The Brief | February 18, 2021

The Brief: Life sciences capital, resilient electric grids, women’s healthtech, board diversity, minority-led suppliers, challenging finance fallacies

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Greetings, Agents of Impact! 

Answer The Call. Explore opportunities at the intersection of gender-lens investing and climate solutions with entrepreneurs, investors and special guests on Agents of Impact Call No. 27, Tuesday, Feb. 23, at 9am PT / 12pm ET / 5pm London / 8pm Nairobi. RSVP now

Featured: ImpactAlpha Original

Investors put $300 million into Adjuvant Capital as global health innovation shines. Solutions to infectious diseases are attracting capital from catalytic and commercial investors. All it took was a global pandemic. Adjuvant Capital raised $300 million for its debut fund to finance the development of affordable drugs, vaccines, diagnostics, and medical devices for diseases such as malaria, shigella, hookworm, HIV and tuberculosis. In the time of COVID, partners Glenn Rockman, an alumni of the Global Health Investment Fund, and Jenny Yip, ex- of the Gates Foundation’s $2.5 billion strategic investments group, are out to prove that late-stage life sciences technologies, made widely accessible and affordable, can deliver top-tier returns. That thesis attracted philanthropic and private investors keen to demonstrate the market for solutions to long-neglected diseases burdening underserved populations in low- and middle-income countries. “The traditional venture capital community has overlooked infectious disease in favor of more non-communicable diseases,” says Yip. “We want to be part of the next generation and the paradigm shifts of critical innovations.”

The Gates Foundation, which also backed the Global Health Investment Fund, anchored the fundraising with a $75 million program-related investment. Adjuvant is adopting the Gates Foundation’s “global access agreements” to legally bind its investees to make their products affordable to people most in need. The fund has already made more than a dozen investments, including San Francisco-based Excision BioTherapeutics, which is developing CRISPR-based cures for HIV and other infectious diseases. Excision is working with Adjuvant to reduce the costs of curative therapy. “We want to make sure an exciting technology like Excision will actually be able to make it into the hands of patients living in South Africa,” says Yip. In addition to Gates, the fund attracted the Ford and MacArthur foundations, pharmaceutical giants Merck and Novartis, development financiers CDC Group and International Finance Corp. and asset managers such as Anthos and RockCreek

Keep reading, “Investors put $300 million into Adjuvant Capital as global health innovation shines,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Carlyle Group secures ESG-linked credit tied to board diversity goals. The interest rate on the $4.1 billion line of credit will be tied to Carlyle’s goal of having at least 30% diverse representation on the boards of Carlyle-controlled companies within two years. The three-year line of credit from a consortium led by Bank of America is one of the largest ESG-linked loans in the U.S. Carlyle said companies with two or more diverse board members see 12% higher annual earnings growth than peers without diversity at the board level. The financing vehicle gives the firm “a significant opportunity to drive both growth and impact in an aligned way,” said Carlyle’s Kewsong Lee

  • Sustainability-linked loans. The Renewables Infrastructure Group will get a lower interest rate on its three-year, £500 million ($663 million) line of credit if it meets ESG milestones, such as helping more homeowners switch to clean energy, improving worker safety, and supporting community finance. In September, Dallas-based Aligned closed a $1 billion sustainability-linked credit facility tied to impact targets, including reaching 100% clean energy by 2024 (see, “An incentive for companies that deliver on sustainability: lower-cost capital”).
  • Dig in.

DFC backs women’s health startup Kasha Global. Rwanda-based Kasha Global’s e-commerce platform helps low-income women find menstrual care products, contraceptives, pharmaceuticals and other health and hygiene products. With its new ability to make equity investments as well as loans, the U.S. International Development Finance Corp. disbursed a $1 million equity investment in the company, which is also backed by Swedefund and Finnfund. The development finance institutions invested as part of the women-focused 2X Challenge (see,Development financiers seek to hook private investors on gender-lens investing”). More

Ariel Investments scores $200 million from JPMorgan to diversify supply chains. Ariel’s Project Black will acquire minority-led small businesses and build a base of diverse suppliers for Fortune 500 companies, The New York Times reports. Increasing the share of Fortune 500 procurement from minority-owned companies from 2% to at least 10% could unlock more than $1 trillion in revenues for diverse suppliers. 

Dealflow overflow. Other investment news crossing our desks:

  • Alt-lender TomoCredit secures $7 million to help first-time borrowers. TomoCredit offers credit cards based on borrowers’ cash flow, rather than their credit score. The female and immigrant-led startup was launched out of personal experiences securing credit as young and foreign-born individuals.
  • Canada’s Eavor raises $40 million to commercialize geothermal power. The Calgary-based startup is backed by Chevron and BP, Temasek, BDC Capital, Vickers Venture Partners and the Eversource pension fund. 
  • Tikehau Capital impact lending fund raises €100 million. The debt fund is looking to invest in small businesses contributing to a sustainable European economy. The European Investment Fund invested the majority of the capital.

Signals: Ahead of the Curve

Building a smart and resilient grid moves up the to-do list after Texas power failures. The claim that frozen wind turbines caused Texas’ harrowing power outages turned out to be all hat, no cattle. The real culprit: Texas utilities’ and regulators’ failure to build a smart and resilient electric grid despite the growing frequency of extreme weather events. Global demand for electricity is expected to triple in the next 20 years, as the economy becomes increasingly electrified, spurring the need to modernize aging electrical grids. Companies and investors are jumping in. 

  • Microgrids. On-site renewable energy and battery systems can help companies, plants and hospitals be more self-sufficient. Increasingly, businesses, communities and even homeowners will be both power consumers and producers requiring “grid neutrality” in the same way the Internet grew with “net neutrality.” One source of storage capacity: electric vehicles, which can push energy back into the grid or to homes and buildings. Electric school buses that sit idle much of the day, can be moved to areas that need auxiliary power, creating a revenue stream for cash-strapped schools. 
  • Tailwinds. To the chagrin of the state’s solar and wind detractors, the transition to renewables is likely to accelerate as Texas’ utilities undertake a costly round of weatherization upgrades. “It’s not going to be the wind farms that people retire early. It’s going to be the fossil fuel plants,” says Rob Day of Spring Lane Capital. “And they’ll replace them with lower-cost renewables.” 
  • Disruptive innovation. The upgrade from a creaky, one-way network to dynamic and resilient two-way infrastructure for the 21st century recalls the buildout of telecommunications networks in the 1990s. The disruptions, says Schneider Electric’s Emmanuel Lagarrigue, “are very similar to the disruptions that the information technology and the telecom industry went through 20 years ago.” 
  • Power up

Impact Voices: Pass the Mic

How impact investors can challenge three fallacies of legacy finance. Many of the solutions to inequality lie at the intersection of the public and private sectors, Annie Donovan of the Local Initiatives Support Corp. writes in a guest post on ImpactAlpha. That means impact investors should take creative approaches to capital, challenge outdated assumptions, and also support public policies that advance community investing. Read Donovan’s guest post on ImpactAlpha. 

  • Go deeper. Join Donovan, Apollo’s Lisa Green Hall and other guests for a discussion hosted by the Urban Institute on how impact investors can use policy and advocacy, today today at 2pm ET/11am PT. Tune in.
  • ICYMI.Impact investors are wonking out on policy.”

Agents of Impact: Follow the Talent

Tech banker Chris Buddin and industrial banker Fausto Monacelli will lead a new electric vehicle financing group from Goldman Sachs… Cartica Management seeks an ESG engagement manager in the Washington-Baltimore area… First Children’s Finance is recruiting a national director of lending… VertuLab is accepting applications for its Climate Impact Fund fellowship.

Thank you for your impact.

– Feb. 18, 2021