The Brief | January 27, 2022

The Brief: Crypto’s climate play, digitalizing the Philippines’ sari-saris, impact verification, Verdane’s impact fund, Deval Patrick’s next move

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Greetings, Agents of Impact! 

Agents of Impact Call No. 37: Real-world effects of the rising price of carbon. With a ton of carbon fetching nearly $100 in Europe, the price of carbon is finally getting interesting. How and where is carbon pricing showing up in deals and business plans? Share what you’re seeing and meet entrepreneurs and investors who are leveraging carbon-finance for climate action. We’ll go beyond credits to fund strategies, carbon underwriting, corporate accounting, and the wild world of climate crypto (see below). Join The Call, Tuesday, Feb. 8, 10am PT/ 1pm ET / 6pm London. RSVP today.

Featured: Carbon Crypto

Climate is a crypto play, as action moves from TradFi to DeFi to ReFi. If blockchain was a solution in search of a problem, it may have found it in climate change. The gnarly challenges of keeping track of carbon emissions and credits across markets and supply chains requires something like a distributed ledger, the technology behind Bitcoin and other cryptocurrencies. Already, crypto trading has drawn billions of dollars into carbon markets and leapfrogged slow-moving diplomatic negotiations to drive carbon price discovery and cross-exchange carbon trading. “The bigger idea is regenerative finance,” says basinDAO’s Thomas Morgan, who is building a blockchain network to reduce carbon and restore nature. “We’re moving from traditional finance to decentralized finance to regenerative finance.”

  • Token effort. The Swiss foundation Ixo bills its system as the “Internet for impact,” with impact tokens that represent tradable units for emissions reductions, biodiversity and other positive outcomes. Regen Network, in Great Barrington, Mass., is creating an “ecological fintech infrastructure” for ecosystem services. KlimaDAO, backed by billionaire Mark Cuban, has accumulated nearly 15 million “base credit tokens” that represent metric tons of stored carbon. KlimaDao aims to drive up the price of carbon but, at $57 per token, the price is down 98% from its peak. The broader crypto market has shed almost $1 trillion since November.
  • Sci-fi. The Ministry for the Future, Kim Stanley Robinson’s 2020 climate-themed thriller, describes a global “carbon coin” to pay for decarbonization, including by paying off oil companies to keep fossil fuels in the ground. The scenario is based on a paper by Delton Chen, an Australian civil engineer who launched the Global Carbon Rewards initiative to advocate for a carbon currency to incentivize clean energy, sustainable business and carbon removal (but not to pay off oil companies). With the World Bank, San Francisco-based Chia Networks is building a “climate warehouse” to foster interoperability between carbon buyers and sellers.
  • Green crypto. Before it can green the planet, crypto has to green itself. By some estimates, crypto mining consumes 20% of the world’s baseload energy, much of that from cheap coal and other fossil fuels. Chia relies on computer storage rather than processing power and helped launch Circular Drive Initiative to repurpose data center storage drives that would otherwise be shredded. Says Chia’s Bram Cohen, who created the pioneering peer-to-peer file-sharing system BitTorrent two decades ago, “We’re creating a system that will truly decentralize climate finance.” 

Keep reading “Climate is a crypto play, as action moves from TradFi to DeFi to ReFi,” by Amy Cortese and David Bank on ImpactAlpha.

Dealflow: Financial Inclusion

KKR invests $45 million in GrowSari to digitalize ‘sari-saris’ in the Philippines. GrowSari, launched in 2016, helps more than 100,000 Filipino owners of brick-and-mortar retail convenience stores, or “sari-sari” stores, make inventory purchases and manage payments online by providing working capital loans. Micro, small- and medium-sized enterprises “are crucial contributors to the country’s economy and a pillar of the business community,” said KKR’s Ashish Shastry. The private equity giant made the investment via an Asian-focused fund that also has invested in the digital transformation of small businesses in Vietnam, Japan and Australia.

  • Financial inclusion. In Vietnam, where micro and small businesses employ half of the adult working population, HDBank provides fintech services for low-income rural consumers and merchants. LeapFrog Investments said it is backing HDBank to give borrowers an alternative to “black credit,” or exploitative informal loans that can push people back into poverty.
  • Check it out

BlueMark raises $3.8 million for impact verification and assessment. The New York-based firm, part of the consultancy Tideline, has assessed dozens of asset managers and owners under the Operating Principles for Impact Management (for background, see “Adopting impact performance standards to hold sustainable investing accountable for real-world outcomes”). BlueMark raised $2.3 million in equity from Ford Foundation and Radicle Impact and a $1.4 million recoverable grant from the Rockefeller Foundation. It earlier snagged a grant from the Tipping Point Fund on Impact Investing. BlueMark fills a gap “as an expert, third-party that can look under the hood of investor practices and performance,” said Ford’s Roy Swan.

  • Impact management. BlueMark’s verification includes impact labeling and classification under Europe’s Sustainable Finance Disclosure Regulations, or SFDR, and other frameworks. Impact investing “depends on third-party verification to accelerate the maturation of the industry and improve transparency, integrity and comparability among impact investors,” said BlueMark’s Christina Leijonhufvud (disclosure: BlueMark is a sponsor of ImpactAlpha).
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Dealflow overflow. Other investment news crossing our desks:

  • Indian impact investor Aavishkaar secures €50 million ($56.4 million) from German development bank KfW to launch an ESG fund targeting companies in Asia and Africa.
  • BridghtEdge, the impact venture fund of the American Cancer Society, backs biotech company CellCentric to run clinical trials for a new cancer treatment drug.
  • European private equity firm Verdane raises $338.8 million for an impact fund focusing on companies driving the energy transition, sustainable consumption and resilient communities.
  • New York-based Clear Vision Impact Fund secures $140 million to make loans to minority-led or owned small businesses.

Agents of Impact: Follow the Talent

Deval Patrick, former governor of Massachusetts and ex- of Bain Capital, joins Harvard Kennedy School as professor of practice and co-director of the Center for Public Leadership… Econet Group’s Strive Masiyiwa, Baroness Shafik of the London School of Economics, Bridgespan’s Thomas Tierney, and Gates Foundation’s Mark Suzman join the board of trustees of the Bill & Melinda Gates Foundation.

David Wennberg joins Two Sigma Impact as an executive advisor of healthcare investing… Pennrose’s Ivy Dench-Carter and Raquel Favela of National Development Council join Reinvestment Fund’s board… Jordan Park’s Lauren Booker Allen and Tideline’s Shaun Mays join BlueMark’s board (see above)Citi Impact Fund is hiring a senior investment principal of impact investing in New York, San Francisco or Washington D.C.

CDC Group seeks an executive of gender and diversity finance in London… Also in London, Wellington Management is hiring an impact measurement and management associate… Maycomb Capital seeks an education finance lead for its educational resources impact fund… The Los Angeles Cleantech Incubator is looking for a fund management analyst of equity funds… FMO’s private equity team is recruiting a venture associate.

Thank you for your impact.

– Jan. 27, 2022