The Brief | February 5, 2020

The Brief: Impact alpha in emerging markets, $1B for sustainable infrastructure-as-a-service, consolidating ESG data, reshaping finance

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Greetings, Agents of Impact!

Featured: Agents of Impact Call No. 12

Capital on the Frontier: How local, early-stage funds find impact alpha in emerging markets (audio). Small and growing businesses are the pillars of local economies, in both developed and developing countries. Yet, small business and startup financing remains a challenge in all but a few global hubs. WIC Capital’s Everlyne Dioh (Senegal), EquaLife Capital’s Amanda Cotterman (Kenya) and i2i Ventures’ Kalsoom Lakhani and Misbah Naqvi (Pakistan) joined last week’s Agents of Impact call to explore ways to bridge an estimated $5 trillion annual small business capital gap in emerging and frontier markets. “What they’re trying to achieve is paramount to addressing the jobs situation and economic sustainability and resilience of many countries,” said Drew von Glahn of the Collaborative for Frontier Finance, which gathered more than 30 local capital providers in Nairobi last month to stake out collective action to advance financing for small and growing businesses.

The Call kicked off ImpactAlpha’s deep dive into “capital on the frontier,” in partnership with the Collaborative and Visa Foundation. Local fund managers represent a valuable resource for global investors, including development-finance institutions and family offices looking for deals and opportunities in growth markets. Yet such managers – often managing their first funds, writing small checks and backing businesses that need added support – “are all struggling for different reasons to raise capital,” said von Glahn. Suzanne Biegel, who is producing the GenderSmart Investing Summit in London in April, called the risks overstated for first-time funds, which are “where the biggest innovation is happening.” Susannah Eastham said ANDE’s Advancing Women’s Empowerment Fund has received nearly 200 proposals for strategies to boost investment in women entrepreneurs in South and Southeast Asia; at least eight awards will be announced in April. Von Glahn said the Agents of Impact Call was itself an example of collective action. Local capital providers are “consciously building the market at the early stage,” said i2i’s Naqvi. “If you don’t do that, then you’re not going to have building the blocks required to get to later-stage investments and beyond.”

Read on and listen in, “Capital on the Frontier: How local, early-stage funds find impact alpha in emerging markets (audio).”

Dealflow: Follow the Money

Generate Capital raises $1 billion for sustainable infrastructure-as-a-service. The company, founded in 2014 by Jigar Shah and other renewable energy veterans, builds, owns and operates green power, transportation, water and waste management facilities and sells the services to Walmart, Whole Foods, New York City and other customers. San Francisco-based Generate raises long-term balance sheet capital to match the task at hand: building and operating distributed infrastructure for decades to come. “You cannot do that on a fund basis,” Generate’s Scott Jacobs told ImpactAlpha. AustralianSuper, Sweden’s AP2Queensland Investment Corporation and Railways Pension invested in the mega-round. 

  • Infrastructure revolution. The future is “democratized, digitized, decentralized and decarbonized,” says Jacobs. Generate sticks to proven technology like solar, battery storage, electric vehicles, wastewater treatment and energy efficiency. It is one of the largest owners of hydrogen-electric fleets and of organic waste management assets. “You don’t need to reinvent the world, you just need to rebuild it,” says Jacobs. “Most of what we need to solve energy poverty, water scarcity, climate change – pick your issue – can be solved with the existing set of solutions.”
  • Expanding board. Generate named as chair of its board Richard Kauffman, chair of the New York State Energy Research and Development Authority (NYSERDA), and Sunrun’s Lynn Jurich as a director. 
  • Dig in.

Greenlane Renewables joins with SWEN Capital Partners to decarbonize natural gas. British Columbia-based Greenlane Renewables creates biogas from organic waste at landfills, wastewater treatment plants, farms and food waste facilities and strips out impurities and carbon dioxide. The biogas can be used as fuel or in the natural gas grid. The planned joint venture with SWEN Capital Partners, a French financial firm, will help European customers finance biogas upgrades via monthly payments rather than upfront cash. “Customers benefit from reduced capital expenditures in projects, built-in operation and maintenance while retaining their autonomy to sell the resulting renewable natural gas back to the natural gas grid,” said Greenlane’s Brad Douville.

Nasdaq buys OneReport to ease environmental, social and governance data reporting. The acquisition of Brattleboro, Vt.-based OneReport will speed to market Nasdaq’s tool for companies navigating multiple ESG frameworks and streamline reporting. The product, Nasdaq OneReport, “will broaden our strategic engagement and collaboration with issuers who are seeking clarity on ESG reporting,” said Nasdaq’s Nelson Griggs.

BlueHub Loan Fund floats $75 million Sustainability Bond for community development. The Boston-based loan fund, an affiliate of BlueHub Capital, has loaned $1.3 billion to date for community projects such as affordable housing, healthcare facilities, childcare and grocery stores. The bond offering, BlueHub’s first, will provide longer term, more flexible capital.

Coding bootcamp Galvanize acquired by K12 for $165 million. Publicly-traded K12 operates high school and career training programs via its Destinations Career Academies. Denver-based Galvanize, which also offers co-working space and corporate up-skilling, is among a wave of coding bootcamps launched over the past decade and the latest to be acquired.

Signals: Ahead of the Curve

Agents of Impact respond with another half-dozen tools to reshape finance. More than two dozen Agents of Impact responded to ImpactAlpha’s call for ideas to shift investor behavior and drive systemic changes in finance as part of our What Next series with the Global Impact Investing Network. From rewarding community-driven impact (Shu Dar Yao) and tapping cash assets with real impact (Catherine Berman) to putting a value on natural capital (MaryKate Bullen) and supporting new managers (Brian Jones), Agents of Impact are retooling finance. Catch up on Part I and Part 2 and take a look at the final set:

  • Increase the costs of extractive business. Efforts to change mindsets will fall on deaf ears unless the current cost of doing business in extractive and exclusive ways is made explicit, says Eric White of Cogent Consulting.
  • Provide ‘true cost’ reporting. Don’t waste time lobbying professionals to change their mindsets, says Realana’s Portland Reed. “Instead, require companies to show the true costs of their actions and let investors make the most prudent choice.”
  • Hold governments accountable for E, S and G. Capital managers chasing yields continue to snatch up sovereign bonds of Eskom, South Africa’s state-owned power utility, despite its abysmal performance on environmental, social and governance issues. Says Jana van Deventer of Intellidex, “Investors must be educated on the role governments play in failing to address ESG issues.”
  • Get smart about measuring impact. Predictive Impact Analysis (PIA) enables investors to forecast social returns on investment, says Meeghan Zahorsky of Thoughts In Gear. Among other benefits, PIA gives “investors and investees a framework to monitor progress to the expected impact returns.”
  • Distinguish between ‘real’ and ‘paper’ impact. “Real” impact (value-creation for all share- and stake-holders) and “paper” impact (ESG certification) can be really different, says Andrea Vigevani of Rome’s Istituto per la Cooperazione Universitaria. “The issue is how to measure impact in an objective way.”
  • ICYMI: The GIIN’s Amit Bouri’s Three ways asset owners can shift mindsets, incentives and portfolio theory.
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Agents of Impact: Follow the Talent

Tami Kesselman, ex- Bain consultant, joins LOHAS Advisors as a partner… Boundless Impact is looking for a content editor in New York… Sunwealth is hiring a project associate in Cambridge, Mass… Incofin Investment Management seeks an agro investment analyst for Latin America in its Bogotá office… Inclusiv is recruiting a director of resiliency and clean energy finance and other roles in New York… Youth Business Internationalissued a call for proposals for a consultant to identify good practices for supporting young refugee and migrant entrepreneurs… Social Venture Circle’s clean tech pitch showcase is Mar. 31 and its Spring Climate Summit is April 1, in New York.

Thank you for reading. 

–Feb. 5, 2020