Impact Investing | January 26, 2022

The Brief: Hedging meat risk, cleaning municipal water, banking off-grid solar in Kenya, tackling income inequality

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Greetings, Agents of Impact! 

Features: Alt-Protein

Corporations move into plant-based proteins to hedge against the climate risks of meat. You’ve heard about stranded fossil-fuel assets. Get ready for stranded meat assets. The global food system is responsible for as much as one-third of greenhouse emissions; 14% comes from livestock-based agriculture alone. “The Protein Transformation,” a new report from MSCI and impact investor Blue Horizon, found that global food companies face significant climate-transition risks from shifts in consumer preferences and public policy. One hedge: an accelerated shift to plant-based and alternative proteins. In a sample of 485 publicly-listed companies, the researchers found that companies that generate more than half of their revenues from plant-based and alternative proteins had 95% lower climate-transition risk across their value chains than those with smaller shares of alt-protein revenues. If all the companies in the sample generated most of their revenues from animal-free foods, the report estimates that at least $295 billion in market-cap losses could be avoided in a scenario of limiting global warming to 1.5 degrees Celsius.

  • Growing share. Animal-free protein alternatives are a $290 billion market that could account for 11% of global protein consumption by 2035. Nearly half (46%) of the food companies in MSCI and Blue Horizon’s research have some involvement in the plant-based and alt-protein market, though less than 6% disclose their share of alt-protein-related revenues. Only six companies report earning more than 50% of revenues from such products, including Beyond Meat, the only company with a 100% alt-protein business. The others: Select Harvests, Jonjee Hi-Tech Industrial and Commercial, Chacha Food, Qianhe Condiment, and Foshan Haitian Flavoring and Food.
  • Climate impact. Research suggests the carbon emissions of alternative protein are 10 to 50-times lower than animal products. The carbon intensity of the six leading companies was 29% lower than the rest of the sample, the MSCI study found. The vast majority of agrifood companies’ carbon emissions are in so-called “Scope 3” emissions from suppliers and distributors rather than direct emissions from company-owned farms, factories and vehicles. The climate policy risks for such Scope 3 emissions “can be considered lower for plant-based protein producers,” the report said.
  • Corporate transparency. Environmental analysts have griped for years that sustainability and environmental impact claims of alt-protein companies can’t be substantiated by public data. Beyond Meat and Impossible Foods, for example, don’t disclose greenhouse gas emissions across their operations and supply chains. MSCI and Blue Horizon said they encountered “limited and non-standardized” corporate disclosures. One obstacle: plant-based and alternative-protein-related metrics are not included in ESG reporting standards like the Sustainability Accounting Standards Board or the Global Reporting Initiative.

Keep reading, “Corporations turn to plant-based proteins as a hedge against the climate risks of meat,” by Jessica Pothering on ImpactAlpha.

Dealflow: Energy Access

Commercial bank loan helps Bboxx expand off-grid solar in Kenya. U.K.-based Bboxx launched in 2010 to provide pay-as-you-go solar products to low-income African households without electricity. A $15 million loan from SBM Bank Kenya will help Bboxx expand its solar products and services to 470,000 rural Kenyans. The U.K. government-backed intermediary GuarantCo provided a guarantee of $11.3 million, covering 75% of the loan. The goal: bring more commercial banks into off-grid solar lending to make loans in local currency and reduce companies’ currency exchange risks.

  • Clean energy. Bboxx will purchase nearly 90,000 solar home systems and appliances, such as refrigerators and phones. Last week, Bboxx received a $5.5 million loan from Africa Go Green Fund to provide clean solar-powered cookstoves.
  • Check it out

Bain Capital Double Impact backs AqueoUS Vets to remove contaminants from U.S. water infrastructure. Nearly 110 million Americans use water that’s contaminated with PFAS, a chemical that can cause decreased fertility, liver damage and cancer. California-based AqueoUS can remove PFAS and other contaminants in surface and groundwater and treats approximately 168 million gallons of water daily, including for water districts in Los Angeles and Orange County in California. The $1.2 trillion Infrastructure Investment and Jobs Act, passed in November, includes billions of dollars to improve water systems. AqueoUS was looking for a partner “to continue to grow outside of its California home-base,” Bain Capital’s Todd Cook told ImpactAlpha. Dive in.

Dealflow overflow. Other investment news crossing our desks:

  • German asset management firm Prime Capital raises €586 million ($661 million) for a sustainable infrastructure fund focused on wind energy projects in Scandinavia.
  • Microtraction backs Nigeria’s Pivo, a women-led fintech, to provide working capital loans to small and medium-sized supply-chain and logistics companies.
  • U.K.-based Sylvera scores $32 million in Series A financing to help corporate partners evaluate and invest in carbon credits.

Signals: Systemic Risk

The advanced techniques investors are using to address income inequality. Today’s extreme levels of income inequality affect investments across asset classes, as well as economic and social stability more broadly. Some investors are tackling such systemic risks with what The Investment Integration Project, in Systemic Stewardship: Investing to Address Income Inequality,” calls “advanced techniques,” including collective action, standards-setting, and the strengthening of local systems. Some examples:

  • Working together. To help companies “find a balance between controlling their tax bill and paying a fair share,” 11 major investors, including Bâtirente, MFS Investment Management, NEI Investments, RobecoSAM and Triodos Investment Management, worked with the Principles for Responsible Investors on a guide to engaging corporations on their tax responsibility.
  • Rating tools. CCLA Investment Management, one of the U.K.’s largest charity fund managers, convened “Find it, Fix it, Prevent it,” to mobilize investors to work against modern-day slavery. The coalition of 56 supporters managing $10 trillion in assets, including Australian Super, Fidelity International and Schroders, is working on improved data disclosure and a rating tool to help investors tackle the issue.
  • Public goods. The Heron Foundation, a private foundation focused on community economic development, used fixed-income loans and bonds to build affordable housing in California’s San Joaquin Valley. “These two investments, especially when issued by governments to support nonprofits, significantly promote the building of infrastructure and public goods,” according to the TIIP report.
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Agents of Impact: Follow the Talent

Eugenia Unanyants-Jackson becomes global head of ESG at PGIM, the investment management business of Prudential Financial… Tanya Barnes, ex- of Blackstone, joins J.P. Morgan Asset Management’s new sustainability-focused growth private equity team… James Manyika, ex- of McKinsey Global Institute, joins Google as senior VP of technology and society… Sarah Fortt, formerly with Vinson & Elkins, and Betty Moy Huber, formerly with Davis Polk, join Latham & Watkins to head the firm’s ESG practice with partner Paul Davies

Thomson Reuters Foundation is hiring a senior manager of inclusive economies in London… CREO seeks a director of programs in New York… Root Capital is looking for a senior manager of foundations in Cambridge, Mass… Sustainable Business Consulting is hiring a remote senior sustainability consultant… Clermont Partners seeks a CSR and sustainability writer in the Washington, D.C.-Baltimore area.

Thank you for your impact.

– Jan. 26, 2022