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Jigar Shah: Deployment, deployment, deployment are the keywords for sustainable infrastructure in 2021. First came solar and wind energy. Then batteries and storage. Now, a raft of better, cheaper and more sustainable solutions are ready for primetime – and billions of dollars in financing. “Infrastructure” funds raised more than $76 billion last year, slightly down from 2019 but a surprisingly strong showing given pandemic-related slowdowns. Look out this year for dramatic growth in electric vehicle fleets (see Dealflow, below), regenerative farming, building efficiency and food waste reduction, Generate Capital’s Jigar Shah says on the latest episode of ImpactAlpha’s Agents of Impact podcast. “Not only is the technology getting cheaper and better and easier to finance and deploy. But you also have a lot of tailwind from political leadership saying, ‘It’s the right thing to do, and it’s the right time to do it,’” Shah says (see Voices, below).
Generate, which last year raised more than $1 billion to finance microgrids, HVAC systems, biogas converters, charging depots, wastewater treatment and other technologies, is hammering out deal structures and aggregating projects so Wall Street can pop sustainable infrastructure into the portfolios of the biggest asset owners. Solar and wind are well understood, but projects like green hydrogen, fuel cells and anaerobic digesters take more work. “There’s always a frontier of technology where nobody wants to do the $25 million, $30 million, $50 million check,” he says. “We’re filling that piece of the value chain, and we’re bridging people to bankability.” A key role for government: climate justice. Job training, loan guarantees and early-stage project development financing are needed to make sure the benefits of the sustainable-infrastructure rebuild reach all communities, Shah says. “We definitely need 25 million new people to get to work to be able to decarbonize at the scale that we need to decarbonize. That’s a lot of jobs. That’s a lot of good-paying jobs.”
Listen in to David Bank’s conversation with Jigar Shah, “Deployment, deployment, deployment are the keywords for sustainable infrastructure in 2021,” on ImpactAlpha’s Agents of Impact podcast. And catch up on all of ImpactAlpha’s podcasts, including our weekly Impact Briefing.
Dealflow: Follow the Money
Medical Credit Fund blends $19.2 million to finance Africa’s frontline health clinics. Small, privately-run clinics are often the only providers of essential health services in remote and low-income parts of Africa. Medical Credit Fund has provided working capital and financing for equipment and facilities to these providers for 12 years. A consortium of U.S. government funders and private foundations have committed guarantees of $19.2 million to facilitate new loans to private clinics to upgrade facilities, procure personal protective equipment, and shore up revenues lost due to national stay-at-home orders. The facility will target clinics in Ghana, Kenya, Nigeria, Tanzania and Uganda (see, “Agents of Impact converge on financing solutions to ‘light every clinic’”).
- Mitigating risk. The guarantees enable Medical Credit Fund to disburse capital remaining in its first fund and kick-start lending from its second fund. The U.S. International Development Finance Corp. kicked in $17.7 million in loan guarantees, while the Rockefeller, Skoll and MCJ Amelior foundations contributed $1.5 million. This is the first deal from the Health Finance Coalition, which aims to use blended-finance to catalyze private capital to advance U.N. Sustainable Development Goal No. 3 (Ensure healthy lives and promote well-being for all).
- Malaria intervention. Financially-crippled healthcare centers would jeopardize access to malaria treatments in the five target countries. COVID’s economic impacts “could be devastating for malaria, if the private sector health providers start to shut down,” said Martin Edlund of nonprofit Malaria No More, which is managing the loan guarantees.
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Electric fleet company Proterra to go public through merger with ArcLight SPAC. The Burlingame, Calif. electric bus maker announced a merger with ArcLight Clean Transition Corp., a publicly traded special purpose acquisition company. The transaction values Proterra at $1.6 billion and includes an additional $415 million from Daimler Trucks, Franklin Templeton, Chamath Palihapitiya and others. “I just made my biggest investment in climate change,” tweeted Social Capital’s Palihapitiya, who this week announced plans to take fintech firm SoFi public via Social Capital’s SPAC. In addition to commercial electric buses, the company manufactures battery systems and charging solutions. The value of ArcLight shares more than doubled on the news.
- Fleet flurry. Competition is heating up, as falling electric battery costs and lower operating costs fuel corporate and public-sector demand for electric delivery vehicles. GM on Tuesday revealed plans for its own electric delivery van, while Amazon has backed Rivian to develop an electric delivery vehicle. U.K. electric van maker Arrival is going public via SPAC, in a merger with CIIG Merger Corp. Last month, NextEra acquired Oakland-based eIQ Mobility, which makes software to advise fleets on when and how to electrify operations (see, “Electrification of vehicle fleets sparks disruption of energy and transportation”).
- Ahead of the curve. Among Proterra’s early backers was Obvious Ventures, the “world-positive” VC firm co-founded by Medium’s Ev Williams (see, “Talking trillion-dollar sustainability disruptions”). Proterra’s electric buses have logged more than 16 million service miles. “Proterra stands out because of that track record in the real world,” Obvious’ Andrew Beebe told ImpactAlpha. The company raised $200 million last fall from Cowen Sustainable Advisors, Soros Fund Management, Generation Investment Management and Broadscale Group.
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Morgan Stanley invests $100 million in Lafayette Square to support housing, jobs, and financial inclusion. Black-run investment firm Lafayette Square invests in communities that have been traditionally neglected, “not only to drive short-term recovery but also to achieve real, measurable change for decades to come,” says founder Damien Dwin. Morgan Stanley backed the New York firm to preserve affordable housing, provide basic services and invest in small businesses in underserved communities. Lafayette will also take stakes in diverse investment managers. Lafayette’s first deal: housing tech venture Factory_OS.
- Affordable housing. Morgan Stanley last week invested $100 million in National Equity Fund to preserve affordable housing along Atlanta’s mass transit routes (see, “Morgan Stanley backs Atlanta affordable housing fund”).
Dealflow overflow. Short takes on funding news crossing our desks:
- Bain Capital Double Impact fund backs TeachTown. Seattle-based TeachTown makes software for educators, clinicians and parents of students with special learning needs. The company is Bain Capital’s first investment from its $800 million second impact fund (see, “Bain Capital raises $800 million for second Double Impact fund“). It joins Penn Foster and PresenceLearning in Bain Capital Double Impact’s education and workforce portfolio.
- BukuKas raises $10 million to digitize small businesses in Indonesia. The Jakarta-based company has developed an app supporting the shift of Indonesian small businesses to online payments and sales – part of a wave of tech startups digitizing the informal economy. Sequoia Capital India led the Series A.
- BlueOrchard makes $25 million investment in Trilinc Global. The Zurich-based impact investor backed Trilinc’s Global Sustainable Income Fund to facilitate growth-stage loans and trade finance for emerging market small businesses.
Impact Voices: Pass the Mic
What the U.S. return to the Paris Agreement means for investors. President-elect Joe Biden expects to rejoin the global climate agreement on “Day One” and shift the U.S to 100% clean energy and net-zero emissions by 2050. The climate focus creates opportunities and risks for investors across the spectrum, writes RBC Wealth Management’s Kent McClanahan in a guest post on ImpactAlpha.
- ‘E’ for environment. Biden has proposed eliminating fossil fuel subsidies for U.S. oil and gas companies, which would render 45% of U.S. oil production unprofitable. Companies will likely be required to disclose climate risks and greenhouse gas emissions. Buildings will need to cut their emissions in half by 2050.
- Climate tech. Biden has called for a $400 billion investment over 10 years in new battery technology, carbon sequestration, carbon-free hydrogen, net-zero-energy buildings, and decarbonizing steel, concrete and chemicals. The new technologies “present incredible investment opportunities as well as the positive, measurable effects that impact investors seek,” writes McClanahan.
- Keep reading, “What the U.S. return to the Paris Agreement means for investors,” by Kent McClanahan on ImpactAlpha.
Agents of Impact: Follow the Talent
Gary Gensler, former head of the Commodity Futures Trading Commission, is expected to be President-elect Joe Biden’s pick to lead the Securities and Exchange Commission… Leticia Peguero steps down as vice president of programs at Nathan Cummings Foundation… Global Forest Generation seeks a communications director… Sistema.bio is looking for a national technical manager in Pune, India… Philadelphia-based TPP Capital launches a place-based social impact investing fellowship for MBA and university students and mid-career professionals… Duke’s Fuqua School of Business holds its Sustainable Business and Social Impact conference on Wednesday, Feb. 24… ProVeg and Beyond Animal host New Food Invest on Thursday, March 18.
Thank you for your impact.
– Jan. 13, 2021