Greetings, Agents of Impact! It was great to see so many of you on yesterday’s Call, “Optimizing muni bonds for racial equity.” We’ll have the recap and video replay in tomorrow’s Brief.
Featured: Global Goals
Facing up to shortfalls – and trade-offs – in the Sustainable Development Goals. The climate action at the COP27 conference wrapping up this week in Egypt is only one part of the broader sustainable development agenda. “The SDGs are issuing an S.O.S.,” U.N. Secretary-General António Guterres said as G20 leaders gathered in Bali, Indonesia. Launched in 2015, the 17 Sustainable Development Goals – ranging from ending hunger (SDG No. 1) to decent work for all (No. 8) – provide an ambitious roadmap for ending poverty and promoting global prosperity by 2030. At the midway mark, the world is not on track to meet almost any of the goals, according to the U.N.,’s latest progress report. The annual gap to finance the SDGs for emerging and low- and middle-income countries: $4.3 trillion.
- Investor action. The Global Investors for Sustainable Development Alliance, an investor alliance representing $16 trillion in assets, has a “model mandate” to help asset owners and managers invest in sustainable development, as well as a blended-capital instrument to finance sustainable infrastructure in emerging economies. “The SDGs remain the blueprint to navigate these turbulent times,” the alliance argues. “They can guide us back on course toward a sustainable world with prosperity for all.” The U.N.’s special rapporteur identifies sources of funding for the SDGs that could generate up to $7 trillion a year. They include taxes on wealthy individuals and on pollution, debt relief for low- and middle-income countries, and redirecting subsidies from environmentally-destructive activities.
- SDG trade-offs. There are clear synergies across some goals, like gender equality (No. 5) and combatting climate change (No. 13) (see, “Gender lens + climate finance = broader reach”). Other goals may be in tension, argue Trinity Church Wall Street’s Bhakti Mirchandani and Oxford University’s Bob Eccles in a guest post on ImpactAlpha. Companies that improve climate and environmental performance in response to stakeholder pressure tend to do so at the expense of investments in employment, healthcare, workplace safety and consumer protection (No. 8), research has shown. To resolve the tension, Mirchandani and Eccles suggest companies pull from a different schema: “Operating Principles for Impact Management.” The fifth principle – assess, address, monitor and manage the potential negative effects of investments – applies to the SDGs as well, they say. “Choices must be made.”
- Keep reading, “Facing up to shortfalls – and trade-offs – in the Sustainable Development Goals,” by Trinity Church Wall Street’s Bhakti Mirchandani and Oxford University’s Bob Eccles on ImpactAlpha.
Dealflow: Climate Resilience
Climate Adaptive Infrastructure raises more than $1 billion for low-carbon real assets. The San Francisco sustainable infrastructure investment firm raised $825 in equity and $200 million for a co-investment program for large-scale, low-carbon clean energy, water and urban real assets. Infrastructure investments too often focus on past needs, says CAI’s Bill Green, ex- of Macquarie. CAI, he says, invests in the “development of real assets purpose-built for the future, with the lowest feasible carbon emissions profile and designed to withstand the impacts of the climate crisis.”
- Deploy, deploy, deploy. CAI’s initial investments include a natural gas-fired “peaking” power plant in Riverside, Calif. The firm also has taken controlling stakes in Oakland-based clean energy developer Intersect Power and Boston-based hydropower developer Rye Development.
- Stocking the pipeline. Climate and green infrastructure funds are riding a wave of demand for low-carbon solutions. Bucking the private investing downturn, carbon and emissions tech startups have raised $10.7 billion in venture capital investment across 517 deals through the third quarter, putting the category on pace to top last year’s record of $13.6 billion, according to Pitchbook.
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Upaya Social Ventures exits India-based maker of sustainable tableware. The Seattle-based impact fund made a $27,000 equity investment in Tamul Plates in 2015, helping the all-natural disposable plate and bowl manufacturer triple its revenues, quadruple its production, and grow its workforce tenfold. Upaya has sold its stake for more than double its investment to an unnamed family office in India. Assam-based Tamul raised additional investment from Artha Impact, which first invested in the company alongside Upaya.
- Good jobs. Upaya launched in 2011 to fight extreme poverty in India by investing in companies that create dignified jobs. Tamul Plates employs more than 3,000 rural workers through community-owned micro-enterprises. “Not only are companies like this vital to the economic well-being of their communities, they can produce investor returns as well as significant impact,” said Upaya’s Kate Cochran.
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Impulse scores $20 million for battery-powered induction stoves. Gas stoves, still used by one-third of U.S. households, emit methane even when turned off and release toxins linked to respiratory illnesses. Fast-heating electric-powered induction cooktops are starting to catch on. San Francisco-based Impulse this week launched battery-powered induction stoves that don’t require new electric panels or rewiring. “By building an induction stove that’s not only easy to install and access, but also fundamentally better than current offerings, we hope to make it more compelling for more people to switch to electric-powered appliances, which are better for the environment,” Impulse’s Deanna Chang told ImpactAlpha.
- Home electrification. Consumer savings and incentives from the Inflation Reduction Act are expected to drive a boom in demand for induction stovetops (for context, see “Eight ways the Inflation Reduction Act is resetting the climate table”). Lux Capital led Impusle’s Series A equity round, with participation from Fifth Wall, Construct Capital and Lachy Groom, a former Stripe product manager. Impulse raised $5 million in a seed funding round last year.
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Dealflow overflow. Other investment news crossing our desks:
- Delhi-based BeatO raised $33 million in Series B funding to offer online diabetes prevention and management for patients in India.
- Berlin-based JUCR secured €31.2 million ($32.4 million) in a seed and debt funding round to build EV charging infrastructure in Europe.
- New York-based Fennel raised $5 million in seed funding to provide retail investors with insights on the ESG practices of public companies in their portfolios.
- Mexico City-based Perfekto snagged $1.1 million in pre-seed financing for subscription-based imperfect produce to reduce food waste.
Impact Voices: Measurement and Management
From carbon counting to carbon accounting: The case for Emissions Liability Management. “The tools and tactics that have driven voluntary climate action are unlikely to withstand the pressures of traversing from voluntary to mandatory emissions disclosure,” Stanford’s Alicia Seiger and Marc Roston write in a guest post on ImpactAlpha, let alone shift capital at the speed and scale required. In a new paper, they propose a shift from carbon counting to carbon accounting to scale climate investment from billions to trillions of dollars. Such carbon balance sheets would track “E-liabilities” – that is, a firm’s stock of carbon emissions, not just its estimated emissions flows.
- Audited statements. Firms would have the choice to retain carbon liabilities, or pass them on to customers, the authors explain. Retained emissions would appear as long-duration liabilities until extinguished by permanent and additional carbon removal projects, the authors write. “In the meantime, firms would manage a portfolio of capital, offsets and other carbon risk-management transactions to balance their carbon liabilities.”
- Cost of capital. The accounting system would close the gap between carbon emissions and a firm’s cost of capital. “High emissions firms would consume more capital to purchase assets or insurance to balance their E-liabilities,” Seiger and Roston write. A voluntary or regulatory framework “could directly penalize firms based on straightforward financial risk measures for the emissions on their balance sheets.” Markets could determine the quality and duration of different carbon credits. “E-liabilities ought to remain a liability until a firm irreversibly removes carbon,” the authors say.
- Beyond Scope 3. Seiger and Roston acknowledge that “abandoning downstream Scope 3 feels jarring to many climate activists.” The difficulties in linking measurement to management of such emissions make Scope 3 useful only for voluntary (read: marketing) measures, they say. “Few firms have the legal or financial cover to spend materially on voluntary climate action.” With Emissions Liability Management, “spending on carbon offsets and carbon removals moves from ‘good corporate citizenship’ to essential financially-responsible decisions.”
- Keep reading, “From carbon counting to carbon accounting: The case for Emissions Liability Management,” by Alicia Seiger and Marc Roston on ImpactAlpha.
Agents of Impact: Follow the Talent
Pradeep Menon, former managing director of Refinitiv, joins real estate sustainability services firm Evora Global… The National Endowment for Democracy seeks a grants officer for the Latin America and Caribbean regions… Apollo Global Management is recruiting a summer MBA associate for climate equity in New York… Greater Cincinnati Foundation is looking for a manager of philanthropic partnerships… National Community Investment Fund is hiring a senior impact analyst and several other roles in Chicago.
Thank you for your impact!
– Nov. 17, 2022