The Brief | October 11, 2024

The Week in impact investing: Financial architecture

ImpactAlpha
The team at

ImpactAlpha

TGIF, Agents of Impact! 

Don’t miss these ImpactAlpha events next week:

  • Agents of Impact Call No. 65: Preserving homeownership and affordability. The latest addition to next week’s Call: Jazmin Segura of Common Counsel. Segura joins Grounded Solutions Network’s Devin Culbertson, Impact Community Capital’s Michael Lohmeier, ROC USA’s Paul Bradley, and other special guests to explore strategies to preserve housing affordability and ownership, Wednesday, Oct. 16, at 10am PT / 1pm ET / 6pm London. RSVP today. This Agents of Impact Call is supported by Robert Wood Johnson Foundation.
  • Meet the ImpactAlpha editorial team. Jump into breakout rooms to share your stories with ImpactAlpha editors and journalists, and with each other. Help us help you to amplify your impact. We’re looking forward to this engaging online session. Join us, Friday, Oct. 18, at 10am PT / 1pm ET / 6pm London. Register today.

In today’s brief:

  • Roundup: Tapping talent and treasure for shared goals
  • Podcast: At stake in this year’s climate summit 
  • Plugged In: Innovations in climate finance
  • Spotlight: Sustainable AI data centers?

🗣 Collective quantified goals. New financing for climate action and sustainable development, which countries have access to it and on what terms, “are issues of survival for millions of people and for the well-being of our planet,” reads the revised manifesto known as  Bridgetown 3.0. ImpactAlpha’s Amy Cortese outlined the stakes at next month’s COP29 climate summit in Baku, Azerbaijan, as well as at this month’s World Bank and G20 meetings and, of course, a crucial election contest in the US. One key marker: what climate negotiators call a “new quantified collective goal” for financing climate mitigation and adaptation in countries that have contributed little to climate change but are bearing the brunt of it.

Agents of Impact are working to reach other collective goals across sectors, geographies and asset classes. The new fund from Water Unite Impact is bringing in corporate foundations (largely of UK retailers) as first-loss capital to crowd in financing from development finance institutions and commercial investors for water entrepreneurs in Africa, as Roodgally Senatus reported. Kavita Kapur Macleod and Phoebe Higgins of the Environmental Policy Innovation Center and Liz Adams and Peter Stein of Lyme Timber Advisory Services outlined plans for a revolving fund to speed National Forest land purchases to support conservation and public access. Jessica Pothering reported on the lessons learned by investors like Accion Venture Lab and Elevar Equity in building inclusive fintech and other impact ventures: to reach customers and build trust, cut in, not out, middlemen and women

A conversation between Andrea Dobson of the Winthrop Rockefeller Foundation and Ian Fuller of Westfuller explores how racial equity can become a lens through which all investments are assessed. Providing a broader range of Americans with chances to take risks, experiment and learn from their experiences will raise all of our chances of long-term success, argued Grow America’s Daniel Marsh in a guest post for ImpactAlpha. Needed: A new financial architecture fit for purpose and for our collective quantified goals. – David Bank

Sponsored by SOCAP Global

Grab this last-minute SOCAP offer. The ImpactAlpha team will be all over this year’s SOCAP agenda, convening discussions across diversity, ownership, climate and artificial intelligence and more. Thousands of Agents of Impact will be in San Francisco, Oct. 28-30 for more than 100 sessions across three full days, organized across eight tracks with 240+ speakers (here’s the agenda). This year’s event has a renewed focus on matchmaking and dealflow opportunities, a dedicated event app, discounted hotel rates and more. Learn more about SOCAP24 and join a global community of funders and founders across the impact ecosystem. SOCAP has just released 100 discounted tickets ($300 off!). Register today to save $300 before they run out.

The Week’s Podcast

🎧 This Week in Impact: Another petrostate COP. Host Brian Walsh takes up ImpactAlpha’s top stories with editor David Bank. Up this week: What’s at stake as climate negotiators prepare for COP29 in oil-rich Baku, Azerbaijan; how inclusive fintech ventures are cutting in middle men and women to build trust; and, a look at innovative financial models for forest conservation and water startups.

The Week’s Call

Plugged In: Designing financial products for climate solutions with SecondMuse’s Natalia Arjomand (video). After 15 years supporting entrepreneurs who shared its vision of an inclusive and resilient economy, SecondMuse realized that the challenge wasn’t a lack of capital, but rather the right kind of capital to meet entrepreneurs’ needs. “We decided to go back to first principles and really focus on the design of these financial products,” Natalia Arjomand, who leads Second Muse’s Future Economy Lab, told host Sherrell Dorsey on the latest Plugged In conversation. “We take a collaborative approach, working closely with the communities we serve to co-create solutions that address their specific challenges.”

  • Fit for demand. Take SecondMuse’s partnership with Silver Lining, a New York-based small business coaching company, to tackle the difficulty small businesses face in securing traditional mortgages for their storefronts. Design workshops brought together small business owners and financial experts and led to a fund that offers lease-to-own financing for small business property ownership as well as technical assistance. “We really took the time to understand, why are you not able to get a traditional mortgage from a bank?” recalled Arjmond. “And we designed a product that helped address all of those needs.”
  • Right capital. For entrepreneurs pursuing funding for climate and climate-related projects, Arjmond advises caution amid the rush to raise dollars. “Not all capital is created equal. Entrepreneurs need to do their due diligence – not just on the financial terms but on what the investor brings to the table in terms of connections, expertise and long-term commitment.” Entrepreneurs should align with investors who match their values and time frames, she advises. “Look for partners who believe in your vision and who are in it for the long haul.”
  • Read on and listen to,Designing financial products for climate solutions with SecondMuse’s Natalia Arjomand (video)” by Sherrell Dorsey. Catch up on previous episodes of Plugged In with Mandela Barnes, Ciara May and Rachelle Olden.

The Week’s Deal Spotlight

AI data centers tackle the sustainable energy challenge. Global electricity usage is spiking after decades of stable demand. The culprit: the proliferation of energy-gobbling data centers that power cloud computing and artificial intelligence. More than $18 billion in private capital was invested in the construction of data centers in the US last year, a 44% annual increase. Private equity has sunk nearly $800 billion into digital infrastructure, meaning data centers and telecoms, during the past four years. The increasingly urgent question: Can data centers go green? “If you are trying to deliver capacity for a client who’s only lukewarm on sustainability stuff, speed to market is going to trump everything,” Peter Freed, former energy strategy director for Meta, told ImpactAlpha. Right now, that means natural gas, he says. “We’re just hoping that we’ll see some creative thinking.” 

  • Clean energy. Indeed, soaring demand for electricity is spurring innovation. This week, Scala Data Centers in Sao Paulo, Brazil, raised $550 million to build large-scale data centers across Mexico and South America using hydropower. Barcelona-based startup Submer raised $55.5 million to scale “waterless data centers” using environmentally friendly immersion cooling for hot servers. In Bethesda, Md., Blue Energy raised $45 million for modular, underwater nuclear power plants – and already has in hand a deal for an unspecified data center to use the power. 
  • Corporate investment. Some 40% of existing and planned data centers are supplied by clean energy, according to Goldman Sachs. Opportunities to invest in renewable energy to power the facilities “are underappreciated.” Even as they ramp up power demand, Big Tech firms are driving the growth of green alternatives. Last year, US wind and solar capacity that was contracted to data centers jumped more than 50% to 40 gigawatts – amounting to two-thirds of total US corporate renewables, according to S&P Global. Amazon, Google, Microsoft, Apple and Meta have a collective renewable portfolio of more than 45 gigawatts globally – enough to power nearly 34 million homes.
  • Fission and fusion. Nuclear fission, from old school reactors to next-generation models, is getting a hard look as an option for clean, affordable “baseload” power. At least three US data center owners have signed deals with US nuclear power plants to supply their facilities. Microsoft inked an arrangement last month to restart the Three Mile Island facility, where a partial meltdown in 1979 caused America’s worst nuclear accident. “You’re not going to get to a fully decarbonized system without nuclear power,” Freed said. The real “civilizationally changing” energy source, he added, is fusion. Fusing atoms, rather than splitting them, holds the promise of bountiful energy with next to no waste. Commercialization remains just out of reach, but hopes, and capital commitments, run high. In August, Zap Energy in Seattle raised $130 million to build a fusion system that confines plasma without expensive magnets.
  • Keep reading, AI data centers tackle the sustainable energy challenge,” by Lynnley Browning. Catch up on all of this week’s dealflow reporting on ImpactAlpha.

The Week’s Talent and Jobs

💼 See and share more than a dozen new impact jobs posted this week on ImpactAlpha’s Career Hub and view hundreds of more jobs in impact investing and sustainable finance. Have a job listing to post? Submit it here.

Former Secretary of State John Kerry became co-executive chair of Galvanize Climate Solutions, where he will work closely with co-executive chairs Tom Steyer and Katie Hall… Trillium Asset Management brought on Kathleen Bochman, formerly with Moderna, as portfolio manager in Boston… Illumen Capital added Viridiana Santacruz, an MBA candidate at UC Berkeley’s Haas School of Business, as a bias reduction intern… The UK Climate Change Committee appointed Emma Pinchbeck, previously with Energy UK, as CEO.

British International Investment appointed Leslie Maasdorp, formerly with the New Development Bank, as its new CEO. The UK development finance institution’s current CEO, Nick O’Donohoe, is retiring after seven years in the role (listen to ImpactAlpha’s podcast interview with Nick O’Donohoe on risk, liquidity and catalytic capital in emerging markets)… Justice Climate Fund tapped Shiva Patel, previously with DC Green Bank, to lead the design and implementation of its Clean Communities Investment Accelerator initiative, which is backed with nearly $1 billion from the US’s Greenhouse Gas Reduction Fund.

Conduit Connect tapped Jo Pisani as investment advisory committee chair… 2811’s Waldo Soto Bruna joined Climate-KIC’s advisory board… Regeneration.VC welcomed Moller & Forster’s Philipp Möller as an advisor… Virginia CDFI Coalition added Bria Maria Hodge of the Latino Economic Development Center to its board of directors… Lebo Sebobi, previously with Brands’ On Retailers, joined Norsad Capital as ESG and impact manager.

Kellie Valladares, formerly of Attentive, joined Aligned Climate Capital as director of operations…  BlueHub named Monica Sevy, previously with Earthjustice, as chief information officer… Reinvestment Fund welcomed Zoe Millstein, a former sustainability intern with Contour Housing Partners, as a two-year policy fellow… Ownership Works added Sofia Soto, previously with McKinsey, as a principal on its client advisory services team… Diego Torres, previously with Goldman Sachs, joined Accion Venture Lab as an investment and portfolio associate.

That’s a wrap. Have a wonderful weekend. 

– Oct. 11, 2024