The Brief | October 9, 2024

The Brief: Crafting a global financial architecture to meet Paris climate goals

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Greetings Agents of Impact!

📣 Agents of Impact Call No. 65: Preserving affordable housing. Increasing the supply of new affordable housing is important. Preserving existing housing units for low-income families is existential. Foundations, endowments, family offices and other investors increasingly view affordable housing as a core real estate investment and a source of low-risk, steady returns that is resilient even through economic downturns. On next week’s Call, we’ll explore investable models for affordable housing preservation with Impact Community Capital’s Michael Lohmeier, ROC USA’s Paul Bradley, and other special guests, in conversation with ImpactAlpha’s David Bank. Join hundreds of other Agents of Impact, Wednesday, Oct. 16, at 10am PT / 1pm ET / 6pm London. RSVP today. ImpactAlpha’s coverage of affordable housing preservation is supported by Robert Wood Johnson Foundation.

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In today’s Brief:

  • The road to Brazil leads through Baku
  • Financing women’s health services
  • Climate-smart construction, food and farming
  • Failure and risk-taking in community development 

Climate negotiators head to Baku to craft a financial architecture for a net-zero future. In just a month, global envoys will gather for COP29, the annual climate gathering meant to advance the goals of the 2015 Paris climate accord. For the second straight year, the gathering will be held in a country largely financed by fossil fuels. Baku, Azerbaijan, is largely built on the oil industry, including famous gushers that exceeded even Texas’s. Last year’s COP was held in Dubai, in the UAE, one of the world’s biggest oil producers. The back-to-back petrostate gatherings has the climate cognoscenti fretting; some are planning to skip this year’s affair as they eye next year’s COP30 in BelĂ©m, Brazil. But the agenda for Baku, dubbed “the finance COP,” is anything but trivial. “COP29 is not a write off,” Katherine Stodulka of Systemiq tells ImpactAlpha. “It is an absolute wasted opportunity if we’re missing engagement around COP29 and around that new target for climate finance.”

  • Collective quantified goals. Negotiators will agree on a new target for climate aid to emerging markets – in bureaucrat-speak, that’s a New Collective Quantified Goal on Climate Finance, or NCQG. The target will update the arbitrarily chosen, and still unfulfilled, goal of funneling $100 billion to emerging markets for climate mitigation and adaptation. Delegates will also try to make good on last year’s pledges, including the “transition away from fossil fuels,” a tripling of renewable energy by 2030, a doubling of adaptation finance by next year, and operationalization of the “loss and damage” fund. The Baku agenda could “lay the groundwork for the whole finance architecture of Paris for the next decade or more,” says Alden Meyer of consultancy E3G.
  • Bridgetown 3.0. The concerns of less developed countries that bear the brunt of a changing climate they did little to cause are rising on the agenda with Brazil’s G20 presidency this year and as COP30 host next year, and the new prominence of the the V20 group of 68 climate vulnerable nations, helmed by Barbados and its Prime Minister Mia Mottley. Mottley’s updated Bridgetown 3.0 initiative, a plan for equitably reforming the global financial system, calls for development banks to look beyond national income to climate vulnerability and conservation needs when allocating concessional finance. The Bridgetown manifesto also urges the International Monetary Fund to issue $650 billion in Special Drawing Rights, a form of international reserves for use by low- and middle-income countries for sustainable development and climate action that can help tide countries over during rough patches. “We need the political will,” says Mottley. “Nothing more, nothing less.”
  • Nature and biodiversity. Even before COP29 gets underway in Baku, a parallel “biodiversity COP,” or Convention on Biological Diversity, will take place in Cali, Colombia. There, discussion will center on countries’ biodiversity strategies and action plans to advance the 2022 Kunming-Montreal Global Biodiversity Framework, which is akin to the 2015 Paris climate accord. Colombia’s environment minister, Susana Muhamad, has called for unifying the climate and biodiversity tracks, as well as a third focused on desertification. Under Brazil’s leadership, COP30 is expected to emphasize nature and biodiversity. Home to 12% of the world’s forests, Brazil is promoting a $125 billion Tropical Forests Forever Facility to pay nations to protect and restore their forests. The fund would be seeded with $25 billion from governments and philanthropies – a tall order, to be sure – in order to crowd in another $100 billion in private capital.
  • Country platforms. A series of Just Energy Transition Partnerships were launched at COP27 in Glasgow, Scotland, as a way to help coal-dependent countries transition from fossil fuels. Multi-billion dollar packages were announced for South Africa, Indonesia, Vietnam and Senegal. The JETPs, as they’re called, have gotten bogged down in the messy realities of implementation. The new twist: “country platforms” that put transitioning countries in the driver’s seat and prioritize up front planning and project pipelines to drive success. Last month, Colombia announced a donor-backed initiative to mobilize $40 billion in public and private finance to support its energy transition and invest in ecotourism, sustainable agriculture and restoration. “The push is to really roll out next generation country platforms,” said E3G’s Laura Sabogal Reyes at a recent briefing. “Colombia is very much charting its decarbonization and resilience trajectory,” with investment plans and detailed projects that match funders’ criteria.
  • Keep reading, “Climate negotiators head to Baku to craft a financial architecture for a net-zero future,” by Amy Cortese on ImpactAlpha. 

Dealflow: Investing in Health

Maven raises $125 million to expand digital health services for women and families. New York-based Maven is among the growing number of women’s health ventures helping to plug gaps in care and information since the US Supreme Court overturned Roe v. Wade in 2022 (for more, see, “Financing models to safeguard women’s reproductive health“). Maven partners with employers and health plans to offer virtual consultations and access to specialists on fertility and family planning, pregnancy and postpartum care, mental health and menopause. Employers can select services for insured, partially insured and uninsured workers; individuals can also pay for consultations themselves. Maven partners with managed care organizations to serve low-income women on Medicaid. Its Series F equity round was backed by StepStone Group, General Catalyst, Sequoia and others. Maven has raised more than $425 million since 2014, including a $90 million round in 2022 that closed after the Dobbs ruling.

  • Financing women’s health. Women-focused health tech ventures weathered the fundraising drought better than the broader health tech sector. But they still attract just 2% of health tech venture funding. Maven’s $90 million round accounted for 20% of all VC funding for women’s health in 2022. New research has found that women’s health ventures led by women – that is, the majority – are less likely to get funding than those run by men.
  • Ripe for picking. “There is growing recognition of how under-invested women’s health has been historically and therefore the opportunity for innovation and significant returns,” said Erika Seth Davies of Rhia Ventures, an impact investment firm focused on reproductive and maternal health. Through RH Capital, Rhia has invested in more than 20 women’s health companies, including online mental health services provider Seven Starling. Laurene Powell Jobs’ investment firm, Emerson Collective, in April led a $60 million round for Midi Health, which provides remote care for women going through perimenopause and menopause. Acclinate raised $7 million in May to work with pharmaceutical companies to conduct more diverse clinical trials to drive health equity.
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RSF Social Finance lends $13.5 million to sustainable food and recycling enterprises. The San Francisco-based firm made the loans through its RSF Social Investment Fund, an evergreen debt fund providing flexible financing to businesses underserved by traditional lenders (see, The Liist). In April, RSF added three “high-impact social enterprises” to the fund’s portfolio. It has added another three in climate-smart construction, food and farming. RSF provided a $500,000 loan to Goodr, an Atlanta-based waste management company that collects edible food waste from restaurants, airports and other businesses and donates it to local nonprofits to feed those in need. Inedible waste is composted. “The challenges of food waste and insecurity continue to be urgent, and RSF’s support means we will remain equipped to respond,” said Goodr’s Jasmine Crowe-Houston

  • Climate-smart food. Through a partnership with Walden Mutual Bank, RSF provided a $7 million line of credit to Colorado-based Mad Capital to finance regenerative organic farming transitions (for background, see “Sustainable lending for sustainable food”). That follows a $5 million loan from RSF last year to finance regenerative ag deals in the US Midwest. The new facilities “will allow us to support more farmers as they invest in making the transition to regenerative organic farming,” said Mad Capital’s Brandon Welch. Mad Capital has a deal pipeline of $150 million and covering 250,000 acres of farmland. It also raised $14 million earlier this year towards a $50 million fund. 
  • Recycled materials. RSF provided a $6 million loan to Glavel, a Vermont-based company that makes foam glass gravel, which is lightweight, recycled-glass that can be used to build homes and other infrastructure. Glavel says the product is a low-carbon substitute that’s just as strong as foam, crushed stone and other construction materials. RSF’s loan package includes $2 million to refinance existing debt and a $3.5 million loan for new equipment purchases. Glavel partners with nonprofits to offer job training and employment for formerly-incarcerated individuals.
  • Check it out.

Dealflow overflow. Investment news crossing our desks:

  • KoBold Metals, a Berkeley, Calif.-based company that uses AI to dig up lithium, cobalt and other metals critical to the energy transition, raised $491 million. (KoBold Metals)
  • Town Hall Ventures, Rethink Impact and Emerson Collective backed a $30 million equity round for Eleanor Health, a Waltham, Mass.-based provider of outpatient addiction treatment. (Eleanor Health)
  • Equator Africa secured a $5 million commitment from the International Finance Corp. to invest in early stage climate tech ventures in Africa, bringing its total raised to $54 million. (IFC)
  • Ethiopia-based private equity firm Renew Capital backed ChipChip to enable consumers and businesses to buy fresh produce from local smallholder farmers through collective purchasing. (Africa Private Equity News)

Impact Voices: Inclusive Economy

In community development, the scoreboard is not the only measure of success. “Failure is not an option” is a phrase that in recent decades has been associated with entrepreneurs hellbent on success at any cost. A new, healthier mindset in community development: Failure is a necessary part of bold risk-taking. Providing a broader range of Americans with chances to take risks, experiment and learn from their experiences will raise their chances of long-term success, argues Daniel Marsh of Grow America, a community and economic development nonprofit. “Our culture champions risk-takers, yet the freedom to take risks is a privilege many Americans can’t afford,” he writes in a guest post for ImpactAlpha. Stark disparities in wages, business opportunities and access to housing can make risk-taking prohibitive. “The opportunity to fail is perhaps the greatest resource we can provide.” The 50-year-old nonprofit formerly known as the National Development Council has invested $1.3 billion to develop and preserve more than 16,000 affordable housing units and loaned over $675 million to more than 5,000 small businesses.

  • Equitable community development. In coming years, Grow America plans to invest upwards of $10 billion in projects designed to create affordable housing, revitalize neighborhoods and support businesses owned by women and people of color. “My colleagues and I would not have the know-how or infrastructure we have today if not for the past five decades of trial and error,” Marsh says. “The scoreboard will never tell the whole story.”

Agents of Impact: Follow the Talent

Former Secretary of State John Kerry becomes co-executive chair of Galvanize Climate Solutions, where he will work closely with co-executive chairs Tom Steyer and Katie Hall… Trillium Asset Management brings on Kathleen Bochman, formerly with Moderna, as portfolio manager in Boston… Illumen Capital adds Viridiana Santacruz, an MBA candidate at UC Berkeley’s Haas School of Business, as a bias reduction intern.

Regeneration.VC welcomes Moller & Forster’s Philipp Möller as an advisor… Virginia CDFI Coalition adds Bria Maria Hodge of the Latino Economic Development Center to its board of directors… Lebo Sebobi, previously with Brands’ On Retailers, joins Norsad Capital as ESG and impact manager… Fair Finance Fund has an opening for an executive director… GAWA Capital seeks a senior investment officer for Latin America.

Finance in Motion is looking for an investment management analyst… Community Investment Management is recruiting an investment analyst… Join Lowercarbon Capital’s Clea Kolster for a conversation with Chadd Evans of Overlay Capital on the future of fusion, featuring a case study on Zap Energy (see, “Zap Energy clinches $130 million amid a hot streak for fusion energy startups”), today at 2pm ET/11am PT. 

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

Thank you for your impact!

– Oct. 9, 2024