The Brief | August 26, 2024

The Brief: Kamala Harris and the new community lending ecosystem

ImpactAlpha
Credit: NoorNation
The team at

ImpactAlpha

Greetings Agents of Impact! This week, at ImpactAlpha:

  • TODAY: Connect with other Agents of Impact. As part of the ImpactAlpha community, you have access to an incredible network of professionals putting finance to work for good. Join us today, at 1pm PT / 4pm ET for an hour of facilitated introductions with other Agents of Impact who are pushing the boundaries of finance. Still time to register.
  • The Call: Private investing behind federal funding for water, health and resilience. Welcome to World Water Week. This Thursday, join us to identify high-impact water investment opportunities with North Star Strategy’s Radhika Fox, who crafted federal water policy as head of the EPA’s Water Office, Shaun O’Rourke of Quantified Ventures, which designs investable solutions for water and health, and Rogelio Rodriguez of the nonprofit WaterFX, which helps communities finance equitable water infrastructure, Thursday, Aug. 29 at 10am PT / 1pm ET / 6pm London. RSVP today.

In today’s Brief:

  • Building capacity for green community lending 
  • Forest carbon in South America
  • Solar-powered desalination in Egypt 

How Kamala Harris helped prepare grassroots lenders for the new wave of green financing. The Greenhouse Gas Reduction Fund is a first-of-a-kind effort to stand up a distributed green finance ecosystem that can reach deep into the country’s forgotten communities to facilitate a broad-based green transition. But even $27 billion can’t stand up such a distributed, efficient and, most of all, equitable ecosystem from scratch. The EPA, which is distributing the GGRF, doesn’t need to. Groundwork laid in recent years to create a financial marketplace of community-based lenders for startups and small businesses is paying off just in time for the historic infusion of catalytic federal funds. The driver and the champion of that network of lenders, intermediaries and capital providers: Vice President Kamala Harris. As vice president, she has dug into the nitty-gritty of getting capital out to small businesses and entrepreneurs in communities that have been underserved, and often intentionally excluded, from traditional banking services. That work meant building the capacities of lenders and minority-led banks committed to serving such communities, including community development financial institutions, or CDFIs, and minority-depository institutions. 

  • Small business credit. Harris dedicated just one line to small businesses in her speech at the Democratic National Convention last week: “We will provide access to capital for small business owners and entrepreneurs and founders.” In 2022, Harris helped launch the Initiative for Inclusive Entrepreneurship, or IIE, to ensure the equitable distribution of $10 billion in Treasury Department support for small businesses after the Covid crisis. The State Small Business Credit Initiative, or SSBCI, provides funds to states and Tribal governments to create financing programs for small businesses – from loan guarantees and collateral support to venture capital. Hyphen, a public policy nonprofit, incubated the program and recruited partners. Impact fund manager Mission Driven Finance built partnerships and programs with Tribal Nations and Native financial intermediaries. JumpStart, a Cleveland-based venture developer, spearheaded outreach to diverse venture fund managers. And revenue-based lender Founders First provided technical assistance to diverse small businesses and suppliers. “There are so many people in our country that have incredible dreams,” began Harris’s IIE launch remarks. “Far too many still lack the resources and support to make those dreams a reality.” 
  • Capacity building. In an 18-month pilot program, the IIEhelped community lenders and emerging fund managers create inclusive delivery channels for the credit initiative, reaching more than 3,000 small businesses and 650 emerging fund managers. The pilot deployed $10 million in direct funding and spurred another $177 million in private capital. And it has spawned innovative finance vehicles, including funds to crowd in private capital for Indigenous CDFIs, diverse suppliers and contractors, and emerging fund managers. That sounds a lot like what the Greenhouse Gas Reduction Fund, or GGRF, is attempting to achieve. “We started with SSBCI because it was here and now and allocations were being made,” Mission Driven Capital’s Stephen Nunes tells ImpactAlpha. “But the thought was always that there’s more federal funding coming, so let’s get private funders [lined up].”
  • Green financing. The initiative is moving to a new home at the Milken Institute, which already has been working to prepare lenders for the $27 billion GGRF that was officially awarded to coalitions of green banks, CDFIs and nonprofits this month. Lenders are looking to blend in other federal funding, including the Inflation Reduction Act’s investment tax credits, “direct pay” option for non-taxed entities, and GGRF loans. The SSBCI program can help bridge funding gaps in the GGRF, such as for pre-development financing and working capital, and help tide over developers as they wait for government reimbursements of their tax credits. The Treasury’s IIE program also is able to support contractors and suppliers. Together, the IIE and GGRF initiatives are “transformational,” says Kim Folsom of Founders First, and present business owners with an opportunity for “generational advancement.”
  • Keep reading, “How Kamala Harris helped prepare grassroots lenders for the new wave of green financing,” by Amy Cortese on ImpactAlpha. 

Dealflow: Investing in Nature

Brazilian carbon developer Systemica acquires forest manager Arapuá. São Paulo-based Systemica develops carbon credit-generating projects for biodiversity preservation and reforestation in South America. It has acquired Paraguayan forest management company Arapuá to expand its portfolio of carbon projects. Arapuá’s projects focus on forest restoration by helping communities grow commercial crops like cocoa and açaí in forested areas. The company’s work stretches across roughly 1,000 acres in Paraguay. About 80% of its revenues come from agricultural sales and 20% from longer-term carbon credits. “This model ensures financial resilience for the projects, as agricultural income is generated earlier while the carbon credits mature with tree growth,” the companies explained in a statement.

  • Strengthening carbon markets. Most of Systemica’s portfolio focuses on forest and land protection. It’s working to protect native plant and animal species in the Triunfo do Xingu Environmental Protection Area of Paraguay, which is facing deforestation from land theft, mining and livestock farming activities. The company is also working on a biodiversity preservation project with the Amazonian municipality of Itacoatiara in Brazil. Given the scrutiny and controversy over preservation projects in the voluntary carbon markets, Systemica is expanding into restoration projects. Credits in restoration projects are generated by calculating tons of carbon removed, which fetch higher prices than carbon “avoidance” credits.
  • Investing in nature. Systemica is looking to restore close to 100,000 acres of degraded land in South America by 2030, focusing on ecological restoration. Agroforestry systems like those it’s acquiring via Arapuá will help offset more costly ecological restoration efforts. Last year, Brazilian investment bank BTG Pactual acquired a minority stake in Systemica “to foster the still incipient carbon credit market in Latin America.” Through its Timberland Investment Group, BTG also works in partnership with The Nature Conservancy on climate-smart forestry investments for institutional investors.
  • Dig in.

Egypt’s NoorNation raises fresh capital for solar-powered water desalination and irrigation. Egypt’s shortage of fresh water is so acute that its supply could run out next year. To help rural communities address water scarcity, Giza-based NoorNation makes solar-powered desalination and irrigation systems that remove salt infiltrating fresh water supplies. Its LifeBox system also provides farmer households with power for lighting and running appliances and data to better manage their water resources. The company serves farmers in Egypt and Rwanda and launched a water purification pilot project in Tanzania. NoorNation secured an investment from KBW Ventures, a venture fund founded by Saudi prince Khaled bin Alwaleed. KBW Ventures joined BFA Global’s Catalyst Fund in NoorNation’s seed equity round.

  • Climate tech in Africa. Despite a difficult fundraising environment, Africa’s climate tech startups did relatively well compared to other startups last year, raising nearly a third of the $3 billion in venture equity and debt on the continent. Off-grid solar companies take in the largest share of Africa’s climate tech venture capital. The biggest deals are coming from south of the Sahara; Egypt’s startup scene – the fourth largest on the continent – is dominated by fintech, health tech and logistics tech.
  • Share this post. 

Dealflow overflow. Investment news crossing our desks:

  • Miami-based BeMe Health raised $12.5 million in pre-Series A equity to provide 24/7 mental health support to teenagers. (BeMe Health)
  • Singapore-based DiMuto raised $5.9 million in a round led by Yield Lab Asia Pacific to expand its food supply chain monitoring tech to the US and Latin America, and to expand applications in climate-adaptive agriculture, like greenhouse farming. (AgTech Navigator)
  • Solace raised $14 million for its digital platform that connects patients with expert healthcare advocates to help them navigate the US healthcare system and improve outcomes. (Solace)

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Colorful Capital’s Megan Kashner and William Burckart have ended their efforts to raise an LGBTQ+ focused investment fund. “Despite the challenges presented by the current market, we are resolute in our mission to advance capital access,” Kashner and Burckart wrote in a note. Separately, Colorful Capital is hosting a webinar on how investment can address the systemic risk of LGBTQ+ inequality, on Friday, Sept. 13 (see, “Mitigating the systemic risk of anti-LGBTQ+ sentiment in investing”)… Kenan Fikri, ex- of Economic Innovation Group, joins the US Department of Commerce as director of the regional economic research initiative.

The Netherlands Advisory Board on Impact Investing is hiring an intern… Impact Investors Foundation seeks a monitoring and evaluation specialist in Lagos… LISC is recruiting a director of lending and investments, an investor relations analyst and for other roles… The International Finance Corp. is looking for an sustainability operations officer in Bogota or Sao Paulo… Jordan Park Group seeks a senior impact analyst.

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

Thank you for your impact!

– Aug. 26, 2024