The Brief | August 28, 2023

The Brief: Wall Street’s willful ignorance, alt-pesticides for African farmers, rooftop solar in Vietnam, World Water Week, fall conference circuit

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Greetings, Agents of Impact! 

Featured: Institutional Impact

Wall Street CEOs fiddle while Maui burns. The devastating wildfire in Maui is the kind of horrific tragedy the US and Europe experienced in past centuries, when infrastructure was poor and health and safety measures were minimal or non-existent. Now, as then, it is disproportionately the poor and the socially- and economically-vulnerable who bear the brunt of such disasters. Leaders in business, finance and investment have slow-walked their response, to say the least, to the escalating climate catastrophe, ImpactAlpha contributing editor Imogen Rose-Smith writes in her latest Institutional Impact column. “While the world is literally burning, many still assume business is as usual.” 

Take David Solomon, the pugnacious chief of what was once – but maybe no longer – the world’s most prestigious global bank. Almost at the same time Maui was burning, New York magazine asked, “Is David Solomon too big a jerk to run Goldman Sachs?” One of the charges against Solomon: his alleged attitude toward a group of student climate change activists at his alma mater, Hamilton College. The students say Solomon “laughed and told us he’d be dead in 30 years, so climate change would be our problem anyway…. When we brought up the topic of climate justice, he didn’t know what it was.” (A Goldman spokesperson told New York the encounter didn’t go down as the students say.) In the eyes of these students, notes Rose-Smith, “the CEO of a major investment bank seems oblivious to the seriousness of the climate crisis and its social implications.”

  • Institutional shift. Major institutions, asset owners and business leaders have yet to catch up to the pace of climate change or to heed cries for climate justice, writes Rose-Smith. “We need a step-change in our thinking with regards to how and where we invest our capital. It is not enough to think about the clean energy transition as an investment and capital markets opportunity for the future,” she argues. “We need to factor in the enormous social and economic costs of climate change today.”
  • Investing in solutions. Last November, Goldman Sachs and Bloomberg Philanthropies announced their first blended-finance investments for sustainable transport in India and Vietnam through their Climate Innovation and Development Fund. “Catalytic philanthropy is all well and good. But not sufficient,” says Rose-Smith. Goldman’s Horizon Climate fund, which closed in January at $1.6 billion, is the firm’s first direct private markets strategy dedicated to climate and environmental solutions. The fund represents just 0.1% of the $1.5 trillion in assets managed by Goldman Sachs Asset Management. “We are going to need all that money, and more, if we are going to successfully transition to a clean energy economy and prevent tragedies like Lahaina,” Rose-Smith says, referencing the Maui wildfire. “And to insure that when they do happen, we build back better and stronger for everyone, not just for the very rich.”

Dealflow: Financing Farmers

Kentegra Biotechnology in Kenya scores $15 million for organic crop treatments. Imported crop treatments are expensive for smallholder farmers in Africa. Kentegra Biotechnology is helping farmers substitute affordable biopesticides for toxic chemicals on farms. The company processes and sells pyrethrins, derived from pyrethrum flowers, which are naturally toxic to many pests; formulated correctly, they’re non-toxic to humans. The mix of debt and equity from the development finance institutions Finnfund and the US International Development Finance Corp. will help Kentegra contract with 90,000 flower farmers to ramp up its production capacity. 

  • Reviving local production. Kenya was once the world’s largest producer of the pyrethrum flowers, but production dwindled as demand for synthetic chemicals grew. Kentegra contracts with 10,000 farmers, half of whom are women, and dispatches agronomists to train farmers in regenerative and organic practices. Farmers earn premium prices for the flowers compared to other crops, and can harvest every two to four weeks, boosting their income.
  • Check it out

ResponsAbility provides $20 million to CME Solar for commercial solar in Vietnam. Solar investor and developer CME Solar Investments secured a long-term senior loan from ResponsAbility to finance rooftop commercial and industrial solar projects for power purchasers like Foxconn and LG. A recent project for Foxconn has a generation capacity of 31.5 megawatts and could save up to 20,000 tons of carbon each year. Vietnam, one of the world’s largest consumers of coal, aims to phase out coal completely by 2050. 

  • Clean tech. ResponsAbility says the loan to CME Solar is its “most substantial” investment in climate finance to date. Swiss-based ResponsAbility was acquired by UK-based M&G last year to address demand for climate finance in emerging and frontier markets. CME Solar previously secured a $12 million loan from ResponsAbility in 2021.

Dealflow overflow. Other news crossing our desks:

  • French utility ENGIE is acquiring Houston-based battery storage producer Broad Reach Power from EnCap Energy Transition, Apollo and others in a deal valued at more than $1 billion. (CityBiz)
  • Peruvian digital small business lender Prestamype raised $5 million from ALIVE Ventures, Oikocredit and others. (LatamList)
  • Canada-based LemFi raised $33 million to make it easier and cheaper for immigrants to send remittances from North America and Europe to friends and families worldwide. (Tech Economy)

Signals: Water Equity

Water security climbs the climate agenda at World Water Week. From Maui to the Middle East, tensions over dwindling water supplies are flaring. One-quarter of the world’s population is facing elevated water stress, according to new research by the World Resources Institute. And more than two billion people around the world still lack safe drinking water. Water issues, long overshadowed by climate change concerns, can no longer be ignored. “The future seems to be in climate-nature nexus investments where water is an essential building block,” WaterEquity’s Monica Altamirano tells ImpactAlpha. The water-focused asset manager backed by Matt Damon was among the growing roster of private sector financial institutions and corporations that attended last week’s World Water Week forum in Stockholm.  

  • Blended finance. Under discussion: Just Water Partnerships. Modeled on the Just Energy Transition Partnerships being designed to help low- and middle-income countries transition to renewable energy, the water equivalents would enable nations to invest in water access, resilience and sustainability. In July, the Green Climate Fund helped seed a water reuse blended finance fund for South Africa. The fund aims to mobilize $1.5 billion from private investors for water projects in the parched country. Members of the CEO-led Water Resilience Coalition, including Starbucks, Ecolab, Gap and DuPont, have invested in WaterEquity’s $150 million Global Access Fund IV to increase access to safe water and sanitation in Asia, Africa and Latin America. The balance sheet investments unlocked a $100 million commitment from the US International Development Finance Corp.
  • Water opportunities. In a recent survey by CDP, global CEOs identified $2.3 trillion in commercial opportunities from increasing water efficiency and resilience, creating new products, and expanding into new water-related markets. Some 1,100 of them said their annual performance reviews are linked to water goals.
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Agents of Impact: Follow the Talent

Reminder: Don’t miss these upcoming ImpactAlpha partner events:

Aadil Sulaiman, ex- of Year Up, joins Root Capital as director of the Next Generation Jobs Initiative… The Colorado Housing and Finance Authority appoints Santhosh Ramdoss of Gary Community Ventures to its board of directors… Rethink Education’s Andre Benin joins Building Hope’s board of directors… The Packard Foundation seeks a democracy rights and governance program officer… Common Future is hiring a remote impact initiatives vice president.

Elemental Excelerator’s innovation challenges will award up to $2 million to sustainability entrepreneurs. The deadline to apply is Friday, Sept. 15… Diversity VC and lawfirm Cooley are hosting an online discussion on the lawsuit against Fearless Fund and its implications for diversity and inclusion in venture capital, Wednesday, Aug. 30 (for context see, “Legal challenge to Fearless Fund misses the mark on racial bias in venture capital“).

Thank you for your impact!

– Aug. 28, 2023