The Brief: Mexico and India sweat their elections as climate action waits

Greetings, Agents of Impact! The next edition of our specialty newsletter, ImpactAlpha Latin America, drops today. As an  ImpactAlpha subscriber, you get the top stories first. For the full LatAm experience, opt-in to the new feature at no additional cost. ¡Disfruta! – David Bank

In today’s Brief:

• Climate on the ballot in Mexico
• Robert Wood Johnson Foundation doubles its impact investing mandate
• Clean Energy Ventures’ $305 million decarbonization fund
• Diversifying impact asset classes in Latin America

Featured: Climate on the Ballot

Mexico chooses a new president amid extreme heat – and little urgency on climate action. Mexico’s vote on Sunday will grab headlines for the election of the country’s first female president. Less prominent will be the climate crisis facing the country, even amid raging wildfires, extreme heat, and a water crisis in the country’s largest city. Neither of the women leading the polls, Claudia Sheinbaum of the leftist governing party and Xóchitl Gálvez of the center-right opposition coalition, have made climate policy plans and ambitions central to their campaigns. Mexico counts as a laggard on climate action in both Latin America and the G20 group of large economies (Mexico has the 12th largest economy in the world and second largest in Latin America). Climate Action Tracker ranks Mexico’s climate policies and goals as “critically insufficient.” Without a leader committed to climate action, “we will hardly be able to get on the path to compliance,” warned Sandra Guzmán of the Climate Finance Group for Latin America and the Caribbean. “This is the most important six-year period to achieve climate goals.”

• Scientist-in-chief. On paper, Sheinbaum, the protege of current President Andrés Manuel López Obrador, has an ideal resume for putting Mexico on a more ambitious climate path. Sheinbaum, an environmental engineer, contributed to the Intergovernmental Panel on Climate Change reports that won the 2007 Nobel Peace Prize. As the Morena party’s leading candidate, however, she has sent conflicting messages. She’s called for 50% renewably-sourced power by 2030, but her plan makes no mention of a net-zero target and includes new gas-burning power plants. The tell may be her support for Pemex, the state-owned oil company and longtime political power center. Sheinbaum has proposed that Pemex diversify revenue streams, into lithium, geothermal and renewable energy, doubling-down on the debt-laden oil giant. “The pattern I see is governments that tend to consolidate and monopolize industries end up not innovating at all,” laments Rogelio de los Santos of Monterrey-based Dalus Capital, which invests in early-stage climate ventures in Latin America.
  
• Conflicting signals in India. Over six weeks of voting, Indians have literally braved climate change to reach the polls. In parts of Delhi, the temperature on Tuesday hit 50 degrees Celsius, or 122 degrees Fahrenheit. At least two ministers fainted in recent weeks while campaigning outdoors. India is the world’s third-largest greenhouse gas emitter, yet climate change has been a negligible campaign topic. Prime Minister Narendra Modi, who is widely expected to win a third term, has set a net-zero target of 2070. But the development of renewable energy has slowed, and last year, coal-fired energy growth was higher than renewable energy growth for the first time since 2019. State-run Coal India said it will expand output and start five new coal mines. “We are sending extremely conflicting messages on fossil fuels, on coal in particular,” says Ashish Fernandes of Climate Risk Horizons, a think tank in Bangalore. Read ImpactAlpha contributing editor Shefali Anand’s election dispatch from Delhi.
  
• Global vote. National elections are taking place in 64 countries and the European Union this year, covering 50% of the world’s population. Most will touch people who are highly vulnerable to climate change. That includes the US, where the November presidential election represents a crucial test for the country’s belated mobilization around decarbonization and the energy transition. In South Africa, the party of Nelson Mandela is expected to lose its majority for the first time in 30 years in today’s election. None of the top three parties have prioritized climate action, despite a water shortage, extreme floods, and a long and costly energy crisis. Net Zero Tracker’s Thomas Hale put a positive spin on the global vote, “This super election year is as much an opportunity as it is a risk for climate action.”
  
• Keep reading, “Mexico chooses a new president amid extreme heat – and little urgency on climate action,” by Jessica Pothering on ImpactAlpha. 

Dealflow: Catalytic Capital

Robert Wood Johnson doubles its impact investing mandate with $325 million commitment. New Jersey-based Robert Wood Johnson Foundation more than doubled its impact investing target, bringing its total impact allocation to $625 million. The $13 billion foundation said it aims to attract an additional $1 billion from banks, commercial lenders, insurance companies, private investors and other foundations by the end of next year to advance health equity, specifically in communities affected by structural racism. That includes investing in drivers of social determinants of health, wealth and wellbeing, such as equitable homeownership models and minority-led community development finance institutions (see RWJF’s Zoila Jennings’ guest post, “Changing how capital flows through communities to improve health”). “For us, it’s not about the transaction. It’s about what the transaction represents along the pathway to system-level change,” RWJF’s Kimberlee Cornett told ImpactAlpha. “We’re very intentional about that. We take financial risks when the opportunity for social impact warrants it.” (Disclosure: Robert Wood Johnson Foundation supports ImpactAlpha’s coverage of Muni Impact.) 

• Program-related investments. RWJF recently made a $5 million equity investment in Invest Appalachia, a catalytic impact fund in Central Appalachia that wrapped up fundraising earlier this month; it recruited the MacArthur Foundation to invest in the fund. RWJF also invested in Washington, DC-based Blackstar Stability, which is helping low-income, diverse families transition out of predatory loans into more stable and traditional mortgages. In Denver, the foundation backed the Dearfield Fund for Black Wealth to provide down-payment assistance to first-time Black homebuyers.
  
• Catalyzing capital. RWJF is aiming to drive systemic change by de-risking deals in underinvested communities and inviting along commercial co-investors. “We’re pretty precise about what we count as leverage,” Cornett said. The test: “The foundation’s capital is doing something that enables another investor to come into the transaction.” RWJF made $48 million in impact investments last year through loans, equity investments and guarantees. 

• More.

Clean Energy Ventures raises $305 million for industrial decarbonization. The early stage climate tech investor exceeded its $200 million target for its second fund. Investors included Builders Vision, the Grantham Foundation, New Summit Investments and Carbon Equity. The firm is “doubling down on our thesis to invest in novel hardware-oriented, climate-saving technologies with the potential to bring outsized emissions reductions and top-tier financial returns,” Clean Energy Ventures’ Temple Fennell told ImpactAlpha. On the firm’s radar: industrial decarbonization, plastic alternatives and electro-chemical processes for producing low-carbon fuel and other products, especially in Europe.

• Hands on. Boston-based CEV has invested in carbon fiber maker Boston Materials, carbon-oxygen long duration battery storage company Noon Energy, and zero-carbon ammonia producer NitroFix. Each portfolio company must have the potential to mitigate at least 2.5 gigatons of greenhouse gas emissions by 2050. CEV provides portfolio companies with scientific and operational experience, leadership coaching and connections to customers and investors to help their solutions scale.
  
• More. 

Dealflow overflow. Investment news crossing our desks:

• TPG Rise Climate led the $100 million Series A financing round of Syre, a Stockholm-based textile recycling company launched by H&M Group and Swedish impact investor Vargas. (Syre)
  
• Several firms including Airbus, BMW and Michelin will get a share of €1.4 billion ($1.5 billion) in public funding from the European Commission for clean hydrogen fuel projects. The EC says it is hoping to unlock an additional €3.3 billion in private capital. (Bloomberg)
  
• Mexico City-based Jeeves secured a $75 million credit facility from Community Investment Management to expand cross-border payments in Latin America. (ImpactAlpha)
  
• Spiro, which manages a fleet of 14,000 electric motorcycles with swappable batteries in Benin, Togo, Rwanda and Kenya, secured a $50 million line of credit from the African Export-Import Bank to expand its footprint in more African countries. (APEN)

Impact Voices: LP/GP

How Vox Capital diversified across asset classes to meet impact investor demand. Some 70% of impact investments in Latin America are concentrated in private equity. Across the world, that number is more like 20%. “This shows not only the need but also the opportunity of diversification in Brazil,” and across Latin America, argue Daniel Izzo and Daniel Brandão of São Paulo-based Vox Capital, one of Brazil’s earliest impact asset managers. In a guest post on ImpactAlpha, Izzo and Brandão detail Vox’s evolution from a VC-only firm. Vox now manages seven venture funds totaling around $200 million in assets. In 2021, the firm launched a fixed-income fund (currently managing $10 million) that invests in high-grade bonds of Brazilian public companies contributing to the Sustainable Development Goals. This year, Vox established a foothold in nature-based solutions when it structured a $10 million bond for sustainable livestock after a regenerative agriculture fund failed to gain traction with investors. By integrating asset classes, Vox “helps investors achieve their impact goals while mitigating market fluctuations,” the partners write.

• Stabilizing returns. Diversification is a time-tested investment principle that mitigates risk by spreading investments across various asset classes. In impact investing, write Izzo and Brandão, diversification “allows for a broader spectrum of impact themes and sectors, enhancing the ability to address a range of global challenges while promoting portfolio resilience.” To critics who expect managers to be hyper-specialized, they counter: “We are specialists in positive impact, without compromising on professional and rigorous management.”

• Keep reading, “How Vox Capital diversified across asset classes to meet impact investor demand,” by Vox Capital’s Daniel Izzo and Daniel Brandão on ImpactAlpha.

Agents of Impact: Follow the Talent

Maty Ndiaye, previously with Admaius Capital Partners, joins Mediterrania Capital Partners as its West Africa managing partner… BlackRock is hiring a climate finance partnerships director in New York… Also in New York, Nuveen Green Capital has an opening for a strategic finance associate director, and New York Community Trust is looking for a program officer… Hamilton Lane is looking for an impact vice president in Philadelphia. 

The American Heart Association seeks a Baltimore-based managing director for its social impact fund… Acumen LatAm Impact Ventures, or ALIVE, seeks a senior investment analyst in Bogota… Allianz Global Investors is on the hunt for an impact private credit intern in Paris… The Ford Foundation is recruiting a program officer for China in Beijing… UNICEF seeks a temporary innovative finance manager in Copenhagen.

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

Thank you for your impact!

– May 29, 2024