Greetings Agents of Impact!
In today’s Brief:
- Trading nature credits in the UK
- Redemption for a bank in Salt Lake City
- Measuring climate adaptation and resilience
Featured: Carbon Markets
Can the UK’s market for trading nature credits deliver ‘biodiversity net gain’? Governments are waking up to the value of natural capital. Without an abundance of water, soil, and biological diversity, businesses and societies can’t function, much less flourish. But implementing the 2022 Kunming-Montreal Global Biodiversity Framework will require trillions of dollars in private financing. Private-sector financing for biodiversity efforts has been stuck at about $13 billion or so annually (for background, see “Biodiversity is the new climate change”). The UK’s Biodiversity Net Gain market, which entered into effect this month, offers a glimpse of one potential source of such financing, climate finance journalist Louie Woodall reports for ImpactAlpha. The policy requires all new developments in England – from housing projects to roads and railways – to deliver at least a 10% gain in biodiversity.
- Biodiversity units. Developers can enhance biodiversity on their own property or by buying off-site “biodiversity units.” UK government analysts suggest the annual market for such units could reach £274 million ($345 million). Environment Bank is supporting over 6,000 acres of habitat creation to underpin high-quality units. “It looks like a massive market with great value for Environment Bank,” says founder David Hill, “but more importantly, great value for the natural environment.” Specialist asset manager Gresham House rolled out “a specialist biodiversity strategy” to invest in habitat banks created by Environment Bank. Gresham House is targeting an initial raise of $380 million.
- Financialization risk. Biodiversity credit schemes face the same pitfalls as voluntary carbon markets, Woodall writes: “Insufficient oversight, poor standards, and all too many opportunities for unscrupulous actors to engage in greenwashing.” Frederic Hache of the Green Finance Observatory argues, “The goal of offset markets is to divert discussion away from nature destruction to short-term gain and competitiveness.” To mitigate such risks, the UK government has established a statutory biodiversity metric and tools to calculate biodiversity net gain. Off-site and on-site habitats have to be maintained for at least 30 years. The not-for-profit model “has simply failed to protect natural capital and nature. It hasn’t worked,” Hill says. “As soon as you get private investment opportunities into nature, then you’ll see it scale.”
- Keep reading, “Can the UK’s market for trading nature credits deliver ‘biodiversity net gain’?” by Louie Woodall on ImpactAlpha.
Dealflow: Financial Inclusion
Sorenson Impact backs Redemption’s purchase of Holladay Bank to create a new Black-owned bank. “My father preached the imperative to accelerate the financial inclusion of Black Americans by supporting mission-driven Black banks — something he called ‘a bank-in movement,’” Bernice A. King, the youngest daughter of Martin Luther King Jr., said in announcing an agreement to acquire Holladay Bank and Trust, a state-chartered commercial bank in the affluent Holladay suburb of Salt Lake City. Sorenson Impact Foundation provided a $1 million program-related investment to Redemption Holding Company, the Delaware public benefit corporation formed by King and former White House policy advisor Ashley Bell to acquire Holladay Bank. When completed and pending federal regulatory approval, the transaction will mark the first time that Black investors have purchased a non-minority-owned bank.
- Financial inclusion. The number of Black-owned banks has dwindled from more than 130 a century ago to 17 today. Black investors have sometimes bought distressed Black-owned banks to keep them under Black ownership. “But they’re walking into a very difficult business situation to manage since the bank isn’t performing well,” Sorenson’s Savannah Johnson told ImpactAlpha. Redemption’s acquisition of Holladay Bank flips the script: Black owners are acquiring a well-performing, non-minority-owned bank to widen access to financial services for financially-underrepresented individual and business borrowers (disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha). As of December 31, 2022, Holladay Bank manages $68 million in total assets, including $56 million in total deposits.
- Keep reading.
Blue Earth Capital takes stake in Nepra to expand waste recycling in India. Gujarat-based Nepra Resource Management deploys nearly 2,000 pickers to deliver dry waste to five waste recycling facilities. “Responsible waste management is not only vital for environmental stewardship but also presents a significant opportunity for economic growth and societal benefit,” said Rohan Ghose of BlueEarth, the Swiss impact investing firm that is acquiring a significant minority stake in Nepra from a fund managed by Aavishkaar Capital. A separate Aavishkaar fund will stay on as an investor.
- Financing circularity. Nepra is BlueEarth’s first climate-focused deal in India. The private equity investor closed a $308 million climate impact fund last month to invest in global companies driving the low-carbon and circular economies. Recycling India’s dry waste, such as plastic, paper, glass, rubber, metals and other materials, could generate close to $1.6 billion yearly. Nepra says its waste recycling facilities have mitigated 460,000 tons of CO2 emission.
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Dealflow overflow. Investment news crossing our desks:
- Apax Global Impact, the $900 million impact fund of Sir Ronald Cohen’s Apax Partners, will acquire a majority stake in Scotland’s Integrated Environmental Solutions, which provides decarbonization-focused stimulation tools and consulting to building project managers.
- Pittsburgh-based Black Tech Nation Ventures closed a $50 million inaugural fund to invest in Black-led and owned tech businesses in Pittsburgh and other cities, along with startups led by women, LGBTQ+ and other diverse founders. (BTN.vc)
- Soros Economic Development Fund, the impact investing arm of Open Society Foundations, committed $25 million to Allied Climate Partners to de-risk early-stage climate development projects in emerging markets and increase their bankability (see, “Blended finance stars as COP28 seeks to unlock climate capital”).
Correction: Impact Engine has $240 million in assets under management, not $140 million as we wrote in yesterday’s story, “Impact Engine doubles down on ‘purpose-built’ private equity with $85 million fund.”
Impact Voices: Climate Finance
How three investors are measuring their impact on climate resilience. Creative financing models are being developed to direct more capital to climate adaptation, which faces a financing gap estimated to be at least $200 billion annually. Metrics on adaptation are critical for incentivizing those efforts. But measuring resilience is a far more complicated task than quantifying greenhouse gas mitigation efforts. “The definition of resilience varies by context, sector, and target population,” Ellie Turner of the Impact investing consultancy 60 Decibels writes in a guest post on ImpactAlpha. each with different approaches to measuring resilience and capturing useful metrics across their portfolios.
- Resilience measurement and management. Turner profiled three impact investors “to provide practical examples of how investors can more easily measure resilience and, in doing so, contribute to closing the adaptation finance gap.” Mercy Corps Ventures established a Venture Lab, a grant-based vehicle designed to pilot test cutting edge technologies for climate resilience, and to share learnings with others. Mercy Corps Ventures assesses each investment’s climate adaptation and resilience, or CAR, impact according to customized metrics. Acumen Fund surveys a sample of customers to determine how the company has impacted them. Catalyst Fund’s resilience metrics include: users more resilient, women more resilient, green jobs created, hectares sustainably managed, liters of water conserved, and tons of carbon mitigated.
- Keep reading, “How three investors are measuring their impact on climate resilience,” by Ellie Turner on ImpactAlpha.
Agents of Impact: Follow the Talent
Veris Wealth Partners promotes Roraj Pradhananga to co-CIO and Jane Swan to head of advisory services… British International Investment promotes Maria Smith to managing director and chief impact officer and Samir Abhyankar to managing director and head of its financial services group… Mad Agriculture, which finances farmers transitioning to regenerative agriculture, promotes Elizabeth Candelario to chief strategy officer… Silicon Valley Community Foundation appoints Greta Hansen, Santa Clara County’s chief operating officer, to board chair. The foundation also adds David Chun of Equilar and Neythri Futures Fund’s Archana Sathaye as members of the board.
Common Trust has an opening for a remote final due diligence associate… Sorenson Impact seeks a communications assistant and lead writer in Salt Lake City… Arnold Ventures has an opening for an impact investing executive vice president in New York… Also in New York, the GIIN is looking for a communications manager… Schneider Electric has an opening for a sustainability analyst in Singapore… Madiro.org seeks a fund manager in Rwanda… The Impact Office is recruiting an intern in Geneva… Access to Nutrition Initiative is hiring an impact investment manager… Abler Nordic is on the hunt for an impact and ESG manager in Norway.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– Feb. 29, 2024
