The Brief | December 11, 2023

The Brief: Playing mispriced muni risks, small business resilience in Africa, rooftop solar in India, crunch time at COP28, India’s climate investors

The team at


Greetings, Agents of Impact! 

Featured: Muni Impact

Muni investors see through mispriced risks to find alpha and impact. Lower risk: Bonds issued by high-performing school districts that serve low-income populations. Higher risk: Issuances that fund entertainment complexes that disrupt and displace residents of majority minority neighborhoods. Rampant misperceptions, and mispricing, of demographic risk in the $4 trillion municipal bond markets has left opportunities for impact, and alpha, hiding in plain sight. Investors with more intentional strategies for racial equity are finding them, with help from advisors with unique analytics and ratings that can cut through legacy gaps in information and transparency. “Investors that are smart, that really want to beat the market, that want to see opportunities and not be beholden to past thoughts on race, are beginning to see the opportunity,” says Homero Radway of Activest, an investment research firm that will launch its “fiscal justice” fund strategy next month (see, “Activest’s FIRE strategy seeks to bend the arc of municipal finance toward fiscal justice”)

  • Extraction or renewal? Louisville, Ky., a majority white city with a strong credit rating, is on the hook for annual payments for a bond that financed the construction of a stadium, after promised tax revenues failed to materialize, in part because of the stadium’s disruption and displacement in Black neighborhoods. In contrast, a 2019 municipal bond issued by Essex County, NJ, helped finance the replacement of lead pipes in Newark, a majority Black city with a poor credit rating. The city completed the project, a national model for lead replacement, seven years ahead of schedule. “Racism adds up,” Radway says. “If you are a bondholder, if you’re an investor, you are actually being cheated by this place that is not building an ecosystem that pays you well.”
  • Hidden impact. Roughly 10% of the $158.4 billion of municipal bonds issued in the first half of 2023 were labeled green, social, sustainable or sustainable-linked. Many other bonds that are not labeled may nonetheless provide social and environmental benefits and reduced risks. For example, the Val Verde school district in California’s Inland Empire, where most kids qualify for a free or reduced-cost lunch, sends 60% of its students to college, versus 40% for the state’s public school students. The district’s schools are among 2,000 high-performing schools in low-income districts identified by HIP Investor. Labeled or not, bonds issued by one of those districts are “an opportunity for impact investors,” says HIP’s R. Paul Herman.
  • Stocking the pipeline. To meet investor demand, cities and other muni bond issuers are ramping up efforts to plan, execute and communicate the impact of equitable and resilient community development. Some are even realizing benefits in the form of lower costs of capital. Atlanta, Dallas and St. Paul are among the initial municipal cohort convened by Public Finance Initiative to help issuers understand and communicate the racial equity and social impacts of bond issuances. Agencies from Hawaii, Alabama, Tennessee and a half dozen other states have joined the Lincoln Institute of Land Policy’s Accelerating Community Investment initiative. Cities that implement equitable plans and projects “are going to continue to be more competitive on pricing for the capital that they need,” says Lincoln Institute’s RJ McGrail.  
  • Keep reading, “Muni investors see through mispriced risks to find alpha and impact,” by Dennis Price on ImpactAlpha.
  • 👋 This Week’s Call: How to spot overlooked impact and risk in municipal bonds. Learn how to spot mispricing of racial and climate risk – and overlooked opportunities for impact – in the municipal bond market, on the next Call in ImpactAlpha’s Muni Impact series, supported by the Robert Wood Johnson Foundation. Join Activest’s Homero Radway, Kestrel’s Monica Reid, R. Paul Herman of HIP Investor, Court Street Group’s Matt Posner and other Agents of Impact, Wednesday, Dec. 13, at 10am PT / 1pm ET / 6pm London. RSVP today

Sponsored: AlphaMundi Foundation

Gender-inclusive strategies to unlock value in Africa’s small businesses. Nairobi-based AlphaMundi Foundation is helping turn challenges for women into opportunities for impact. With support from DEG Impulse’s develoPPP program, the foundation worked with Value for Women to help five East African portfolio companies build resilience and competitive advantage through workforce empowerment and value chain inclusivity initiatives.

  • Impact targets. AlphaMundi worked with Uganda-based Asili Agriculture to help female farmers access loans and help female employees grow within the company. Asili received support to identify gender-inclusive solutions for its business model, resulting in its first Gender Strategy and commitment statement, with quantifiable targets, including reaching 50% women in new recruits and internal promotions. It also teamed up with lender Tugende to increase the number of female farmers able to access input loans for a successful soybean harvest.
  • Read the case study,Asili Agriculture: Building Resilience and Competitive Advantage in Agriculture Through an Inclusive Gender Approach,” on 2X Global.

Dealflow: Digitizing Small Businesses

Mercy Corp Ventures backs Tappi to boost economic and climate resilience in Africa’s small businesses. Flooding and droughts, which disrupt logistics, damage stock, depress consumer spending and raise the cost of goods, affect nearly all informal and small businesses in Africa’s biggest markets, according to Mercy Corp Ventures. It can take up to a year for a small business owner to recover.  The impact venture fund is backing Nairobi-based digital services company Tappi to foster small business economic and climate resilience. “Digitization of small businesses [is] key to building a more resilient network of small businesses across emerging markets,” Mercy Corp Ventures’ Dan Block told ImpactAlpha. The firm invested in Tappi’s $1.5 million pre-seed round alongside Chui Ventures, SOSV and other investors. 

  • Digitalization for resilience. A wave of African startups emerged during the pandemic to bring Africa’s mostly-offline retailers into the digital age (revisit, “New channel of capital for small businesses worldwide: enterprise tech startups“). The evolving data ecosystem “could address barriers to deliver a variety of services including financing, climate financing, insurance, etc., to businesses and their employees,” said Mercy Corp Ventures’ Hetal Patel
  • Beyond payments. Tappi offers a broad range of services, including customized websites, payment processing, customer messaging, and social media promotion – all available via smartphone and feature phone. “Tappi is not simply selling digitization solutions business-to-customer with the potential for access to financial services,” Mercy Corp Ventures wrote. “Tappi is a frictionless way of creating a digital identity.” 

India’s Ashv Finance scores $10 million from Encourage Capital for rooftop solar lending. Mumbai-based Ashv Finance, part of Aavishkaar Group, provides flexible, collateral-free loans to small businesses enterprises in 15 Indian states. The non-banking financial institution will use the investment from Encourage Capital to “foray into rooftop solar finance, something we have been contemplating for a while,” said Ashv’s Nikesh Kumar Sinha. Ashv aims to deploy 3.9 billion rupees (about $47 million) in rooftop solar loans to micro and small businesses over five years. Encourage Capital made the investment through its Solar Finance equity fund. In May, Encourage Capital backed Mumbai-based Svakarma Finance to launch small business loans for rooftop solar. Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • ADM Capital’s Asia Climate-Smart Landscape Fund secured commitments from Ceniarth and the Packard and MacArthur foundations to invest in sustainable agriculture, agroforestry and aquaculture enterprises in Indonesia. (ADM)
  • San Francisco-based Pachama, which uses satellite imaging and AI to monitor carbon stored in forests, secured $64 million in Series B funding from Lowercarbon Capital, Breakthrough Energy Ventures and other investors. (Carbon Herald)
  • New Mexico State Investment Council committed $10 million to a fund managed by Dangerous Ventures, a Santa Fe-based venture firm investing in diverse-led, early-stage climate and sustainability companies. (New Mexico Inno)

Signals: COP Watch

Down and out in Dubai. COP28 negotiators will spend the next two days wrangling over details of a final agreement as the sprawling climate conference draws to a close. Goals such as tripling renewable energy and doubling energy efficiency by 2030 are relatively easy lifts. The stickiest debate, and the one that will determine how the United Arab Emirates’ COP presidency is remembered, is whether to phase out or phase down fossil fuels – or punt on the issue altogether. More than 80 countries want the “phase out” language, but large oil producers like Saudi Arabia remain opposed to even phasing down their chief money-maker. OPEC has urged its members to reject any mention of fossil fuels. China’s top climate envoy called COP28 “the hardest meeting” in his 16 years of COP negotiations. (It won’t be much easier next year, when COP29 takes place in Azerbaijan, another autocratic, oil-rich country). Focusing on cutting emissions without addressing their main source is “like trying to cut with one half of the scissors,” says Tzeporah Berman of the Fossil Fuel Non-Proliferation Treaty (see, “Winding down production to fulfill the Paris Agreement”).

  • Competing agendas in India. India, which has edged out China as the world’s most populous country, exemplifies the challenges. The country is adding renewable energy at a rapid rate, but insists it still needs coal to meet growing energy demand (for background, see “India poised to lead – and test – the just energy transition”). Already the third-largest emitter, India’s emissions are swelling along with its middle class. “India firmly believes that equity and climate justice must be the basis of global climate action,” the country’s environment minister Bhupendra Yadav said over the weekend. “This can be ensured only when the developed countries take the lead in ambitious climate action.”
  • Green investors. Climate is increasingly key to the investment strategies of India’s venture capital, private equity and angel investors. Nearly half of private investors in India say climate change is an important part of their funding mandate, up from one-third last year, according to the Climate Capital Network. Most climate capital is going to early-stage equity investments, the network’s climate finance survey found. “We must move from The Age of Innovation to The Age of Adoption,” urge the report’s authors. Investors told researchers they plan to direct capital to hardware, infrastructure and commodity-based innovations. Expect less investor engagement in nature restoration, environmental analytics, micro-mobility, and urban logistics.

Agents of Impact: Follow the Talent

Erick Berkerts will step down as CEO of Evergreen Climate Innovations at the end of this year. Michelle Carr, ex- of The Nature Conservancy, will replace Berkerts as CEO… RMI is looking for a remote strategic planning and growth manager… International Finance Corporation is hiring an investment analyst for climate and sustainable finance in Washington, DC… Amalgamated Foundation has openings for a community stewardship director and a growth and impact director.

Supply Change Capital is on the hunt for a senior associate to lead deal sourcing and diligence… The Nature Conservancy seeks an associate director of development for corporate philanthropy, based in Cape Town… Sustainable Finance Initiative seeks a communications volunteer in Hong Kong for its Impact Summit.

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

Thank you for your impact!

– Dec. 11, 2023