Greetings, Agents of Impact!
Featured: ImpactAlpha Original
Global corporations start to capitalize on ‘positive externalities.’ When it comes to corporations known for responsible business and sustainable practices, Unilever is often cited as one of the best examples. But when the Canadian research firm Impak Finance last year drilled deeper into corporate impact, the French energy equipment and management company Schneider Electric far outscored Unilever. The difference? Relatively few of Unilever’s products and brands directly improve social or environmental conditions, while Schneider drives about 30% of its revenues from activities related to the U.N. Sustainable Development Goals, primarily through reduction of carbon emissions. “One dollar invested in Schneider Electric will deliver more positive externalities related to the SDGs than a dollar invested in Unilever,” Impak Finance’s Boris Couteaux told ImpactAlpha.
Positive externalities, once treated as, well, externalities, are becoming the new coin of the sustainable investing realm. Fund managers are looking for companies with “sustainability value-add” that has not yet been priced into their stock. Schneider Electric, for example, is productizing what it calls “decentralized, decarbonized, digitized” electricity for commercial and industrial customers looking for cost savings and reliability as well as carbon-emissions reductions. Sustainability is driving the disruption of the electricity grid, as global electricity demand doubles in the next 20 years, Schneider’s Emmanuel Lagarrigue told ImpactAlpha. “The point is to make infrastructure more sustainable and to create new cash flows,” he said. “Impact investing now commands a premium. That’s a big change over the last three to four years. You have a lot of capital available.”
Keep reading, “Global corporations start to capitalize on ‘positive externalities’,” by David Bank on ImpactAlpha.
Dealflow: Follow the Money
Lightsource BP spends $100 million on equipment to fuel solar expansion. The San Francisco-based utility-scale solar developer is prepping nearly four gigawatts of solar capacity after a new equity agreement with oil major BP, which owns 50% of the company as of December. BP took a 43% stake in Lightsource in 2017 as it revived its renewable energy investing activity. BP’s early foray into energy alternatives was largely a bust and shut down in 2011 after the Deepwater Horizon oil spill.
- Energy transition strategies. BP, which has focused on electric vehicle technology, lags oil and gas peers Shell, Total and Norway’s Equinor in championing clean energy investment. Even the most progressive of oil majors are only spending about 5% of their total capital outlays on renewable energy sources.
- Growing footprint. The equity infusion from BP has allowed Lightsource to multiply its project pipeline six-fold. It has two gigawatts of solar capacity in operation and 1.5-gigawatts queued up as part of a three-year U.S. expansion plan.
- Read on.
Ankur Capital raises $34 million for impact tech in India. The Mumbai-based impact investor provides early-stage capital and technical assistance to India’s tech-intensive startups in agtech, healthcare, logistics, financial services and education. It raised its 500 million-rupee ($7 million) first fund in 2016. With its second fund, the firm is targeting 3.5 billion rupees ($50 million) and plans to cut checks of up to $5 million. Backing from the U.K.’s CDC Group, the Dutch Good Growth Fund, and the Small Industries Development Bank of India (SIDBI) helped Ankur reach its first close. The firm has 14 investments in its portfolio and plans to invest in 15 to 18 companies with the new fund.
Signals: Ahead of the Curve
Hopes for a U.S. green bank spring eternal. Green banks are operating in two dozen countries and more than a dozen U.S. states, but establishing a national green bank in the U.S. has proved a stubborn challenge. With interest rates at historic lows – and global temperatures at historic highs – the timing may finally be right. Green banks are public or nonprofit financial institutions that mobilize capital for clean energy, green infrastructure and emissions reduction projects. A legislative framework for reaching net-zero carbon emissions by 2050, unveiled last week by a committee of the U.S. House of Representatives, calls for the creation of a national green bank. The National Climate Bank Act, introduced by Democratic senators in July, would capitalize a nonprofit bank with $35 billion of federal funds over six years. Presidential contenders including Pete Buttigieg and Elizabeth Warren include green banks in their planks. “We saw a window of opportunity in the 2020 election and surge in popular interest in doing something about climate change,” Jeff Schub of the Coalition for Green Capital told ImpactAlpha.
- Catalytic capital. Green banks use low-cost capital, subordinated debt, credit enhancements and other tools to marshal private capital for projects that might not otherwise attract such financing due to their size, difficult economics or lack of performance data. The 14 green banks that have launched since 2011 in Connecticut, Hawaii and other states have spurred $676 million into $3.7 billion in clean energy investments. A U.S. climate bank funded with $35 billion could activate a total $1 trillion via co-investment, capital recycling and balance sheet leverage, according to the Coalition for Green Capital.
- Global club. South Africa and Australia are among the two-dozen or so countries that have established green banks to help meet national climate goals. Nine nations, including India, Peru and Rwanda, announced similar plans at COP25 in Madrid last month.
- Public banks. Green banks are part of a broader wave of public sector financial innovation. California last fall enacted a law allowing for city-owned public banks that serve the common good. Neither green banks nor public banks are true banks. They don’t take deposits; instead they work with private sector investors and lenders. A key difference: public banks serve as a government’s bank account, holding funds such as pensions that must be preserved. Green banks, funded with appropriations, have more flexibility in deploying capital.
Agents of Impact: Follow the Talent
Film and television producer Effie Brown, known for Project Greenlight and Dear White People, becomes CEO of female-focused film fund Gamechanger Films… Agtech investor Omnivore promotes Reihem Roy and Subhadeep Sanyal to partners… Impact investor SEAF is hiring a Human Resources Coordinator (not a COO, as indicated previously) in Washington, D.C… Mission Investors Exchange is looking for a temporary program coordinator to support its peer learning programs… The Knight Foundation is recruiting summer interns in the U.S… Mission Driven Finance is accepting applications for its community finance fellowship… NextCity is hosting a webinar, “How to put racial and class equity first,” with Rodney Foxworth on Jan. 15.
Thank you for reading.
– Jan. 14, 2020