The Brief: Green shoots in Puerto Rico’s reconstruction

Greetings Agents of Impact! 

This week, catch ImpactAlpha’s Roody Senatus in Washington, DC, at the Aspen Employee Ownership Ideas Forum, Dennis Price in San Juan, Puerto Rico, at NEXA: Jobs Summit, and Amy Cortese in New York at TIIP’s System-level Investing Symposium. I’ll be checking in at Elemental Interactive in SF. Say hi! – David Bank

In today’s Brief:

• Blended finance in Puerto Rico
• Storing energy in sand 
• BII’s small business strategy

Featured: Blended Finance

The impact investing opportunity in Puerto Rico’s economic comeback. In one of Puerto Rico’s poorest neighborhoods, you can find what economists might call a “green shoot.” The plan for Oasis, a six-acre, $43 million campus in San Juan’s Villa Prades public housing community includes a school, a health clinic and a training center for entrepreneurship and job skills. The development required careful financial engineering, including stacking philanthropic dollars, New Markets Tax Credits, low-income investment funds, and a bridge loan. Ramphis Castro and his team at Platform for Social Impact aim to mobilize investors to build as many as 75 similar hubs across Puerto Rico. The campus “is designed to elevate and activate the people who have the power to lift the economy,” Castro writes for ImpactAlpha. At NEXA: Jobs Summit in San Juan this week, Platform for Social Impact is showcasing impact investment opportunities in Puerto Rico after years of bankruptcy, natural disasters and Covid (ImpactAlpha is the conference media partner). “This is our moment,” says Castro, pointing to record low unemployment and strong new business growth. 

• Social infrastructure. Oasis “is an investment in removing obstacles for striving families,” including in job placement, childcare and training, Castro says. Other investment opportunities in healthcare and energy “can be de-risked by federal aid and infrastructure funding that has been moving through to projects and social support.” Capacity-building capital can help farmers, businesses and project developers access more of the $50 billion in disaster aid still sitting on the sidelines. After unlocking project development funding, Edgar Gomez Cintron at the Center for Habitat Reconstruction is structuring financing for the rehabilitation of thousands of vacant homes owned by community land banks on the island. 

• Leapfrogging the grid. Puerto Rico’s electric grid was famously fragile during the 2017 Hurricane Maria disaster. Years later, power delivery remains strained and energy costs high. That presents “a tremendous arbitrage opportunity in converting to solar,” argues Castro. Investments in residential solar can lower customers’ bills; companies like Casa Pueblo are reinvesting in solar and microgrids owned and operated by the community.

• Blended finance. Puerto Rico’s reconstruction will draw heavily on local community development financial institutions which have grown 15-fold on the island over the last decade, with 86 cooperatives qualifying as CDFIs. The challenge facing Puerto Rico, like other emerging economies, is the financial engineering required to pool and deploy assets. “The deals are not often turnkey,” says Castro. “Our experience is that each dollar invested unlocks more potential. Such capabilities are taken for granted in some parts of the world, but are far less prevalent in places like Puerto Rico.”

• Keep reading, “The impact investing opportunity in Puerto Rico’s economic comeback,” by Ramphis Castro of Platform for Social Impact.

Dealflow: Energy Transition

Vietnam’s Alterno raises $1.5 million to store renewable energy in sand batteries. More than 80% of Vietnam’s power is generated from fossil fuels, mostly coal. The country’s coal dependence will affect Vietnam’s ability to trade with Europe as the EU phases in a carbon tax on imported goods. Ho Chi Minh City-based Alterno is making thermal batteries to store renewably-generated energy, primarily to support a renewable transition and reduce the carbon footprint of Vietnam’s agriculture sector. Local investor Touchstone Partners and The Radical Fund in Singapore led Alterno’s seed equity round.

• Sand storage. Renewable sand-based batteries use solar or wind energy to heat air trapped within sand to about 600 degrees Celsius. The sand stores the energy as thermal heat. Alterno is piloting the technology with tea producer DoTea and Sucden Group, a coffee supplier to Nestle, which are trying to decarbonize their drying processes. Separately, Finland’s Polar Night Energy raised €7.6 million ($8.3 million) to build industrial-scale sand-battery storage, using crushed soapstone from a nearby fireplace manufacturer.
  
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Savills Investment Management secures £123 million for affordable housing in the UK. London-based Savills’ Simply Affordable Homes fund will invest in new and existing affordable and social housing, as well as in shared-ownership homes. The debut follows the investment manager’s acquisition of affordable housing developer and acquirer Simply Homes in 2022. The UK “faces serious housing challenges, especially with regard to affordability,” said Savills’ Alex Jeffrey. Savills developed its impact framework with social impact advisor The Good Economy. Investors in the fund’s first close include Samsung Life Insurance, Savills Investment Management’s parent company, and London CIV. UK-based impact investor Big Society Capital committed £10 million ($12.7 million) to the fund and an additional £5 million via Schroder BSC Social Impact Trust. 

• Equitable homeownership. Separately, JPMorgan Chase committed $20 million in philanthropic funding to eight organizations working to expand homeownership access in underserved US communities. Impact Charitable, a Denver-based donor-advised funds provider, secured $3 million on behalf of the Dearfield Fund for Black Wealth, which provides interest-free down payment assistance loans to Black first-time homebuyers. In Washington, DC, City First Enterprises scored $3 million to help Black and Latino first-time homebuyers with down payments and closing costs. JPMorgan is also expanding homebuyer grants and mortgage support programs for its customers in majority-Black and Latino communities.
  
• Check it out.

Dealflow overflow. Investment news crossing our desks:

• Windfall Bio raised $28 million in Series A funding from Prelude Ventures and Amazon’s Climate Pledge Fund for “methane-eating microbes” to help agricultural producers cut greenhouse gas emissions. (Windfall Bio)
  
• Utah-based Torus secured $67 million to produce batteries and link them into “virtual power plants.” (Torus)
  
• Quinbrook raised $600 million from Blackstone and other US and European investors for large-scale solar + storage projects. The Valley of Fire fund acquired the portfolio of Quinbrook’s first solar + storage fund, and took a majority stake in a major project in Las Vegas. (Quinbrook)

Impact Voices: Development Finance

How and why British International Investment directs capital to small businesses. If a financial institution provides credit to a micro-entrepreneur who was previously excluded, the impact is likely to be felt by that individual and their family. If a smallholder farmer buys crop insurance, it’s a similar story. “At the micro end of the small business spectrum, the impact pathway is likely to be pretty short,” British International Investment’s Paddy Carter writes in a guest post for ImpactAlpha. For larger firms, “the impact story changes and becomes more complicated,” he says, including the indirect effects of investments on other firms, as BII explains in a new report, “How and why we finance SMEs.”

• Creative destruction. Job creation is one of the most common impact metrics used for investments in small businesses, which are considered the economic growth and job engine of many emerging markets. “Lending to small and mid-sized businesses creates jobs in the borrowing firms but can also destroy them at competing firms,” notes Carter. “Job destruction can be a good thing.” BII wants to see bad jobs replaced with better ones. Carter argues for focusing on quality of jobs and other local impacts, like whether enterprise growth is enabling access to better and more affordable goods and services.
  
• Strategy evolution. BII last year launched and funded Growth Investment Partners, a small business investment firm in Ghana, to support the capital needs of larger small and mid-sized businesses. The institution plans to replicate the strategy in other markets. Locally-run – and backed – fund managers already exist across Africa, Asia and Latin America, tapping local market knowledge and networks to address small business financing needs. “We see our role as plugging gaps across the SME financing continuum – for firms of different sizes, at different stages of their lifecycle, and with different needs,” Carter writes.
  
• Read the full piece. 

Agents of Impact: Follow the Talent

Heading for Change names Sana Kapadia, formerly with 2X Global, as chief catalyst. Samantha Anderson will step away as the organization’s “change weaver” (disclosure: Heading for Change sponsors ImpactAlpha’s Climate + Gender coverage)… Social Finance is hiring an associate director of impact investments in San Francisco… Race Forward seeks a senior director of research and impact evaluation in Oakland, Calif.

Quadrature Climate Foundation is looking for a program director, preferably in London… Open Society Foundations seeks two program managers, one based in Africa and one in Asia… Private Infrastructure Development Group seeks a senior impact adviser in Nairobi… ClimateTracker.org is accepting applications for its Caribbean Climate Justice Journalism Fellowship.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– April 9, 2024