The Brief | September 15, 2020

The Brief: COVID lessons from Southeast Asia, energy access in Nigeria, Bridges’ impact SPAC, sustainable cities fund, peak oil at BP

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Greetings, Agents of Impact! 

Featured: Impact Voices

COVID-19 lessons from Southeast Asia’s social entrepreneurs. The Philippines, Indonesia and other Southeast Asian nations have moved in recent weeks from crisis management to the COVID era’s new normal. In Indonesia, women-led e-commerce platform Ecodoe pivoted to production of personal protection equipment and is using its experience to build out a suite of services for micro, small, and medium-sized enterprises. Bean-to-bar chocolate manufacturing company Krakakoa, also in Indonesia, boosted sales with e-commerce and digital marketing. In the Philippines, education technology company Edusuite is helping schools accelerate the transition to digital. “We have been relieved to find so much optimism and opportunity in the social entrepreneurship ecosystem in Southeast Asia,” write Kevin Robbins and Mike Monteleone at Regional Investment Support for Entrepreneurs, or USAID RISE, in Phnom Penh, Cambodia.

Challenges remain. In a guest post on ImpactAlpha, Robbins and Monteleone lay out three ways that impact investors and donors can bolster small and growing businesses. Top of the list: short- and medium-term working capital grants and soft loans. “The ideal lender would provide patient, low-interest terms that would allow the company to repay once economic conditions have improved.” RISE and other support organizations are connecting businesses with low-cost, scalable technical assistance, including guidance on accessing relief mechanisms and pivoting business models, from pro bono providers like Credit Suisse, Crossfields, EY Ripples, Rippleworks and Senior Expert Contact. Some businesses that have survived the initial COVID shock need more time-intensive coaching to take the business forward. A financing innovation: RISE offers “discounted repayable grants,” in which a small down payment unlocks services; repayments are triggered when companies hit milestones of success. Such financing can make the intensive assistance affordable for growing companies, say Robbins and Monteleone. “Donor financial support is crucial to meet this increase in demand.”

Keep reading, “COVID-19 lessons from Southeast Asia’s social entrepreneurs,” by Kevin Robbins and Mike Monteleone on ImpactAlpha.

Dealflow: Follow the Money

Lumos clinches $35 million from DFC to expand energy access in Nigeria. Netherlands-based Lumos sells solar systems to West African businesses and households that lack reliable access to energy. The company sells 80-watt and 160-watt systems on a pay-as-you-go basis through partnerships with mobile operators like MTN. The company serves more than 100,000 customers in Nigeria. An investment from the U.S. International Development Finance Corp. aims to help Lumos produce and sell 160,000 new systems. The financing follows a July investment from Dutch development bank FMO that supported Lumos’ expansion in Cote d’Ivoire.

  • Cost-effective. Half of Lumos’ customers live below the poverty line, according to an impact study by U.K.-based CDC. Nearly 80% depend on generators for power because they’re connected to unreliable energy grids; their Lumos system payments are lower than the roughly $9 per week they would pay for utility service and generator fuel. More than 90% are first-time solar product users and 19% use their solar systems to generate additional income. 
  • Commercial and industrial. French development finance institution Proparco, EDFI ElectriFI and Energy Access Ventures invested in Solarise, which offers solar project financing for industrial and commercial businesses in East and Southern Africa. Broadreach Energy, which builds and operates everything from rooftop solar installations to utility-scale solar farms across Africa, raised $25 million from private equity firm Metier.
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Bridges Fund Management and AEA Investors to float $400 million ‘impact’ SPAC. The private equity players filed to float a $400 public offering for AEA-Bridges Impact Corp., a ‘special purpose acquisition company’ that will hunt for mid-cap private companies to take public. According to the filing, New York-based AEA, with $15 billion in assets under management, will tap Bridges’ impact investing experience to look for businesses that contribute to the U.N. Sustainable Development Goals,” or where impact management expertise can maximize positive impact. Other potential targets: opportunities to transform currently negative business practices to generate positive outcomes. 

  • Spate of SPACs. The recent crop of SPACs will test the appetite of public-market investors for impact-themed issues; success could create a new source of capital for sustainable businesses. TPG Pace Group filed last week to raise $350 million to acquire a business on the grounds of its environmental, social and governance, or ESG, profile. 
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Japan’s Takenaka Corp. backs Urban Us sustainable cities fund. New York and California based Urban Us invests in startups focused on improving mobility, health, safety and the environment in urban areas. The deal pipeline is supported by its URBAN X accelerator program, which is taking applications for its ninth cohort. Real estate and infrastructure company Takenaka made an undisclosed investment in Urban Us’s third fund. 

Signals: Ahead of the Curve

BP’s new business-as-usual: falling fossil fuel demand. How will the energy transition play out? Faster than previously thought. That’s the message from BP, which released its annual global energy outlook. The British oil giant painted three scenarios: a rapid transition in which carbon emissions from energy fall by 70% by 2050; net zero, where shifting social norms cut emissions even further; and business-as-usual. 

Oil demand peaks around 2019 levels in all three scenarios. The forecast is in stark contrast to BP’s 2019 outlook – as well as the views of most of its energy peers – which presumed demand would grow for at least another decade. BP sees all fossil fuels – coal, oil and natural gas – falling from about 85% of energy in 2018 to as low as 20% by 2050, a shift BP chief economist Spencer Dale called “entirely unprecedented.” COVID-19 could accelerate even the company’s most aggressive scenarios, reducing global GDP by 4% in 2025 and by almost 10% in 2050. 

  • Green infrastructure. Investment in wind and solar capacity will average $500 to $750 billion a year under the rapid and net-zero scenarios, “several times greater than recent investment levels in wind and solar,” said Dale. BP did its part last week, taking a $1.1 billion stake in two U.S. offshore wind projects by Norway’s Equinor. As part of BP’s pledge to remake itself as a diversified, low-carbon energy company, it plans to boost investments in renewables tenfold (see, Net-zero pledges by BP’s new chief raise the stakes for oil majors). 
  • Policy shift. The rapid transition and net-zero scenarios assume steep increases in carbon pricing, reaching $250 per ton ‎of CO2 in the developed world by 2050 and $175 in emerging economies. “Delaying these ‎policies measures and societal shifts may lead to significant economic costs and disruption,” warns BP. The U.S. Commodities Futures Trading Commission last week called for an economy-wide price on carbon that reflects the full social costs of emissions. 
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Agents of Impact: Follow the Talent

Jane Fraser was named first female CEO of Citigroup… Jonathan Tudor, ex- of Centrica, joins the Clean Growth Fund as an investment partner… The Kresge Foundation is recruiting a social investment officer for its Detroit program in Troy, Mich… Social Venture Circle seeks a manager of investor programming and services in Philadelphia or New York… Deloitte Italia is hiring a sustainability consultant in Milan… Schroders is looking for a sustainable investment analyst in London… The Kellogg School of Management’s social impact team seeks a part-time communications and data assistant. 

Mission Investors Exchange is hosting a film screening and conversation with the playwright and director of “The Moment Was Now” today, Sept. 15, at 3pm ET… SOCAP’s Radical Collaboration series and Avivar Capital are hosting “Bridging Capital Barriers: Understanding Diverse Perspectives on Fund Underwriting,” with Illumen Capital’s Daryn Dodson, Angela Matheny of Colonial Consulting, Megan Walsh Thompson of Ford Foundation, along with Avivar Capital’s Tina Castro, Anita Foster Washington and Destana Herring on Wednesday, Sept. 16… The Organisation of Eastern Caribbean States is hosting “The Sustainable Development Movement Summit,” Sept. 23 and 24 featuring Jamaica Stock Exchange’s Marlene Street Forrest, the Shark Group’s Daymond John and Resilience Capital Ventures’ Gillian Marcelle…  Applications are open for the 2021 ImpactAssets 50 database of impact fund managers.

Thank you for reading.

–Sept. 15, 2020