The Brief | February 8, 2024

The Brief: Climate signals from the insurance industry

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ImpactAlpha

Greetings, Agents of Impact! In today’s Brief:

  • Climate signals from the insurance industry
  • Farmer resilience in Kenya
  • Financing African women in tech
  • Divesting from Wall Street

Featured: Climate Finance

California’s climate-risk pioneer Dave Jones on our ‘march toward an uninsurable future’ (Q&A). As California’s insurance commissioner for most of the 2010s, Dave Jones was one of the first regulators to model climate risk scenarios for insurers. In 2016, he formed the Sustainable Insurance Forum for regulators and supervisors. In 2018, he warned the Financial Stability Board about the impact of climate risk on the insurance industry. As those risks hit home – and homeowners – insurers are retreating from areas hardest-hit by wildfires and extreme weather. Last year, the US saw a record 28 weather events that cost $1 billion or more – a total of $93 billion in losses. “The evidence is very clear,” says Jones, now director of the Climate Risk Initiative at UC Berkeley’s Center for Law, Energy and the Environment. “We are marching toward an uninsurable future.” 

  • Safety net. Who will insure the uninsurable? Jones argues for state-run programs, such as the Fair Access to Insurance Requirements set up by some 37 states as an insurer of last resort. Federal programs such as the National Flood Insurance Program are not risk-adjusted, he says; taxpayers not in flood areas subsidize the costs. Americans keep migrating to flood-prone areas and rebuilding after floods. “Rates aren’t sending the right signal,” Jones says.
  • Private sector. Nature-based solutions like coastal restoration, regenerative agriculture, prescribed forest fires, and forest thinning can mitigate climate-related property damage. “Insurers have declined to account for these investments in their underwriting and rate modeling,” says Jones. Community “hardening” strategies like the “Fortified Home” standards can help buffer houses from hurricane winds. Less flammable roofing materials, shatter-proof windows and other features can help homeowners survive wildfires. 
  • Fossil farce. The US insurance industry holds about $536 billion in fossil fuel investments. Big insurers such as State Farm and Allstate, Jones says, are investing in industries that contribute to the climate changes that force them to flee hot spots. “One should ask the question, why does it make sense to keep insuring these industries that are contributing to climate change, which itself is contributing to your inability to write insurance?”

Dealflow: Catalytic Capital

Eco.business Fund backs Family Bank to finance climate resilience for farmers in Kenya. Most commercial banks in Africa have long dismissed farmers and other agricultural businesses as too risky. Kenya’s Family Bank offers working capital for farmers to purchase farm inputs and machinery, and operates a small lending program for the country’s tea and dairy farmers. Impact investment firm Eco.business Fund’s $5 million loan will help Family Bank extend financing to farmers and agribusinesses for climate-smart technologies and practices.

  • Farmer finance. Eco.business Fund’s loan to Family Bank follows $10 million in financing in 2022 to support Kenya’s tea farmers. During the pandemic, USAID provided outcomes-based funding to the bank to encourage affordable lending and capacity building to Kenya’s small agri-businesses. Such partnerships have helped “in widening our capital base and scaling up lending to this sector,” Family Bank’s Nancy Njau said. Lending to agribusinesses, she said, can “bridge their financial need to scale climate-smart agriculture technologies to enhance climate resilience.”
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Village Capital partners with Standard Chartered to catalyze capital to African women in tech. Female founders receive just 2% of venture capital in Africa (and about the same globally). Standard Chartered bank launched its Women in Tech program in Kenya in 2017 to usher more seed capital to women-led tech startups. Women in Tech has provided about $450,000 to entrepreneurs participating in the program’s incubation cohorts. Village Capital is partnering with Standard Chartered to use its startup acceleration and peer selection model to level up the capital available to Women in Tech participants. Village Capital’s programs have supported more than 1,400 startups globally since 2009.

  • Early stage. The first two investments from the partnership went to Kenya-based Bena Care, which is building a network of affordable home care providers for patients with chronic illnesses, and Zambia-based Mighty Finance, a digital lender for women-owned micro and small businesses. Each company received $75,000 investments.
  • Check it out. 

Dealflow overflow. Investment news crossing our desks:

  • Los Angeles-based Avnos inked $36 million in an equity round led by NextEra Energy for its direct air and water-based CO2 capture technology. (Canary Media)
  • K-12 education software company Branching Minds received an undisclosed amount of growth equity from Bain Capital’s Double Impact fund. The private equity firm is in the market with its third impact fund and a target of $1 billion. (Bain Capital)
  • Health-focused fintech company MAPay is launching the Apierion Impact Fund to tap donor advised funds for investments addressing global health inequity. (Apierion)
  • Women-led climate tech VC Voyager Ventures closed its $100 million Voyager Select fund with backing from Novo Holdings, Northwestern University and other investors. (Voyager Ventures)
  • Suma Wealth inked $2.2 million from Radicle Impact, Vamos Ventures, OVO Fund and the American Heart Association’s impact fund for its financial products and content tailored to the young US Latino community. (TechCrunch)

Impact Voices: Racial Justice-Lens Investing

How Kataly Foundation is divesting from Wall Street to reinvest in communities. The $450 million foundation co-founded by Regan Pritzker is one of the few philanthropies focused exclusively on building power and asset ownership in Indigenous, Black and other communities of color. Led by Nwamaka Agbo, Kataly Foundation plans to spend down its reserves and redistribute wealth to communities (listen to Agbo’s conversation with ImpactAlpha contributing editor Monique Aiken). When the foundation set out to align its investment strategy with its mission and values, it confronted the question: How can a foundation divest from Wall Street? In a guest post on ImpactAlpha, Kataly’s chief investment officer Lynne Hoey walks through the foundation’s plans to spend down its assets and craft an investment strategy that prioritizes racial justice.

  • Transparent journey. “Too often, the investment decisions that foundations make are shrouded in secrecy,” writes Hoey in the first in a series about the foundation’s journey. “Trillions of dollars are invested by foundation endowments and donor advised funds. By sharing our own investment journey, we are hoping others will join us in this act of radical honesty.”
  • Spend out. Pritzker, an heir to the Hyatt Hotel fortune, described her motivations on a 2021 Agents of Impact call. “As someone who inherited wealth, it was easier for me in some ways to hear the critique from our grantees that that wealth is not mine, and that our wealth is not ours, that it was extracted from natural resources from people’s labor, has been siphoned off from our public systems through tax saving strategies,” Pritzer said. “The call to action wasn’t just to invest in better companies but to think much bigger picture about overall economic, political and social systems.”

Agents of Impact: Follow the Talent

Vision Ridge promotes Rob van Es to partner and Christina Scalzo managing director… Boann Social Impact appoints Brian Smith, previously with Rhiza Capital, as managing director… JPB Foundation promotes Deepak Bhargava to president… Working Power names Yerina Mugica, a former managing director at the Natural Resources Defense Council, as co-executive director… Aurum Impact hires Mats Multhaupt, previously with Future Cleantech Architects, to its investment team. 

Blue Owl Capital is on the hunt for a corporate sustainability associate in New York… Also in New York, Global Impact Productions seeks a fundraising coach… Meta has an opening for a net-zero and sustainable strategy manager in Denver… Arnold Ventures is looking for an impact investing executive vice president… Advantage Capital is looking for an impact research analyst… Mastercard Foundation is on the hunt for a Nairobi-based senior investment director for its Africa Catalytic Impact Fund. 

M&G Investments is recruiting a contractual sustainability lead in London… John Podesta, Jigar Shah and Cranemere’s Diana Propper de Callejon are among the speakers at “From billions to trillions: Federal funding as a catalyst for private investment,” at Duke’s Fuqua School of Business, Wednesday, Feb. 28… DRK Foundation’s Rachel Macauley, Katapult’s Muthoni Wachira, and Hetal Patel and Scott Onder of Mercy Corp Ventures will join a panel discussion on climate investing in Africa at next week’s Africa Tech Summit in Nairobi.

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Feb. 8, 2024