Greetings, Agents of Impact!
Zoom in to today’s Call. What’s your prediction for 2021? Your plan? Your ask? Bring something to share on our last Agents of Impact Call of the year, today, Tuesday, Dec. 22, at 10am PT / 1pm ET / 6pm London / 9pm Nairobi. Zoom right in.
Signals: Ahead of the Curve
U.S coronavirus relief package boosts lenders in underserved communities. The $900 billion stimulus bill set to be approved by Congress is being celebrated as a breakthrough for community lenders. “This is a powerful milestone for our field,” said Lisa Mensah of the Opportunity Finance Network, which had advocated for community development financial institutions, or CDFIs, and minority-owned depository institutions, or MDIs. The COVID-19 Emergency Relief bill, part of the larger government spending package, directs $12 billion to CDFIs and MDIs. That’s in addition to a $15 billion carve-out for such lenders in a fresh $284 billion round of the Paycheck Protection Program for struggling small businesses. The provisions are “a recognition of the role that we play that can’t be replicated by other institutions,” said Matt Josephs of the Local Initiatives Support Corp., which, like other CDFIs, has tried to rush capital to businesses in communities that mainstream banks don’t reach (see, “Innovative CDFIs scale up to help underserved communities move from relief to recovery”). With COVID cases spiking and new shutdowns looming, he said, the bill comes “just in the nick of time.”
- Equity-like capital. The relief bill establishes a $9 billion Emergency Capital Investment Program, to be run by the Treasury, that will provide equity-like capital for minority-owned and CDFI banks and credit unions. Once signed, “Congress will have created the largest-ever fund with financial returns tied to impact objectives,” tweeted Calvert Impact Capital’s Beth Bafford. A $3 billion boost to the Treasury Department’s CDFI Fund, including $1.2 billion earmarked for minority lending institutions that predominantly serve communities of color, will support a broader group of CDFIs. The first tranche of emergency funds will be deployed over the next 60 days.
- New Markets Tax Credits. The bill also reauthorized a key program relied upon by community developers to attract outside capital. The New Markets Tax Credit program was reauthorized for five years at $5 billion per year.
- Dig in.
Short takes. Here’s a sampling of the reports and other signals crossing our desks:
- Impact alpha in listed equities. The top 10 highest performing companies on social and environmental impact saw the largest gains in share price over the past three years, according to a study of more than 100 European companies by Canadian impact rating agency impak. ImpactAlpha’s Dennis Price moderated a panel previewing the results, “In search of impact alpha in listed equities.”
- Energy transition’s mixed message. More oil and gas companies are trying to get on board the net-zero energy transition. Thwarting progress: Executive pay targets that reward fossil fuel production growth, according to “Groundhog Pay,” a new report from CarbonTracker.
- Exchange-traded forest risk. Many mutual funds are taking steps to mitigate deforestation risk. Not so in the $6.7 trillion world of exchange-traded funds, says PlanetTracker. Those exposed to substantial forest risk include large ETF managers like BlackRock, Goldman Sachs, Wells Fargo and UBS.
- Resilient home ownership. Among the efforts in a new cohort assembled by Neighborhood Economics are Rebirth Credit Union, a distributed credit union network piloted in Black churches in Allentown, Penn., and anchored by Hope Credit Union; and Community Investment Trust in Portland, Ore., a loss-protected investment that allows community members to collectively buy local real estate.
Dealflow: Follow the Money
Brazilian fintech Creditas snags $255 million to expand access to consumer credit. The Series E equity round led by impact investor LGT Lightstone values Sao Paulo-based Creditas at $1.75 billion. The consumer lending startup, launched in 2012 by former Boston Consulting Group and Deutsche Bank executive Sergio Furio, aims to improve Brazilians’ access to credit. Borrowers can secure low-interest by putting up their cars, homes and other assets as collateral. The startup has originated nearly $200 million in loans to date, nearly doubling its reach since 2018 (see, “Endeavor Catalyst backs Brazilian lending platform Creditas”).
- New markets. Creditas will use the financing to expand its loan portfolio and market footprint to Mexico. Participating investors include SoftBank, Amadeus Capital Partners, Tarsadia Capital, Wellington Management and Vostok Emerging Finance.
- Dig in.
DFC approves $500 million for Safaricom-led Ethiopian telecom project. The U.S. International Development Finance Corp. approved a $500 million loan for companies seeking a telecommunication license in Ethiopia, led by Kenyan mobile provider Safaricom. Safaricom said it needs $1 billion to complete the mandate. The financing is part of DFC’s announcement last week of $2.1 billion in new debt investments to boost economic growth in Africa, Eastern Europe, Indo-Pacific, Latin America and the Middle East. DFC’s Adam Boehler said the investments “will strengthen small businesses, support female entrepreneurs, expand telecommunications and increase development in emerging markets.”
- COVID response. An executive order signed by President Trump earlier this year gave DFC authority under the Defense Production Act to finance domestic production of commodities deemed critical to the effort to stem the coronavirus pandemic (see, “White House stands up an impact investing arm to finance COVID-response suppliers”). The agency was forced to halt the first such loan, a $765 million commitment to Eastman Kodak Co. It has approved a $590 million loan to ApiJect Systems Corp. for vaccines injectors.
- Recent deals. DFC backed Bangalore-based Varthana with a $15 million loan to help the company support schools amid the COVID crisis, including help with the transition to online learning. It provided Netherlands-based Lumos with $35 million in financing to expand access to solar energy in Nigeria.
Green Hydrogen Systems raises €28 million to help fuel Europe’s climate goals. The Danish startup makes electrolyzers that split hydrogen from water molecules. The convertible loan of €20 million euros from AP Moller Holding, as well as an additional €7 million investment from Nordic Alpha Partners and €1 million from Norlys Holding, will help the company scale its production as the European Union looks to ramp up green hydrogen.
- Climate goals. The E.U. has ambitious plans for green hydrogen to help decarbonize high-intensity sectors such as chemicals and steel. It’s aiming to install 6 gigawatts of hydrogen capacity by 2024 and 40 gigawatts by 2030, up from 300 megawatts today.
- Share this.
Dealflow overflow. Short takes on a few of the deals crossing our screens.
- Electric scooter startup Superpedestrian secures $60 million to expand in NYC. The Cambridge, Massachusetts-based company uses artificial intelligence that detects hazards in real-time. Investors include OurCrowd, Citi Impact Fund, Winthrop Square Capital and more.
- Group14 raises $17 Million to scale production of battery materials. South Korea manufacturing giant SK Materials led the investment in the Seattle-based producer of materials for lithium-ion batteries for electronics, cars and much more. Return investor OVP Venture Partners also participated.
- Incofin backs rural Chinese microfinance firm Huimin. Incofin’s agriculture-focused fund agRIF invested $2.1 million in equity to help the microfinance firm serve female smallholder farmers in Ningxia, one of the poorest provinces of China. Danish development financial institution IFU also participated.
Agents of Impact: Follow the Talent
Blue Haven Initiative is looking for a strategic operations associate in Cambridge… Total Impact Capital seeks an analyst in Washington DC… Illumen Capital is recruiting an operations manager in the San Francisco Bay Area… BlocPower is hiring a data lead and senior software engineer in New York… Kanin Energy seeks a junior project engineer.
Thank you for reading.
– Dec. 22, 2020