital tools for farmers can increase resiliency to baked-in weather patterns. A dollar invested in adaptation saves up to seven times that in disaster-related costs (see, “Financing for adaptation can drive Africa’s economic development and climate goals”). Yet adaptation funding accounts for barely 5% of global climate investment, or around $30 billion in 2017-2018. That needs to ramp up 10x to meet the adaptation needs of developing countries. “Adaptation cannot be the neglected half of the climate equation,” said the U.N.’s António Guterres at this week’s Climate Adaptation Summit hosted by the Netherlands. He urged donor governments and development banks to deploy half of their climate funding for adaptation, up from 20% today. U.S. climate envoy John Kerry vowed the U.S. would “significantly increase” climate funding, including by making good on the $3 billion pledged to the Green Climate Fund under President Obama; $2 billion of that was held up by President Trump. “It’s cheaper to invest in preventing damage, or minimizing it at least, than cleaning up,” Kerry says.
- Regenerative capital. Mitigation meets adaptation in regenerative agriculture. “We need to restore many of our degraded systems before we can sustain them,” write Provenance Capital Group’s Logan Yonavjak and Adrian Rodrigues in a guest post on ImpactAlpha. Regenerative farming practices draw from indigenous land management, permaculture, biodynamic farming and other traditions. Also needed: regenerative capital structures. “If we want companies to achieve positive impact outcomes, such as rebuilding soil health, it would be detrimental for these companies to chase an explosive growth model,” they write. “Like nature itself, outcomes such as rebuilding soil health and sequestering carbon cannot be rushed.” Read, “Retool finance to rebuild soil health,” by Logan Yonavjak and Adrian Rodrigues.
- Financial innovation. Financing mechanisms can help emerging economies tap institutional funding and unlock domestic funds for climate adaptation, suggests a report released at the adaptation summit. Debt-for-climate swaps, such as one created for the Seychelles, let third parties purchase and restructure a country’s debt and use the proceeds to fund ecosystem-based climate adaptation (see, “Debt-for-nature swaps let impact investors finance climate resilience”). Other examples: climate resilience bonds, climate insurance for small farmers (see Dealflow, below), and nature performance bonds, where payments are reduced for nature-based outcomes.
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Sponsored by BlueMark: Impact Reporting
The next building block for impact investing: quality reporting. The lack of common standards and dearth of historical impact performance data has left even experienced impact investors with gaps in their impact reporting processes. “Third-party verifiers such as BlueMark play an important role in bringing greater accountability, discipline and comparability to the market,” writes Christina Leijonhufvud of BlueMark, a Tideline company. BlueMark’s assessments are organized around five characteristics of high-quality impact reporting: context, relevance, comparability, balance and reliability. Says Leijonhufvud, “As impact investors become more comfortable with reporting on both quantitative and qualitative inputs, the bar for ‘performance’ and best practices will rise across the industry.”
- Keep reading, “The next building block for impact investing: quality impact reporting,” by Christina Leijonhufvud on ImpactAlpha.
Dealflow: Follow the Money
Pula raises $6 million to expand farmers’ insurance from Africa to Asia. The Kenya-based insurance tech venture has facilitated crop insurance for more than four million smallholder farmers in 13 African countries since 2015. Such protection is often inaccessible to small farmers, whom mainstream insurers deem too costly to underwrite. Africa-focused venture capital firm TLcom and gender-lens investor Women’s World Banking backed Pula’s Series A round to support its expansion to Asia.
- Climate resilience. Crop and farm insurance is a critical backstop for the half-billion smallholder farmers worldwide, as climate change jeopardizes farmers’ livelihoods. Pula has a product protecting farmers against locusts, for example, which decimated farms in Kenya last year.
- Dig in.
Imperfect Foods scores $95 million for ‘ugly’ produce sales. Imperfect Foods has raised $214.1 million since 2015 to help reduce food waste by redirecting foods deemed too “ugly” for supermarkets. The San Francisco-based company has seen its weekly delivery orders and order size double during the pandemic. Imperfect’s Series D round was led by Northwest Venture Partners and Insight Partners, which also led its $72 million Series C round last May. The company says it reaches more than 400,000 customers.
- Imperfect system. The Atlantic reported in 2019 that Imperfect’s sourcing from large commercial producers, like Dole, risked making ugly-produce companies “an ally of exactly the food system that creates waste and hunger in the first place.” Imperfect Foods committed to better sourcing transparency and says that 78% of its produce comes from family farms and farming cooperatives that would otherwise take a hit on unsold product; only 3% of its produce comes from corporate farms.
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Citi Impact Fund backs Black, female and veteran founders. Citi Impact Fund launched last year to invest in companies addressing workforce development, financial inclusion, and sustainable energy and water use – particularly those led by women, Black and other underrepresented founders (see, “Citi Impact Fund secures $50 million to invest in Black entrepreneurs”). The $200 million fund rolled out seven investments, bringing its total portfolio to 11 companies.
- Portfolio companies. Among the new companies is Blac, female-led MedHaul, which works with healthcare providers to provide low-cost, safe and reliable transportation for low-income patients; KETOS, a female-led company aiming to make water safe and sustainable; Perch, a Black-owned company offering an app that helps unbanked youth build credit; and veteran-led Shift, which helps current and former members of the U.S. military start new careers.
MPower raises $25 million to help international students pay for a U.S. education. The fintech platform works with 350 universities and colleges in the U.S. and Canada to provide loans for international and DACA (for “Deferred Action for Childhood Arrivals”) college students from over 200 countries. Washington, D.C.-based MPower offers loans based on students’ future earning potential without requiring cosigners, credit histories or collateral. New York-based investment manager Tilden Park Capital Management backed MPower for its “strong credit quality and social mission,” said MPower’s Manu Smadja.
- Underserved students. Half of MPower’s borrowers come from families earning less than $15,000 annually. More than four out of five borrowers said they had no other option to finance their degrees (see, “MPower’s impact report makes the case for student-centric finance”).
- Dig in.
Bain Capital Double Impact invests in Multi-Specialty Healthcare. The Boston-based private equity firm invested an undisclosed sum in the Baltimore-based health provider, which treats injuries for low-income, underinsured workers and their families. Bain Capital invested from its $800 million second impact fund.
Impact Voices: Pass the Mic
Decarbonization opportunities in ‘the climate decade.’ A decade ago, cleantech and climate investments were not ready to scale. Renewables were expensive. Batteries were heavy. And the full impact of climate change was not yet obvious. This decade is different. “We’re not shoehorning sustainability into old systems. We’re redesigning the economy,” writes Andrew Beebe of Obvious Ventures. “The scale of this transformation is on par with the digitization economy before it.” Corporations are competing on speed (“carbon neutral by 2030!”) or depth (“carbon negative by 2030!”). “These are not pie-in-the-sky, free-of-charge goals,” says Beebe. “These ambitions cost money, and take time and focus.” Beebe’s signals:
- Capital flow. This is no longer only about loan guarantees and U.S. defense department grants. Private money showing up includes TPG, KKR, Wellington, Breakthrough Energy Ventures, Union Square Ventures, Fifth Wall, EIP and Moxxie. Climate-focused funds are growing in size as well. “The money has now definitively entered the building,” says Beebe, who started in cleantech in 2003 as a founder of solar developer Energy Innovations.
- Electrify everything. Areas ripe for investment, Beebe says, include flying cars and other “non-road” solutions (Moxion, Ampaire, ZeeAreo), connected vehicles (Amp, Amply, EVConnect), and everything battery-related (Zenlabs, Qnovo, Sila).
- Better buildings. The next phase of cleaner, greener and healthier buildings will include robotic construction (Canvas, Built, Plant), “digital twins” for buildings (Avvir, Doxel), and grid-integrated buildings (Blueprint Power, Bloc Power, Carbon Lighthouse).
- Carbon trading. Areas of opportunities in carbon trading include enterprise-grade carbon accounting (Emitwise, Sinai, Plan A), robust and automated carbon trading platforms (Pachama, Nori, Sylviaterra), and API-level carbon-commerce integration (Patch, Cloverly). “Know this about the transition to an economy free of carbon emissions,” Beebe says. “It’s big, it’s getting bigger, and it won’t be going away.”
- Keep reading, “We have entered the climate decade,” by Andrew Beebe on ImpactAlpha.
Agents of Impact: Follow the Talent
Amy Harder, ex- of Axios, joins Breakthrough Energy Ventures to lead a new journalism initiative… Abi Mustapha-Maduakor becomes CEO of the African Private Equity and Venture Capital Association… Credit Suisse expands its ESG team with Michael van der Meer, Angela Saxby, Sina Dorner-Müller, Timothy Oehmigen and Karim Sayyad… Jenny Everett steps down as managing director of the Aspen Network of Development Entrepreneurs in March. ANDE is recruiting a managing director, events manager, global operations manager and advocacy manager.
Inclusive Prosperity Capital is recruiting a general counsel and clean energy finance investment analyst… Adasina is hiring a social justice investment fellow… New Economy Coalition seeks an interim development officer… The Norrsken Impact Accelerator launches with a focus on foodtech… The Opportunity Finance Network’s Amir Kirkwood will lead a discussion on greening community development stimulus funding, Thursday, Jan. 28… Social Venture Circle and the American Sustainable Business Council are co-hosting a conversation with Omicelo’s Joshua Pollard and Brookings’ Andre Perry on the intersection of home, health and wealth, Thursday, Jan. 28.
Thank you for your impact.
– Jan. 26, 2021