The Brief: Emerging markets lookahead, women in safe homes, off-grid revival, value-based health care, green policy proposals

Greetings, Agents of Impact!

Featured: Looking Ahead

Helping small businesses in emerging markets survive and thrive in 2021. The stabilization and revival of micro, small and medium-sized businesses has been the emerging markets story of 2020. In the first of ImpactAlpha’s year-end series of thematic lookaheads, Jessica Pothering declares, “Emerging economies can’t restart if small businesses fail.” Even before the pandemic, ImpactAlpha identified small business infrastructure as a big opportunity. Then came a novel coronavirus and a novel worldwide shutdown. In wealthier economies, sweeping stimulus packages prevented an all-out cratering of the small business sector. No such relief was possible in many emerging economies. Tech-enabled startups filled some of the gap. Such “B-to-small-B” providers are bringing small shops and producers online, helping owners maintain sales and setting them up for growth as e-commerce booms. Bonus: These service providers are generating a wealth of data that, leveraged effectively, could build more robust pathways to financial inclusion for both formal and informal businesses, which would be a welcome legacy of the pandemic.

• Ready for rebound. Back in 2015, microfinance institution BRAC underestimated the demand for small business capital after West Africa’s Ebola crisis. The best way to support economic recovery, BRAC says now: be ready to cut new checks (see, “Lessons Learned: How Liberia and Sierra Leone rebounded after the Ebola shutdown“). 
• Local knowledge. Local capital providers aren’t waiting around for the money to flood in (see, “Emerging market fund managers scramble to keep enterprises and entrepreneurs afloat“). They’re scraping together relief funds and mobilizing resources to get portfolio companies back up and running and boost their resilience. Here’s how to help them do more. 
• Peddling resilience. When investors largely bowed out in March and April, Africa’s tech startups geared up. The companies that have rebounded fastest are the ones using their platforms and services to help small businesses and the informal economy rebound (see, “Post-pivots, African tech startups are peddling pandemic resilience”).
• Gender lens. Women worldwide have been disproportionately affected by the COVID pandemic. To stem the growth of already gaping inequities, development financiers are trying to coax private investors to purposely target women in their investment strategies (see, “With billions as bait, development financiers seek to hook private investors on gender-lens investing”).
• What we’re watching. How banks and other commercial lenders, along with development finance institutions and multilateral banks, respond to accumulating proof points around small-business creditworthiness and investability will be key to progress on sustainable development objectives.

Keep reading, “Looking ahead: Helping small businesses in emerging markets survive and thrive in 2021,” by Jessica Pothering on ImpactAlpha.

Dealflow: Follow the Money

MacArthur Foundation, Big Society Capital anchor U.K.’s Women in Safe Homes fund. The investment fund will acquire residential properties and lease them to U.K. charities that assist women experiencing or at risk of homelessness. The fund, a joint venture of property investor Patron Capital and impact investment firm Resonance, is one of the first in the U.K. to adopt an explicit gender lens. “This fund will give us the opportunity to support more women coming out of prison, reduce the risk of reoffending and give them the best chance at a second chance,” said Nacro’s Nahar Choudhury. The fund’s lease-to-own model enables the charity partners, including Preston Road Women’s Centre, Nacro and Refuge, to acquire the homes after 10 years. MacArthur, Big Society Capital and Patron anchored Women in Safe Homes, which has raised £15.5 million ($20.5 million) toward its target of £100 million. 

• Catalytic capital. MacArthur made its $5 million program-related equity investment as part of the Catalytic Capital Consortium, or C3, which also includes Omidyar Network and Rockefeller Foundation. MacArthur’s Debra Schwartz said the “fund clearly demonstrates the power of catalytic capital to help build a more just, equitable, and resilient world.” MacArthur’s recent C3 investments have given a boost to Acumen’s ALIVE, Impact America’s second fund, One Acre Fund and Prime Impact Fund.
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Zola Electric scores $8 million partnership for solar mini-grids in Africa. Investment and spending on energy access in sub-Saharan Africa and other emerging markets screeched to a halt at the outset of the COVID-19 pandemic. It appears to have come roaring back. “I’ve never seen the amount of new interest that I’m seeing right now,” said Bill Lenihan of Zola Electric, which will sell at least $8 million in mini-grid technology through a new partnership with Distributed Power Africa, a subsidiary of South Africa-based mobile telecom provider Econet Group. It’s one of the largest revenue deals to date for distributed electrification. “It’s a demonstration of these large energy companies embracing digital networked smart energy as a real solution for the market,” Lenihan told ImpactAlpha. DPA will deploy’s Zola’s Infinity power systems in Zimbabwe, Zambia and a half-dozen other countries, as well as South Africa.

• AiiM raises $80 million for sustainable infrastructure in sub-Saharan Africa. The third fund from the South African private equity firm targets sustainable investments in power, transportation and energy. AiiM paid $31 million for a stake in off-grid solar firm BBOXX last year (see, “BBOXX raises $31 million to fuel East Africa off-grid solar expansion”). 
• Shakeout. The number of people in sub-Saharan Africa without access to electricity likely increased in 2020, reversing years of progress, according to the International Energy Agency. An estimated 580 million people on the continent lacked electricity access last year. A number of off-grid providers have folded or been acquired in recent years. Survivors with more specialized models may now be in position to ride post-pandemic growth. “There isn’t a market – schools, healthcare, homes – where reliable energy is not more valuable now than it was before,” Lenihan said.
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Cityblock Health raises $160 million to support low-income patients. The Brooklyn-based company aims to provide “value-based care” in low-income communities in the U.S. (see, “Cityblock raises $65 million to expand low-income health services in the U.S.“). Its Series C round was led by General Catalyst. Wellington Management, Thrive Capital, Maverick Ventures and Redpoint Ventures participated. Cityblock, which has raised $300 million in equity financing, is valued at more than $1 billion. 

• Value-based care. Elation Health, which helps doctor’s offices digitize patient records, raised $40 million last week from investors, including Generation Investment Management. 
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Dealflow overflow. Short takes on a few of the transactions crossing our desks:

LISC’s Black Economic Development Fund secures $25 million from Aflac. The fund will begin making bridge loans, participation loans and bank deposits in Black-owned institutions by early next year. Costco invested $25 million in the fund in September.

Kansas City’s Sunderland Foundation backs local Opportunity Zone fund. The $1 million investment anchors Equity2’s Impact Fund, an impact-focused Opportunity Zone fund that backs “community-focused real estate projects” and minority- and women-owned businesses in the Kansas City region.

Ada Ventures closes $50 million to invest in diverse founders in Europe. The Europe-focused fund will cut first checks to seed-stage technology companies solving global challenges such as mental health, obesity, workers rights and affordable childcare. Big Society Capital and the British Business Bank were the lead investors in the fund. 

Inclusio raises €60 million in an initial public offering on Euronext Brussels. The offering from the social purpose real estate company, one of the first impact finance products in the public market, was oversubscribed (see, “Inclusio seeks to anchor its social mission by going public”).

Signals: Ahead of the Curve

Bumper crop of green policy proposals await Biden administration. Tis the season… for climate policy frameworks. President-elect Joe Biden has pledged to rejoin the Paris climate agreement on Day One of his administration and unwind four years of environmental rollbacks. And then what? His transition is picking through a raft of policy ideas and frameworks. A big opportunity: Green recovery plans being drawn up by nations could shave projected greenhouse gas emissions by 25% by 2030. Biden has pledged to put climate and a just transition at the center of his agenda and spend $2 trillion over four years on climate. Some proposals that have caught our eye:

• Material disclosure. In a 300-page blueprint, Climate21, a group of former government officials and experts, lays out detailed actions that a dozen federal agencies can take, from mandating that corporations disclose material climate-related financial risks, to using the government’s procurement power to steer spending to American-made, green and fair labor purchases. 
• Climate innovation. The U.S. needs to increase spending on climate research fivefold, and “revolutionize the world’s physical economy,” writes Bill Gates. His book, “How to Avoid a Climate Disaster,” is due out in February. Gates wants to see a new National Institutes of Energy Innovation to focus climate funding.
• Carbon markets. Putting a price on carbon, via a tax or cap-and-trade or other system, is widely embraced as a way to use market signals to shift capital and reduce emissions. The game changer: an international carbon trading market that brings together U.S., China and Europe, Mark Campanale of Carbon Tracker told ImpactAlpha. 
• Green bank. Connecticut, Hawaii, Michigan, Nevada, New York, and Rhode Island are among the dozen or so states that operate green banks – public or nonprofit financial institutions that mobilize capital for clean energy, green infrastructure and emissions reduction projects (Connecticut Green Bank’s Bryan Garcia is on the Biden transition team). A national green bank, owned by the federal government, could mobilize private capital towards decarbonization and climate resilience, says the Center for Climate and Energy Solutions. A U.S. climate bank funded with $35 billion could activate at least $1 trillion via co-investment, capital recycling and balance sheet leverage, according to the Coalition for Green Capital (see, “Green banks being prepped for the U.S. national stage (again)”). 
• National Investment Authority. America’s aging infrastructure is in dire need of an overhaul at the same time the transition to a low-carbon economy requires greening of the power grid, transportation, food production and manufacturing. Cornell University professor Saule Omarova proposes a National Investment Authority akin to the European Investment Bank, the E.U.’s infrastructure lender, but with equity investment authority as well. “We really need to be bolder and more proactive if we want to solve the problems of such magnitude that we’re facing now,” Omaraova told ImpactAlpha.
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Agents of Impact: Follow the Talent

Vanessa Lopez, ex- of Global Brigades, joins Nia Impact Capital’s impact investment team as chief operating officer… Google’s Karan Bhatia and Neel Kashkari of the Federal Reserve Bank of Minneapolis join the Urban Institute’s board of trustees… Heather Zichal, an advisor to former President Barack Obama, is the new CEO of the American Clean Power Association… Tom Scriven, ex- of Renew, LLC, will lead a new Denver office for mission-focused law firm RPCK Rastegar Panchal… The American Sustainable Business Council and Social Economy Europe are teaming up to advocate for sustainable policies in Europe and the U.S.

Carbon Trackerseeks an operations manager in Austin or New York… 60 Decibels is hiring a finance manager in New York… Wefunder is looking for a head of talent… Cambridge Associatesseeks an investment director of sustainable and impact investing in London… Americans for Financial Reform Education Fund has an opening for a managing director of campaigns and communications… Pacific Community Ventures is soliciting feedback on its policy paper, “Meeting The Moment: U.S. Impact Investing Policy, Inequality, and COVID-19 Recovery.” Join the sessions on market infrastructure policy, today at 12pm ET, and sector-specific policy ideas, Thursday, Dec. 17.

Thank you for reading. 

–Dec. 14, 2020