The Brief | May 31, 2023

The Brief: Proxy season’s big chill, securitizing off-grid solar payments, green Opportunity Zones, trucking cooperative in Nashville

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👋 The Call: How asset allocators are driving racial equity in municipal bonds. ImpactAlpha’sMuni Impact” calls have examined intentional efforts by issuers and fixed-income managers to address long-standing racial inequities in the municipal bond market. Next up: cutting-edge strategies that pension funds, endowments and other asset allocators are using to push for racial equity in muni markets. Join Harvard’s David Wood, Renaye Manley of the Service Employees International Union, and other Agents of Impact, Wednesday, June 14, at 10am PT / 1pm ET / 6pm London. RSVP today

Featured: Proxy Season

Big Chill: Political backlash and legal threats sap shareholder support for climate action and ESG. Shareholders are voting on a record number of resolutions related to corporate action on climate and environmental, social and governance factors at this year’s annual meetings. But support for such resolutions is flagging as major asset managers recalibrate their proxy-voting strategies in the face of a coordinated campaign by Republican state attorneys general, including threats of legal action. Last year, more than 30 proposals won majority approval. “We’re nowhere near that,” said Heidi Welsh of the Sustainable Investments Institute. “The really big players are stepping back. They’re spooked a bit by the anti-ESG rhetoric.” Today’s test: shareholder resolutions at ExxonMobil’s annual general meeting that call on the oil giant to detail the risks of climate-related litigation, report on methane emissions, and quantify the costs of retiring assets to comply with net-zero scenarios, among other proposals. 

  • Pressure tactics. Shareholder activists trace the big chill to a March letter to some of the world’s largest asset managers from 21 attorneys general expressing concern with “the ongoing agreements between asset managers to use Americans’ savings to push political goals during the upcoming proxy season.” Groups including the Net Zero Asset Managers Alliance and Climate Action 100+, the AGs said, may be engaging in “potential unlawful coordination and other violations.” After insurers received a similar letter, the Net Zero Insurance Alliance lost nearly half of its members.
  • Climate litigation. One of Exxon’s main arguments against the climate resolutions is that the Paris climate agreement’s net zero goals are unlikely to be achieved; therefore, Exxon’s risks under such scenarios do not “meet the level of likelihood required to be considered in our financial statements.” One proposal before Exxon shareholders requests a risk assessment of environment-related litigation pending against the company. Sparking the novel proxy strategy is a court ruling in Guyana that requires Exxon to guarantee it will cover “unlimited” costs in the event of an oil spill at the massive offshore oil field it’s developing. Failure to comply could result in a suspension of Exxon’s drilling permit. A narrower proposal requests disclosure of potential liabilities of a worst-case spill in Guyana.
  • As You Vote. Shareholder activist group As You Sow comes in for special opprobrium in both the AGs’ letter and Exxon’s recommendations to shareholders. Among the organization’s counter-measures is a partnership with Iconik, which allows individual investors to cast their votes in line with As You Sow’s recommendations. (Iconik also has partnerships with and Bill McKibben’s Third Act.) Iconik’s Alex Thaler said shareholders have voted on resolutions at nearly 750 public companies since the app launched last month. That signals the preferences of individual investors, rather than asset managers. “Most of the voting on our platform I would describe as skewing progressive,” he told ImpactAlpha. “If you do pass through the vote to individuals, rather than these intermediaries, what kind of vote do you get? I believe it’s more pro-social than pro-business.”
  • Keep reading, “Big Chill: Political backlash and legal threats sap shareholder support for climate action and ESG,” by Amy Cortese and David Bank on ImpactAlpha. 

Dealflow: Sustainable Securitizations 

Sun King raises $130 million through securitization of off-grid solar payments. Public agencies and private companies from California to Cote d’Ivoire are leveraging cash flows to finance climate adaptation and green initiatives. Social enterprise Sun King has struck a deal to securitize $130 million in current and future customer payments for its solar products. The debt financing is denominated in Kenyan shillings and backed by British International Investment, Stanbic Bank Kenya, Citi and other development finance and banking institutions. “This securitization could be key to unlocking the extensive capital needed to fund solar energy initiatives at the scale the climate crisis requires,” said Sun King’s Anish Thakkar. BII and Stanbic separately provided Sun King with $20 million in working capital. 

  • Scalable opportunity. Low-income customers and small businesses in emerging markets are underserved by traditional banks. Mobile money and financial technologies are providing insights into borrowers’ buying and spending patterns, as well as their credit profiles, accelerating cost-efficient access to finance. Banks want in. “Segments of the population that were difficult to reach and unviable commercially in the past, now — because of technology — are feasible to serve at scale,” Citi’s Jorge Rubio Nava told Bloomberg.
  • Trend spotting. Banks are leaning into the commercial and impact opportunity of serving emerging market customers. Citi expects an uptick in sustainability-driven securitizations in emerging markets. Standard Bank this month led a $200 million round of debt for solar and financial services provider M-KOPA; repayment terms include impact incentives. African banks, including Standard and Absa, are taking equity stakes in inclusive agtech and enterprise tech companies like Khula, Nomanini and HelloChoice.
  • Growth mode. Sun King’s solar lanterns, home systems and other products reach more than 100 million people. Its latest financing follows last year’s $260 million Series D equity round and $10 million green bond issue. Last month, Sun King acquired pay-as-you-go cookstove venture PayGo.
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Opportunity Zone investors bet $5 million on a Pennsylvania factory supporting the green building transition. In a previous career, John Wolfington redeveloped defunct factories and brownfield sites for residential and commercial use. Now, he’s manufacturing materials so other developers can make buildings greener and more efficient. Exceler Building Solutions has raised $5 million to produce prefabricated panels at its factory in Hazleton, Pa., in once-thriving coal country. Investors get special tax treatment because the company is located in a designated Opportunity Zone. 

  • New materials. Exceler makes precast building panels using software that dramatically cuts material waste. One potential manufacturing partner designs solar panels that look like brick and can be affixed to any building. Another, based in Belgium, designs green building materials for hospitals and data centers. “We’re not trying to reinvent the wheel, we’re just trying to make it roll better,” Wolfington told ImpactAlpha.
  • Green jobs. Exceler is looking to raise up to $20 million as an Opportunity Zone investment. The company is ramping up production in Hazelton and has plans for a new facility in an Opportunity Zone in the Florida Panhandle. Green materials “aren’t a huge market yet, but that’s where we’re going,” Wolfington said. “Everyone is trying to reach net zero.”
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Dealflow overflow. Other news crossing our desks:

  • FinDev Canada and Triodos Investment Management provided a $10.2 million loan to Maranatha to develop solar capacity for the Dominican Republic’s electricity grid. (FinDev Canada)
  • Seed Commons provided debt financing to support the launch of Third Eye Trucking, a trucking cooperative in Nashville, Tenn., founded by three formerly incarcerated individuals. (Opportunity Finance Network)
  • Korbit Technologies raised $11.3 million from Khosla Ventures, Jobs for the Future and others for its AI-guided mentoring application for software developers. (Korbit)
  • YeneHealth secured funding from The Case for Her to provide menstrual cycle and health information to women and girls in Ethiopia. (The Case for Her

Agents of Impact: Follow the Talent

Former Enel CEO Francesco Starace joins EQT Infrastructure as a partner… Elemental Excelerator is hiring a chief of staff in the San Francisco Bay Area… Root Capital is looking for a gender equity advisor in Indonesia… The Alliance for Community Development seeks an executive director in San Francisco… Aspen Institute and Rutgers University are hosting the Employee Ownership Ideas Forum in Washington, DC, June 14-15. 

Thank you for your impact.

– May 31, 2023