Greetings, Agents of Impact!
Featured: Nature-Based Finance
Can’t we just pay the Democratic Republic of Congo to keep its oil in the ground? The biggest failure of nature conservation and restoration efforts “are the unrewarded provision of public goods and services,” the U.N. Environment Programme declared in a report last year. Case in point: the Democratic Republic of the Congo’s decision to auction off oil-drilling rights in one of the most biodiverse and carbon-critical land masses on the planet. The Congo Basin accounts for more than 5% of the worlds’ tropical forests, 70% of Africa’s forestland, and is home to one of the planet’s last active land-based carbon sinks. The central African country, long ravaged by poverty, war, corruption and colonial and post-colonial resource exploitation, is eying $32 billion in annual revenues, bolstered by surging oil prices amid the global energy crisis. What’s needed: an urgent and radical effort to reward the D.R.C. for the public good of keeping the oil in the ground. Such an effort would represent an unprecedented step-up in global nature-based solutions finance, which registered only $133 billion in investments in 2020.
- Pricing carbon. D.R.C. President Felix Tshisekedi in a meeting with U.S. President Joe Biden last year put a price on the avoided carbon in the Congo Basin: $100 per ton. “The current price of forest carbon, at $5 per ton, is neither fair nor realistic,” he said, calling for “a fair price for forest carbon that incorporates foregone opportunities.” The U.S. is negotiating a 10-year, $1 billion forest carbon credit scheme with the D.R.C. The World Bank has a $42 million initiative with the country. A dozen international donors pledged $1.5 billion to protect the Congo Basin over the next four years. Such financing schemes fall far short of what’s needed, warned Eve Bazaiba Masudi, the D.R.C.’s minister of the environment. “The D.R.C., despite its environmental potential, has not benefited sufficiently from climate funds. This is why we expect fair funding in exchange for the services provided by our forests.”
- Natural capital. More than $8 trillion is needed by 2050 for land-based climate solutions. The $133 billion invested in 2020 represents only a quarter of what’s needed annually for forest and peatland restoration, regenerative agriculture, water conservation and biodiversity preservation. African countries at the Petersberg Climate Dialogue last month called for carbon credit and conservation schemes to be linked to sovereign debt reduction. Such schemes are being tested in the Seychelles and Belize, but represent hundreds of millions of dollars against the tens of billions in emerging market debt payments owed this year alone.
- Keep reading, “Can’t we just pay the Democratic Republic of Congo to keep its oil in the ground?” by Jessica Pothering on ImpactAlpha.
Dealflow: Electrify Everything
Blue Frontier raises $20 million for energy-storing air conditioners. There should be a word for that feeling when you blast your air conditioner on a hot day and feel guilty about the climate impacts – schadenkühl much? Air conditioners account for 5% of global emissions and demand is spiking amid heat waves around the globe. Blue Frontier aims to soothe your conscience – and the climate – with units that use a salt solution that can store energy to reduce electricity use by up to 90% and replace traditional refrigerants that emit potent greenhouse gasses.
- Climate capital. The Boca Raton, Fla.-based startup raised a $20 million Series A round led by Breakthrough Energy Ventures, the 2150 Urban Tech Sustainability Fund and VoLo Earth Ventures. Building tech provider Modern Niagara also participated. “Blue Frontier’s technology is a game changer for both cooling decarbonization and grid efficiency,” said VoLo Earth’s Kareem Dabbagh.
- Chill out.
IDB and Green Climate Fund lead $450 million fund for e-mobility in Latin America and the Caribbean. The Covid pandemic reduced users and revenues for public transportation systems worldwide, dealing a hard blow to efforts to move away from fossil fuels. IDB is joining forces with the U.N.’s Green Climate Fund and nine Latin American and Caribbean countries to advance low-carbon transportation and strengthen the resilience of urban transport infrastructure. The fund will provide concessional loans and grants to Barbados, Chile, Colombia, Costa Rica, the Dominican Republic, Jamaica, Panama, Paraguay and Uruguay.
- Smart cities. The fund will deploy $284 million to finance electric buses, taxis, ride-hailing and delivery service vehicles, and institutional fleets; $98 million will go toward micro-mobility, including short-distance vehicles, docking stations, cycling lanes and pedestrian streets. The fund will also finance green batteries and green hydrogen pilot projects. IDB is hoping to cut 7.5 million tons of carbon emissions and impact nine million people through benefits such as green jobs and lower energy bills.
- Catalytic capital. IDB and its partners committed $200 million, including $5 million in grants. The Green Climate Fund, which manages $40 billion of assets, will allocate another $200 million, including $55 million in grants. The government partners will add $50 million to bring the fund’s total to $450 million. The fund’s technical assistance facility aims to improve designs, regulations and business model for private financing, and to also create a gender action plan to increase equity in e-mobility.
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Dealflow overflow. Other investment news crossing our desks:
- Boston-based biotech company Ginkgo Bioworks, whose research spans food-based alternative proteins to COVID-19 testing, purchased its competitor Zymergen in an all-stock transaction valued at $300 million.
- Copenhagen-based Agreena acquired U.K.-based Hummingbird Technologies, which uses remote sensing and AI to verify regenerative farming practices (see, “Deal spotlight: Climate-smart agriculture”).
- Mumbai-based Jai Kisan raised $50 million to provide credit and other financial services to smallholder farmers in India.
Impact Voices: Impact Management
How one climate tech fund counts – and reports – the impact of its portfolio. Climate disclosure is coming. The Securities and Exchange Commission has proposed rules that would require mandatory corporate reporting of direct emissions – possibly including indirect “Scope 3” emissions generated by the end-uses of a company’s products or services. The agency also is mulling rules that would require more stringent disclosure for funds that are marketed as environmental, social and governance, or ESG, products, as a guard against greenwashing (for background, see “An opportunity to rein in greenwashing in asset management”). European regulators have already imposed such rules. “Public reporting is the right thing to do,” Peter Fox-Penner, Gabriella Rocco, and Morgan Sheil of Energy Impact Partners write in a guest post explaining the firm’s fourth impact report, which tallies ESG metrics and carbon impacts across almost 60 portfolio companies. “With heightened regulatory interest, the case for high-quality, transparent reporting only gets stronger,” they say.
- Scope 3. Energy Impact Partners surveyed 96 impact-oriented private equity and venture funds and found less than one-third published an impact report and just 15 produced complete carbon impact numbers. The complexity of assigning responsibility for Scope 3 emissions has sparked a spirited debate even from ESG advocates. EIP calculates its Scope 3 footprint with the help of portfolio company Greenly. “Greenly’s extensive library of emissions data factors and our relatively straightforward operating model allowed us to get a good handle on this part of our footprint,” the authors write.
- Projected impact. EIP’s Frontier Fund backs early-stage decarbonization technologies that lack data for measuring carbon savings. “We are using 10-year forecasts of sales along with a careful assessment of the competing technologies our companies will replace to project ten-year savings,” the authors explain. The firm is working with Prime Coalition’s Project Frame initiative to create greater standardization in PE and VC impact reporting.
- Ownership-weighted. Like other funds, EIP supplies only some of the capital its portfolio companies need. “While it is important to understand the companies’ full results, we think it is also important to weight our own claims of enabling savings by the share of capital we provide,” the authors say. The firm calculates its share of enabled portfolio annual savings at about 520,000 metric tons, more than 50 times the firm’s own footprint.
- Keep reading, “How one climate-tech fund counts – and reports – the impact of its portfolio,” by Energy Impact Partners’ Peter Fox-Penner, Gabriella Rocco, and Morgan Sheil on ImpactAlpha.
Agents of Impact: Follow the Talent
Radha Rajkotia, ex- of Innovations for Poverty Action, is named CEO at Building Markets… Bill Stoddart, ex- of 45North Partners, is named CEO at Iroquois Valley Farmland REIT. Christopher Zuehlsdorff joins Iroquois as chief operating officer… Genie Cesar-Fabian, ex- of Palladium Equity Partners, joins Ethic as general counsel… Gary Community Ventures is hiring a vice president of philanthropy in Denver… Living Cities seeks an assistant director of equitable entrepreneurial ecosystems.
ImpactPHL, NEXUS and Impact for Breakfast are hosting “Sustainable fashion x impact investing,” a webinar featuring Marci Zaroff and Steph Stephenson of ECOfashion Corp, Kimberly McGlonn of Grant Blvd and investor Nina Farran, Tuesday, Aug. 9… Chobani is convening the World Refugee Forum Wednesday, Aug. 10… Register for Aunnie Patton Power’s course, “Innovative financing for social impact,” in San Francisco, Wednesday, Aug. 17.
StartOut Equity Summit will feature a discussion on “Why climate change is an LGBTQ+ issue,” with Adriana Embus of Include Ventures, Aaron Blumenthal of 500 Startups, Alex Mitchel of L.A. Cleantech Incubator and Katherine Woolford of SeaAhead, Thursday, Sept. 15… RE+ 2022 will convene Sept. 19-22 in Anaheim, Calif.
Thank you for your impact!
– Aug. 1, 2022