The Brief | March 18, 2020

The Brief: Lessons from the pandemic, climate disruption, development-finance commitments, sustainable aquaculture in Sweden

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Greetings, Agents of Impacts!

Agents of Impact share lessons from the pandemic. You may be sheltering in place but you aren’t shrinking from the challenges. We will be updating our running post of dispatches from the global mobilization with new entries from guest contributors. Checking in earlier: Caprock Group’s Matthew Weatherley-White, SVX Mexico’s Laura Ortiz, Natural Investments’ Michael Kramer and Preventable Surprises’ Jérôme Tagger.

Today, UpStart Co-Lab’s Laura Callanan weighs in with examples from the creative economy that show “how we can have world-class experiences, engage in top-quality work and do it at home rather than by moving and traveling.” And Catalyst Opportunity Funds’ Jeremy Keele says investors are still keen on Opportunity Zones as they offset capital gains from the late, great year of 2019. And, alas, he says, renter demand for affordably priced multifamily housing “will continue (or perhaps even increase) during a potential recession.” Impact Engine’s Priya Parrish says, “There is enough momentum in impact investing that I don’t believe the industry will face a setback disproportionate to other strategies.” Big Path Capital’s Michael Whelchel writes that impact investing “recognizes that we are connected to each other more than we can imagine.” Tell us about the resilience and disruption you are seeing in your projects, places and portfolios. Collect the whole set.

– David Bank, editor

Featured: ImpactAlpha Original

The carbon disruption is here, disguised as a pandemic. The world’s largest carbon emitter reduced emissions by an estimated 25% last month. This month, the world’s second-biggest greenhouse gas emitter may also make dramatic reductions. Satellite images of last month showed clear skies over chronically smoggy China as the country put activities on hold to contain the coronavirus. As many regions of the U.S. shut down workplaces, schools, events and air travel, carbon dioxide emissions are expected to fall sharply. The world has just achieved what few thought was possible even a few months ago: distributed and concerted global action to make the kind of deep cuts in greenhouse gas emissions that are necessary to forestall the most cataclysmic effects of climate change. Even a modest downturn in demand triggered a crash in oil prices that will strand billions of dollars in fossil fuel assets (see “Is oil’s freefall the tipping point in the transition to a low-carbon economy?). “The virus can be seen as the straw that broke the back of an unsustainable sector,” Carbon Tracker’s Kingsmill Bond told ImpactAlpha.

Can flattening the curve bend the arc of carbon emissions in the long term? A good place to start would be reversing the ever-greater financing of a fossil-fuel economy that needs to shrink. An updated “Banking on Climate Change” report from Rainforest Action Network and other nonprofits says fossil financing will hit $1 trillion per year by 2030 under banking business-as-usual. Funding of fossil fuels from the 35 largest banks has grown each year since the adoption of the Paris Agreement in late 2015, totalling $2.7 trillion, according to the report.

  • Leaders and laggardsJPMorgan Chase remains the “world’s worst banker of climate chaos,” according to the report. The No. 1 funder of fossil-fuels has put a total of more than $270 billion into such projects and companies since 2015. Banks scoring the least worst on climate financingCrédit AgricoleRBS and UniCreditGoldman Sachs ranked 12th, the best score for any non-European bank. One to watchRoyal Bank of Scotland, which last month committed to halve the climate impact of its financing activity by 2030 and end financing for major oil and gas companies unless they put in place credible transition plans.
  • Global action. How to institutionalize the reductions and make them the new normal even when the emergency eases? “Governments need to step up to the plate and stop people from getting addicted to cheap oil, and thereby starting the whole cycle again,” Carbon Tracker’s Mark Campanale told ImpactAlpha. Potential measures include a carbon tax to keep prices at the gas pump level even as crude prices fall; an end to carbon subsidies, which remain double those of renewable energy; and, certainly, to reject any “shaleout,” or aid package for oil producers that are flailing in the global shakeout. Renewable energy supply is on an exponential growth curve that is unlikely to be reversed.

Keep reading, “The carbon disruption is here, disguised as a pandemic,” by Amy Cortese and David Bank on ImpactAlpha.

Dealflow: Follow the Money

U.S. International Development Finance Corp. allocates $881 million. The successor agency to OPIC committed to a raft of projects, including a $100 million loan to WaterEquity’s Global Access Fund targeting Africa, the Indo-Pacific and Latin America; a $190 million loan to Trans Pacific Networks for digital infrastructure to connect Singapore, Indonesia, and the U.S.; $250 million and $100 million in political risk insurance for “blue bonds” to bolster coastal economies in Kenya and Saint Lucia; and $241 million in long-term debt financing for a portfolio of energy assets developed by IEnova in Mexico.

Aqua-Spark backs Swedish Algae Factor to convert waste water to industrial products. The Gothenburg-based company uses algae to convert effluent water from ‘recirculating aquaculture systems’ into products for cosmetic and solar industries. Aqua-Spark, with €132 million ($145 million) in assets, has backed 19 sustainable aquaculture companies since 2015.

Indian startups StanPlus Tech and Lal10 raise impact capital on BayTree marketplacePegasus FinInvest led the $1.5 million round of medical response services company StanPlus Tech, with participation from Hyderabad AngelsSorenson Impact led a $1.1 million round for Lal10, an artisan platform promoting sustainable livelihood, which also included Beyond Capital FundUpaya Social Ventures and Pegasus FinInvest. Online impact investing marketplace BayTree facilitated both deals.

responsAbility launches $3 million facility to support new energy access fund. The grant funding will support portfolio companies backed by the Swiss impact asset manager’s $200 million private debt fund, launched last monthGood Energies Foundation and the Swiss State Secretariat for Economic Affairs provided the funding.

Agents of Impact: Follow the Talent

Andrew Bailey takes over as governor of the Bank of England from Mark Carney, who becomes the U.N.’s special envoy on climate action and finance (see, “Agent of Impact: Mark Carney)… Mark Green resigns as head of the U.S. Agency for International Development… Marina Linhart steps down as CEO of Next Street. Charisse JohnsonMichael Roth, and Samantha Berg are becoming managing partners and assuming the leadership and governance of Next Street

SVX MX is hiring an impact investing analyst and intern in Mexico City… Avivar Capital is looking for a summer intern in Los Angeles… Cornerstone Capital will discuss what types of investments may prove more resilient as economic disruption gives way to recovery on “Forever Changed,” a webinar today at 2pm ET… IIX is offering ImpactAlpha subscribers $20 off its virtual masterclass, “Measuring Impact for Sustainability.” Use code VMC20 at checkout.

Thank you for reading. 

– March 18, 2020