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Featured: Muni Impact
Tear down this road: Cities start to remove highways that divide and disadvantage communities. In Nashville, Interstate 40 cut through a Black neighborhood in the 1960s, demolishing homes and businesses. In St. Paul, I-94 devastated a middle-class Black neighborhood. In Oakland, Calif., the Nimitz Freeway divided once-vibrant Black neighborhoods before it collapsed in a 1989 earthquake – and was rerouted. With their hefty environmental footprint and fraught history, highways are egregious examples of past infrastructure harms. Ripping them out has the potential to be transformative, reports Andrea Riquier for ImpactAlpha. Transportation Secretary Pete Buttigieg last year called out “highways that have cut communities in two” and acknowledged that “sometimes it was federal dollars that divided a community, often along racial lines.” The Reconnecting Communities program, part of the bipartisan U.S. infrastructure act, provides $195 million this year and $1 billion over its five-year life to remove, retrofit, mitigate or replace transportation infrastructure.
- Model city. Tearing down part of a freeway was such a boon that Rochester, N.Y., is planning for removal of more of its 1950s-era Inner Loop highway. In 2017, the initial project reunited downtown and outer neighborhoods, improved air quality and transportation, and spurred mixed-used development and affordable housing over the former highway. Five years later, a $22 million investment has yielded economic benefits of $229 million. Congress for the New Urbanism called the project “a positive precedent for freeway removal efforts around the U.S.”
- Reconnecting communities. Nashville, Las Vegas and other cities are drawing up plans to cover or redesign major thoroughfares. The “ReConnect Rondo” project in St. Paul, Minn., envisions a downtown “African American cultural enterprise district” built on a land bridge over I-94. Louisiana, however, is bucking the trend to remove highways that split minority neighborhoods decades ago. The state is seeking to build a four-mile stretch of I-49 through a historically Black section of Shreveport, drawing criticism from local community members and national advocates.
- Public and private. Many of the local projects plan to complement federal funds by issuing municipal bonds. Despite higher interest rates, market conditions are favorable for muni issuers. Demand remains high and supply lean. Muni issues through July are down 13% compared to a year ago and are on track for one of the lowest totals in a decade. Many communities will likely also seek investors for public-private partnerships, or PPPs. One useful model: “transit-oriented developments” that locate density around urban transit hubs.
- Keep reading, “Tear down this road: Cities start to remove highways that divide and disadvantage communities,” by Andrea Riquier on ImpactAlpha. Check out all of our coverage of Muni Impact, which is supported by the Robert Wood Johnson Foundation (posts do not necessarily reflect the views of the foundation).
Dealflow: Catalytic Capital
Temasek and HSBC commit $150 million for green infrastructure in Southeast Asia. Innovative financing mechanisms could catalyze capital to fill the more than $3 trillion gap in sustainable infrastructure financing in Southeast Asia through 2030, according to the Asian Development Bank. Singapore-based Temasek and London-based HSBC have committed equity funding to launch Pentagreen Capital, a debt-financing platform for clean transport, clean energy and energy storage, and water and waste management projects in the region. Pentagreen will later consider opportunities outside of Southeast Asia, as well as projects in agriculture, land use and climate adaptation (see, “Climate adaptation gets a fund of its own to invest in data, analytics and resilience”). The platform aims to deploy at least $1 billion within five years.
- Flexible debt. Pentagreen’s Marat Zapparov, ex- of International Finance Corp., hopes to attract commercial investors by bringing flexible debt capital to the table. ADB will provide technical assistance and project development services. Clifford Capital will provide project finance and back office support. “Neither private nor public sector can close the financing gap alone,” said HSBC’s Noel Quinn. The partners, he said, “can deploy significant amounts of blended finance for projects in Southeast Asia that would otherwise go unfunded.”
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EarlySalary raises $110 million for instant-cash loans to India’s young earners. The Pune-based fintech company aims to provide access to credit for underserved consumers in India’s third and fourth tier cities. EarlySalary provides instant credit, salary advances and buy now, pay later financing “to the growing, yet underserved, middle-income segment in India,” said Akshay Tanna of TPG, which invested via its impact-focused Rise Fund. EarlySalary’s customers are using the loans “to finance upskilling courses, healthcare needs, personal emergencies and short-term cash flow mismatches,” he said.
- Growth targets. EarlySalary is also looking to expand from 18 cities to 150 cities and reach one million customers in India over the next two years. The Series D financing values the company at $300 million.
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Organic brand Coyuchi looks to raise capital from the crowd. Long before sustainability became a buzzword, San Francisco-based Coyuchi was selling high-end organic cotton sheets, bath towels and other textiles to eco-conscious consumers. Over three decades, the company has grown revenues to $33 million and its fan base to more than 200,000 customers. Coyuchi is looking to tap that network via a $15 million “Regulation A” crowdfunding offering (for context, see “Startups raise ‘community rounds,’ turning customers and fans into investors”). The offering “allows us to engage our already highly loyal customer base in a deeper, transparent way,” said Coyuchi’s Eileen Mockus.
- Organic growth. Coyuchi purchases from 400 smallholder farms in India, which receive fair trade premiums. Everyday investors can buy Coyuchi shares for a minimum of $450, and receive perks as well as equity. The company has raised $20 million in venture capital.
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Dealflow overflow. Other investment news crossing our desks:
- Merak Ventures is looking to raise $100 million to invest in up to 20 seed-stage climate, insurance and enterprise tech startups in India over the next four years.
- eSmart Systems secured €40 million ($40.1 million) to provide inspection and maintenance services to global utilities for critical energy infrastructure.
- Vive Crop Protection scored $26 million in Series C funding, alongside an undisclosed debt investment from Silicon Valley Bank, to help farmers improve crop quality sustainably.
- Sea6 Energy raised $18.5 million from Aqua-Spark and others to convert red seaweed into biofuel and other bio-renewable products to replace chemicals and plastics.
Impact Voices: Back to School
Education financiers aim to flip the odds in favor of students in the Global South. Hundreds of millions of students in low and middle-income countries are still suffering the consequences of the Covid-19 pandemic and related lockdowns. Central to the recovery will be leveraging innovative financing instruments to draw in more private capital from investors “to back solutions with high impact potential for enhancing equitable outcomes,” write Dalberg’s Kusi Hornberger and Ines Charro, and Nirav Khambhati of Kaizenvest, in a guest post. Pre-pandemic, International Finance Corp. estimated additional financing of $250 billion annually was needed to achieve the targets set out in Sustainable Development Goal No. 4: quality education for all. The financing gap has likely increased. The authors are working with Education Finance Network, developed by USAID, to convene donors, investors and education practitioners to leverage private resources to support education systems in low and lower-middle income countries. “We are calling on non-state actors to raise the stakes,” they write.
- Education innovation. Non-state enterprises educate over 350 million children around the world and support public education systems with technology, assessments, tutoring and textbooks. Varthana, India’s largest lender to non-state K-12 schools, stepped up during the pandemic to help shuttered schools create online lessons accessible on basic phones. The firm is backed by the U.S. International Development Finance Corp. and Kaizenvest.
- High impact. Evidence supports the impact and financial promise of educational investments, say the authors. Innovative financing instruments, such as impact bonds, income share agreements and blended finance, can improve quality in education systems with services that target the most underserved groups, the authors say. Impact investors allocate only a small fraction of their investments to education, according to Global Impact Investing Network.
- Keep reading, “Education financiers aim to flip the odds in favor of students in the Global South,” Kusi Hornberger, Ines Charro and Nirav Khambhati.
Agents of Impact: Follow the Talent
Lisa Mensah is stepping down as Opportunity Finance Network’s president and CEO (see “Agent of Impact: Lisa Mensah”); Beth Lipson, who has worked at OFN for the past 25 years, will take over on an interim basis… Andy Jarvis, ex- of the Alliance of Diversity and CIAT, will join Bezos Earth Fund as director for the future of food… Elevar Equity is recruiting a Latin America office manager in Mexico City… The World Economic Forum seeks a lead for financial innovation in New York… Living Cities has several open positions in Washington, D.C.
The Connecticut Green Bank is hiring a director of environmental infrastructure programs and a senior accountant in Hartford… Tideline is hosting “Systems-level investing: What is it, and how does it differ from or reinforce sustainable and impact investing?” with Monique Aiken and Bill Burckart of The Investment Integration Project, Carole Laible of Domini Impact Investments, Brian Minns of University Pension Plan, and Tideline’s Ben Thornley, Wednesday, Sept. 7.
Thank you for your impact!
– Aug. 31, 2022