The Brief | December 15, 2022

The Brief: Just energy transition partnerships, investing in healthy communities, AI for plant-based food, growth lending in Africa, family offices for impact

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Greetings, Agents of Impact!

Featured: Climate Finance

Just Energy Transition Partnerships and other ways to shift climate finance to low-income countries. First came South Africa. Then Indonesia. Now, Vietnam has inked a deal for $15.5 billion to speed its timeframe for peaking emissions and moving away from coal. Just Energy Transition Partnerships are a G7-driven financing model that blends public and private funding to help emerging economies transition from coal while addressing livelihoods and other social consequences. The model has been quietly gaining traction and winning over skeptics since the first JETP – an $8.5 billion deal with South Africa – was announced at COP26 in Scotland last year. Last month, Indonesia inked a $20 billion JETP. Energy transition packages involving India, the Philippines and Senegal are in development. JETPs are part of a new Western model of overseas infrastructure investment emphasizing flexibility, speed and scale. They’re also a counter to China’s Belt and Road Initiative. “The progress in pilot markets is building appetite among developing countries for more JETPs,” Duke University’s Jonathan Phillips and Jackson Ewing write in a guest post on ImpactAlpha. Other developments with the potential to shake loose climate funds for low and middle-income countries over the coming years include:

  • Development finance reform. Decades-old development finance institutions and multilateral banks are starting to shift from simply supplying capital to mobilizing and catalyzing capital, in particular from pension funds, insurance companies, endowments and other private actors that have 900-times the financial might of development banks. Calls for change have come from U.S. Treasury Secretary Janet Yellen to Barbados’ Prime Minister Mia Mottley. “True scale can only come through private sector participation,” say Philips and Ewing. “This requires a greater international financial institution focus on guarantees, blending and other de-risking tools, as well as a focus on improving local investment climates.”
  • Voluntary carbon markets. Carbon markets can drive more private capital into low- and middle-income countries. The Energy Transition Accelerator, launched by U.S. climate envoy John Kerry, the Rockefeller Foundation and Bezos Earth Fund at COP27 last month, seeks to catalyze private capital for carbon-reduction efforts to offset countries’ emissions. The Africa Carbon Markets Initiative, also inaugurated at CO27, similarly supports the development of voluntary carbon markets. Together, these developments “have the potential to drive private capital into relatively more commercial sectors, like utility-scale renewables, in middle-income countries, and free up international financial institutions to focus on the more difficult end of the climate financing demand spectrum: adaptation, low-income countries, and relatively new sectors like e-mobility and nature based solutions,” say Philips and Ewing.
  • Keep reading, “Just Energy Transition Partnerships and other ways to shift climate finance toward low-income countries” by Duke University’s Jonathan Phillips and Jackson Ewing. 

Sponsored by Mission Investors Exchange

How impact investments are helping build healthy communities. Wealth influences health. It’s easier to lead a healthy life when you live in zip code with fairly-paid jobs, stable housing, clean water and green parks. With a full suite of resources including grantmaking, policy efforts and impact investing, the Robert Wood Johnson Foundation and other impact investors “can attract capital to investments that improve community conditions to help people live their healthiest lives possible,” writes RWJF’s Kimberlee Cornett, who directs the foundation’s $200 million impact investment allocation to improve health and racial equity in the U.S. (disclosure: Robert Wood Johnson Foundation supports ImpactAlpha’s coverage of Muni Impact).

  • Investing in racial equity. The foundation’s impact investments include a $2.5 million investment in the Dearfield Fund for Black Wealth, which is expanding homeownership for Black families in Denver with low-cost down payment assistance. A $4.8 million guarantee to Prudential facilitated a loan to ROC USA to expand ownership of manufactured housing. And the foundation deposited $40 million in cash in seven banks and credit unions designated as minority depository institutions. Cornett says the foundation is pursuing opportunities and partnerships “that bend the arc toward racial equity by expanding home ownership, promoting high-quality jobs, and innovating wealth-building pathways for people of color.”
  • Keep reading, “How impact investments are helping build healthy communities,” by Kimberlee Cornett on ImpactAlpha. 

Dealflow: Alt-Proteins

NotCo lands $70 million for its line of plant-based foods as it readies an IPO. NotCo’s AI platform, which it named Giuseppe, analyzes the molecular structures of animal-derived foods and then develops alternatives by matching flavors and textures with plant-based ingredients. The Chilean food company launched in 2015 with an animal-free mayonnaise designed by the artificial intelligence software and has since brought to market alternative milk, ice cream, meat and other products. NotCo’s latest funding round is an extension of last year’s Series D and was led by sustainability-focused VC firm Princeville Capital. Tiger Global Management, Jeff Bezos’ Bezos Expeditions and others had previously invested in the round. NotCo, valued at $1.5 billion, is reportedly looking to go public in 2025.

  • Boom then bust. Venture capital shoveled money into plant-based food companies in 2019 and 2020, as media and markets hyped their sustainability potential and shifting consumer diets. Beyond Meat raised more than $240 million in its 2019 IPO. The market, and company valuations, have since cooled, as rising food prices steer consumers away from premium products.
  • B2B. NotCo is partnering with Kraft Heinz, Starbucks, Shake Shack and others to develop new products. The move toward B2B sets NotCo apart as other plant-based food companies struggle to differentiate themselves with consumers.
  • Dig in.

TLG Capital partners with two investors in Africa to lend to startups and growing businesses. U.K.-based TLG Capital wants to unlock $5 billion in growth by backing the biggest drivers of Africa’s economy: entrepreneurs. TLG is teaming up with growth-stage lender Norsad Capital in Botswana to provide capital to small and mid-sized businesses. Together the firms have $400 million in assets under management. Norsad, an impact investor, has been providing loans of $500,000 to $10 million to Southern African businesses in hospitality, energy, retail and financial services for 30 years.

  • Venture debt. TLG also is partnering with Lagos-based Future Africa on a $25 million venture debt fund for Future Africa’s portfolio companies. Venture debt is scarce in many emerging markets, leaving companies reliant on expensive equity capital to cover working capital, property rentals or inventory financing costs. The market environment is making equity harder to find, notes Future Africa’s Iyinoluwa Aboyeji, “plus the terms are most likely not going to be friendly.” Future Africa launched six years ago and has backed more than 90 African startups.
  • Check it out

Dealflow overflow. Other investment news crossing our desks:

  • Colorado-based Mad Capital raised $4 million to finance farmers looking to transition to regenerative agriculture practices.
  • The International Finance Corp. backed Ecuador-based Banco Internacional’s $79 million blue bond to finance sustainable fisheries and aquaculture.
  • Nigerian fintech startup Owoafara scored early funding from gender-lens investor ShEquity to offer digital payments, credit, savings, insurance and pension services to the unbanked.
  • French startup MORFO raised €4 million ($4.3 million) from Demeter, RAISE Ventures and others to use drones for reforestation projects.
  • California-based Sound Agriculture secured $75 million, led by BMO Impact Investment Fund and Chan Zuckerberg Initiative, for crop treatments and specialized plant breeding that help farmers reduce dependence on synthetic chemicals.

Impact Voices: How To

Six tips for bringing family office capital to impact funds and enterprises. Family offices have developed to help ultra-high net-worth families run their financial affairs, including managing assets, preparing taxes and managing philanthropic activity. A small but growing number are moving into impact investing as a way to reflect their family’s values and bring generations together. Many already invest in private-market alternatives and expect to do more going forward. And family offices are likely to have long time horizons and flexible return expectations. Yet most family offices are private by design. Many entrepreneurs wonder, “How can I see if my company or fund may be a candidate for their capital?” says One World’s Scott Saslow, who offers tips in a guest post on ImpactAlpha. Among them:

  • Know your audience’s challenges. Many family offices are facing the challenges of succession planning and engaging younger generations. This presents an opportunity for fund managers and social entrepreneurs to offer an investment service and “an educational and bonding opportunity among multiple family office members,” Saslow writes. “Also, know that many family offices struggle with measuring impact, so have your story clear on that subject.”
  • Stay flexible. Fund managers may feel they are being “brushed off” if they get sent to the family foundation for capital. “The reality is that some family foundations need help investing their corpus of capital in a sustainable way,” Saslow says. Families may have more readily available capital in their foundations than in commercial capital vehicles.

Agents of Impact: Follow the Talent

Omidyar Network recruits Bryce Covert, Kim Kelly and Edward Ongweso Jr. as “reporters in residence” to write about worker power, corporations and capital markets, and “reimagining capitalism”… BlackRock promotes its deputy chief financial officer Joud Abdel Majeid to head of investment stewardship; he succeeds Sandy Boss, who becomes chief operating officer for BlackRock’s global client business… 

The ImPact is hiring a catalytic capital senior associate for Trimtab, an impact-first fund of funds that The ImPact is incubating with Blue Haven InitiativeThe Investment Integration Project launches its Racial Equity Working Group to guide investor action on system-level investing to address racial injustice… Croatan Institute’s BIPOC Leaders Advancing an Inclusive and Sustainable Economy, or BLAISE, initiative, is recruiting paid summer internships. Firms interested in hosting interns can apply here

Thank you for your impact.

– Dec. 15, 2022