The Brief | December 21, 2020

The Brief: Financing climate adaptation in Africa, linking ESG and credit, social investment trust IPO, Black-led funds, the Great Burp Forward

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Greetings, Agents of Impact! 

Call No. 26: Looking ahead to 2021. New year, new opportunities. Bring a prediction, a plan or even an ask for 2021 to share on our last Agents of Impact of the year. And come prepared to reality-check the forecasts of David Bank and the ImpactAlpha team (including by scanning our series of year-end lookaheads). Join hundreds of fellow Agents to chart what’s next, tomorrow, Dec. 22, at 10am PT / 1pm ET / 6pm London / 9pm Nairobi. RSVP today

Featured: Impact Voices

Financing for climate adaptation can drive Africa’s economic development and net-zero goals. Across Africa, 600 million people lack access to affordable and reliable electricity. Africa’s 1.1 billion people are also among the world’s most vulnerable to drought, heat and other effects of climate change. Spurring economic development through energy access and mitigating catastrophic climate change through reduced emissions are sometimes pitted as contradictory goals. Instead, increased financing for climate adaptation and resilience can chart a course to prosperity, improved living standards and net-zero emission of greenhouse gases, Nick O’Donohoe of CDC Group, the U.K. development financial institution, argues in a guest post on ImpactAlpha. Next month’s Climate Adaptation Summit aims to advance investments in resilient infrastructure and agriculture; insurance and resilience bonds and other financial products; and development of markets for adaptation solutions and services that build resilience to climate change. At least $300 billion in climate adaptation financing is needed each year, according to the U.N, 10 times current international financial flows.

“Africa is not the culprit behind climate change, yet it is already feeling its impact,” O’Donohoe writes. Adaptation, called out alongside mitigation as a pillar of the Paris climate agreement, is particularly important for African countries already experiencing climate shocks. CDC, O’Donohoe says, aims “to ensure all our investments are resilient to climate-related impacts, and to invest more in the companies that deliver adaptation and resiliency solutions at the local level.” In most countries, however, markets are nascent for investments, products or services in adaptation and resilience. Only South Africa has committed to net-zero emissions by 2050. “Long-term private sector growth and job creation will depend not just on institutions collaborating to provide capital,” O’Donohoe says, “but on ensuring the companies receiving that capital are resilient to climate change and developing solutions to address its impact.”

Keep reading, “Financing for climate adaptation can drive Africa’s economic development and its net-zero goals,” by Nick O’Donohoe on ImpactAlpha. 

Dealflow: Follow the Money

The Renewables Infrastructure Group secures £500 million ESG-linked line of credit. The London-based energy infrastructure investment firm will get a discount on interest on a three-year line of credit if it meets social, environmental and governance milestones, including helping more homeowners switch to clean energy, improving worker safety, and supporting community finance. The credit facility is backed by a consortium of global banks, including National Australia Bank, Royal Bank of Scotland, ING, Sumitomo Mitsui Banking Corporation, Barclays and Santander

Schroders and Big Society Capital raise £75 million for public ‘social investment trust.’ Investment trusts in the U.K. are publicly-listed companies that invest in other companies. British investment firm Schroders has teamed up with Big Society Capital on a socially-focused trust to make investments addressing homelessness, domestic violence, mental health and learning disabilities in the U.K. Schroder BSC Social Impact Trust’s initial public offering raised £75 million ($101 million) – the minimum target to list – and begins trading Dec. 22 on the London Stock Exchange. The trust has already acquired seven investments from Big Society Capital. Check it out

Living Cities backs Black-led investment firm Jacmel Growth Partners. Brooklyn-based Jacmel Growth Partners was founded by Haitian-American Nick Jean-Baptiste, a former Wall Street banker, to support mid-size, family owned businesses. It has invested $45 million in five companies. One of them is EquityMetrix, a provider of software to the oil and gas industry. Living Cities invested via its Blended Catalyst Fund, citing the potential of Jacmel’s model to “create more equitable outcomes and close wealth gaps.” Read more.

HCAP Partners exits investment in home healthcare company Mission Healthcare. The impact investor, which took an undisclosed stake in the San Diego-based home health and hospice provider in 2019, has sold its stake to Chicago-based Vistria Group. HCAP invests with a “good jobs” thesis. It is continuing to help Mission set up a financial assistance fund for the healthcare provider’s employees facing pandemic-related hardship.

PayPal and HubSpot commit $62.5 million to LISC’s Black Economic Development Fund. PayPal committed $50 million and HubSpot kicked in $12.5 million. The two companies are the latest corporations to back the LISC fund, joining Netflix, Costco and others. LISC has raised $175 million to invest in Black economic development, business leaders and institutions. 

Podcast: Institutional Shift

The Great Burp Forward and other trends to watch in 2021 (podcast). In our latest Institutional Shift podcast with Equilibrium Capital’s Dave Chen, we looked back on our forecasts from last January, just before you-know-what changed everything. The results: not bad. 

  • Year in review. Chen called this year’s drop in air travel, though he expected the driver to be carbon concerns, rather than the coronavirus. He got points for citing the acquisition trend, which continued with BlackRock’s billion-dollar acquisition of Aperio, and Morgan Stanley’s $7 billion purchase of Eaton Vance, both of which enable customized index accounts focused on sustainability. Likewise, his call that sustainability solutions would become increasingly core to corporate strategy. Chen had cited John Deere & Co.; Morgan Stanley analysts recently raised their estimates for the agriculture equipment maker based in part on “new precision ag technology that is helping farmers make more profitable and sustainable decisions for the crop cycle” (h/t Jamie Martin). 
  • Year ahead. The new urgency and the new political climate will see once-hidden corporate climate strategies come out “like one big massive burp,” Chen says. Moore’s Law-type cost curves will disrupt a broad set of industries. “We’re seeing the full force of technology being applied in the sustainability area across multiple industrial sectors,” he says. Corporate “net-zero” pledges are driving a “land grab” for carbon credits, carbon-smart restoration and conservation projects and green infrastructure. “Money, representing demand, is going to outstrip the supply of carbon-transition infrastructure projects.” 
  • Read on and listen in to Institutional Shift: The Great Burp Forward and other trends to watch in 2021.”

Agents of Impact: Follow the Talent

The Jewish Community Foundation of San Diego’s Beth Sirull received JLens’ Jewish Leadership in Impact Investing Award… Omidyar Network is looking for a chief of staff in Washington, D.C… Temasek is recruiting an associate director for impact investing in Singapore… Aegis UK has an opening for a head of ESG research in London… Echoing Green needs an outreach strategist in New York. 

Thank you for reading.

– Dec. 21, 2020