The Brief | September 1, 2022

The Brief: Parsing ESG regulations, decarbonizing global shipping, reusable PPP, genomic solutions, ESG acquisition in Europe, Pakistan’s climate calamity

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Greetings, Agents of Impact!

👋 Agents of Impact Call: Mapping opportunities for catalytic climate capital. Venture capital and private equity are pouring money into climate startups and large-scale renewable energy. Where capital is not flowing: emerging markets, low-income communities and projects aimed at climate adaptation and climate justice. We’ll kick off our fall season of Agents of Impact Calls with BlocPower’s Donnel Baird, Shell Foundation’s Ashish Kumar, and Jonathan Phillips of Duke University’s Energy Access Program, who will join Amy Cortese and David Bank to explore effective strategies for bridging the gaps. Bonus: We’ll launch ImpactAlpha’s new Climate Finance Tracker with Eric Berlow of Vibrant Data Labs. Answer the Call, Wednesday, Sept. 14, at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Institutional Impact 

Imogen’s summer fun: Parsing the proposals to regulate ESG. The discussion around sustainable investment in the U.S. has become so politically polarized that it is hard to see the Biden White House make any ESG regulation stick, ImpactAlpha contributing editor Imogen Rose-Smith writes in her latest Institutional Impact column. Anything the Securities and Exchange Commission does is likely to be challenged and, eventually, gutted by the Supreme Court. Or rolled back by President Ron DeSantis. “I’m not trying to be defeatist,” Rose-Smith insists. Gamely reviewing the hundreds of public comments on the S.E.C.’s proposals, she found that even ESG supporters have reservations. “Overly prescriptive or unclear disclosure requirements could disincentivize further ESG integration and consideration by adding liability and costs,” Principles of Responsible Investment warned in its comment. “The discussion is part of normal policymaking,” Rose-Smith writes. “But this highly politicized environment is not normal.”

  • Europeans at the gate. Commentators in the U.S. are encouraging the S.E.C. and others to work with the U.K. and Europe to ensure a global regulatory framework for ESG. The PRI urged the S.E.C. “to build a harmonized global system of investor and product disclosure.” European and U.K. standards won’t perfectly align in a world where the U.S. is not fully committed to ESG, “but over the long term these other frameworks will prevail,” Rose-Smith says.
  • Weaponizing ESG. Dozens of states are passing anti-ESG laws directed at protecting the fossil fuel industry – but could be expanded to areas such as abortion and LBGTQ rights (for background, see, “Riskwashing: How the crusade against ESG is hurting businesses, taxpayers and retirees“). The laws borrow language from previous divestment campaigns, but with a difference: “There has always been a fiduciary-duty loophole to these divestment laws (including most fossil-fuel divestment initiatives),” Rose-Smith writes. “Barring most major banks sure sounds like a violation of fiduciary duty.”
  • Risk, adjusted. “Maybe the solution lies not in policy at all, but in investing,” says Rose-Smith. Investment capital can play a role in tamping down political divisions by investing in new businesses and innovations, including in places like Kansas, Texas, Oklahoma, Pennsylvania, Utah and Ohio. “If certain strategies come with attractive risk-adjusted returns and speed the clean energy transition, it may not matter that they cannot call themselves ‘green,’” Rose-Smith said. “When it comes to doing business with Florida, Texas and West Virginia, that might be all to the good.”
  • Keep reading, “My summer fun: Parsing the proposals to regulate ESG,” by ImpactAlpha contributing editor Imogen Rose-Smith. Catch up on all of Imogen’s Institutional Impact columns.

Dealflow: Maritime Transition

Blue World raises €37 million for methanol fuel for decarbonized shipping. Starting in January, most global shipping companies will be required to have their vessels’ exhaust tested and graded on the Energy Efficiency Existing Ship Index. Denmark-based Blue World Technologies is looking to commercialize a green alternative to the gas engines and diesel generators used in large cargo ships. The company says its methanol-based fuel cell system can power even large ships using current infrastructure. Blue World passes methanol through a “reformer” to extract the hydrogen, which is then consumed via the fuel cell. The process creates water and CO2, which Blue World compresses, stores and combines with hydrogen to make more methanol.

  • Clean energy transition. Breakthrough Energy Ventures Europe, or BEV-E, led the $37.2 million Series B round. Other investors include Vaekstofonden, the sovereign fund of Denmark. BEV-E’s Carmichael Roberts called Blue World’s fuel cells “a climate-friendly solution with an attractive total cost of ownership.” Breakthrough launched BEV-E in 2019 with €100 million from the European Investment Bank and others to invest in European clean energy technologies.
  • Check it out.

Mexico’s MEDU scores $4 million for reusable medical protective gear. Hospitals generate more than five million tons of waste yearly from gowns, gloves, syringes and more, according to Greenhealth. Mexico City-based MEDU Protection, launched by former chemist Tamaro Chayo, provides reusable protective garments like surgical gowns, head coverings and full-body suits. “The products can be reused for up to 50 washes, so you can use the same gown instead of changing into a different one, which saves money and waste,” said Chayo. The garments come with a mobile app that helps keep track of each wash. After 50 washes, garments are returned to MEDU for disinfection and conversion into medical scrubs and sustainable packaging.

  • U.S. expansion. MEDU says it has deployed around 7,000 of its medical garments to hospitals in Mexico, Los Angeles and New York since January. By the end of 2022, MEDU aims to divert 6,000 tons of hospital waste from landfills and incinerators. Early-stage venture firm MaC Ventures Capital led the round, with participation from Halcyon Fund and angel investors.
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Dealflow overflow. Other investment news crossing our desks:

  • MedGenome, a Bangalore-based genetic testing company, secured $50 million in a round led by Novo Holdings.
  • The Bill & Melinda Gates Foundation invested $5 million in Bactolife, also backed by Novo Holdings, to reduce the risk of gut infections in humans and animals.
  • Duplo raised $3.4 million in a seed round backed by Oui Capital to digitize payments for African merchants (see, “Agent of Impact: Olu Oyinsan”).
  • Metlife Investment Management will acquire Affirmative Investment Management, a London-based fixed-income fund manager that specializes in ESG impact.

Signals: Climate Calamity

Epic floods in Pakistan highlight gap in climate funding for emerging markets. The monsoon-season floods sweeping through Pakistan have killed more than 1,000 people, including hundreds of children, and created at least 500,000 flood refugees. Damage to homes, infrastructure and cropland could total more than $10 billion. Pakistan’s climate change minister Sherry Rehman calls the floods a “climate-induced humanitarian disaster of epic proportions.” The bitter lesson: Climate adaptation funding is wholly inadequate for low and middle-income countries on the frontlines of climate change. 

  • Debt burden. The International Monetary Fund has approved more than $1.1 billion (and imposed austerity measures) to head off a default by Pakistan’s debt-burdened treasury. The Green Climate Fund has allocated $131 million for climate mitigation and adaptation projects in the country. The climate finance and aid mechanisms to support net zero, adaptation and resilience in least-developed and middle-income countries “are not fit for purpose as climate impacts outpace countries’ ability to pay for their costs,” tweeted Daniel Firger of Great Circle Capital Advisors. “We need a deep structural reset; #LossAndDamage is a start.”
  • How to help. Kalsoom Lakhani of i2i Ventures, a Pakistan-based early-stage venture capital fund, shared a list of vetted aid organizations. Karachi Relief Trust can receive funds via a U.S.-based nonprofit and has “a strong reputation on the ground [and] exists for relief efforts like these” she says. Rizq is focused on Punjab and hard-hit Balochistan. HANDS already has 10,000 or so volunteers in the field. “Our support should go beyond a one-time donation, since there will be an enormous impact on these communities,” writes Lakhani.
  • Tune in.

Agents of Impact: Follow the Talent

Ilmi Granoff, formerly of ClimateWorks Foundation, will be a visiting senior fellow at the London School of Economics’ Grantham Research Institute on Climate Change and the Environment… Founders First Capital Partners is hiring a remote underwriting associate… Bamboo Capital seeks a senior subsidy manager… North Sky Capital seeks an associate for infrastructure investments in Boston.

Full Spectrum Capital Partners’ Taj James and Integrated Capital Investing’s Jen Astone will explore how BIPOC-led funds create opportunities for entrepreneurs and businesses, Thursday, Sept. 15… Mission Investors Exchange and the U.S. Impact Investing Alliance are hosting “In the balance: Refreshing the toolkit,” Wednesday, Sept. 21, featuring the Alliance’s Fran Seegull,  LOCUS Impact Investing’s Jim Baek, Robert Wood Johnson Foundation’s Kimberlee Cornett, Morgan Stanley’s Grace Chionuma, and Ford Foundation’s Mai-Anh TranThe Drop, a climate tech conference for climate founders, investors and scientists, will take place on Wednesday, Sept. 21 in Malmo, Sweden.

Thank you for your impact!

– Sept. 1, 2022