The Brief | April 4, 2024

The Brief: How investors can amplify the US ‘green bank’

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact!

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In today’s Brief:

  • Amplifying US ‘green bank’ funding
  • Mitigating ESG risks in textile supply chains 
  • Systems-first proxy voting

Featured: Deploy!

Investors ready products to amplify US ‘green bank’ funding. The Biden administration’s “national green bank” program will come into focus today as Vice President Kamala Harris and EPA chief Michael Regan are expected to award $20 billion in climate finance funds to several coalitions of nonprofit lenders. Even before the funds start to flow – likely this fall – the focus is shifting to outside capital that can magnify the impact of the once-in-a-generation federal funds. As reported by ImpactAlpha, awards for the largest part of the Greenhouse Gas Reduction Fund, the $14 billion National Clean Investment Fund, or NCIF, are expected to go to three coalitions – Power Forward, Climate United and the Coalition for Green Capital. The Greenhouse Gas Reduction Fund is designed to catalyze investment by the private sector to amplify the impact. The coalitions will stand up a distributed “green bank” that will work with private lenders to mobilize loans for clean energy, building retrofits and zero-emission transportation. “GGRF is a historic investment in climate finance,” says Cat Berman of CNote, one of the mission-focused groups that is stepping up to leverage the federal climate funds. 

  • Climate cash. San Francisco-based CNote is today debuting a product called Climate Cash that enables investors, from individuals to large corporations and foundations, to park some of their cash in mission-driven and minority depository institutions participating in green lending. “Climate Cash becomes a force multiplier for GGRF” by encouraging private capital to place their deposits with financial institutions engaged in climate-resilience lending, Berman tells ImpactAlpha.
  • Flexible funds. In Washington, DC, Opportunity Finance Network is putting the finishing touches on a climate fund that will aggregate capital to supplement the federal funds flowing to its members. “We want to create a fund that’s flexible enough to allow for the use of GGRF funds, so they can be leveraged to go further,” Harold Pettigrew, who heads the CDFI membership organization, tells ImpactAlpha. OFN is expected to be awarded some of a $6 billion program to boost lenders’ green loan expertise and capacity. “This is an unprecedented moment for our industry, but more broadly for our nation,” says Pettigrew. It’s a level of investment in green energy, infrastructure and homes “that we’ve never seen before, and perhaps never will,” he adds.
  • Crowding in. The announcement follows months of speculation. Dozens of groups applied to manage parts of the GGRF, forming new partnerships that are reshaping the community lending ecosystem. “This is a downpayment of public investment that will crowd in private investment to disadvantaged communities,” says Jessica Buendia of Dream.org, a nonprofit started by Van Jones that has been involved in the GGRF design. “It’s an amazing moment to be in if you want to invest in not just greenhouse gas-reducing projects but in the most deserving communities in this country. There’s so much opportunity for investors to be able to leverage the due diligence process (of lenders) and coinvest.”
  • Keep reading, “Investors ready products to amplify US ‘green bank’ funding,” by Amy Cortese on ImpactAlpha.

Dealflow: Sustainable Fashion

Aavsihakaar backs Midland Bank to boost ESG in Bangladesh’s textile industry. Textiles account for 20% of Bangladesh’s GDP and 80% of its exports. Poor working conditions, human rights abuses, and water and land pollution grab headlines and pose risks. India-based impact investment firm Aavishkaar Capital invested $5 million in Bangladesh’s Midland Bank to finance mid-sized textile and other businesses and “enhance and elevate” borrowers’ environmental, social and governance practices, including gender inclusivity and climate-smart business practices. Midland Bank’s ESG screening and compliance support will “serve as a beacon, showcasing the positive outcomes of ESG adherence,” said Markus Aschendorf of German development bank KfW, which helped Aavishkaar launch its $250 million ESG First Fund.

  • ESG first. Aavishkaar, the $1 billion impact asset manager, set up its ESG First Fund to address capital gaps for mid-sized businesses in Asia and Africa and improve ESG practices “along the supply chains serving the global markets.” The fund targets debt investments of $2 million to $5 million in agriculture, fashion, personal care and manufacturing, like pomegranate exporter INI Farms, automotive parts manufacturer Jumps, and apparel makers Hela Apparel and Balaji Epz. The fund aims to “help businesses capitalize on [the] global drive for ecologically conscious, gender equal and purpose-driven businesses,” Aavishkaar said.
  • Check it out. 

Dealflow overflow. Investment news crossing our desks:

  • Cambia Capital secured $20 million for the first close of its Douglas Fir Fund, which invests in residential real estate developments that are leveling up green building practices beyond what’s required for third-party certification. (Cambia Capital)
  • Morgan Stanley’s private equity group acquired Resource Innovations, a tech company and advisory firm focused on helping utilities, government agencies and corporations improve energy efficiency and cut their carbon footprints. (Resource Innovations)
  • CFAO Group made a $3 million equity investment in Kenyan electric bus maker BasiGo to increase production in Kenya and Rwanda. (Disrupt Africa)
  • Indian electric two-wheeler maker Ola Electric secured $50 million in debt ahead of its planned IPO. (The Economic Times)

Signals: System Investing

With ‘systems first’ proposals, shareholders seek to mitigate economy-wide risks. The annual proxy season is a litmus test for new investor concerns: this year, artificial intelligence and deep sea mining are among the new issues raised by investors. But a deeper shift is afoot, suggests ImpactAlpha contributor Bill Gridley. In proxy proposals at Meta and Google, Walmart and Target, Shell and others, investors are embracing a “systems first” approach that looks beyond individual company risks to focus on how company actions affect the broader health of the economy, and therefore their own diversified portfolios. Some 62 of the 500 or so shareholder resolutions filed this proxy season make system-level or “beta stewardship” arguments, double last year’s tally, according to The Shareholder Commons. The nonprofit’s “Portfolios on the Ballot 2024” report flags proposals targeting systemic risks posed by climate change, biodiversity, income and racial inequality, public health, disinformation and corporate influence. The report and online toolkit is intended to help investors vote in the interests of their overall portfolios. Gridley calls the attention to system-level risks at this year’s corporate annual general meeting season “noteworthy and welcome.”

  • Climate risk. Climate and biodiversity make up almost half of the systems-level proposals flagged in “Portfolios on the Ballot.” In a proposal filed at Home Depot, Domini Impact Investments emphasizes the economy-wide dangers of losing biodiversity, which provide vital ecosystem services upon which the economy depends. Follow This is urging investors to “protect the value of their entire investment portfolios” by voting in favor of a proposal requesting that oil giant Shell align its medium-term emissions reduction targets with the global climate goals. Retail investors can use a tool from proxy voting platform Iconik, which has partnered with The Shareholder Commons.
  • AI and disinformation. Shareholders of Alphabet and Meta – two of the so-called Magnificent Seven – will vote on disinformation and artificial intelligence proposals. A proposal before Meta shareholders filed by Arjuna Capital argues that generative AI used by Meta and disseminated across its platforms “threatens to amplify misinformation and disinformation globally, posing serious threats to the company, human rights and democratic processes” (for context, see “Disinformation poses systemic risks – so universal owners are pressing media companies to renounce it”).
  • Living wages. Almost a dozen proposals target economic inequality as a systemic risk. Asset manager Legal & General Investment Management and the Nathan Cummings Foundation, an asset owner, have filed proposals at retailers Walmart and Target seeking fair wages. From a single-company perspective, maximizing profits by paying workers a below living wage might make sense. But from a systems perspective, income inequality is an urgent and growing economic issue. The “trickle-up proposals,” writes Gridley, “are backed by economic research which finds that paying a fair wage to labor results in a faster, not slower, growing economy.”

Agents of Impact: Follow the Talent

Chelsea Adler, a veteran of Centerbridge Partners and Arsenal Capital Partners, joins MUUS Climate Partners as head of investor relations… Global Green Growth Institute is recruiting a Mexico City-based senior associate of adaptation and climate change… Savia Ventures is looking for a full-time associate… Open Society Foundations has an opening for a program manager for finance, climate and equity… CapShift seeks an office manager in Boston.

Tideline is hosting, “Anchoring in social determinants: A closer look at health-focused investing,” with Reginald Gordon of Richmond Memorial Health Foundation, Mikelle Moore of Multiplier Advisors, John Vu of Kaiser Permanente, and David Zuckerman of Healthcare Anchor Network, Wednesday, April 17… Applications are open through Friday, April 5 for the Pan-Amazon Impact Fellowship from Latimpacto, Amazon Investor Coalition, Open Society Foundations and Fundo Vale… Impacta VC is launching the third edition of its Impacta Fundraising Strategy Program, a three-month program for Latin American startups raising early stage capital.

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

Thank you for your impact!

– April 4, 2024