The Brief | December 21, 2021

The Brief: Exponential climate capital, vehicle subscriptions in Africa, natural-resources governance, impact market mechanisms, direct air capture

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Greetings, Agents of Impact! 

Featured: Looking Ahead

Climate finance in 2022: Mobilizing capital for exponential progress. It’s an optimist’s favorite: The chart of solar energy capacity shows that for two decades at least, actual installations have repeatedly outpaced even the best-case forecasts of global energy experts. For pessimists: The pace of climate change also is exceeding scientists’ worst-case scenarios. To reach net-zero by 2050, we need compounding emissions reductions of 7% – every year. Climate solutions have to “go exponential” to have any chance of averting the worst of the climate catastrophe. There’s still an outside chance to muddle through, by aligning policy and capital with a wholesale mobilization of talent and will for exponential progress. Some of the signals ImpactAlpha will be watching for in 2022: 

  • Bigger funds, bigger deals. The new mega-funds are hunting for mega-opportunities. In the year ahead, look for investors to home in on emerging solutions for hard-to-decarbonize sectors like steel, cement and aviation; green infrastructure such as waste-to-energy systems; and carbon removal, fusion and other moonshot technologies that will be needed to achieve net-zero by mid-century.
  • Spinning off ‘ReNewCos.’ Fossil fuel-era icons are being pushed to split off their sustainable-growth businesses from their carbon-intensive legacy operations. The ‘ReNewCos’ can reap the rich valuations and easier access to capital enjoyed by clean energy providers and electric vehicle makers; the OldCos can be milked for profits while they last.
  • Carbon at $100 a ton. There is finally a price on carbon, or rather, multiple prices across the patchwork of policy “compliance” markets and increasingly active voluntary markets. Prices on the European Union’s trading system nearly tripled this year to €81; prices in California’s market have risen nearly 60%. Conservation projects and mitigation investments that don’t currently pencil out will look attractive when prices for averting a ton of carbon reach $100 or more.
  • Climate action requires climate justice. From the streets of the Bronx to rural Kenya, communities of color are bearing the brunt of climate change. They are also uniquely positioned to identify and scale solutions.
  • Investors flex their muscles (even more). Emboldened shareholders are readying ambitious proposals for the 2022 proxy season, asking companies to set science-based targets, create transition plans and align their lobbying with global climate goals. They are taking the fight to the board level, voting against directors wed to business-as-usual.
  • Keep reading, “Climate finance in 2022: Mobilizing capital for exponential progress,” by Amy Cortese on ImpactAlpha. Catch up on all of our climate finance coverage

Dealflow: Green Economy

Nigeria’s MAX secures $31 million to give Africa’s ride-hailing drivers an upgrade. The Lagos-based transit startup offers taxi and app-based drivers access to zero-emission vehicles and financing, health coverage, insurance, school tuition assistance, maintenance and ride-hailing apps. The company says its 13,000 informal and unbanked drivers have completed 17 million trips and saved 22,000 metric tons of carbon. The Series B round was led by private equity investor Lightrock and Global Ventures, a U.A.E.-based venture capital firm. Other investors included French development finance institution Proparco, Yamaha and Novastar Ventures.

  • Africa expansion. MAX began as a motorcycle ride-hailing app and has pivoted to logistics and driver services. The investment will allow MAX to expand into Egypt and Ghana. It will also deploy EVs and charging infrastructure for more than 100,000 drivers. The company raised $7 million in 2019. Dive in

Tipping Point Fund for Impact Investing promotes impact transparency and accountability. The half-dozen grantees of the collaborative fund managed by the U.S. Impact Investing Alliance will split $950,000 to advance impact investing market infrastructure and accountability to stakeholders. Prosperity Now, for example, will organize grassroots advocates to push for federal policies that bolster entrepreneurial ecosystems and increase the flow of capital to entrepreneurs of color.

  • Impact infrastructure. Other funding recipients include B Lab, Opportunity Alabama, Pacific Community Ventures, Reimagine Main Street and Urban Institute. The fund has made more than $6.5 million in grants since 2019 to support public goods for the impact investing market. (Disclosure: U.S. Impact Investing Alliance sponsors ImpactAlpha’s Policy Corner.) Share this post

Ford Foundation commits $3 million to support natural resource governance in West Africa. Extraction of metals, minerals and fossil fuels in West Africa has hurt local economies, exacerbated environmental problems and contributed to climate change. The Extractive Industry and Climate Change Governance Fund, funded from the billion-dollar social bond the Ford Foundation launched last year, will back civil society organizations to address natural resources governance, with a focus on Nigeria and Ghana. “With renewed efforts toward energy transition, there’s an opportunity to transform the natural resources sector toward embracing equitable governance and sustainable practices,” said Ford’s Anthony Bebbington. The Africa Center for Energy Policy will manage and deploy the fund. Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Tugende, which finances the purchase of motorcycle taxis in Uganda and Kenya, secures $5 million in subordinated debt from Nordic Microfinance Initiative.
  • Proceeds from a $500 million green bond issued by TD Bank will provide financing for green building, clean transportation and energy projects.
  • Sustaera scores $10 million in a round led by Bill Gates and Jeremy Grantham to absorb carbon from the atmosphere using direct air capture technology.
  • German agtech venture Stenon snags $20 million for its real-time soil sensing technology for smallholder farmers.

Agents of Impact: Follow the Talent

Sarita Gupta is promoted to vice president of U.S. programming at the Ford Foundation… At Energize Ventures, Tyler Lancaster and Kevin Stevens are promoted to partner, and Mark Tomasovic and Eileen Waris are promoted to principal… Upstart Co-Lab is hiring an associate in New York.

Thank you for your impact.

– Dec. 21, 2021