Greetings, Agents of Impact!
👋 Next week’s Call: Optimizing muni bonds for racial equity. Market shapers are steering the $4 trillion municipal bond market toward racial equity. Investors are pushing cities and other issuers for clarity around the impact and equity of their bonds. Issuers are delivering, with new tools and best practices. Rob Fernandez of Breckinridge Capital Advisors will join Public Finance Initiative’s Lourdes Germán, Kimberlee Cornett of the Robert Wood Johnson Foundation, and other Agents of Impact, Wednesday, Nov. 16 at 10am PT / 1pm ET / 6pm London. RSVP today.
Featured: COP Watch
With progress on ‘loss and damages,’ COP27 may exceed low expectations. No one has been expecting much from this year’s COP27 climate summit. Not the island nations and African countries pleading for climate funds. Not the climate activists who will be kept safely away from the conference venue. Not the bankers who are backpedaling on pledges to phase out oil and gas financing. And not many leaders of rich countries, who are focused on domestic politics, inflation and energy security. Yet, as the 27th “Conference of the Parties” kicked off in Sharm el-Sheik, Egypt this weekend, a breakthrough came on one of the thorniest issues facing global leaders: loss and damages to help low and middle-income countries pay for damages from droughts, floods and other climate-related disasters they had little hand in creating. The issue was formally added to the COP agenda for the first time. That clears the way for debate on the demands of emerging and frontier nations for a dedicated financing facility to compensate them for climate-related damages.
- Complex negotiations. The breakthrough is a bright note as COP27 gets underway in the Egyptian resort town amid geopolitical tensions and a cascading series of crises. “This is a complicated COP at a complicated time,” Rachel Kyte of Tufts University’s Fletcher School tells ImpactAlpha. Compensation for loss and damages is a central concern of emerging and frontier economies, whose leaders also have been frustrated by a separate set of unfulfilled promises for funds meant to help them mitigate and adapt to climate change.
- Mapping methane reductions. Climate negotiators from 200 countries will try to implement agreements that were announced at COP26 last year. In Glasgow, more than 120 nations signed onto a Global Methane Pledge to reduce man-made methane by 30% of 2020 levels by the end of the decade. The pledge was short on details. “We need something ambitious to more effectively roadmap and resource the reduction of methane,” says FullCycle’s Stephan Nicoleau, who is part of a government and private sector coalition pushing for a Global Methane Pledge 2.0.
- Protecting forests. Financial commitments to the LEAF Coalition, a public-private coalition formed at COP26 to mobilize $1 billion toward ending tropical deforestation, have risen to $1.5 billion. Led by the U.S., U.K. and Norwegian governments and corporations, the coalition pools funds to pay countries and states to keep their forests intact (for background, see, “LEAF Coalition will pay for success in protecting tropical forests”). Ecuador is the first country to agree to a binding “emissions reduction purchase agreement” with the group, which it says will be signed by April. That will enable Ecuador, one of the world’s most biodiverse regions, to receive results-based payments for forest carbon credits from coalition members.
- Keep reading, ImpactAlpha’s COP27 preview, by Amy Cortese.
Dealflow: Inclusive Climate Finance
Amazon commits $53 million to support female climate tech founders. Amazon, through its $2 billion Climate Pledge Fund, says it will invest $50 million directly in climate tech companies run by women, as well as climate tech incubators and accelerators that prioritize women-led entrepreneurs. Bringing a gender lens to climate innovation can surface talent, innovation and market needs, notes a recent GenderSmart report (for context, see “Gender lens + climate finance = broader reach”). “We must address the gender inequalities that persist in climate finance, and ensure female entrepreneurs have an equal seat at the table and access to the funding, networks and technical support they need to scale climate solutions,” said Amazon’s Kara Hurst.
- Catalytic climate capital. Amazon will allocate $3 million to launch a Climate Gender Equity Fund with the U.S. Agency for International Development. USAID will match Amazon’s commitment to the fund. The fund will provide grants for global businesses, NGOs and accelerators working on women-led climate solutions. Amazon will call on the 376 signatories of The Climate Pledge, which includes Verizon, JetBlue, Uber, IBM, Visa, Microsoft and Salesforce, to invest in the fund.
- Check it out.
Acrecent raises $34.8 million from impact investors to lend to Puerto Rico’s small businesses. The Guaynabo-based lender has for nearly 20 years provided business loans, equipment financing and real estate lending to small and midsize businesses in Puerto Rico. The company is addressing a roughly $10 billion financing gap for businesses on the island, which has been exacerbated by natural disasters like recent hurricane Fiona. Switzerland-based BlueEarth Capital, family office Ceniarth, Calvert Impact Capital and Community Development Venture Capital Alliance participated in the funding round to enable Acrecent to expand services to healthcare, affordable housing construction, hospitality and renewable energy companies.
- Island impact. “Acrecent has consistently made credit accessible to local small and medium-sized enterprises since its founding in 2004, despite a global financial crisis, a protracted economic recession in Puerto Rico, the ongoing Puerto Rico government debt-restructuring, and [recent] hurricanes,” states Calvert, which invests in Acrecent’s impact fund via its community investment note portfolio. The fund has deployed more than $30 million in loans to over 80 businesses and created or maintained more than 16,700 jobs since launching in 2018. Alternative assets manager Sygnus acquired a majority stake in Acrecent in late 2021.
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Dealflow overflow. Other investment news crossing our desks:
- The U.N.’s International Fund for Agricultural Development provided a $2 million loan to Mozambique microfinance bank Futuro Mcb to expand financial services to women-led rural enterprises.
- Carlyle Group invested $350 million to acquire a majority stake in Aspen Power Partners, a clean energy financing platform that invests in community solar development.
- A fund from Community Preservation Corp. and TruFund Financial Services made its first investment in Black-led Infinite Horizons to finance affordable housing development.
Signals: Impact Assets
Social and environmental crises drive assets to impact – and to ImpactAssets. The Covid pandemic and the Black Lives Matter movement drove a surge of philanthropic and impact investing capital to Bethesda, Md.-based ImpactAssets last year, according to the impact fund manager’s latest impact report. The firm’s impact portfolio, which includes private capital in addition to donor advised funds, grew to $1.8 billion in 2021, up $674 million since 2020. “There were so many things that happened in 2020 that really got people fired up,” ImpactAssets’ Margret Trilli tells ImpactAlpha. Total funds under management, which includes cash not yet deployed, grew to $2.2 billion, from $1.4 billion in 2020. Private debt and equity investments doubled from the previous year, to $455 million.
- Who’s your manager? ImpactAssets saw clients putting more emphasis on supporting investments in Black and female fund managers, many of whom have yet to establish long track records. “There are a lot of investors who want to invest in emerging managers, specifically because of racial equity or gender equality,” Trilli says.
- Impact goes mainstream. “We’re having far fewer conversations about what impact investing is,” Trilli observes. “Impact investing is mainstreaming.” The range of investors is growing, too, with traditional, non-impact-focused money flowing toward climate solutions. “I’m seeing a tidal wave of private capital coming. Even non-impact investors are looking for good investments, and this is a damn good investment,” she says.
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Agents of Impact: Follow the Talent
The U.K. Department for Environment, Food and Rural Affairs selects Pittsburgh-based Federated Hermes and U.K.-based Finance Earth to manage a new nature restoration fund… Willem Schramade, ex- of NN Investment Partners, joins Schroders as head of sustainability client advisory… Nakul Zaveri, ex- of Relativity Investment Management and Global Environment Fund, joins LeapFrog to co-lead a new climate investment strategy.
Align Impact is hiring a catalytic capital investment analyst to start in February… Oak Hill Advisors is looking for an ESG and sustainability analyst in New York… Devex will host an event from COP27 featuring Eric Berlow of Vibrant Data Labs, who will present a global version of the Climate Finance Tracker, Thursday, Nov. 10. A livestream will be available the next day… The U.N. Development Programme joins the interim secretariat of the Task Force on Inequality-related Financial Disclosures.
Thank you for your impact!
– Nov. 7, 2022