The Brief | March 11, 2024

The Brief: The Great Deployment runs through the muni bond market

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact!

In today’s Brief:

  • Munis and The Great Deployment
  • Sustainability-linked loans for the garment industry
  • The trials of Grameen’s Muhammed Yunus

⚡ Plugged In: Tech equity in action. Google-backed Tech Equity Collective is working to double the number of Black developers in tech by 2030. Tech Equity Collective’s Rachelle Olden joins ImpactAlpha’s Sherrell Dorsey on this week’s Plugged In, Wednesday, March 13 at 10am PT / 1pm ET / 5pm London. RSVP today.

Featured: Muni Impact

The Great Deployment runs through the muni bond market. “In a thousand cities and towns,” President Biden said in his State of the Union speech last week, “the American people are writing the greatest comeback story never told.” At the heart of that comeback is the buildout of green infrastructure: community solar, energy retrofits, EV charging stations, stormwater management and more. US cities and local agencies have a historic opportunity to leverage hundreds of billions in federal climate funding into trillions of dollars in blended public-private financing for the low-carbon transition. Much of the catalytic capital is earmarked to help communities of color and other underserved communities compete for and execute climate resilience projects (see, “Justice40: Frontline communities step up to deploy historic federal climate funding”). 

It’s a policy-meets-execution moment. California, Illinois, Ohio and other states are marshaling know-how, seeding projects, and blending finance to drive an equitable and resilient climate transition. Community development financial institutions, or CDFIs, are preparing to underwrite climate solutions with funding through the Greenhouse Gas Reduction Fund, a $27 billion chunk of capital from the Inflation Reduction Act that’s expected to serve as the nation’s “green bank.” Scaling up requires bread-and-butter municipal bonds, a plentiful, low-cost and often tax-exempt source of infrastructure financing. “Buy-in from state and local government agencies that are willing to commit financial obligations backed by income taxes, sales taxes and liens on physical assets will be needed for a full transition to zero,” argues Court Street Group’s Matt Posner. 

  • Billions to trillions. The announcement of awards to manage key parts of the Greenhouse Gas Reduction Fund are expected imminently from the Environmental Protection Agency. Much of the GGRF, as it is called, will be channeled through CDFIs, green banks and other community lenders with “capillaries” that reach deep into parts of the country where mainstream funders are not present. Are they ready? “While CDFIs play a vital role in community development, their ability to handle large-scale implementation of complex programs like those in the IRA may be limited by capacity, reach, expertise and existing resources,” Posner writes in a guest post on ImpactAlpha. Needed: Engagement with the municipal bond issuers, which raise some $40 billion per month for public infrastructure. State-level bond banks – entities that pool local government loans and issue municipal bonds to support local projects – could leverage public funds to tap private capital in the $4 trillion muni market. Read Posner’s full post. 
  • Racial-equity scorecard. As cities repurpose muni bonds for climate infrastructure, it’s crucial that proceeds center racial equity and benefit low-income communities that have borne the brunt of fossil fuel pollution. Bond issuers from Chicago to St. Paul to Atlanta are boosting intentionality around racial equity in muni bond-funded projects and capital investments. A racial and social equity scorecard from Urban Institute and Public Finance Initiative helps issuers and borrowers assess and report on racial and social equity outcomes in proposed bond issuances. “Cities, counties, housing authorities, school districts and other issuers have the opportunity, ability and we believe, responsibility to carefully consider how bonds will overcome or entrench those divides,” Public Finance Initiative’s Lourdes Germán and Urban Institute’s Brett Theodos explain in a guest post. Get their full take.
  • Answer The Call. Join Calvert Impact Capital’s Beth Bafford, Growth Opps’ Michael Jeans, and other Agents of Impact on the next Call, “The Great Deployment runs through the muni bond market,” Wednesday, March 20 at 10am PT / 1pm ET / 5pm London. RSVP today.

Dealflow: Impact Incentives

Blue Earth Capital inks sustainability-linked loan for Asia’s garment sector. Asia’s garment sector, which feeds global fast-fashion demand, is notorious for human rights and environmental abuses. Q Collection is beefing up environmental, social and governance practices at garment factories in Bangladesh with a $30 million debt package from Swiss impact investor Blue Earth Capital. Q Collection will get preferential loan terms if it meets certain social and environmental targets. The Singapore-based company will use the financing to build manufacturing facilities powered by rooftop solar, rainwater harvesting techniques and additional energy efficiency equipment. The sustainability-linked loans will help Q Collection “create more jobs for underserved communities, while contributing to a more sustainable garment manufacturing sector,” the partners said in a statement.

  • Sustainable debt. Sustainability-linked loans have lagged globally despite a surge in the sustainable bonds market. The Sustainability-Linked Bond Principles and other frameworks respond to market skepticism about the effectiveness of the approach in improving ESG performance. The Q Collection deal is the first sustainability-linked loan in Blue Earth Capital’s $1 billion portfolio.
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Pharma company Eisai backs South African health tech venture RecoMed. The Japanese pharmaceutical company launched subsidiaries in South Africa and Kenya in 2022 to supply drugs for cancer, dementia and other non-communicable diseases. It made a strategic investment in RecoMed, an online booking system for patients of more than 3,000 healthcare providers in South Africa. The capital will support RecoMed’s digital services for breast cancer patients, a key therapeutic area for Eisai in Africa. “The average life expectancy is increasing, and there is expected to be a growing demand for cancer and dementia treatments,” Eisai said of its Africa strategy.

  • African health innovation. Japanese investors are showing increased interest in Africa’s startup scene, including in the healthcare sector. Asia Africa Investment and Consulting has two Africa-focused healthcare innovation funds, and has backed companies like Nigeria’s Helium Health, which helps healthcare providers digitize and manage health records, and Kenyan syringe manufacturer Revital Healthcare.
  • Check it out. 

Dealflow overflow. Investment news crossing our desks:

  • Rochdale Capital provided $25,000 in working capital to Pua’s Plate Lunch, a Native Hawaiian-owned business. “Emerging community development financial institutions like Rochdale Capital are crucial in helping small businesses owned by people of color and/or women succeed,” said Pua’s Napualokelani Shanamelissa Kamakele. (Rochdale Capital)
  • Colossa Ventures raised one billion rupees ($12 million) to “unlock the great potential of India’s trillion-dollar women economy” by investing in early-stage companies founded by and/or serving women. (YourStory)
  • Stichting Pensioenfonds ABP, the €500 billion ($547 billion) Dutch pension fund manager, earmarked €30 billion for impact investing by 2030, including €11 billion for climate and biodiversity investments. (Chief Investment Officer)

Signals: Inclusive Economy

Facing raids and trials, Muhammed Yunus struggles to preserve Grameen’s anti-poverty network in Bangladesh. An armed raid on the offices of Grameen Telecom in Dhaka last month was the latest escalation of a decade-long vendetta against Grameen Bank founder Muhammad Yunus. Prime Minister Sheik Hasina removed the Nobel Peace Prize winner as head of Grameen Bank in 2011, but until recently had kept her hands off most of the other Grameen enterprises, including the telecoms group, a textile company, and a joint venture with Danone that makes enriched yogurt for underfed children. The 83-year-old Yunus has managed to stay out of prison – for now. But the legal attacks by Hasina’s government have set back the work of dozens of Grameen-linked firms and worker-owned cooperatives that have helped halve the country’s poverty rate since 2006, Peter Green reports for ImpactAlpha.

  • Perilous moment. The crackdown comes as Bangladesh’s impressive economic gains are threatened by rising energy costs, inflation and post-pandemic recovery. The raid on the Grameen complex “gives organizations within Bangladesh, whether NGOs or in the private sector, reason to worry about being perceived as insufficiently supportive of the government,” said Jonathan Morduch, a professor at New York University and author of The Economics of Microfinance. Yunus, free on bail until mid-April, is facing more than 170 accusations of corruption and law-breaking, ranging from diverting state funds to staying in his post past the national retirement age of 60.
  • Travesty of justice. Credited with sparking the microfinance revolution that transformed global anti-poverty strategies, Grameen Bank has since the 1970s lent nearly $37 billion, including more than 19 million loans to microenterprises. The tens of millions of dollars in cash that Grameen companies generate, which are reinvested in other poverty-fighting programs or distributed to the companies’ worker-owners, are a lucrative pool of cash that could be diverted to strengthen Hasina’s grip on power, say Yunus allies. In January, 247 global leaders including 127 Nobel laureates wrote an open letter to Hasina urging her to end what they called a “travesty of justice.”
  • Keep reading, “Facing raids and trials, Muhammed Yunus struggles to preserve Grameen’s anti-poverty network in Bangladesh,” by Peter Green on ImpactAlpha.

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Victoria Stark, previously with Investec Bank, joins Blue Earth Capital as fund controller… RUNWAY’s Jessica Norwood joins Potlikker Capital’s investment committee… Invest in Our Future is on the hunt for a pair of managing directors… The IFC has an opening for an environmental and social policy managing director in Washington, DC… The Predistribution Initiative is recruiting a senior associate and an analyst… Greentown Labs has several openings… Platform for Social Impact will host a two-day impact investing summit in San Juan, PR, April 10-11. 

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

Thank you for your impact!

– March 11, 2024