The Brief | July 26, 2021

The Brief: Philanthropy unbound, community solar in the U.S., catastrophe bonds in Jamaica, mini-grids in Nigeria, ‘Volcker Shock’ for climate

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Greetings, Agents of Impact!

Mark your calendar for this ImpactAlpha partner event: 

  • Truth in Impact. Knowing how and when to use the impact investment label is part of being a credible investor. Tideline will launch its “Guide to Using the Impact Investment Label” with a discussion of how an investor’s intentions, value-added contributions, and social and environmental performance measurement help distinguish between ESG and impact approaches. Join Caprock’s Mark Berryman, Jordan Park’s Lauren Booker Allen, GIIN’s Kelly McCarthy, Morgan Stanley’s Jamie Martin and Tideline’s Ben Thornley, Wednesday, Aug. 4, at 11am ET. Register today.

Featured: The Reconstruction

How philanthropy unbound can put humanity back into investing in all its forms. Renée Joslyn wants to restore philanthropy to the roots of the word: love of humanity. Joslyn, the founder of Philanthropy Unbound, a consultancy specializing in individual, family, and corporate philanthropy and social impact programs, joined The Reconstruction podcast on the eve of the 10th annual Black Philanthropy Month, coming in August. With host Monique Aiken, she explored a broad definition of philanthropy that includes financial, social, intellectual and human capital and recognizes that grants are investments with a collective return (see, for example, “Mobilizing all forms of capital for sustainable development,” by Gillian Marcelle). “Philanthropy needs to be unbound,” Joslyn says, from the premise that “it’s only mainstream, large institutions that get to give love to humankind.”

Philanthropy Unbound’s annual Philanthropy 100 lists leaders – including corporations, foundations, individuals and nonprofits – that are re-imagining how capital can express such love for humanity. Joslyn says investors in decision-making roles must acknowledge the harm from practices that have persisted for decades. From how assets are managed to who receives them, many of the accepted practices of philanthropy may exacerbate injustice and overlook the breadth and diversity of humanity-loving activities, she says. The institutional image of philanthropy leaves out alternative and imaginative models, including giving circles, volunteerism and mutual aid. Foundations often provide restricted grants only for expenses readily tied to programs. By starving infrastructure and then taking that funding away after a year, foundations actually work against the sustainability of the organizations they seek to support, says Joslyn. “The opportunity now is to say, ‘Oh, I need to invest differently. I need to pay attention,'” Joslyn reflects. “‘I need to make sure that what I’m doing is comprehensive.'” 

🔎 Read “The Reconstruction: How philanthropy unbound can put humanity back into investing in all its forms,” by Monique Aiken and Anjali Deshmukh. 

🎧 Listen to Monique Aiken’s conversation with Renée Joslyn. Catch Monique’s earlier conversations and all of ImpactAlpha’s coverage at The Reconstruction.

Dealflow: Follow the Money

KKR acquires minority stake in Sol Systems’ community renewable energy platform. Washington, D.C.-based Sol Systems has financed or developed more than one gigawatt of community solar projects valued at more than $1 billion since 2008. Its nearly 17,000 U.S.-based customers include corporations, municipalities and others. Sol’s partnership with Microsoft, for example, will finance and develop 50 megawatts of renewable energy and commit at least $50 million to communities where the assets are located. KKR was attracted by Sol’s “integrated platform, and a leadership team that’s driven by positive impact,” KKR’s Tim Short told ImpactAlpha. “With partners like Sol Systems, we can put large amounts of capital to work in the right places.” Sol is part of Renewables Forward, which launched last October to invest in under-resourced and minority communities.

  • Sustainable infrastructure. The billion-dollar partnership with KKR will help Sol acquire shovel-ready renewable energy and storage projects across the U.S. KKR made the investment through its third global infrastructure fund.
  • Power up

World Bank catastrophe bond for Jamaica to cover up to $185 million in disaster relief. The bond will allow the government of Jamaica to quickly secure capital for recovery and to respond more rapidly if the Caribbean country is hit by three tropical storms or hurricanes before the end of 2023. USAID and the German and U.K. governments provided financial support for the transaction through the World Bank’s Global Risk Financing Facility. “This catastrophe bond adds an indispensable layer of disaster risk financing,” said Nigel Clarke, Jamaica’s minister of finance. Jamaica is the first Caribbean country, and the first small island country, to independently sponsor a catastrophe bond, the World Bank said.

  • Pandemic bonds. Catastrophe bonds were the model for the World Bank’s first pandemic bonds, issued in 2017 after the Ebola outbreaks in West Africa, to provide “surge funding” to help low-income nations respond to pandemics. The bank was criticized, however, when the bond failed to pay out during the Democratic Republic of the Congo’s Ebola outbreak in 2018. In 2020, the bond wasn’t triggered until five weeks after the World Health Organization declared a global pandemic. (see, “Amid wave of COVID relief bonds, the World Bank’s pandemic bond has yet to pay out”).
  • Check it out

CrossBoundary backs PowerGen to develop mini-grids in Nigeria. Nairobi-based PowerGen has developed three megawatts of small-scale distributed energy projects serving 20,000 people in Africa. The investment from CrossBoundary Energy Access will nearly quadruple PowerGen’s customer base through a network of 28 solar mini-grids in Nigeria. CrossBoundary Energy Access is a sister company to CrossBoundary Energy, which sold its 40-megawatt off-grid solar portfolio to ARCH Emerging Markets Partners last year.

  • Blended finance. CrossBoundary is providing an undisclosed amount of long-term project financing for the initiative and will acquire and manage the portfolio of mini-grids once developed. Oikocredit, Triodos and E.U.-backed ElectriFi are providing $9 million in construction financing. The World Bank and the Nigeria Rural Electrification Agency are contributing grant funding based on the number of new customers connected to the mini-grids.
  • Read on

Dealflow overflow. Other investment news crossing our desks:

  • REGMIFA secures $10 million from FMO to back financial institutions lending to small businesses and low- and middle-income households in Africa.
  • Swedish startup Ignitia raises $4.2 million to expand its tropical weather forecasting platform to Brazil and Africa (see, “Ignitia secures early funding to alert smallholder farmers to weather changes”).
  • Yamaha Motor is launching a $100 million, 15-year corporate venture fund for technologies to help the company meet its 2050 net-zero carbon goals.
  • Brazilian impact investor Vox Capital re-ups with Celcoin in the fintech’s $55 million round.
  • Hydropower developer Natel Energy closes $20 million in financing led by Breakthrough Energy Ventures and Chevron’s corporate venture arm.
  • New York Life commits $50 million to IMPACT Community Capital to preserve affordable housing in the U.S.

Impact Voices: Climate Action

The case for a ‘Volcker Shock’ for climate. How is climate in the early 2020s like inflation in the late 1970s? Then: wage and profit expectations became disconnected from economic realities. Today: wage and profit expectations have become disconnected from ecological realities. “Climate policy today – like monetary policy in the 1970s – suffers from a chronic lack of credibility,” argues Volans’ Richard Roberts in a guest post on ImpactAlpha. “Without that confidence, businesses and investors will not adjust – indeed, are not adjusting – capital allocation and business models in line with what’s needed to limit global warming to well below 2°C.” In 1981, the chair of the Federal Reserve, Paul Volcker, shocked the system and reset expectations by dramatically raising interest rates.

  • Inflation lessons. Politicians need to be honest with voters about the pain that tackling global warming will involve, says Roberts. When the U.K. adopted its version of the Volcker shock, then-Prime Minister Margaret Thatcher warned “some things will get worse before they get better.” Roberts suggests policy credibility could be restored with institutional design. Just as central banks guide monetary policy and instill confidence, independent “Carbon Councils,” as advocated by former Bank of England Governor Mark Carney, could set enforceable emissions reduction targets.
  • Read Roberts’ full take.

Agents of Impact: Follow the Talent

Jim Baek, ex- of Deutsche Bank, joins LOCUS Impact Investing as executive director of its community investment guarantee pool… Patricia Decker from the USC Marshall School of Business and Jeremy Soares from Yale School of Management join Mendoza Ventures’ fellowship program for diverse MBA students. Global Impact Investing Network takes over management of the Impact Classification System from IMP+ACT Alliance.

RBC Capital Markets is looking for an analyst for its sustainable finance group in New York… Winners of the American Society of Mechanical Engineers impact hardware competition include India’s Offgrid Energy Labs, Life and Limb and Padcare Labs, Africa’s Medevice Kenya, Tech Era and Aqualoo Technologies, and Conservation X Labs, JK Engineering and Project Prana from the U.S. and Europe.

Thank you for your impact.

– July 26, 2021