Greetings, Agents of Impact!
Featured: Catalytic Capital
Doubling down on guarantees, MCE Social Capital aims to unlock capital for climate + gender. Moving capital to address the intersection of climate adaptation, gender equity and smallholder agriculture requires – for now – concessional capital to mitigate perceived and actual risks. “It’s taking longer to grow the space and crowd in more capital than we all hoped,” says Camilla Nestor of MCE Social Capital, which since 2007 has deployed investment guarantees to mobilize more than $300 million for farmers in Africa, Asia and Latin America. “There’s definitely a need to grow the universe of impact-first, risk-tolerant capital.” MCE last week closed on $41.6 million for its MCE Empowering Sustainable Agriculture, or MESA, Fund, to make loans to agri-lenders and rural finance institutions that improve smallholder farmers’ climate resilience and create economic opportunities for women.
Blended finance remains a necessary tool. MCE Social Capital made its reputation using philanthropic guarantees from high-net-worth donors to catalyze private capital for lenders to rural borrowers perceived to be at high risk of default. MCE is complementing its balance-sheet lending with its first closed-end, impact-first debt fund to respond to climate change’s disproportionate impacts on women and rural communities and still-yawning rural capital gaps. The MESA fund includes a $14 million catalytic tranche that helped secure $27 million in senior capital from the US International Development Finance Corp., FMO, Visa Foundation and ImpactAssets. Many of the early deals in the MESA Fund pipeline will be matched by MCE’s traditional guarantee funds. “There is money to be made here, but this is also a sector that’s becoming riskier because of climate change,” says MCE’s Christina Lukeman. “I think philanthropists and impact-first investors should be excited about their role in helping to unlock additional capital, given there’s such an opportunity for outsized impact.”
- Keep reading, “Doubling down on guarantees, MCE Social Capital aims to unlock capital for climate + gender,” by Jessica Pothering on ImpactAlpha.
Dealflow: Corporate Venture Capital
TELUS’ Pollinator Fund for Good backs three impact tech ventures. Among the additions to the Vancouver-based corporate impact fund is Houston-based Climate Robotics, which uses robotics and artificial intelligence to convert agricultural waste into biochar for sequestering carbon. The Pollinator Fund led Climate Robotics’ $20 million funding round. Ontartio-based Erthos makes plant-based resin alternatives to single-use plastics. South Africa’s smart energy company Plentify retrofits and links electric home water heaters so they operate more efficiently. The linked devides can serve as virtual power plants, allowing for a shift in energy usage away from peak hours to times when excess renewable energy is available. “TELUS’ investment is a catalyst in our mission to ease the strain on global electricity grids amidst rapid urbanization and climate change,” said Plentify’s Jon Kornik.
- Corporate impact footprint. The Pollinator Fund has deployed over $40 million in 30 impact startups. Half of the fund’s portfolio companies are led by Indigenous and other underrepresented founders; 42% are led by women. Canadian telecommunications company TELUS launched the corporate fund three years ago to invest in impact startups improving health, agriculture, the environment, and social and economic inclusion.
- Check it out.
Twinco Capital secures €50 million from BBVA to provide trade financing for emerging market suppliers. The Spanish fintech startup will use the $53 million line of credit to make loans to small businesses in emerging markets, which face a $2.5 trillion trade financing gap. Women-led Twinco partners with large fashion and retail companies to extend low-cost working capital to suppliers in Bangladesh, Pakistan, Thailand, Vietnam and Indonesia, as well as Spain. The debt investment came from Madrid-based BBVA Spark, which was carved out of the financial services giant’s balance sheet last year. Twinco is reinventing supply-chain financing “by incorporating innovative environmental and social criteria into their supplier financing model,” said BBVA’s Roberto Albaladejo.
- Sustainable supply chains. Since it launched in 2019, Twinco has extended $250 million to suppliers. It fronts up to 60% of purchase orders, with the rest paid upon delivery. Twinco foregoes collateral to streamline the process for small suppliers. “Technology and machine learning provide invaluable data insights on commercial, financial and ESG performance, giving our customers a state-of-the-art supply chain risk management tool,” explained Twinco’s Carmen Marin. Twinco scored $12 million in an equity and debt round led by Quona Capital earlier this year.
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Dealflow overflow. Other investment news crossing our desks:
- US energy company Tenaska and Copenhagen Infrastructure Partners, through its $3 billion energy transition fund, will partner on a portfolio of gigawatt-scale green hydrogen projects in the US. (CIP)
- Canada’s Eavor Technologies raked in $182 million from Microsoft’s Climate Innovation Fund, Temasek, Japan Energy Fund and other investors for a patented process for producing geothermal energy. (Eavor)
- Financial services giant Northwestern Mutual allocated an additional $75 million to the impact investment fund it created in June 2021 to back Black fund managers. (Northwestern Mutual)
- Algenesis Corp. clinched $5 million in a seed round backed by Circulate Capital to make biodegradable and compostable products, such as footwear, textiles and phone cases, from algae. (Circulate Capital)
Short Signals: What We’re Reading
🤝 Shifting governance rights. Wealth and ownership are important, but so is the fundamental right of workers and other stakeholders to decide how their companies work for them, argue Transform Finance’s Andrea Armeni, Curt Lyon and Julie Menter. (Stanford Social Innovation Review)
🤖 Digital edge for Black entrepreneurs. The BLADE Blueprint study surveyed nearly 900 Black entrepreneurs to understand how they are creating wealth through digital businesses. More than three-quarters owned profitable businesses (vs. 54% for all small businesses owned by people of color and 66% for all small businesses). (Plexus and Black Innovation Alliance)
⚡ Climate tech companies to watch. From nuclear fusion (Commonwealth Fusion Systems) to plant-based burgers (NotCo), MIT Technology Review highlights startups and established businesses it believes have the greatest potential to substantially reduce greenhouse-gas emissions or otherwise address global warming. (MIT Technology Review)
💧 A market for water savings in Latin America. After years of selling irrigation management tools to farmers, Argentina-based Kilimo adjusted its business model to focus on “water neutrality” for corporations. The concept is “like carbon markets but specifically tied to water savings,” says Kilimo’s Jairo Trad. (AgFunderNews)
🌐 Investing in sustainable development. A loan to an electric mobility company in Kenya. Political risk insurance for a hospital in Ukraine. And equity in a sustainable forestry venture in West Africa. The US International Development Finance Corp. has approved $3.4 billion in transactions so far in the fourth quarter. (DFC)
- Catch ImpactAlpha’s Q&A with DFC’s Nisha Biswal at this month’s GLI Forum Latam.
🇺🇸 Decarbonizing the United States. Recent energy and climate policies have put the US on a path to zero net-emissions by mid-century, scientists find in a new report. “The main challenge now is effective implementation of these policies,” said Stephen Pacala of Princeton University. (National Academies of Sciences, Engineering, and Medicine)
Agents of Impact: Follow the Talent
Arup is hiring a climate and sustainability leader in Boston… The Low Income Investment Fund is hiring a racial equity and impact lending officer in New York… The International Finance Corp. is looking for a short-term consultant for its sustainable finance initiative in Washington, DC… Pollination is recruiting an executive director for environmental markets in Washington, DC or Chicago… The Investment Management Corp. of Ontario seeks a principal for sustainability policy and innovation in Toronto.
Thank you for your impact!
– Oct. 30, 2023