The Brief | February 3, 2022

The Brief: Corporate carbon calculus, healthier fats, Black-owned bond issuers, sharing scooters, Latin American e-commerce, asset owners’ race to the top

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Greetings, Agents of Impact! 

Rising price of carbon starts to hit balance sheets – and corporate decision-making. The carbon footprint of corporations, long regarded as a “non-financial” factor, is about to become very material indeed. The price of carbon is rising more steeply than anyone would have predicted even a year ago. And with market prices now trending higher than the internal prices used by most companies, the hit to corporate balance sheets may also be higher than many chief financial officers have calculated – unless companies dramatically reduce their own emissions. This week, prices on the E.U.’s carbon trading market topped €88, or about $100. On the U.K.’s market, a ton of carbon is fetching £85, or about $115. “I don’t know why we’re not all jumping for joy that the price is over $100 a ton in Europe,” CDP North America’s Paula DiPerna tells ImpactAlpha. “It’s really a breakthrough and an important development.”

Internal corporate carbon prices increased to a median of $25 per ton last year, up from $20 in 2018, according to CDP’s annual survey. The prices vary widely, from $1 to the $1,600 per ton set by biotech company Amgen. General Motors uses a shadow price of $25 to evaluate energy efficiency projects. Microsoft charges its business units a fee of $15 per ton and channels the funds to renewable power, energy efficiency and carbon offsets. Host Hotels & Resorts, which operates 80 hotels mostly in North America, has adopted an internal price of $100 per ton. In compliance markets, covered companies are awarded some credits and buy offsets for the balance. In California, prices have nearly doubled in the last two years, to $28 per ton. Emissions cost Ryanair €150 million last year under the European ETS system. And that was before the price hikes of the past year. And consider ExxonMobil, one of the world’s top emitters: The oil giant released 112 million metric tons of CO2 and other greenhouse gasses in 2020. At $100 a ton, that’s a liability of $11 billion – more than its $8 billion average annual earnings (but not as high as Exxon’s 2021 earnings of $23 billion, fueled by soaring oil prices). Look at it another way: ExxonMobil is sitting on a huge cache of carbon emissions to avoid. The rising price of carbon may soon mean ExxonMobil’s oil is worth more left in the ground.

Dealflow: Agrifood Tech

Zero Acre Farms raises $37 million to make healthier, sustainable vegetable oils. Vegetable oils, including soybean, sunflower, canola and palm oil, are used to make most packaged foods and restaurant meals. Linked to chronic diseases such as heart disease, obesity, cancer and diabetes, vegetable oils also are responsible for nearly one-fifth of tropical deforestation worldwide and contribute to global carbon emissions. San Mateo, Calif.-based Zero Acre says its microbe-based fermentation process is able to make a healthier and more sustainable oil. “We use this ancient technique to produce oils and fats with significantly lower levels of the bad fats that have been linked to inflammation and disease, while having a fraction of the environmental footprint,” said Zero Acre’s Jeff Nobbs

  • Investing in food. The Series A round was led by Chris Sacca’s Lowercarbon Capital and San Francisco-based venture firm Fifty Years. S2G Ventures, Collaborative Fund, Robert Downey Jr.’s FootPrint Coalition Ventures and others participated.
  • Share.

Citi issues $2.5 billion bond to preserve affordable housing. Proceeds from the bond will finance the construction, rehabilitation and preservation of affordable housing properties for low and moderate-income families in the communities where Citi has a presence. The global bank partnered with five Black-owned firms – Blaylock Van, CastleOak Securities, Global Oak Capital Markets, Loop Capital Markets and Security Capital Brokerage – to underwrite the bond.

  • Returns on inclusion. Citi’s Action for Racial Equity initiative includes a goal to expand the bank’s business with minority-owned broker dealers and depository institutions. The partnerships, said Citi’s Michael Verdeschi, “enhance our best-in-class capital market distribution capabilities, while also financing affordable housing projects.”
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Energy Impact Partners’ Deep Decarbonization Frontier Fund secures $2.5 million from FirstEnergy Corp. (see, “Energy Impact Partners raises $200 million to target industrial decarbonization”).
  • E-scooter ride-sharing app Superpedestrian raises $125 million in debt and equity funding from investors including Sony Innovation Fund, General Catalyst and Citi Impact Fund.
  • Colombia’s Melonn scores $20 million in Series A funding, led by QED Investors, to help small businesses in Latin America sell and deliver goods to customers.
  • Zeta Energy raises $23 million to develop and commercialize sulfur-based lithium batteries for electric vehicles and energy storage companies.

Impact Voices: Institutional Impact

Race to the top: How responsible asset allocators are investing for a better world. In last week’s Institutional Impact column, O Canada, how do your pension plans get high ESG scores when you’re up to your neck in tar-sands oil,” ImpactAlpha contributor Imogen Rose-Smith called out New America’s Responsible Asset Allocators Index, the biennial ranking of giant pension and sovereign-wealth funds. The rankings “rely on what the world’s largest allocators say they do, rather than what they actually do,” wrote Rose-Smith. “The analysis falls short when it comes to the real-world impact of the plans’ entire investment portfolios.” Not so fast, says New America’s Scott Kalb. In a guest post on ImpactAlpha, Kalb responds to Rose-Smith’s critiques and explains the Index’s goals and approach. 

  • The methodology. RAAI scores “are based on what asset allocators do,” writes Kalb. RAAI’s methodology avoids use of investor self-assessments or surveys, he says. Rather, the analysis “is based on annual reports, websites and information in the public domain – documents that are regulated, audited and that reflect real actions.”
  • Race to the top. There are many ways to motivate change among asset allocators. “Promoting a ‘race to the top’ is RAAI’s preferred approach,” writes Kalb. “We believe this is the right path because investors need expertise, support and positive incentives to change practices that may have become deeply rooted and institutionalized over time.”
  • Raising the bar. Rose-Smith said she didn’t intend to undermine RAAI or the hard work put into the index. “I did want to highlight the need to consider the totality of what these allocators are doing.” She said RAAI and other indexes have done a service by raising the bar for transparency. “But it is incumbent on us as journalists and society to ask harder questions.”
  • Keep reading, Race to the Top: How responsible asset allocators are investing for a better world,” by New America’s Scott Kalb on ImpactAlpha.

Agents of Impact: Follow the Talent

Elevar Equity promotes Amie Patel and Shobha Venkataraman to partners… Bjorn Sorenson, ex- of Blue Dot Advocates, joins RPCK Rastegar Panchal as senior counsel and head of learning, development and impact assessment. Sebastian Martinez-Villalba, ex- of DigitalBridge, joins the law firm as senior associate… Shari Davis of Democracy Cohort, Valeria Fernández of Altavoz Lab, and Justin Hendrix of Tech Policy Press are among the Democracy Cohort of Emerson Collective Fellows.

CalSTRS seeks an investment officer for its sustainable investment and stewardship strategies unit… Zevin Asset Management is hiring an equity analyst in Boston… MCE Social Capital has openings for a portfolio manager, analyst and intern… Render and Access Ventures launch a second Reconstruct Challenge for innovations decreasing barriers to employment in Louisville, Ky… As You Sow grants investment firm Xponance exclusive rights to its racial justice and diversity, equity and inclusion data to develop institutional investment products.

Thank you for your impact.

– Feb. 3, 2022