Greetings Agents of Impact!
ICYMI. Help us dust off this gem from the ImpactAlpha archives, “JD Vance, the impact fund manager his partners would rather forget.” Before the Hillbilly Elegy author and now-Ohio senator cozied up to billionaire investor Peter Thiel and Donald Trump, JD Vance teamed up with another tech billionaire, AOL founder Steve Case, to make investments and serve on the board of companies like the now-defunct greenhouse grower App Harvest. Vance’s boss at Case’s Rise of the Rest fund was none other than Ron Klain, later President Biden’s chief of staff. As Dennis Price and I wrote two years ago, “No worries, JD – they’re not eager to discuss their partnership with you, either.” That’s still true! Have you worked with the new veep nominee? Drop us a line. – David Bank
In today’s Brief:
- Anxious jitters around the Greenhouse Gas Reduction Fund
- Workforce training in Hawaii
- Breaking the cycle of poverty in Puerto Rico
- Capitol Gains podcast with former US Rep. Ben McAdams
Featured: Deploy!
EPA seeks ways to mobilize private capital as it races to beef up green banking. The Environmental Protection Agency and dozens of key allies are scrambling to stand up a $27 billion plan to create a major new market for green financing – on deadline. The clock is ticking as the EPA and groups selected in April to manage and distribute the Greenhouse Gas Reduction Fund race to finalize complex agreements to get money flowing by Sept. 30 to safeguard the funding from potential clawbacks by a future US Congress or administration. Jitters have mounted among practitioners eager to get going. “There are so many factors that are a little terrifying that we don’t control,” Justice Climate Fund’s Amir Kirkwood tells ImpactAlpha. The coalition of community lenders and minority depository institutions is ramping up to expand green lending under GGRF, a part of President Biden’s Inflation Reduction Act. Republicans have promised to slash the program. EPA head Michael Regan was grilled by the House Oversight Committee this month about what the Republican majority charged was an abuse of authority “to advance a radical climate agenda.”
- Market demand. With a focus on underserved communities, the GGRF envisions a broad-based green transition that will leverage private capital to amplify its impact at least seven-fold. First, low-income households and cash-strapped organizations and municipalities have to decide to upgrade at all. When the old boiler goes out, it’s still easier to buy a new furnace than it is to install a heat pump. “Pulling people off that default behavior” will be among the biggest challenges, says Eric Hangen of the University of New Hampshire, co-author of “Enhancing the Greenhouse Gas Reduction Fund.” ReWiring America’s incentive calculator can help renters and homeowners find suppliers and identify incentives for heat pumps, EVs and solar panels. But many homeowners, renters and small businesses have limited abilities to repay a loan, even to reduce energy costs. “It’s not only a finance problem,” Hangen tells ImpactAlpha. “It’s about a whole lot more than that.”
- Private-public. The report argues for “rethinking the private-public partnership.” Given the challenges of federal contracting, Hangen suggests GGRF lending institutions might best deploy federal financing for post-project refinancing and “takeouts” of private lenders. With less paperwork, private investors would provide construction and bridge financing for projects, with assured takeouts to reduce the risks. That could spur the velocity of projects and expand the pool of contractors able to participate. Other opportunities for private capital include pre-development financing, workforce development, bridge financing for lenders awaiting federal funds, small business assistance, and “gap financing” for non-eligible project components, such as roof repairs needed before solar panels can be installed. The GGRF’s financing tools are powerful, but fractured, the report concludes. “What is in short supply is the ‘glue’ to put these pieces together in support of a comprehensive strategy at the community level.”
- Direct pay. Tax incentives are often no good to entities that don’t pay taxes. Direct pay, a provision of the Inflation Reduction Act, enables tax-exempt organizations such as nonprofits, state, local and Tribal governments, publicly-owned utilities and rural electric cooperatives to transfer federal tax credits from eligible clean energy projects to third parties for cash. Caveat: The tax incentives kick in only after the investment has been made, meaning investment is required up front. And the complex direct pay process may require resources that many local governments and nonprofits don’t have. “A turnkey model for leveraging direct pay to advance solar and renewable energy finance,” from Rochdale Capital and National Bankers Association Foundation offers a template. “This is the report that GGRF awardees should have read before they got the money,” Rochdale’s John Holdsclaw IV tells ImpactAlpha.
- Keep reading, “EPA seeks ways to mobilize private capital as it races to beef up green banking,” by Amy Cortese and David Bank on ImpactAlpha.
Dealflow: Future of Work
Social Finance launches $2.5 million education fund for low-income students in Hawaii. The Boston-based nonprofit’s Hawaii Renewable Learning Fund offers zero-interest, no-fee loans for qualifying students to earn degrees or certificates in high-demand fields and land jobs with local companies. Social Finance is partnering on its latest outcomes-based workforce training program with the University of Hawaii’s engineering college. Donors include Hawaii’s Harold KL Castle Foundation. The fund is an evolution of Social Finance’s pioneering “career impact bonds,” which allow students to attend college or other educational programs with little to no upfront tuition, in exchange for a fixed percentage of their future income (listen to our podcast conversation with Social Finance’s Tracy Palandjian).
- Path to good jobs. Students hired by one of the fund’s three employment partners at a salary of more than $50,000 annually, and who stay for a minimum number of years, will have their loan repaid by the employer, said Social Finance’s Abby Silverman. She declined to specify how many years. Graduates who land jobs paying greater than $50,000 elsewhere will pay their loans back in fixed monthly payments, funding future loans. Graduates earning less can defer repayment. “This isn’t merely an investment in individual students – it’s a strategic investment in Hawaii’s sustainable future,” said Michael Matsumoto of consulting and engineering firm SSFM International, one of the partners. Social Finance hopes the availability of talent will attract more employers willing to repay the loans.
- Career impact bonds. Social Finance’s $50 million UP Fund invests in student-friendly income-share agreements to upskill workers and help them secure good jobs. Investors in that fund include Blue Meridian Partners, Schmidt Futures (founded by former Google CEO Eric Schmidt and his wife, Wendy), family office Blue Haven Initiative, the Shapiro Foundation in Boston, and donor advised funds at Fidelity and Vanguard. Social Impact is managing Massachusetts’ $10 million Climate Career Fund to provide low-cost loans to individuals training to become electricians, EV mechanics, HVAC technicians and for other climate-related jobs in high demand.
Platform for Social Impact secures $43 million for community center in Puerto Rico. This spring, ImpactAlpha’s Dennis Price visited the Platform for Social Impact, which is working to blend capital to fund projects that improve social infrastructure and services for residents of low-income and public housing communities in San Juan (see, “In Puerto Rico, mobilizing billions for economic mobility with capital from across the spectrum”). The nonprofit has secured $43 million in blended finance to build a new center that will house the OASIS Project, a community center that will host Puerto Rico’s Boys and Girls Club, and provide job training, health and educational services, and social and family support. “Through integrated services, we have the capacity to break the cycles of poverty among vulnerable families,” said PSI’s Eduardo Carrera, who previously led the Boys and Girls Club.
- Catalytic capital. Carrera is on a 10-year mission to advance social and economic progress for the US island territory, which is struggling to recover from natural disasters, decades of underinvestment and a lagging economy. “If we are really going to do this at scale, it [takes] the whole spectrum of finance,” Carrera told ImpactAlpha. Local Initiatives Support Corp., the Nonprofit Finance Fund, RAZA Development Fund, and Low Income Investment Fund provided debt capital to the project. Capital One and Civic Builders invested via the New Market Tax Credit program. Puerto Rico’s Department of Housing is contributing funds through its infrastructure-focused Investment Portfolio for Growth, and the US Department of Education via Covid relief funds. Six foundations provided grant funding.
- Community oasis. The OASIS Project will provide integrated services to low-income San Juan housing communities with more than 35,000 people. A new community health clinic for primary and specialized care services will serve 4,000 patients annually. The Project Makers incubator will provide training and resources to 100 business founders each year. And the Boys and Girls Club will offer after-school tutoring, activities, and health and life skills support to 550 youth in the community.
- Check it out.
Dealflow overflow. Investment news crossing our desks:
- Brussels-based Kois Invest raised €150 million ($163.5 million) for its Impact Expansion fund to make growth equity investments in Europe’s small businesses that are improving healthcare access, addressing skills and employment gaps, and targeting climate issues. (Kois Invest)
- British International Investment committed $10 million to NMB Bank Zimbabwe to lend to the country’s agricultural producers and exporters. (BII)
- Cygnum Capital, formerly Lion’s Head Global Partners, provided $5 million in debt to wireless and broadband provider NuRAN Africa to expand connectivity services in Cameroon and the Democratic Republic of the Congo. (Cygnum Capital)
- Mitti Labs raised $3 million from Lightspeed Venture Partners, Voyager Ventures and other backers to help rice farmers in India improve farming practices and cut methane emissions. (AFN)
ImpactAlpha Podcast Network: Capitol Gains
Utah’s Ben McAdams on local solutions to political division (podcast). Local governments accountable to everyday citizens may be the antidote to dysfunction in Washington. “Local governments still work. They’re solution-oriented. They’re bipartisan,” says former Congressman Ben McAdams of Utah on the first episode of Capitol Gains, a biweekly podcast from Matt Posner of Court Street Group and James McIntyre, a municipal affordable housing and clean energy finance expert, that untangles the threads of policy, politics and money in pursuit of a more engaged citizenry. “Right now, the focus needs to be on enabling the states and the local governments, the metros, to be our solution and hope that that trickles up,” McAdams says. Capitol Gains is the newest addition to the ImpactAlpha Podcast Network.
- Local cavalry. McAdams is the former mayor of Salt Lake County and the last Democrat from Republican-dominated Utah to get elected to the US Congress. He now leads Putting Assets to Work, where he helps local governments unlock billions from underutilized public land for community benefit (for context, see, “Ben McAdams: Marrying public real estate and private capital”). Talented people at the state and local level, McAdams says, “are part of the cavalry and part of the solutions to American problems.”
- Innovation labs. Local governments are the kind of laboratories needed at the federal level. We need “a regulatory regime that demands accountability, but allows for flexibility and local autonomy,” McAdams says. The Biden Administration’s bipartisan infrastructure law and the Inflation Reduction Act are “incredibly transformative,” but national dysfunction is stifling innovation, he says. “I would rather see the electric cars of the future, the digital currencies of the future, built and regulated by the United States, not China.” From Dreamers seeking a path to citizenship, to permitting reform to enable the energy transition – “all of these things are so important, not only for the prosperity of everyday Americans, but for the national security and the interest of democracy on the global stage.”
- Read the full recap, and listen to the Capitol Gains podcast.
Agents of Impact: Follow the Talent
Libra Foundation names Supriya Lopez Pillai, previously with Hidden Leaf Foundation, as president… Tracey Fung, formerly with Palladium, joins the US International Development Finance Corp. as an associate director… Partnership for Carbon Accounting Financials appoints FirstRand’s Justine Bolton, Prajna Khanna of the Naspers-Prosus Group, and Lloyds’ Alison Vipond to its board of directors.
Reinvestment Fund is hiring a clean energy and sustainable finance lending director… Finance in Motion is on the hunt for an investment officer in Frankfurt… The Global Fund for a New Economy is looking for a remote chief development officer… The Ellen MacArthur Foundation seeks a senior research analyst in the UK.
The Foundation for Black Communities has an opening for a community impact director… The Catalytic Climate Finance Facility will host a webinar, “Gender and energy nexus within climate blended finance,” on Tuesday, July 30… ImpactAssets is hosting “Investing for climate resilience,” with Spencer Glendon of Probable Futures and ImpactAssets’ Margret Trilli, Thursday, Sept. 12.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– July 16, 2024