The Brief | January 4, 2023

The Brief: Developing climate project developers and other 2023 climate trends, financial inclusion in rural India, Indonesia’s underbanked, green concrete

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Greetings, Agents of Impact! 

Featured: 2023 Climate Forecast

Public and private climate investors are saying, ‘Show me the projects.’ Capital is no longer the gating factor in accelerating the low-carbon transition. The $4 trillion to $6 trillion in annual climate investment needed to keep global warming below 1.5 degrees Celsius is available. So is technology needed to get at least halfway to net zero. “Where the world has not caught up is in creating the projects,” the Department of Energy’s Jigar Shah said on ImpactAlpha’s Agents of Impact podcast last month. To move the needle on climate, “we need a new crop of entrepreneurs who think of themselves first and foremost as project developers,” Nate Lowbeer-Lewis of Spring Lane Capital Partners writes in a guest post. Spring Lane last month co-hosted a two-day project development cram-session for sustainability entrepreneurs dubbed “Developer U.” More than two dozen entrepreneurs turned out, from industries including microgrids, fabric recycling, aquaculture and anaerobic digestion. “Innovation can be amazing, but scale drives impact,” says Lowbeer-Lewis.

  • Developing developers. For too long, there’s been an assumption in the sustainable investing sector that project development would arrive as needed, says Lowbeer-Lewis. “That’s not how it works.” Existing project developers are mostly focused on the types of projects they already know well. “Traditional infrastructure investors never want to back the first deployment of any new solution… nor the second, third or fourth,” he says.
  • Innovation to deployment. Project development entrepreneurs must learn how to protect against cost overruns, how to draft financeable supply and offtake contracts, and how to efficiently navigate complex permitting pathways with multiple stakeholders. For investors looking for attractive opportunities in energy, food, water, waste and transportation, Lowbeer-Lewis says, “deployment at scale is where the money is at.”
  • Keep reading, “Investing in climate entrepreneurs who think like project developers,” by Spring Lane Capital’s Nate Lowbeer-Lewis

Last year’s policy progress sets this year up for climate action. The Inflation Reduction Act is the climate investment gift that promises to keep on giving. The I.R.A. was already spurring U.S. investment in renewable energy, electric vehicles and charging infrastructure, and heat pumps even before many of its provisions went into effect on Jan. 1, as we wrote in our year-end climate outlook. The White House in its own year-end review estimated that the climate bill and earlier infrastructure act will drive more than $3.5 trillion in public and private sector investment over the next decade. The U.S. policy pivot is reverberating around the globe, as other nations align their own policies to prepare for the global climate race. The I.R.A.’s support for wind and solar power, battery storage, carbon capture and low-carbon hydrogen “simply outshine existing policy frameworks in most other countries,” says Wood Mackenzie’s David Brown in the research firm’s 10 Energy Predictions. “A leveling-up of policy support will unlock new business opportunities for the entire globe.” Other predictions for climate action in 2023:

  • EVs ready for a spin. Electric vehicles are a staple on 2023 lists – and a major presence at the giant CES show kicking off this week in Las Vegas. “Electric vehicles will truly go mainstream this year,” declares Joann Muller of Axios’ What’s Next newsletter. Bloomberg homes in on a new crop of affordable electric SUVs. Many of the 20 or so new EV models debuting this year will fall into that cargo and family-friendly categories – “the sweet spot in the American market,” according to Bloomberg.
  • Consumers feel their power. Big banks continue to fund new fossil fuel development despite their “net-zero” rhetoric and the urgent need to slash global emissions. Overall, U.S. banks are sitting on more than $1 trillion in consumer savings, giving everyday account holders considerable clout. “I sense a big shift in the zeitgeist,” notes Karl Burkart of the nonprofit One Earth. “People have woken up to the sickening reality that their bank deposits, and their retirement savings, are literally killing the planet.”
  • Climate tech stays strong. After red-hot growth, investments in the sector showed signs of slowing in 2022. Climate Tech VC surfaced trends that bear out the bear market, including valuations that are coming down to Earth, slower deployment of funds, and a shift among some investors to low capital-expenditure sectors such as software. Others, however, are seizing on the pullback to double down on promising early-stage climate tech. PitchBook predicts that U.S. venture investment in climate tech will reach a new peak in 2023. Driving the surge: the I.R.A., increasing acceptance of the need to manage climate change, and corporate and government pledges to reduce emissions.
  • Keep reading, “Last year’s policy progress sets this year up for climate action,” by Amy Cortese on ImpactAlpha. 

Dealflow: Financial Inclusion

Elevar Equity re-ups investment in SarvaGram to speed financial inclusion in rural India. Mumbai-based SarvaGram provides consumer and business loans to rural and peri-urban households in India that otherwise have difficulty accessing affordable financial services. Elevar Equity invested in SarvaGram shortly after it launched in 2019 and has participated in every equity round. The impact investment firm backed SarvaGram’s $35 million Series C round alongside Temasek, Elevation Capital and TVS Capital.

  • Rural reach. SarvaGram uses a physical branch and partner network, as well as credit-scoring and loan management tech, to reach underbanked households in more than 8,000 villages. The company offers home loans, farm and small business loans, and personal loans for important expenses like weddings. More than 80% of its borrowers are women.
  • Market growth. Financial services have reached an “inflection point in rural markets, as demonstrated by growing economic activity and aspirations seen across rural households,” Elevar’s Jyotsna Krishnan said. SarvaGram says financial services for India’s rural households is a $400 billion market. Elevar estimates the market will grow to $10 trillion in the next decade.
  • Check it out

MUFG Bank bets $200 million on Indonesia’s Akulaku to gain access to underbanked consumers. Tokyo-based MUFG Bank, the megabank created by the 2005 merger of Mitsubishi Tokyo Financial Group and UFJ Holdings, is looking to expand its footprint throughout Asia this year. The missing piece: the large population of underserved consumers and small enterprises in Southeast Asia. At least six of every 10 Southeast Asians are un- or underbanked, and many small enterprises remain disconnected from the formal credit system. MUFG is investing in Jakarta-based Akulaku to gain access to its customer base of 10 million consumers and merchants in Indonesia, the Philippines and Malaysia. “Our investment in Akulaku will further solidify our commitment in this region to meet growing financial needs of underserved customers,” said MUFG’s Kenichi Yamato.

  • Financial inclusion. Akulaku is an e-commerce and fintech company that helps more than 90,000 merchants to sell their products. The mobile app’s 32 million registered users have completed nearly 300 million transactions since 2014. Akulaku also offers buy-now, pay-later credit, cash loans, digital banking, wealth management and insurance brokerage services. The company is looking to provide financial services for 50 million people in Southeast Asia by 2025.
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Dealflow overflow. Other investment news crossing our desks:

  • U.K.-based Concretene raised £8 million ($9.6 million) to green and strengthen concrete by mixing it with graphene.
  • Plastics recycling company Nexus Circular scored $150 million in a round led by Cox Enterprises.
  • Mumbai-based Eduvanz raised $12.6 for its education lending marketplace that offers no-interest loans to students in India.
  • Liberation Labs secured $20 million to build a fermentation facility to produce alt-proteins at commercial scale. 

Agents of Impact: Follow the Talent

Matthew Denn, former lieutenant governor and attorney general of Delaware, joins the Draper Richards Kaplan Foundation as managing director. Nicole Pollock, former chief of staff and policy for Providence, R.I., becomes the foundation’s chief of staff… Quantified Ventures is hiring an associate director for the outdoor economy, a senior associate for environment and resilience, and other roles.

The Center for Economic Democracy is recruiting a communications associate and a capital strategies associate/manager… Boston’s Mayor’s Office of Workforce Development seeks an economic development contracts and grants administrator… U.N. Women is hiring an evaluation specialist.

Thank you for your impact.

– Jan. 4, 2023