The Brief | March 2, 2023

The Brief: Regeneration and risk-taking at FLII, decarbonizing food, green hydrogen, Egyptian fintech, clean energy acquisition

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Greetings, Agents of Impact!

Featured: Conference Circuit

Regeneration and risk-taking: Overheard at the Latin American Impact Investing Forum. Some 800 agentes de impacto turned out for the forum, known as the FLII, in Mérida, Mexico this week. ImpactAlpha tuned in to the conversations and debates on stage and on the sidelines about fund raises, natural capital and risk mitigation in one of the most active regions for impact investing. Some takeaways:

  • Regenerative fund roll-out. Fund managers are bringing new strategies, opportunities and models to investors interested in sustainable agriculture, land restoration and conservation. Advisory firm SVX Mexico is rolling out its first fund, Regenera Ventures, which will invest in landscape regeneration throughout Mexico. The fund will source deals through a network that includes Conservation International. Brazil’s Vox Capital is expanding beyond venture capital with the launch of a natural capital strategy. Mexico and Switzerland-based Asymmetrica is raising a $30 million fund that will buy out retiring farmers, transition the farms to organic practices, and give farm workers a cut of the equity. “Land is substantially undervalued,” Asymmetrica’s Francisco Escobar told ImpactAlpha, who said the fund’s model offers investors a high-impact inflation-hedge.
  • ESG backlash explainer. An audience member asked Cliff Prior of the Global Steering Group for Impact Investment to contextualize the backlash against environmental, social and governance-based investing (catch up: “GOP ditches ‘pro-business’ with attacks on ESG that hurt corporations, investors – and red states”). In the U.S., “it’s just politics,” he said. “Why would you want to remove information for a customer? That’s absolutely crazy. It’s the equivalent of Nazi book-burning in 1930s Germany.” Globally, the concern is greenwashing, which is “being tightened up” with an ever-growing list of countries rolling out regulatory reporting taxonomies. ESG investing is approaching $53 trillion, he said. “Despite the backlash, all of the evidence is that ESG investing is increasing.”
  • ‘For the record.’ “The mission of all development finance institutions is to catalyze changes that make conditions hospitable for private investment,” said Luyen Doan Tran of the International Finance Corp. Government-backed and multilateral finance institutions control at least $6 trillion in assets globally. But DFIs have been found to be highly risk-averse and are more often catalyzed than catalytic in underinvested markets worldwide (see, “To catalyze climate capital, development finance institutions are pressed to ‘publish what you fund.’”) “We know that we need to take more risk,” acknowledged Gema Sacristan of IDB Lab. To mitigate risk for other investors, the division at the Inter-American Development Bank is experimenting with subordinated capital and services and using mezzanine finance to develop a “mezzanine finance asset class” in the region.
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Sponsored by CalCEF Innovations

Seeking proposals for a China climate ETF or mutual fund. California Clean Energy Fund (CalCEF) Innovations, a nonprofit public benefit corporation, is seeking proposals from sustainable financial advisors and fund management companies that specialize in the development of climate-aligned exchange-traded funds and mutual funds, as well as the marketing of those investment products to U.S.-based retail and institutional investors. The purpose of the request for proposals (RFP) is to expand China-focused, climate-aligned investment product offerings for the U.S. market through the development of a climate-friendly fund product – in the form of an ETF, index fund or mutual fund, which tracks a designated climate index. The RFP will offer a sponsorship of up to $300,000 to deliver the fund. All work required for regulatory approval must be concluded by October 31, 2023.

  • How to apply. All proposals must be submitted by Friday, March 31. For more information read the full RFP.

Dealflow: Food Waste

Divert raises $1.1 billion to convert food waste into renewable natural gas. The Concord, Mass.-based company raised $100 million in growth equity from investors including Ara Partners and Canadian oil giant Enbridge. Enbridge also provided $1 billion in structured project finance to Divert to build large-scale anaerobic digestion facilities, which use microbes to break down food and animal waste to produce renewable natural gas, while also sequestering the methane and carbon. Divert works with 5,400 food retail stores, and has an additional 1,000 stores under contract.

  • Green infrastructure. Through the billion-dollar partnership with Enbridge, Divert says it will build large-scale anaerobic digesters within 100 miles of 80% of the U.S. population. The U.S. is responsible for more than 90 million metric tons of food waste each year. Divert says the anaerobic digestion facilities could offset up to nearly 400,000 metric tons of carbon annually.
  • Biogas transition. Renewable natural gas is interchangeable with conventional natural gas and has the potential to reduce greenhouse gas emissions by up to 236 million metric tons by 2040. Enbridge is one of the latest oil majors looking to phase out fossil fuels via renewable natural gas (see, “ImpactAlpha Deal Spotlight: Oil giants’ biogas acquisitions”). Divert signed a 10-year, $175 million offtake agreement with BP late last year.
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Dealflow overflow. Other investment news crossing our desks:

  • Belgium-based Incofin raised $77 million to invest in agrifood and financial inclusion in rural India.
  • U.K.-based GeoPura, which converts green hydrogen fuel into electrical energy, secured £36 million ($43.3 million) from Barclays Sustainable Impact Capital, Siemens Energy Ventures and other investors.
  • Egyptian fintech startup Hollydesk snagged $1 million in venture debt funding to help small and mid-sized businesses in Egypt manage and track daily expenses.
  • Massachusetts-based clean energy developer Ameresco will acquire Enerqos Energy Solutions, an Italian clean energy and energy efficiency company.

Agents of Impact: Follow the Talent

Girish Nadkarni, ex- of TotalEnergies Ventures, has been appointed to Clean Energy Ventures’ strategic advisory board… Sesame Workshop is looking for a New York-based senior operations director for international social impact… JUST Community is hiring a director of operations… Village Capital is recruiting a board member… Bamboo Capital Partners seeks a valuation manager in Luxembourg.

IFRS Foundation is looking for a global director of investor relationships… Saint Paul & Minnesota Foundation has an opening for a director of investments… Acre is recruiting a principal consultant for impact investing recruitment in New York… CalSEED is accepting grant applications from early-stage clean energy innovators and entrepreneurs in California through Sunday, March 5.

Thank you for your impact.

– March 2, 2023