Greetings, Agents of Impact!
Signals: Ahead of the Curve
Eight climate finance innovations to accelerate the green recovery. Innovation in climate finance is critical – doubly so with a raging COVID pandemic. Eight new financial solutions to be showcased today by the Global Innovation Lab for Climate Finance “address the climate emergency while providing much-needed sustainable recovery opportunities for overcoming the COVID-19 pandemic economic shock,” says Barbara Buchner of the Climate Policy Initiative, which hosts the lab. The models include climate adaptation notes to fund water infrastructure, rural prosperity bonds for sustainable agriculture, and portfolios of distributed solar projects for schools and health clinics in Africa. Buchner estimates that nearly $7 trillion per year will be required through 2030 to meet sustainable infrastructure needs (see, “Green infrastructure is back on the agenda”). All told, the lab has launched 49 instruments that have mobilized over $2 billion.
- Farmer finance. A “rural prosperity bond” developed by the World Resources Institute would help graduates of WRI’s sustainable agriculture Land Accelerator sell to smallholder farmers on credit (see, “Land Accelerator helps close financing gap for African soil startups”). Separately, a Sustainable Agriculture Finance Facility offers low-cost, flexible credit for Brazilian farmers who pass a sustainable agriculture certification.
- Off-grid schools and clinics. GreenStreet Africa and Nigeria Rural Electrification Fund are bringing private capital to solar installations in public facilities by aggregating and de-risking portfolios of off-grid projects at schools and health clinics.
- Reforestation. Conexsus Impact Fund helps Brazil’s small-scale farmers and forest dwellers with sustainable practices access government-run credit programs. It extended a $2 million emergency credit line to help rural, forestry-based enterprises through the COVID crisis. Separately, GROVE uses satellite imaging and a forestry smart ledger to unlock funding for reforestation and regeneration.
- Collect the whole set.
Laggards get booted from ESG club. S&P Global dropped companies generating more than 5% of their revenues from thermal coal from its environmental, social and governance, or ESG, index. Among those delisted: Duke Energy, Dominion, American Electric Power, Xcel, WEC Energy, DTE Energy, PPL, and CMS Energy. Likewise, the United Nations’ Principles for Responsible Investment delisted five companies that have failed to meet the group’s minimum requirements over two years – a move it calls “a last resort.” They include Primary Wave IP Investment Management in the U.S., France’s BPE and Delta Alternative Management, Indonesia’s Corfina Capital and Stichting GBF in the Netherlands. Two dozen signatories who failed to file a report have also been dropped or delisted. Share this post.
Strengthening trust in impact investing. If impact washing is one of the greatest challenges, then impact verification may represent one of the greatest opportunities in the impact investment market. Impact verification can help asset managers and allocators verify impact claims and align their impact management practices with industry standards. Tideline is launching an independent impact verification business to bring greater accountability, discipline, and comparability to the impact investment market. Learn more about impact verification and Tideline’s plan to help the impact investing industry scale with integrity Thursday, Oct. 1, at 9am ET (note: corrected time). RSVP now.
Dealflow: Follow the Money
Insurer QBE backs Save the Children’s impact fund. Save the Children, known for its humanitarian aid work, has reached a $6 million first close for an impact fund to invest in social enterprises supporting humanitarian causes. Australian insurance firm QBE and Save the Children Australia invested in the fund, which Save the Children launched in January to offset declining sources of aid funding. The pandemic accelerated the urgency. “The demand for our services has been unprecedented, particularly with severe disasters increasing and now the pandemic,” said Paul Ronalds of Save the Children Australia. “We must find new sources of funding for social innovation, including leveraging private sector investment.” QBE’s Gary Brader called on institutional investors to “play a bigger part in investing” for impact.
- Funding focus. Save the Children’s investments will focus on edtech, e-health and fintech enterprises serving disadvantaged children and families. Other charity and humanitarian organizations with impact funds include World Vision, Catholic Relief Services, Mercy Corps and Engineers Without Borders, as well as UNICEF USA, which is leading a COVID relief fund.
- Read on.
Bank of America issues $2 billion ‘equality progress’ bond to advance racial equity. Proceeds from the five-year bond will be used to invest in initiatives having a positive impact on Black and Brown communities. The projects include affordable housing development, mortgage lending, financing for health facilities, medical practices, and minority-owned depository institutions, as well as supply-chain lending and equity investments in minority-owned businesses. It is BofA’s eighth sustainability-focused bond offering and brings the bank’s responsible issuances to $9.9 billion.
- Following suit. Citi recently announced $50 million in additional capital for its impact fund, to be reserved for Black-owned enterprises, along with $1 billion in other racial equity-focused initiatives. Almost 60 companies have pledged more than $3.3 billion to fight inequality and racism since the police killing of George Floyd, per Axios.
- Dig in.
Oil trader Trafigura Group launches renewables group. The new firm, Nala Renewables, is aiming to invest $2 billion and develop two-gigawatts of renewable energy projects over the next five years, the Financial Times reports. Singapore-based Trafigura Group formed the partnership with fund manager IFM Investors.
Series: Impak Battles
Corporate impact face-off: Crédit Agricole and BNP Paribas. Social and environmental crises have heightened focus on the role of banks in the economy. The opportunity: turning massive liabilities like climate change and social justice into assets. The latest installment of Impak Battles, an ImpactAlpha series with impact rating agency impak, compares the positive and negative impacts of French mega-banks Crédit Agricole and BNP Paribas. Spoiler alert: Material positive impact represents only a tiny fraction of the total activities of both banks. Still, writes impak, “Even the smallest sustainably-oriented maneuver can generate a big difference.” The series has featured Nestlé vs. Danone, Engie vs. Enel and Novartis vs Sanofi.
- Global goals. Crédit Agricole’s four material positive impacts, which are dedicated to solving at least one of the U.N. Sustainable Development Goals, amount to 1% of its total activities. More than half of that total (0.57%) relates to financing the low-carbon energy transition through interest-free eco-loans, green bonds, partnerships and investments. BNP Paribas has three material positive impacts. Investments in social companies totaling €885.1 million in 2018 represent 0.06% of its total activities. Access to financial services for the poor and vulnerable make up just 0.02% of activities while the bank’s commitment to microfinance institutions account for 0.01%.
- Low bar. In the end, BNP Paribas nudges out Crédit Agricole for its ability to mitigate negative impacts. BNP Paribas manages more than €36 billion with an environmental, social and governance lens, for example, compared to €2.75 billion at Crédit Agricole. Also, BNP has helped clients issue $59 billion in COVID response bonds in 2020.
- Face off.
Agents of Impact: Follow the Talent
The Runway Project seeks a part-time strategic project manager and an Oakland director… Social Venture Circle hosts a virtual Native American Impact Showcase, featuring Valerie Red-Horse Mohl, as well as pitches and conversation from Wizipan Little Elk of Wolakota Buffalo Range, Tahda Ahtone of JackRabbit Development, Harvest Nation’s Denise and Dani Pieratos and others, today, Sept. 29… The Catholic Impact Investing Collaborative hosts “Investment for a Green Recovery: Innovation in Impact Investing,” on Wednesday, Oct. 21.
Thank you for reading.
–Sept. 29, 2020