The Brief: Steering shipping toward a low-carbon future

Greetings Agents of Impact!

In today’s Brief:

• Decarbonizing cargo container shipping 
• Deep climate tech
• Impact Community’s Jeff Brenner finds the alpha in preserving affordable housing 
• Local currency guarantees for African infrastructure 

Featured: Industrial Decarbonization

How the shipping industry can set sail toward a low-carbon future. Greening fossil-fueled container ships and fuel tankers is among the thornier climate challenges. Some 90% of global trade relies on shipping, which is responsible for some 3% of annual global greenhouse gas emissions, about the same as aviation. The Global Maritime Forum last week issued “a serious wake up call,” calling the next 12 months critical for the shipping industry’s climate goals. “We need all hands on deck to disrupt this hard-to-abate industry,” Amy Duffuor of Azolla Ventures and Alexandra Steckmest of Wallem Steckmest & Co., a Norwegian shipping management company, write in a guest post on ImpactAlpha.

• Green fuels. Recent investments in green shipping, limited as they have been, have focused on energy efficiency, including software for reducing emissions. Now, attention is shifting to new, greener sources of fuel. “Our money is on green methanol, green ammonia and carbon capture as the key shipping solutions for impact and scale,” write Duffuor and Steckmest. “Within the industry, there is ambition to decarbonize, which is leading to untapped business opportunities.” 

• Shipping startups. Batteries and hydrogen are starting to be used for ferries and other short-distance vessels. Carbon capture could be a short-term solution for fossil-fuel powered ships. For long-haul shipping, green methanol and ammonia will likely dominate over the medium and long term. Technology developed by the startup Amogy, backed by Breakthrough Energy Ventures, breaks down ammonia into hydrogen and nitrogen. Oxylus Energy, which raised a $4.5 million seed round led by Azolla Ventures and Toyota Ventures, is producing low-cost green methanol. Calcarea, another Azolla portfolio company, uses “accelerated weathering of limestone,” which mimics the ocean’s ability to store and neutralize carbon, for capturing and storing carbon on ships.
  
• Demand side. The GHG strategy adopted last year by the International Maritime Organization aims to cut emissions by 20% by 2030, 70% by 2040 and to reach net-zero for international shipping by 2050. The shipping giant Maersk has committed to launch more than a dozen green methanol-powered container ships, and has agreements with Chinese producer Goldwind, Norway’s Equinor, Los Angeles-based WasteFuel, and others to supply the fuel. Earlier this year, the Zero Emission Maritime Buyers Alliance, a green cargo initiative launched by companies including IKEA, Nike and Amazon, contracted with container shipper Hapag-Lloyd to use waste-based biogas fuel to reduce emissions by 90%.
  
• Keep reading, “How the shipping industry can set sail toward a low-carbon future,” by Amy Duffuor and Alexandra Steckmest on ImpactAlpha.

Dealflow: Climate Tech

DCVC raises over $300 million for its first climate fund. The Palo Alto, Calif.-based venture capital firm invests in “deep tech” breakthroughs in medical treatments, food systems and other biotech applications. The firm says about 30 of its portfolio companies tackle climate change resilience and mitigation. Pivot Bio, for example, makes environmentally safe crop inputs as an alternative to chemical fertilizers. DCVC has secured more than $300 million for its first climate fund to support the commercialization of deep tech ventures in energy, transportation and industrial decarbonization. The firm also has closed its third biotech fund to invest in biotech companies leveraging AI.

• Sustainable fashion. DCVC has inked at least a half dozen investments from the climate fund. Most recently it backed California-based Unspun to help cut waste from the fashion and textile industries with machines that produce garments on site and practically on demand. Unspun signed a contract last year with Walmart. Other DCVC portfolio companies include Fervo Energy, which is building a geothermal energy plant in Utah. DCVC reupped its investment last month in Berkeley, Calif.-based Twelve, which is building a commercial plant for sustainable aviation fuel. Equilibrium is constructing a 100-megawatt battery storage project in Texas. Verdigris uses a combination of software and sensors to help building owners monitor and manage energy usage. DCVC recently made its first investment in the water sector: ZwitterCo makes wastewater filtration membranes that are specially designed for use in agriculture.
  
• Check it out.

Dhamana gets $14.6 million to mobilize capital for sustainable infrastructure in East Africa. Dhamana Guarantee Co. provides local currency credit guarantees to facilitate financing for sustainable infrastructure in East Africa. The Kenya-based company connects institutional capital from African pension funds, insurance companies and sovereign wealth funds to projects in transport, water, renewable energy and waste management infrastructure. Dhamana raised $10 million in equity financing from the African Development Bank, and $4.6 million from Nairobi-based County Pension Fund Financial Services, FSD Africa and Cardano Development. AfDB’s Solomon Quaynor says Dhamana can accelerate the mobilization of capital from Africa’s institutional investors and “reinforces the catalytic role and potential of credit enhancement companies in leveraging opportunities for infrastructure financing in local currency.”

• Guarantee strategy. Dhamana was founded by InfraCo Africa, a subsidiary of the Private Infrastructure Development Group, or PIDG, a private infrastructure financier focused on Africa and Asia. PIDG owns similar institutions in Nigeria (InfraCredit Nigeria) and Pakistan (InfraZamin Pakistan). AfDB’s Solomon Quaynor says the bank will work with PIDG to seed more credit enhancement companies in Africa.
  
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Dealflow overflow. Investment news crossing our desks:

• Morgan Stanley Investment Management raised $750 million for a private equity fund for growth-stage companies in the mobility, energy, sustainable food, agriculture and circular economy sectors. (ESG Today)
  
• LeapFrog Investments notched a partial exit from Northern Arc, a lender for low-income households and businesses in India that LeapFrog first backed in 2014. (LeapFrog Investments)

• Germany’s Foodforecast raised €3 million ($3.3 million) to help food businesses minimize food waste through sales forecasting and inventory optimization. (EU-Startups)

• Lisbon-based The Land Group launched a €120 million ($133 million) investment fund to acquire, regenerate and manage farmland in South America. (The Land Group)

• Malaysia’s Qarbotech raised $1.5 million for its crop additive that helps farmers boost yields while sequestering more carbon in their soil. It will expand into Indonesia, Vietnam and Thailand. (Agritech Digest)

Podcast: Affordable Housing

Building institutional-grade strategies to create and preserve affordable housing. Increasing the supply of new affordable housing is important. Preserving existing housing units for low-income families is existential. Through this year, rent restrictions have expired on nearly 300,000 units of affordable housing in properties that were built with federal subsidies and tax breaks 15 or 20 years ago. Affordable housing developers have trouble competing with buyers who are intent on flipping those units to market-rate rents, displacing stable and rent-paying low-income families. “We can’t afford to lose access to affordable housing,” Jeff Brenner of Impact Community Capital says on the latest episode of ImpactAlpha’s Agents of Impact podcast. “Market rate developers come in and they can afford to put higher bids on the properties, because their intent is to raise rents so they can produce higher cash flow. So it puts a tremendous amount of pressure to try and find ways to give developers the capital they need to preserve that housing.”

• Institutional scale. Impact Community Capital sources that capital primarily from the large insurance companies, including Allstate, Farmers, Nationwide, Nuveen and Pacific Life, which helped launch the firm in 1998. Since 1998, Impact Community Capital has deployed more than $1.6 billion in financing to create more than 54,000 units of affordable housing. Now, the San Francisco-based fund manager is opening its institutional-grade funds to outside investors as well.  “We want to add another billion to a billion-and-a-half in investments in affordable housing over the next three to four years, because it’s a huge problem that needs to be solved,” says Brenner.
  
• Short and long. The firm provides short-term loans to developers so they can move fast while arranging longer-term federal financing. That capital helps renew rent restrictions and keep the units affordable for families earning less than 100% of their area’s median income. The impact fund manager also provides longer-term, mortgage-backed products to create or preserve housing units financed with public subsidies including Low Income Housing Tax Credits for families earning less than 60% of the area median income. Foundations, endowments, family offices and other investors, Brenner says, have woken up to the fact that affordable housing vacancy rates remain low through both up and down economic cycles. The simple reason: When families have a home they can afford, they don’t want to leave. He says investors now think about affordable “as more of a core real estate investment, something that is low risk, that doesn’t provide outsized returns, but matches up well against their assets and provides predictable income.”
  
• Keep reading, and listen in, to “Building institutional-grade strategies to create – and preserve – affordable housing (podcast),” by David Bank on ImpactAlpha. For more great conversations, check out all of the shows on the ImpactAlpha Podcast Network.

Agents of Impact: Follow the Talent

Accion appoints Paulo Silva, previously with UNICEF, as chief financial officer… Bella Landymore and Sarah Teacher will step into the role of co-CEOs of the Impact Investing Institute. Former CEO Kieron Boyle is appointed to chair… Sandpiper Ventures taps Lauren Ledwell, former CEO of Discoverygarden, as investment principal… Elizabeth Nguyen, previously with Village Capital, joins Draper Richards Kaplan Foundation as a senior associate. 

Illumen Capital adds Femi Olonilua as an investment intern… Sustainable Capital Advisor welcomes Caitriona Cobb, previously with Tesla Government Inc., as project manager… Duke University’s Chibuzor Biosah joins SJF Ventures as a venture fellow… Impact Principles elects Accion’s Kathleen Yaworsky, Schroders’ Catherine Macaulay, Quona Capital’s Monica Brand Engel, Incofin’s Dina Pons, and Secil Yildiz of the Development and and Investment Bank of Turkiye to its advisory board. 

Sonen Capital is looking for a business development director in San Francisco… Also in San Francisco, Climate Policy Initiative is hiring a senior analyst for its Catalytic Climate Finance Facility Learning Hub… Quona Capital seeks an investment associate in Singapore… Pursuit is recruiting an impact investment senior associate in Long Island City.

IIX has an opening for a strategic initiatives senior associate in Mumbai… KKR’s Pete Stavros, who is also founding chairman of Ownership Works, launches Expanding ESOPs to boost worker ownership transitions via employee stock ownership plans, or ESOPs. The coalition includes more than 50 major foundations, advisory and law firms, advocacy groups and financial institutions, including the Ford Foundation, RBC Wealth Management and UBS.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Oct. 2, 2024