The Brief | August 10, 2022

The Brief: Funding U.S. climate banks, Berlin’s green generation, education finance in India, fixed-income impact, sustainable forestry

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Greetings, Agents of Impact!

Featured: Climate Finance

“Green Bank” in U.S. climate bill to provide catalytic capital for renewable energy and community resilience. It’s not the national green bank that advocates have pushed for more than a decade. But the $27 billion Greenhouse Gas Reduction Fund, part of the Inflation Reduction Act moving through Congress, could bank hard-to-finance projects like building energy retrofits, small-scale community solar, and agricultural projects that store carbon and increase the resiliency of farming communities. “The investment capital and ability to build capacity can be really transformative,” Douglass Sims of the Natural Resources Defense Council told ImpactAlpha, calling the fund “long-term, low-cost capital at scale.”

  • Leverage. The U.S. Environmental Protection Agency would make $20 billion in competitive grants to nonprofits “to provide capital, leverage private capital, and provide other forms of financial assistance for the rapid deployment of low- and zero-emission products, technologies and services.” Of that, $8 billion is specifically earmarked to serve low and middle-income communities. Another $7 billion would be available to state, local and tribal entities focused on reaching low-income and disadvantaged communities. Fran Seegull of the U.S. Impact Investing Alliance called on impact investors to ensure the funds “effectively leverage the expertise of investors and business leaders, while holding firm on commitments to equity and environmental justice.”
  • Catalytic capital. Early-stage climate innovation, which long struggled to attract commercial financing, has become a venture-capital darling. But the movement of those promising technologies, first into demonstration projects and then into large-scale production, remains far too slow to meet the climate emergency (for context, see “Catalytic investors sharpen their tools to accelerate commercialization of climate solutions”). Green banks could help create liquidity for renewable energy project developers, and reduce risk for other lenders by taking subordinate positions. Green bank loans could be packaged and securitized to attract additional capital from commercial investors.
  • Climate banking. The structure of the Greenhouse Gas Reduction Fund comes from the National Climate Bank Act introduced by Senator Ed Markey in 2020. Nearly two dozen states have launched their own green banks, starting with Connecticut in 2011. The banks, in New York, Louisiana, North Carolina, Florida and other states, as well as Washington, D.C., have collectively deployed $2.6 billion and mobilized $9 billion, according to the Coalition for Green Capital. The NRDC’s Sims said the new fund’s “capacity-building and 50-state strategy can really spread the opportunities on jobs and investments in greenhouse gas reductions around.”
  • Keep reading, “Green Bank” in U.S. climate bill to provide catalytic capital for renewable energy and community resilience,” by Amy Cortese and David Bank on ImpactAlpha. Catch up on policy developments at ImpactAlpha’s Policy Corner, sponsored by the U.S. Impact Investing Alliance

Dealflow: Impact Tech

Green Generation Fund raises €100 million for food and green-tech ventures. The women-led fund in Berlin is looking to invest in up to 30 early-stage companies in the U.S. and Europe. “Generation Z and Millennials will insist on the plant-based food revolution and the incorporation of CO2-reducing and sustainable measures,” said Green Generation’s Janna Ensthaler. The Green Generation Fund received commitments from German development bank KfW, U.K. family office Kaltroco, Liesner & Co., and several high-net-worth investors.

  • Portfolio companies. Green Generation will invest in pre-seed, seed and Series A rounds. The fund has backed eight companies, including alt-breast milk producer BIOMILQ, regenerative agriculture startup Klim, and The Rainforest Company, which makes products from açai sourced from Indigenous smallholder farmers in the Amazon.
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India’s Jodo raises $15 million to help schools and families cover the costs of education. Education accounts for 15% to 20% of most Indian households’ income, and costs are going up. Bangalore-based Jodo works with fee-based schools in India to set up payment plans for families, making education more affordable to students while ensuring schools can meet their cash flow needs. Jodo partners with more than 700 schools, colleges, universities and skills training organizations. Tiger Global led Jodo’s $15 million Series A round. Elevation Capital and Matrix Partners India reupped their investments.

  • Education finance. Financial providers like Indian School Finance Company and Varthana focus on the educator side of education access in India, providing loans to schools, particularly low-fee private schools. In April, Financepeer raised $31 million from QED Investors and Aavishkaar Capital to provide tuition loans to students, while Dubai-based Zenda secured $9.4 million to expand its “buy now, pay later” education finance product to students in India. Propelld clinched $35 million in February to expand its student lending partnership with Indian schools.
  • Read on.

Dealflow overflow. Other investment news crossing our desks:

  • INVL raised €81.3 million ($83 million) to invest in sustainable forest and farmland in Central and Eastern Europe and the Baltic Sea region.
  • Betterplace secured a $12 million convertible note from Jungle Ventures to expand its blue-collar workforce management platform.
  • The International Finance Corp. will lend €8.1 million ($8.3 million) and help secure matching funds from other lenders for Zener’s low-carbon cooking stoves in Togo.
  • Produze scored $2.6 million in seed financing led by Accel to connect India’s smallholder farmers to international retailers.

Impact Voices: Impact Management

Fixed-income strategies can offer scalable impact with low risk and liquidity. In Cambridge, Mass., Sunwealth aggregates high performing, community-based solar projects to spread risk and stabilize returns for investors. The revenue-based financing model of San Jose, Calif.-based Founders First allows investors to lend money to businesses led by women, people of color, and military veterans and get repaid from a percentage of revenues (for context, see “Impact investors turn to revenue-based financing to bridge capital gaps for founders of color”); business owners retain equity and investors can count on a reliable return. “Through this thoughtful, intentional design, the possibilities for impact expand exponentially,” writes Carrie Endries of Reynders, McVeigh Capital Management, which helped both organizations construct models that support their impact goals while improving the offering to investors. “These investments can be used as fixed-income components of a balanced portfolio, providing regular liquidity at lower risk and the option to recycle capital into impact solutions in perpetuity.”

  • Accessible returns. Well-designed impact models have measurable impact, scalability, and – importantly – financial reliability, says Endries. But impact vehicles commonly lock up capital for long periods of time. Many competing financial products offer scheduled cash-out windows to provide investors with the opportunity to access returns. “Impact models that can show reliable returns and opportunities for liquidity gain an advantage,” Endries says.
  • Keep reading, “Fixed-income strategies can offer scalable impact with low risk and liquidity,” by Reynders, McVeigh’s Carrie Endries on ImpactAlpha.

Agents of Impact: Follow the Talent

Balderton Capital hires Elodie Broad, ex- of Deloitte, as its first head of impact and sustainable future goals… Shashank Churukanti, ex- of SpaceX, joins Evergreen Climate Innovations as a venture associate… Pacific Community Ventures seeks a chief financial officer and a research analyst in Oakland… AgroCenta Technologies is looking for a remote chief financial officer… Capricorn Investment Group will host “Capital for justice: impact through litigation,” Wednesday, Sept. 14 in New York… Criterion Institute and the 2X Collaborative are hosting a webinar on ways investors can address gender-based violence, Tuesday, Aug. 30.

Thank you for your impact!

– Aug. 10, 2022