The Brief | October 3, 2022

The Brief: Community development funds, innovative climate finance, healthcare for underserved Americans, Nigerian solar acquisition, impak ratings

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Greetings, Agents of Impact! 

Featured: Catalytic Capital 

U.S. Treasury channels $8 billion to help CDFIs and MDIs boost small business lending. Community development financial institutions and minority depository institutions played a vital role getting aid to small businesses in low-income, rural and communities of color during the Covid pandemic. While traditional banks focused on clients and larger businesses, many CDFIs heroically mobilized to process Paycheck Protection Program loans for thousands of small businesses outside of traditional banking channels (for context, see, “Innovative CDFIs scale up to help underserved communities move from relief to recovery“). CDFI lending has skewed toward real estate financing, but new funding from the U.S. Treasury Department aims to help the community banks continue lending to low- and moderate-income consumers and underserved small businesses in the U.S., “providing an opportunity to underserved communities across the country to regain their footing following the pandemic and strengthening their resilience against future shocks,” said Treasury Secretary Janet Yellen.

  • Place-based. Nearly $8.3 billion from the Emergency Capital Investment Program, created last year, will go to 162 CDFIs and MDIs, mainly from Mississippi, Louisiana, North Carolina, California and Texas. Durham, N.C.-based Latino Community Credit Union received nearly $100 million; Black-owned credit union Hope Credit Union in Jackson, Miss. will receive nearly $93 million (see, Agents of Impact: Bill Bynum); and Denver, Colo.-based Native American Bank will receive $37.4 million. “This is a significant injection of money into the backbone of the community investing ecosystem at a time when community development finance advocates are considering how best to leverage new public-enabled opportunities stemming from the Inflation Reduction Act,” Fran Seegull of the U.S. Impact Investing Alliance tells ImpactAlpha.
  • Green banks. The IRA includes a $27 billion Greenhouse Gas Reduction Fund that will provide catalytic capital for state green banks, CDFIs and other community-based lenders for renewable energy, reforestation, industrial decarbonization and other projects (see “Community lenders look to carve out a role for themselves in new green bank fund”). To ensure the fund effectively serves low-income and underserved communities, the Center for Impact Finance’s Eric Hangen and Michael Swack proposed five principles for guiding the implementation of the fund (see, “Will a new EPA fund serve low- and moderate-income people? Five principles to promote success”).
  • Check it out.

Seven innovative finance tools to unlock funding for climate challenges. Climate finance is flowing, but persistent gaps remain, especially in emerging economies. Participants in this year’s Global Innovation Lab for Climate Finance are using creative tools to unlock private capital for climate mitigation and adaptation in emerging markets. Interventions range from ensuring affordable, green housing in Africa and Asia, to decarbonizing steel in India, to sustainable shrimp farming in Southeast Asia (a virtual demo day on Oct. 19 will showcase the solutions).Together, the seven projects aim to unlock $1 billion for climate action with guarantees, alternative credit scoring, insurance, technical assistance and other tools. “Tackling difficult challenges in the climate finance space is our raison d’être,” the Lab’s Ben Broché tells ImpactAlpha. The Lab, managed by Climate Policy Initiative, has since 2014 helped develop and launch more than 60 innovative financing instruments that have catalyzed some $3.3 billion in finance or climate action.

  • Carbon offsets. The Fund for Nature, developed by CrossBoundary, seeks to increase the supply of high-quality, nature-based carbon projects to meet growing corporate demand for offsets, while boosting the economic benefits for project developers and local communities. The blended capital fund will provide upfront financing to help launch projects to restore tropical forests or preserve. The fund will be piloted in Africa.
  • Green, affordable housing. Sheltering the fast-growing populations of Africa and Asia will require massive investments in housing. Making sure that housing is affordable, sustainable and resilient to a changing climate is the focus of Reall, an investor in climate-smart, affordable homes. Reall is facilitating the construction of affordable, green homes via targeted construction finance, technical assistance and de-risked local construction loans. It is also paving the way to home ownership for low-income and informal economy participants by helping local lenders adopt alternative credit assessments and de-risking mortgages. The aim is to create “a self-sustaining housing finance ecosystem,” according to Reall.
  • Collect the whole set.

Dealflow: Investing in Health

Town Hall Ventures raises $350 million to improve healthcare delivery to underserved communities. Underserved communities face disparities in health outcomes, life expectancy and deaths. “Our country has an opportunity to transform the lives of people who have been poorly served by the healthcare system,” said New York-based Town Hall’s Andy Slavitt, who headed the Center for Medicaid and Medicare Services during the Obama administration. Slavitt, with David Whelan and Trevor Price, launched Town Hall in 2018 to invest in companies improving healthcare services and addressing the social determinants of health for underserved Americans. The fund is seeking to build “enduring and impactful companies that drive measurable improvements in health outcomes, especially for those who have been poorly served by the status quo,” said Whelan. The raise brings Town Hall’s total assets under management to over $1 billion. Town Hall Ventures’ first two funds raised $115 million and $275 million.

  • Returns on inclusion. Town Hall says the 30 companies it has invested in or partnered with have grown to deliver healthcare services to more than three million Americans in all 50 states. Half of the firm’s portfolio companies are led by BIPOC and/or women founders and CEOs. Portfolio companies include Cityblock Health, which is providing value-based care to low-income patients; Unite Us, a tech company working to bridge health and social services; and Bright Health, a health insurance provider for small businesses and low-income families.
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Societe Generale takes a stake, as Impact ratings-agency impak raises €4.5 million. Ratings by the Montreal and Paris-based impak emphasize the impact of a company’s products and services, not just how it operates. That shift from an ESG-based analysis of inputs to an impact-oriented assessment of a company’s outputs, as shown by its revenue mix, is increasingly central to how investors are valuing a company’s social and environmental potential. European financial services company Societe Generale and impact tech fund Altalurra Ventures invested in company. ImpactAlpha partnered with impak on a series of “corporate impact face-offs,” pitting two companies in the same sector. The “impak battles” included Crédit Agricole and BNP Paribas, Nestlé vs. Danone, Engie vs. Enel and Novartis vs Sanofi.

  • ESG to impact. The banking and advisory division of Societe Generale has adopted “impak ratings” to analyze its corporate clients. “Having a good understanding of our clients’ environmental and social issues is essential to supporting them with their sustainability roadmap,” said Societe Generale’s Pierre Palmieri. Almost two-dozen clients use impak’s impact analysis methodology. Impak’s Paul Allard says the partnership with Societe Generale “shows the acceleration of the financial sector’s transformation towards responsible and positive impact finance.”
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Dealflow overflow. Other investment news crossing our desks:

  • Brookfield’s $15 billion Global Transition Fund will invest up to $2 billion to acquire U.S. renewable energy platforms Scout Clean Energy and Standard Solar.
  • Shell’s New Energies is acquiring Nigeria solar energy provider Daystar Power to help the company meet increased solar energy demand in East and Southern Africa, particularly South Africa.
  • Mumbai-based Syntellect secured an undisclosed investment from Reall to facilitate affordable housing loans to unbanked and low-income borrowers in emerging markets (see, “Seven innovative finance tools to unlock funding for climate challenges,” above.)

Agents of Impact: Follow the Talent

Leroy Barber, co-founder of Voices Project, joins Neighborhood Economics as an executive director… Ari David, ex- of AUA Private Equity, and Manasi Desai, ex- of KKR, join Ara Partners as vice presidents… John Holl, ex- of ACT Commodities, joins Clear Sky Advisers as president of North American carbon and environmental trading… Beneficial State Bank is hiring a chief impact officer.

Skoll Foundation seeks a portfolio and investments analyst… The Nature Conservancy is hiring a land and water protection associate in Michigan and several other roles… HIP Investor is looking for a remote ESG impact investing analyst… DFC seeks a managing director of supervisory investment funds and several other roles in Washington, D.C.

MCE Social Capital is recruiting a manager in Nairobi… Convergence is hiring a manager for its market acceleration and design funding team in Toronto and several other roles… CapRock seeks a client advisor, a head of corporate development, and an investment associateRSF Social Finance is looking for a remote senior associate for philanthropic services and operations.

This year’s Native Women’s Business Retreat will take place Oct. 27-30 in Santa Ana Pueblo, N.M… The NYU Stern School of Business will host an event on building an inclusive and sustainable cannabis industry, Thursday, Oct. 6 in New York… The Service Employees International Union will hold a virtual event on labor risks with former S.E.C. commissioner Robert Jackson Jr., Friday, Oct. 14.  

🍸 Join us for drinks in The Hague. Are you making the scene at next month’s GIIN Investor Forum in The Hague? Join ImpactAlpha and fellow Agents of Impact to kick off the forum with alumni from Oxford’s Social Impact Portfolio, Tuesday, Oct. 11. Spots are limited – RSVP today (Still need GIIN tickets? Grab 10% off.)

Thank you for your impact!

– Oct. 3, 2022