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#Featured: ImpactAlpha Original
Connecting capital markets and low-income communities. For decades, Don Hinkle-Brown has fantasized about having access to the public markets to raise capital for childcare centers and charter schools, grocery stores and health clinics, energy efficiency upgrades and small businesses in low-income communities. Now, he does, in 10 states and the District of Columbia.
Hinkle-Brown is CEO of The Reinvestment Fund, based in Philadelphia, which raised $50 million with one of the first public bond offerings by a so-called community development finance institution, or CDFI. “This is the first time we’ve successfully bridged the capital markets through intermediaries that directly funnel this money to low-income people and communities,” Hinkle-Brown told ImpactAlpha. “It’s very gratifying to have a true capital-markets transaction. It’s many, many years in the making.”
In part because of the successful deal, Hinkle Brown and The Reinvestment Fund were honored as Asset Manager of the Year at the GSG Impact Summit this week in Chicago.
Read, “The Reinvestment Fund tests the public bond market’s appetite for social impact” by David Bank on ImpactAlpha:
#Dealflow: Follow the Money
Advanced Microgrid Solutions closes $34 million Series B. Advanced Microgrid Solutions is an energy storage company whose “Amada” software platform helps utilities manage a growing number of distributed energy sources — like home solar systems — flowing into mainstream utility grids. These sources can cause power fluctuations, voltage issues and higher demand charges, and managing them is expected to be a growing issue for utilities in the near-term. California-based Advance Microgrid Solutions has raised $52 million in equity funding to date, including the latest round, which was led by DBL Partners, utility company Southern Company, and utility-backed investment fund Energy Impact Partners. Arnold Schwarzenegger also participated in the round. The company will use the funds to scale up its software platform while it works to build energy storage facilities with $200 million in infrastructure financing from Macquarie Capital.
Calvert Foundation backs Central America renewables fund. The Calvert Foundation is investing $5 million in the Honduras Renewable Energy Financing Facility (H-REFF) — a $25 million fund that backs small-scale renewables projects in Central America. “As the economies of Central America have grown, their use of fossil fuels for transportation and electricity has become unsustainably high,” the Calvert Foundation notes on its blog. “Development has come with a cost of rising emissions, worsening air and water pollution and negatively impacting health.” Yet only a sliver of impact capital and philanthropic funding is focused on social and environmental causes in Central America. H-REFF was seeded with $7 million from two funds within the Inter-American Development Bank (here and here), and is also backed by the Global Environment Facility and private investors. H-REFF has so far made a previously undisclosed investment in Kingo Energy in Guatemala, which provides pay-as-you-go off-grid solar products. It will target similar opportunities in hydro, wind, biomass, and biogas.
PayPal invests in online lender LendUp. A quarter of American households lack access to basic financial services, while 56% lack access to credit and lending. LendUp, which was founded in 2012, designs affordable online credit and loan products for emerging middle-class Americans. Its flagship product, LendUp Ladder, was designed as a flat-fee alternative to payday loans where customers could borrow more by watching financial education videos and making payments on time. The company says its automated lending process has helped save Americans $75 million in fees and interest. California-based LendUp landed in hot water with federal and state consumer protection bureaus last year for its early lending practices and was ordered to pay out more than $6 million for fees and lending violations. The company, which didn’t admit wrongdoing, said the regulatory actions dealt with issues going back to the early days of the company, before it had a full compliance department, The Wall Street Journal reported last year. LendUp now has a compliance department. The company received early backing from GV — Google’s venture-capital arm — Andreessen Horowitz and other venture-capital firms. The undisclosed investment from PayPal will be used to grow its customer base and to explore a partnership with PayPal.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Tech solutions for economic opportunity. Entrepreneurs are adopting and deploying technologies to help customers build skills and land good jobs, access affordable credit and financial services, maximize benefits and manage debt. Five-year-old Impact Engine is a Chicago-based accelerator turned early-stage impact investor with a portfolio of nearly three dozen “impact tech” startups. For the firm, creating economic opportunities for low-income communities is both high-impact and a good financial investment. In the first of a four-part series of articles, the firm explores the landscape of opportunities in economic empowerment. Skill Scout, in Chicago, for example, helps employers look beyond resumes to find candidates they wouldn’t have otherwise considered by collecting and sharing applicants’ work samples. Pangea Money Transfer, also in Chicago, allows users to quickly and inexpensively send money internationally through their phones. New York-based First Access helps microfinance institutions around the world reduce the cost of underwriting loans and boosts access to credit using a proprietary credit-scoring algorithm to identify a prospective borrower’s real credit risk.
Nations map contrasting paths for sustainable development. As the U.N.’s high-level political forum unfolds, the 44 voluntary national reviews being presented are revealing a myriad of different interpretations and strategies for implementing the 2030 Agenda.
In Kenya, the government officially adopted the Sustainable Development Goals last year alongside its domestic “Vision 2030” — an ambitious development framework that aims to “transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment.” Part of that plan involves achieving 10% economic growth every year. The government has assigned SDG oversight to its Ministry of Devolution and Planning, and its immediate focus will be integrating the SDGs into policy and implementing them via all government departments and ministries between 2018 and 2022. To map its progress, Kenya’s National Bureau of Statistics has been tasked with charting indicators that fit with available or accessible data.
Indonesia, by contrast, is putting the SDG Agenda on hold until 2020, to coincide with the launch of its 2020–2025 and 2025–2045 national development plans. One of its key points of focus will be on financing the SDGs. Indonesia is in the process of building a national framework for issuing green bonds. The government’s hope is that putting in place guidelines for green and sustainable financing will help it leverage private and philanthropic capital.
And in Brazil, the country’s “main message” in its voluntary national review focuses on SDG integration across all levels of government and civil society. Brazil has established a National Commission for the SDGs, with 16 representatives from national, state, and local governments, as well as civic organizations. Local government engagement is lacking in many national 2030 Agenda strategies, (see yesterday’s Brief). Brazil’s National Confederation of Municipalities has developed guidelines for local implementation, starting in 2018.
ImpactAlpha will be digging into the individual reviews in the coming weeks. In the meantime, the “Main Messages” and reviews submitted to date can be found here.
Onward! Please send any news and comments to TheBrief@impactalpha.com.