The Brief | November 28, 2023

The Brief: Markets and methane at COP28, banking community banks, fish farms in Kenya, renewable heat in France, Indigenous venture capital

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Greetings, Agents of Impact! 

Featured: Climate Finance

From carbon markets to curbing methane, the case for climate optimism at COP28. Even before it begins, it has become fashionable to dismiss COP28, this year’s global climate summit in Dubai, as a charade for slow-moving bureaucrats or, worse, a captive of fossil fuel interests. The case for optimism is more persuasive, writes ImpactAlpha’s Amy Cortese. The breakneck global rollout of renewable energy suggests that the low-carbon transition is not only feasible, but inevitable. The International Energy Agency expects renewables to become the world’s largest source of electricity in 2025, overtaking coal. “The difference now from even last year is the astonishing scale-up of clean energy technologies,” says Mark Campanale of CarbonTracker. At the 28th “Conference of the Parties,” the two-week global climate gathering that begins Thursday, progress is expected on goals to triple renewable energy capacity, reduce methane emissions, finalize rules for high integrity carbon credits and stand up a “loss and damages” fund to compensate lower-income countries for natural disasters and historical climate inequities. 

That’s the glass half full. This year is already the hottest on record; the chances of keeping warming to 1.5 degrees Celsius are increasingly slim. A global “stocktake” found that countries are woefully behind on their commitments. China and India’s continued rapid expansion of coal-based power plants puts climate progress at risk. Climate advocates fear that the gathering in the petro-state of the United Arab Emirates, and hosted by the chief of its national oil company, could devolve into greenwashing for fossil fuel interests. Reports that the UAE has used its COP presidency to strike oil and gas deals have stoked such suspicions. “This is a high stakes COP,” John Morton of climate advisory firm Pollination tells ImpactAlpha. “The question now is: How quickly can we deploy and innovate? And, particularly for the UAE presidency, how quickly are we going to commit ourselves to moving away from fossils?”

  • Carbon markets. Expect to hear more about “Article 6” of the Paris climate accord. Carbon markets have the potential to encourage low- and middle-income countries and Indigenous communities to store carbon in forests and wetlands, and to replace fossil fuels with clean energy by letting them sell credits to countries or corporations looking to achieve net-zero goals. Issues with early, low-quality credits have led to a general distrust of such offsets, both in the unregulated “voluntary” market and regulated compliance markets. An agreement at COP28 could help restore trust in carbon markets and unlock billions of dollars for carbon removal and avoidance, starting as early as late next year.
  • Methane summit. Actions are gaining traction to curb methane emissions, an even more powerful heat-trapping greenhouse gas than carbon dioxide. The voluntary pledge to reduce methane emissions by 30% by 2030 has been signed by 150 nations. In Dubai, the US, China and the UAE will co-host a methane summit. COP president Sultan Al Jaber has suggested that several oil and gas firms could pledge to zero out methane emissions and eliminate flaring by the end of the decade. “We’re probably not going to have a material conversation about ending the exploration and extraction of fossil fuels,” says Stephan Nicoleau of FullCycle. “If we’re not going to do that, then the focus really does have to be on methane mitigation.”
  • Keep reading,From carbon markets to curbing methane, the case for climate optimism at COP28,” by Amy Cortese on ImpactAlpha. Catch up on all of ImpactAlpha’s climate finance coverage.

Dealflow: Community Finance

Mission Driven Bank Fund secures $110 million for local lenders in low-income communities. The Mission Driven Bank Fund will back a pipeline of over 300 federally-insured minority depository institutions, or MDIs, and community development financial institutions, or CDFIs, to expand access to credit and other financial services in lower-wealth, rural and communities of color in the US. “The exciting part of the fund is the flexibility and the tools we have to deploy for the banks,” said Beth Bafford of Calvert Impact, which will manage the fund alongside Elizabeth Park Capital Management, a Black-led alternative asset manager. “We can do deposits. We can do equity. We can structure solutions on- or off-balance sheet.” The fund was designed by the Federal Deposit Insurance Corp. to complement the Emergency Capital Investment Program (see, “How the U.S. can boost community financial institutions to counter bank consolidation and bridge racial wealth gaps”). It is anchored by Microsoft and Truist and is targeting a $500 million final close next year.

  • Community Reinvestment Act. Heather Cruz of law firm Skadden Arp said Mission Driven Bank Fund is well-timed with new Community Reinvestment Act regulations that encourage loans, investments or services in cooperation with MDIs and CDFIs. The CRA rules, issued last month, include tougher rules for banks to widen access to mobile and online lending and banking services to underserved communities.
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Investors commit $1.7 million to Aquarech to support fish farmers in Kenya. Africa’s fast-growing population is driving increased demand for protein, including fish. With local fish production dwindling, Kenya is meeting demand with imports. Aquarech gives local, small-scale producers a boost by connecting them to quality inputs, like fish feed, and buyers. Impact investors Aqua-Spark, Acumen, Katapult and Mercy Corp Ventures backed the company’s equity round.

  • Farmer first. Aquarech co-founder Dave Okech, a former fish farmer, experienced the challenges of acquiring high-quality feed, finding cold-storage facilities and negotiating sales prices. The company provides access to credit for buying farm supplies. Its mobile app provides farm data management and climate-smart and precision-farming tips.
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Dealflow overflow. Other investment news crossing our desks:

  • Vancouver-based Active Impact Investments secured C$70 million (US$51.4 million) for its third early-stage climate fund. It is targeting up to $120 million to invest in clean energy, transportation, food and water, and circular economy startups. (Active Impact)
  • Newheat scored €30 million ($33 million) from SWEN Capital Partners, Bpifrance and other investors to expand access to renewable heating in France. (Greentechlead)
  • Dutch B Corp. Naif secured €23 million ($25.2 million) from impact investor Future Business Partnership to make eco- and skin-friendly care products. (ImpactCity)
  • Kiwi raised $13 million in Series A funding, led by Omidyar Network India, to provide access to digital credit in India. (Finextra)

Short Signals: What We’re Reading

☀️ Energy demand grows faster than clean energy supply. A boom of cheap renewable power in Europe and natural gas in the US has helped replace coal-fired generation. But global demand for electricity, especially China and India, is outstripping even the rapid growth of clean energy, leaving fossil fuels to fill the gap. (The New York Times)

🤝 Indigenous VC alliance. The Native American Capital and Investment Alliance, a new group of Indigenous investors, will help equity investors, alternative lenders and investment advisors identify investment opportunities in Native-founded companies. (Venture Capital Journal)

⚾ Diamondbacks share postseason shares with support staff. The unexpected World Series champion Arizona Diamondbacks will distribute their championship winnings more broadly than usual, voting to share “postseason shares” with younger players and support staff, including food-room attendants. (The Athletic)

⚡ Falling price of batteries. Following unprecedented price increases in 2022, battery prices are falling again this year, driven by raw material and component price drops, as production capacity increased across all parts of the battery value chain. (Bloomberg)

👩🏽‍🦱🧑🏼‍🦱👨🏾‍🦲👩🏻‍ Data-driven diversity, equity and inclusion. In the wake of the Supreme Court’s affirmative action ruling, few companies have in place best practices to attract a diverse pool of candidates, according to new data from Paradigm. The DEI strategy firm recommends tracking data throughout the hiring funnel. (Paradigm)

🍏 Food innovation in Appalachia. Local innovators are responding to food insecurity in the mountainous region of the US. Among the solutions: Mountaineer Food Bank in West Virginia is using mobile pantries to transport food to remote regions. (Appalachian Regional Commission)

Agents of Impact: Follow the Talent

Astanor Ventures appoints Thomas Nagy, ex- chief operating officer at 21st.BIO, as part-time operational partner based in Copenhagen… Hope Wandera, ex- of VU Venture Partners, joins Mercy Corp Ventures as an investment analyst… Social Finance Institute seeks a policy writer in Washington, DC… GenZero is recruiting an investment associate in Singapore.

Second Horizon Capital is hiring a part-time and remote impact and sustainability analyst… Faith-based investor Inspire Investing has an opening for a compliance officer… TAS Impact’s Kate Murray, Jeremy Keele of Catalyst Opportunity Funds, and Sorenson Impact’s Alan Lo will join a webinar on bridging the affordable housing gap with impact real estate, Thursday, Dec. 7.

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

Thank you for your impact!

– Nov. 28, 2023