Greetings, Agents of Impact!
Impact Voices: Incentivizing Impact
Four ways investors can structure financing to incentivize positive impact. A loan to Jacaranda Maternity Clinic in Kenya from UBS Optimus Foundation links interest rate reductions to level of care and population served. The Global Innovation Fund spurs investees to diversify supply chains before disbursing a second tranche of capital. Outcome payments have helped Root Capital make smaller and riskier loans to smallholder farmers in Latin America. “Both impact enterprise founders and funders respond to incentives,” Aunnie Patton Power writes in a guest post on ImpactAlpha adapted from her new book, Adventure Finance. “Financially incentivizing impact helps ensure desired outcomes.”
Social impact bonds were an early example of an instrument that links impact goals to terms and conditions of financing. Investors can deploy a growing range of “impact-linked” financial structures, including social impact incentives, impact tranches, and impact-based equity earn-backs and recoverable grants. The structures link outcomes, such as access to basic services for hard to reach populations, to terms and conditions, including the cost of capital, funding disbursements, ownership or convertibility. “Linking financing to impact is not the right option for every impact deal,” says Patton, a lecturer at the University of Oxford, the London School of Economics and the University of Cape Town. “But for flexible founders and funders committed to driving deeper impact, such structures can be powerful tools for aligning impact and financial incentives.”
Keep reading, “Four ways investors are structuring financing to incentivize positive impact,” by Aunnie Patton Power on ImpactAlpha.
Dealflow: Healthcare Economy
Achieve Partners acquires Optimum Healthcare IT to fill healthcare labor gaps. Florida-based Optimum Healthcare IT provides staffing and consulting services to 150 hospital systems in the U.S. Achieve Partners acquired the company to build a job training and apprenticeship program to provide talent for the healthcare sector’s accelerating digital shift. The deal is the first from Achieve’s newly-closed Putting America Back to Work Fund (see, “Achieve Partners raises $180 million to boost apprenticeships and job placements”).
- Future of work. Achieve’s investment thesis: reinvigorate apprenticeships to boost American workers’ economic mobility. The fund will acquire businesses offering worker training and experience in industries facing a skills shortage, like healthcare and IT. “Building a more equitable, resilient economy depends on recognizing that education is a means and not an end,” said Achieve’s Aanand Radia. “It’s about not just learning, but the translation of learning experiences into economic outcomes.”
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LeapFrog leads $75 million raise for India-focused health app HealthifyMe. Singapore-based HealthifyMe’s AI-based wellness app provides nutrition and fitness advice, coaching and tracking. The app has 25 million downloads and two million regular monthly users across India and Southeast Asia. Roughly half of its users are low-income. LeapFrog invested $30 million in the company’s Series C round to help it expand in India and launch in the U.S. “By giving people control of their own health, regardless of geographical, social or economic status, we are supporting communities who are living under the burden of limited resources, both financial and medical,” LeapFrog’s Biju Mohandas told ImpactAlpha.
- Digitized health. The deal is LeapFrog’s fifth healthcare investment. LeapFrog said the COVID pandemic, which devastated India this spring, accelerated demand for online and mobile-based health services. Its investment will support the expansion of HealtifyMe’s services for managing chronic diseases like diabetes and hypertension.
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Aflac and Denham Capital form $2.1 billion sustainable infrastructure partnership. Boston-based Denham has built a 15-year track record investing in global renewable energy and sustainable infrastructure. The partnership with Aflac Global Investments, the $129 billion asset management arm of U.S. insurance company Aflac, will help Denham expand its sustainable infrastructure business. The $2 billion commitment from Aflac will provide senior debt for sustainable infrastructure projects; $100 million will go to Dunham’s second equity fund for sustainable infrastructure assets. Aflac will also acquire a 24.9% equity interest in Denham’s sustainable infrastructure business.
- Feeding demand. Aflac was attracted by Denham’s focus on sustainable infrastructure, Aflac’s Jon Sullivan told ImpactAlpha. “It is our hope we are creating an outlet for more capital to help feed this demand.” An estimated $6.9 trillion per year will be required through 2030 for global sustainable infrastructure (see, “Generate raises $2 billion amid sustainable infrastructure push”).
Medical Credit Fund’s digital finance fund secures $8.3 million to support Africa’s health clinics. Since 2010, Medical Credit Fund has provided nearly $130 million in debt financing for equipment and facilities to more than 6,000 small, privately-run clinics in Africa (see, “Medical Credit Fund blends $19.2 million to finance Africa’s frontline health clinics”). The nonprofit secured 900 million Kenyan shillings ($8.3 million) from the Dutch Ministry of Foreign Affairs for its second fund.
- Equitable healthcare. The fund will provide digital loans for healthcare clinics to increase investments in health infrastructure and access to quality care in Kenya, Ghana, Nigeria, Tanzania and Uganda. Its first deal is a $40,000 loan to Sori Lakeside Hospital in Kenya.
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Signals: Climate (In)action
What does it take to light a fire under global leaders’ climate plans? As smoke from the wildfires raging in the west blanketed much of the U.S., Germany grappled with the aftermath of a deadly flood, and China’s Henan province faced a fresh deluge, the need for dramatic climate action took on new urgency. “On climate, cooperation is the only way to break free from the world’s current mutual suicide pact,” U.S. climate envoy John Kerry said ahead of G20 ministerial meetings next week (see, “From COVID to climate, G20 countries look to catalyze capital for urgent action”). With the COP26 global climate summit in Glasgow just four months away, global action remains sluggish. A report by BloombergNEF and Bloomberg Philanthropies calls on nations to end fossil fuels support, make polluters pay, and mandate climate risk disclosure.
- Fossil fuel funding. G20 nations funneled $636 billion in direct support to fossil fuels in 2019 – even before COVID recovery funding kicked in, according to Bloomberg’s Climate Policy Factbook. From 2015 to 2019, G20 governments propped up fossil fuel companies with $3.3 trillion, enough to fund 4,232 gigawatts of new solar power plants that could power the U.S. almost four times over.
- Carbon price. A dozen G20 countries have established nationwide prices on greenhouse gas emissions. But aside from France and Germany, lax policies and low prices have limited their impact, says Bloomberg. Carbon laggard: Just 8% of U.S. emissions are covered by (state) carbon markets. The average carbon price is a low $6 per ton.
- Step up.
CFOs turn on sustainability reporting and ESG metrics in enterprise software suites. Sustainability is now a “chief financial officer imperative,” writes SAP’s Luka Mucic in a guest post on ImpactAlpha. “Moving beyond traditional balance sheets and profit and loss statements provides meaningful and holistic insight into the total value creation of a business entity.” SAP’s Sustainability Control Tower aims to help businesses drive organization-wide sustainability practices and reporting. Dig in.
Agents of Impact: Follow the Talent
J.P. Morgan’s Private Bank is hiring a head of ESG Integration and a U.S. head of sustainable investing… Manchester Capital is hiring a director of impact investing in Santa Barbara, Calif… Beyond Capital Ventures is looking for an investment fellow… Common Impact seeks a senior consultant in New York… Also in New York, Upstart Co-Lab is hiring a program coordinator… BlackRock is recruiting a vice president for its alternatives-focused impact opportunities fund in Los Angeles… The Sustainable Business Network of Greater Philadelphia is on the lookout for an executive director.
Thank you for your impact.
– July 22, 2021