The Week in impact investing: Positive externalities

The team at

ImpactAlpha

🗣 Virtuous circles. Solar panels, electric vehicles and batteries already are riding declining cost curves. The rising price of carbon, especially in Europe, is setting off new virtuous circles of rising sales and falling costs for green steel, green cement and other low-carbon solutions (listen to this week’s podcast). But exacting a price for the negative externalities of greenhouse gasses only goes so far. “We haven’t figured out how we’re going to afford to pay for this approximately $100 trillion bill to take approximately 1,000 gigatons of carbon out of the atmosphere,” Australian engineer Delton Chen said on this week’s Agents of Impact Call (see below). His modest proposal: A “global carbon reward,” backstopped by central banks, to pay companies and communities for capturing carbon and rewarding the positive externalities of carbon reduction without imposing a cost on consumers, companies or governments. It’s one of those ideas that seems outlandish until it becomes obvious.

Positive externalities are chronically under-rewarded. Enterprise tech and fintech startups that have lowered the costs of serving small and micro-businesses are lighting a competitive fire under big banks, as Jessica Pothering reports. Banks are adopting fintech approaches to serve an emerging customer segment they had long ignored, bringing their own deeper pockets and lower capital costs to bear on a crucial sector for livelihoods. Sistema.bio has reached 200,000 smallholder farmers with low-cost biodigesters that produce energy and fertilizer – and also reduce carbon and methane emissions. Pay-for-success “impact securities” repay investors when nonprofits meet outcome milestones for economic mobility and inclusion. The GIIN’s Amit Bouri endorsed calls for reporting standards to cover the positive and negative impacts of all investments, so investors can value and compare real-world outcomes. He imagines a ‘race to the top’ as investors buy into a better future. We’ll all be richer for it when markets more fully reward entrepreneurs and investors for the positive outcomes they produce. – David Bank

🎧 Impact Briefing. ImpactAlpha’s David Bank joins host Brian Walsh to round up the takeaways from this week’s Agents of Impact Call No. 37 on the rising price of carbon (see below) and share highlights from CDP’s Paula DiPerna, General Atlantic’s Emmanuel Lagarrigue, Estabrook Carbon’s Edwin Datson and Regen Network’s Gregory Landua. Delton Chen articulates the case for a Global Carbon Reward. Plus, the headlines.

👋 Agents of Impact Call No. 38: Policies to catalyze private capital for public good. The principles of impact investing have long captured bipartisan interest. Impact investors must continue to push for policies that catalyze private capital for public good. Fran Seegull of the U.S. Impact Investing Alliance, Cambria Allen Ratzlaff of the UAW Retiree Medical Benefits Trust, and Satyam Khanna, former ESG advisor at both the SEC and EPA, will talk disclosure, accountability and engagement.

  • Mark your calendar. Tuesday, Feb. 22 at 10am PT / 1pm ET. RSVP today.

The Week’s Call

Call No. 37: Ramping up the supply of carbon reduction to meet the urgent demand (video). “I should be popping champagne,” exclaimed CDP’s Paula DiPerna on ImpactAlpha’s Agents of Impact Call this week. With the price for a ton of carbon topping $100 on Europe’s emissions trading scheme and rising elsewhere, The Call was abuzz with talk of global carbon markets, offsets and credits, green premiums, blockchains and registries. “This is a wake up call,” she said. “People see that there’s a high cost to inaction, per ton.”

  • Driving prices. Demand for carbon reduction – including from corporations making their net-zero pledges – has outstripped the supply of high-quality credits and offsets from projects that remove or reduce the gas. And corporations and funds stockpiling carbon credits in anticipation of higher future prices are further fueling the rise. “Everybody wants to be able to pre-purchase their carbon and know that they have it taken care of, because they’re all feeling the squeeze,” said ReGen Network’s Gregory Landua.
  • Backlash. A high price on carbon reflects its real value and drives green alternatives. But if that raises the cost of transportation, heating or food, the backlash could derail decarbonization efforts (cf. France’s 2018 Yellow Vest movement). The key is to make green solutions cheaper and people richer. “You need to combine this with breakthrough technologies that will bring a deflationary impact, because otherwise, the society at large will never accept the transition,” warned General Atlantic’s Emmanuel Legarrigue.
  • Carbon quantitative easing. That’s where Delton Chen’s Global Carbon Reward comes in. The big idea: to finance global decarbonization by valuing – and rewarding – the “positive externalities” of emissions reduction without exacting such a cost on the economy, or the public at all. “Should we stick with our current policy toolkit, which we’re familiar with now, and hope it will work?” asked Chen. “Or should we invest in other options and opportunities? We should be innovating as much as possible.”
  • Keep reading the recap by Amy Cortese and (re)watch the call on YouTube.

The Week’s Dealflow

Deal spotlight: Climate risk (and cost) mitigation. Investor interest in companies helping businesses manage their carbon footprints and climate risks is rising with the price of carbon. San Francisco-based Watershed raised $70 million to develop software to help companies like Airbnb and Warby Parker create climate strategies and work toward net-zero carbon emissions. Colorado-based Entelligent secured financing for its software to help asset managers, banks and insurance firms forecast and evaluate climate risks. “They have to embrace advanced climate science technologies and data,” said Entelligent’s Thomas Stoner Jr.

  • Farming carbon. Estonian agriculture software developer eAgronom raised $7.4 million to develop a farming-based carbon credits platform. Israeli remote-sensing startup Agritask, meanwhile, raised $26 million to give farmers better data and help companies like Starbucks and Heineken reduce risks with sustainable farming and sourcing practices.
  • Environmental conservation. Increasingly robust ecosystem-services markets are boosting climate change mitigation and adaptation, land restoration, conservation and biodiversity. This week, KKR’s Global Impact fund invested in Texas-based Resource Environmental Solutions, which develops green infrastructure and restoration projects for wildlife habitat and wetlands.

Agrifood investing. Eco-friendly online grocer Zero Grocery raises $11.8 million in seed financing to deliver groceries using plastic-free packaging… USDA’s Natural Resources Conservation Service awards $690,000 to Croatan Institute and partners to develop a digital food marketplace that values the social and environmental costs and benefits of farmed foods… Sustainable food investor Blue Horizon backs Argentinian alt-protein producer Tomorrow Foods, its first investment in Latin America.

Financial inclusion. Insurance tech startup Casava scores $4 million in pre-seed funding for affordable income protection and health insurance in Nigeria… Fintech venture U GRO Capital secures $18.5 million from responsAbility to provide credit for micro and small businesses in India… FinDev Canada commits $8 million to the fourth Central American Small Enterprise Investment Fund, a gender-focused fund supporting small businesses in Central America, Colombia and the Dominican Republic.

Fund news. Pay-for-success funds raise $7.8 million for seven nonprofits in San Francisco and Colorado… Toronto-based Amplify Capital’s second impact venture fund raises $30.7 million to invest in early-stage tech startups building solutions in global health, education and the environment… Engine No. 1 secures an anchor commitment from Bay Area advisory firm Jordan Park to launch an exchange-traded fund to invest in companies advancing the energy transition.

Education and skills. Bitwise Industries acquires Denver-based software developer Techtonic Inc. to create tech apprenticeships for low-income women and minorities in Colorado… FourthRev secures $8 million, led by Educapital, to develop career accelerator programs in sectors facing skills gaps, like cybersecurity.

Energy access. The Off Grid Electricity Fund invests $230,000 in Alina Eneji to increase access to reliable and affordable energy in rural Haiti… Lacuna Sustainable Investments backs Bear Peak Power to build solar energy and storage assets in underserved U.S. communities… Sistema.bio secures $15.6 million for modular biodigesters for smallholder farmers.

Low-carbon transition. Mumbai-based EV charging-tech startup BrightBlu raises $1.6 million from Dutch clean energy conglomerate Koolen Industries… Verdox raises $80 million to commercialize electric carbon-capture technology… Utilidata raises nearly $27 million to digitize and decarbonize the electric grid.

Business digitalization. Softbank leads ElasticRun’s $300 million raise for small business digitalization in India… Rwanda Innovation Fund backs Nigeria’s MAX to expand its ride-hailing platform and financial services to East Africa’s drivers.

Health and wellbeing. ConcertoCare raises $105 million to support seniors at home.

Impact M&A. Rosemont takes a minority stake in Veris to secure employee ownership.

The Week’s Talent

Justin Adams, ex- of the World Economic Forum, joins Generation Investment Management’s Just Climate as head of partnerships… Gillian Marcelle of Resilience Capital Ventures joins the founding advisory board of New Majority Capital… William Clark Jr. is president of the newly formed Global Alliance of Impact Lawyers. The North American chapter president is Allen Bromberger… Morgan Sheil, ex- of KKR, joins Energy Impact Partners as associate vice president of ESG and impact. 

Omidyar Network India’s Roopa Kudva joins the board of the Global Impact Investing Network… Jotham Chow and Andrew Newton join Amplify Capital as analysts… Harris Komishane, ex- of Fidelity Investments, joins Invest Green as senior advisor and principal… Tikehau Capital appoints Alexander Bell, ex- of Caisse de Dépôt et Placement du Québec, as head of the North American private equity climate practice, and Cristian Norambuena, ex- of New York City Comptroller’s Office, as director of the practice. 

Jeffrey Cohen, ex- of the Sustainability Accounting Standards Board Foundation, joins Oak Hill Advisors as head of ESG and corporate sustainability… Michael Chitwood, ex- of World Vision USA, joins Opportunity International as chief philanthropy officer… Tanya Beja, ex- of Blue Marble Microinsurance, joins AlleyCorp Social Impact as partner… Coalition for Green Capital names William J. Barber III, son of Rev. Dr. William J. Barber II, as chief consultant for environmental justice and equity.

The Week’s Jobs

Blackstone Charitable Foundation is hiring a director of finance and operations in New York… New Markets Support Company is looking for an impact manager and an impact analystCalSTRS is hiring an investment officer of stewardship strategies… Calvert Impact Capital is looking for a risk management analyst in Bethesda, Md… Raikes Foundation is recruiting a senior director for its conditions of racial equity initiative in Seattle.

Aspen Network of Development Entrepreneurs is hiring a research manager and climate manager in Washington, D.C… ISF Advisors is looking for an associate director… Village Capital seeks a communications associate… The Susan Thompson Buffett Foundation seeks a research and evaluation associate… Sandbox Industries seeks a summer associate at Sandbox Sustainability Ventures. 

RBC Capital Markets is recruiting a vice president of its sustainable finance group in New York… Social Finance is hiring a vice president of workforce partnerships in Boston, San Francisco, Austin or Washington, D.C… Fair Food Network is looking for a senior director of impact investing in Ann Arbor, Mich.

That’s a wrap. Have a wonderful weekend. 

– Feb. 11, 2022