The Brief | August 18, 2022

The Brief: Green bank mobilization, community climate finance, nature-based carbon credits, logistics in Africa, good nursing jobs, solar tracking tech

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Greetings, Agents of Impact!

Featured: Climate and Community

Community lenders look to carve out a role for themselves in the new green bank fund. The Inflation Reduction Act in the U.S. sprinted into law almost as fast as an electric Ford F-150 Lightning can go from 0-60 (if you can get your hands on one). Details of the bill, which contains $369 billion in energy and climate-related investments, are still coming into focus. One murky provision: the Greenhouse Gas Reduction Fund, a $27 billion “green bank” facility that will channel capital to hard-to-finance decarbonization efforts, particularly in low-income communities. The funding could turbocharge initiatives like Accion Opportunity Fund’s loan program for independent truckers, which has helped thousands of individual owner-operators reduce emissions and stay in business, or Rhode Island-based Capital Good Fund, which makes loans for energy-efficiency upgrades, like insulation, heat pumps and windows, to borrowers who wouldn’t qualify for a bank loan. But critics have seized on language that specifies that only not-for-profit, non-deposit-taking entities can access the funds. That could rule out a wide swath of minority-owned banks and community lenders who have for decades worked in low-income communities that big banks all but abandoned. “There’s a ton of confusion,” says Beth Bafford of Calvert Impact Capital. 

Community finance experts see room for for-profit community lenders. They could get funding and technical assistance from an eligible entity or other indirect investment beneficiary by being part of a “qualified project,” which could include a loan purchase, a loan-loss reserve, a guarantee or subordinated debt, says Doug Sims of the Natural Resources Defense Council. The Environmental Protection Agency, which will oversee the fund, has 180 days to design it and begin making grants. “The process of getting the IRA over the finish line didn’t accommodate community consultation and input,” says Sims, so “it becomes even more critical for the next steps to be well thought out and as inclusive as possible.” Community finance institutions are mobilizing for inclusion. “We have these networks – use them!” says Opportunity Finance Networks’ Jennifer Vasiloff. “We’re here and ready to go.”

Impact Voices: How community investors are creating equitable approaches to climate finance. Hurricane Maria in 2017 caused telecommunications and electricity systems to fail across much of Puerto Rico. Credit unions, called cooperativas, that were up and running just 48 hours after the storm, served as the only functioning financial institutions in many municipalities. The cooperativas illustrate how community development financial institutions are building climate resilience for Latino and other vulnerable communities on the frontlines of climate change in the U.S., argue Annie Donovan of Raza Development Fund and Brenda Loya of Amalgamated Bank. CDFIs are well positioned to respond “because they hold unique positions of trust in the communities they serve,” write Donovan and Loya in a guest post on ImpactAlpha. “Opportunities abound in affordable housing construction, deep energy-efficiency retrofits, workforce development for green jobs, and more.”

  • Follow the leaders. The passage of the Inflation Reduction Act means it’s time “for those who use the tools of finance to create a more just and sustainable world to step up our game,” say Donovan and Loya. Enterprise Community Partners’ Green Communities, for example, sets green building standards in affordable housing. Local Initiatives Support Corp. works with affordable housing owners in Massachusetts to track energy performance of 50,000 units. BlueHub Energy has financed solar panels that generate over eight million kilowatt-hours of electricity annually. And Inclusive Prosperity Capital, spun out of the Connecticut Green Bank, is financing climate solutions to accelerate decarbonization and address climate injustices.
  • Keep reading, “How community investors are creating equitable approaches to climate finance,” by Annie Donovan and Brenda Loya on ImpactAlpha.

Dealflow: Carbon Markets

IFC partners with Aspiration in a $10 million fund to lift the quality of carbon credits. Forest projects that don’t remove carbon. Protection for forests that aren’t threatened. The low quality of many of the carbon credits from nature-based climate solutions has hampered growth in the “voluntary” carbon market, whose credits are essential for many companies to meet their net-zero emission targets. A $10 million Carbon Opportunities Fund – anchored by the neobank Aspiration and biodiversity investor Cultivo, along with International Finance Corp. and crypto-tech provider Chia Network – aims to source, tokenize and sell higher-quality credits (for context, see, “Climate is a crypto play”). The fund will initially seek to source up to 700,000 credits – each representing a metric ton of carbon – and recycle the proceeds into additional credits. The credits will be tracked through the World Bank’s climate warehouse, a blockchain repository for verified credits developed by Chia.

  • Voluntary markets. Prices for nature-based carbon credits have roughly tripled in the past year, from $5 to between $15 and $20, but vary widely based on their quality, age and other factors. Credits for longer-term and verified carbon removal are prized over harder-to-trace carbon “avoidance,” but they remain in short supply. “We expect it’s going to be $50 a ton sooner rather than later,” Aspiration’s Steve Glickman told ImpactAlpha (for background see, “That feeling when investors realize carbon is going to $100 a ton“). “The market is inviting in price because demand is already way outstripping supply, and carbon removal will continue to be on the top of that stack of credits.” Separate from its consumer banking business, Aspiration has become one of the largest investors in and providers of nature-based carbon credits.
  • Mobilizing capital. “The endpoint is really to facilitate large scale investment,” Glickman said. The $10 million fund is considered a proof-of-concept for a follow-on carbon fund that could raise hundreds of millions of dollars. The low quality of some carbon-backed crypto tokens, along with the broader “crypto winter,” has stalled the growth of the market. Tokenization “provides another way to demonstrate that credits can be bought and sold as an asset,” Glickman said. “Hopefully that taps interest from another category of institutional investors that want to come in and buy asset-backed crypto.”
  • More.

Lori Systems clinches investment from Google to improve the flow of goods across Africa. In Africa, where infrastructure is underdeveloped and fragmented, there’s an impact case in almost every logistics deal. Companies like Twiga Foods, TradeDepot and MaxAB have raised hundreds of millions of dollars to digitalize local logistics and retail infrastructure. Kenya-based Lori Systems is digitalizing long-haul cargo transport to reduce the cost of goods in frontier markets. The woman-led company has designed an Uber-for-truck-drivers that operates in Kenya, Uganda and Nigeria. It secured an undisclosed amount of funding from Google’s $50 million Africa Investment Fund. Google’s Nitin Gajria said Lori is an “example of how technology can be scalable across Africa and how, in turn, this can drive meaningful economic development.”

  • Consumer impact. The team at Lori says the high cost of logistics accounts for as much as 60% of the price on some products in Africa. “This is how a mango that goes for only five Kenyan shillings at the farm gate ends up with a 70-shilling price tag at the supermarket shelf in Nairobi.” Lori’s thesis is that a more efficient logistics sector will result in lower prices for consumers.
  • Check it out.

Incredible Health secures $80 million to help nurses do well in permanent jobs. A fifth of U.S. health care workers quit their jobs during the pandemic, due to insufficient pay, burn out and other issues. “Nurses are the backbone of the U.S. healthcare system,” said Iman Abuzeid, co-founder of nursing job-placement company Incredible Health. “They deserve well-staffed teams and tools to not only succeed, but also feel fulfilled in their careers.” More than 600 hospitals, including Stanford Health Care, NYU Langone Health and Northwestern Medicine, use the company’s online marketplace to find nursing talent. Incredible Health says it reduces the average hiring time to 14 days compared to the industry standard of 82 days. More than 10,000 nurses join Incredible Health’s platform each week.

  • Investing in health. Oakland-based Kaiser Permanente, which oversees nearly 40 hospitals and 65,000 nurses, is one of Incredible Health’s biggest customers. Kaiser invested in Incredible Health’s Series B round alongside Andreessen Horowitz, the NBA player Andre Iguodala, Workday CEO Chano Fernando, Rethink Impact and others. The round was led by Base10 Partners, a Black-led venture fund that is donating half of its $250 million dollar fund’s carried interest to create STEM scholarships at historically Black colleges and universities. Base10 and Incredible Health will work together to create a scholarship program for nursing students.
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Dealflow overflow. Other investment news crossing our desks:

  • Golding Capital Partners raised €65 million ($66 million) in the first close of its inaugural impact fund to invest in global agrifood tech, fintech and climate tech companies.
  • Majoo scored $10 million in Series A financing backed by Quona Capital to provide software solutions to micro, small and medium-sized enterprises in Indonesia.
  • Black-owned venture firm Brown Venture Group secured $1.5 million from the Bush Foundation to invest in Black, Latinx and Indigenous tech founders.
  • Bangalore-based Renkube snagged $300,000 for its solar-tracking glass that improves the efficiency of solar panels.

Agents of Impact: Follow the Talent

Neo Gim Huay, managing director of the World Economic Forum’s Center for Nature and Climate, will join LGT Bank’s board of directors. En Lee, LGT’s head of sustainable and impact investments in Asia, will also join the board… Zeal Capital Partners is recruiting for several roles, including a chief of staff, investment analyst, and vice president of operations in Washington, D.C… Global Partnerships seeks an investor relations analyst in Seattle… Connect Humanity seeks a remote investment director or manager.

New Markets Support Company is hiring a senior fund accountant and for several other roles in Chicago… The U.S. Department of Housing and Urban Development awarded $41 million in grants to three organizations for affordable housing and community development in low-income communities. Local Initiatives Support Corp. received $17 million; Enterprise Community Partners received $15 million; and Habitat for Humanity International received $9 million.

Thank you for your impact!

– Aug. 18, 2022