The Brief | March 22, 2022

The Brief: Climate disclosure breakthrough, banking Africa’s farmers, ocean carbon capture, impact investing in a time of conflict

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Greetings, Agents of Impact!

Agents of Impact ​​Call No. 40: Political risk and impact investing in a time of conflict. Russia’s invasion of Ukraine scrambled investors’ calculations of political risk. Country risks cross borders, as refugees fleeing Ukraine know. Managing, rather than fleeing, such risks is key to enduring impact in places where civil society and social and environmental progress are needed most. Join Harlan Mandel of Media Development Investment Fund, Open Road Alliance’s Caroline Bressan, and other Agents of Impact to share strategies for investing for impact in challenging environments, Tuesday, Mar. 29 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Climate Risk

S.E.C. disclosure rules signal the arrival of climate accountability. Better than expected. That was the consensus among advocates for greater transparency for corporate climate-related risks and impacts after the Securities and Exchange Commission’s preliminary approval of new climate disclosure rules. The rules, which will affect more than 6,000 publicly-traded companies, were more thorough than many investors had dared to hope in the face of expected pushback from fossil fuel interests. “The idea that environmental risks have risen to the level of financial risk is a historic step,” CDP’s Paula DiPerna told ImpactAlpha. The U.S. Impact Investing Alliance called the new reporting requirements “one of the boldest steps a U.S. regulator has taken toward accounting for the risks of climate change to our economy in a transparent and meaningful way.”

  • Indirect emissions. Surprise breakthrough: inclusion of rules for the disclosure of so-called Scope 3 emissions generated by companies’ supply chains and customers’ use of their products, which often account for the bulk of companies’ carbon footprints. The commission majority included Scope 3 emissions when such information is material to a company’s financial performance, or if the company itself has set Scope 3 goals. ExxonMobil’s Scope 3 emissions came to 730 million metric tons of carbon dioxide in 2019, about the same as Canada’s total emissions.
  • Carbon pricing. The S.E.C. for the first time will ask companies if they set an internal price on carbon, and how (for context, see “Rising price of carbon starts to hit balance sheets – and corporate decision-making”). The rules also cover companies’ use of carbon offsets or renewable energy certificates to meet net-zero goals. Critics say offsets can distract companies from reducing emissions from their own operations. “The S.E.C. is saying you have to be very clear if you are using offsets to reduce your emissions,” says As You Sow’s Danielle Fugeres.
  • New tools. Mandatory Scope 3 reporting sounds good, “but it may not do good,” three Stanford University experts write in a guest post. Scope 3 rules may discourage companies from setting such targets, and suffer from ambiguity, overcounting and gaming, Alicia Seiger, Marc Roston and Thomas Heller argue in How the SEC’s rules will – and won’t – solve climate change,” on ImpactAlpha. Instead, they propose higher frequency Scope 2 accounting for the 75% of global emissions that come from electricity, heat and transportation, or a VAT-like method to track emissions through supply chains. “Effective management of climate change requires a well-kept and closely aligned set of books that accurately, consistently, comparably and authoritatively (and only once) account for all emissions.”
  • Keep reading, “SEC disclosure rules signal the arrival of climate accountability,” by Amy Cortese on ImpactAlpha.

Dealflow: Farmer Finance

Apollo Agriculture raises $40 million to bank smallholder farmers in Africa. Nairobi-based Apollo has used satellite imagery data and machine learning to underwrite loans to Kenya’s small-scale maize farmers since 2016. It now works with 5,000 local agents to deliver advice and inputs, like fertilizer and seeds, to more than 100,000 farmers. Apollo offers insurance through partners like Kenyan insurance tech startup Pula. The Series A financing led by Softbank’s Vision Fund will help the company expand in Kenya, enter new markets in East and West Africa, and “deliver more value per acre,” said Apollo’s Eli Pollack. Added Softbank’s Alexia Yannopoulos, “Embedding valuable financial services like credit, insurance and advice into the supply chain is critical to supporting a more efficient and sustainable global food chain.”

Canada’s Planetary Technologies scores $7.8 million for ocean carbon capture. The Nova Scotia-based company adds alkalinity to the ocean to resist acidification and enhance the seas’ natural ability to sequester carbon from the atmosphere. Planetary (formerly Planetary Hydrogen) says the process enables the ocean to store carbon for tens of thousands of years and reverses damage caused by acidification due to climate change.

  • Carbon credits. Shopify has pre-ordered some of the credits Planetary aims to create with pilot facilities in Quebec and Nova Scotia. Leftover purified alkaline rocks can produce zero-carbon green hydrogen fuel, the company says.
  • Check it out

Dealflow overflow. Other investment news crossing our desks:

  • Kenyan fintech venture 4G Capital raises $18.5 million in equity from Lightrock to provide unsecured loans to micro-businesses in Africa.
  • Powered by People, also in Kenya, snags $5 million to connect local artists and artisans with large global retailers like IKEA and Crate & Barrel.
  • BLOC Smart Africa, a fund managed by Bamboo Capital Partners, will invest €300,000 ($329,000) in Digitech to digitize insurance and reinsurance in Côte d’Ivoire.
  • Lune scores $4 million to help businesses report and reduce the carbon footprint of their products and services

Agents of Impact: Follow the Talent

Unreasonable seeks a chief people officer and a chief financial officer… ImpactAssets is recruiting a director of strategic marketing communications and for other roles… Wellington Management is looking for an associate director of ESG for private investments in Boston… Galvanize Climate Solutions seeks a vice president of market development… Overture is hosting a conversation series on climate tech and government with TPG’s Jim Coulter and Overture’s Shomik Dutta and Brandon Hurlbut, Thursday, Mar. 31.

PolicyLink, FSG and Just Capital are hosting “Raise your voice: Public comment period launch for corporate performance standards on racial equity,” Tuesday, Apr. 5… Humana Foundation and Volunteers of America launch the Community Health Incubator to support social enterprises that improve quality, equity and access to care for Medicaid patients and other at-risk populations.

Thank you for your impact.

– Mar. 22, 2022