The Brief | August 16, 2023

The Brief: Grid resilience on Long Island, blue bond in Gabon, sustainable mineral supplies, health equity in Los Angeles, carbon credits in Africa

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ImpactAlpha

Greetings, Agents of Impact! 

👋 Agents of Impact Call: Catalytic capital in Indian Country. Partners of the Wolakota Buffalo Range on Rosebud Sioux tribal lands embraced Siċaŋġu Co’s “Seven Generations” investing framework, based on Lakota values for the world they’d like their descendants to inhabit. The effort to establish the 1,000-head herd is detailed in the report, “Indigenizing Catalytic Capital.” “A lot of Native entrepreneurs don’t hype their social thesis, even though it runs right alongside their financial thesis,” says Kate Finn of First Peoples Worldwide, which produced the report with support from the Catalytic Capital Consortium. “There is a huge opportunity there for impact investors.” Finn and Siċaŋġu Co’s Clay Colombe, along with Navajo Power’s Brett Isaac and other Agents of Impact, will explore how resourceful entrepreneurs are blending finance to launch Native-led businesses, create jobs and provide vital community services, Wednesday, Aug. 23, 10am PT / 1pm ET / 6pm London. RSVP today. 

Featured: Muni Impact

Long Island issues $400 million green bond to finance a climate-resilient electric grid. From Maui to New York, Portland to Texas, and across the Mid-Atlantic and Midwest, America’s electricity grids are buckling under extreme summer heat. Earlier severe weather events, including Hurricane Sandy in 2012 and Superstorm Isaias in 2020, alerted New York’s Long Island to vulnerabilities in its transmission and distribution network. Sandy alone caused more than $19 billion in damage to New York state. On Long Island, high-speed winds, heavy rains and a 14-foot storm surge left a half-million people without power for more than a week and wreaked havoc on Long Island’s grid. The Long Island Power Authority last week issued $400 million in bonds to fund much-needed grid improvements to boost the utility’s resilience to extreme weather events and accommodate more renewable energy. “Electric systems that are operating today and that will be operating for decades should consider, and prepare for, the possible range of future environments,” writes Rose Fadjia Joseph of HIP Investor, which gives Long Island Power a rating of 86.9 out of 100, connoting outperformance on health, equality, trust and other pillars.

Dealflow: Blue Economy

Gabon raises a $500 million blue bond to swap debt for nature. Investing in ocean health represents one of the best opportunities for slowing climate change, protecting billions of livelihoods, and preserving biodiverse ecosystems. Yet Sustainable Development Goal No. 14, “life below water,” is the least funded of the 17 global goals. The US International Development Finance Corp. provided a $500 million political risk guarantee to support marine preservation and restoration in the central African nation of Gabon. The insurance helped Gabon to buy back more than $430 million of its international debt and roll it into a $500 million “blue bond” at a lower rate. The capital, which will be used marine conservation, is expected to unlock an additional $163 million over 15 years. The Nature Conservancy, which helped design debt-for-nature swaps, advised the deal.

  • Blue bonds. Blue bonds represent just 0.5% of sustainable debt issuances, but they’re on the rise as a tool to help emerging economies refinance crippling sovereign debt loads while unlocking capital for climate resilience and coastal conservation. In 2018, the Seychelles pioneered the blue bond with a debt-for-nature swap (see, “Seychelle’s successful ‘debt-for-conservation’ deal paves the way for more blue bonds”). Belize and Barbados followed suit, along with Ecuador, which inked a $1.6 billion deal to help protect the Galapagos Islands. The DFC supported the blue bonds for Belize and Ecuador. Half of DFC’s insurance risk in the Gabon deal is shared with AXA XL, Swiss Re, Chubb and five other insurance firms.
  • Save the turtles. Gabon’s debt deal requires the country to designate 30% of its coastal territory as biodiversity protection zones. The country’s coastal waters are home to the largest population of leatherback turtles, an endangered species, and are an important breeding spot for humpback whales. The deal includes a conservation fund that is expected to unlock $88 million for marine preservation and restoration by 2038.
     
  • Dive in.

TechMet rakes in $200 million to meet global demand for critical minerals. The energy transition will require ever-more lithium, nickel and cobalt for electric vehicles, batteries, solar panels and wind turbines. Demand for these minerals will grow more than 20-fold by 2035, according to S&P Global. Dublin-based TechMet is building a portfolio of “environmentally and socially responsible” projects and companies, from mining and extraction, to processing and recycling. TechMet has invested more than $180 million in the past year, including in sustainable nickel and cobalt producer Brazilian Nickel and Rwanda’s Trinity Metals, a producer of tin, tungsten and tantalum. Last week, TechMet backed UK-based Cornish Lithium to build lithium supply for EV battery production and storage.

  • Global investor roster. Investors in TechMet’s round include the UK’s Lansdowne Partners, Switzerland’s Mercuria Energy and Chicago-based S2G Ventures. The DFC, which last year took a $30 million stake in TechMet, reupped in the company. TechMet is hoping to reduce global reliance on China for critical minerals and rare earth elements. The US Inflation Reduction Act, which turns one year old this week, includes incentives for US production of critical minerals (see, “Clean energy investors are not waiting for Inflation Reduction Act’s billions to flow”).
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Dealflow overflow. Other news crossing our desks:

  • Wind power developer One Energy Enterprises announced a rare new SPAC deal. TortoiseEcofin Acquisition Corp. III will acquire One Energy and take it public on the New York Stock Exchange. (Bloomberg)
  • The American Heart Association’s impact investing arm directed $850,000 to four organizations in LA addressing economic resilience, food security and recidivism, including FreeWorld, a tech training and job placement venture. (American Heart Association)
  • Residential solar company PosiGen secured a $12 million loan through ImpactAssets, the Connecticut Green Bank and Inclusive Prosperity Capital to make solar energy available in low- and moderate-income communities in the US. (ImpactAssets)
  • Advanced Ionics raised $12 million in a Series A round led by BP to develop electrolyzers to support the production of green hydrogen fuel. (BP)

Signals: Carbon Markets

African leaders want a bigger slice of a bigger market for voluntary carbon credits. Africa needs $250 billion a year to finance climate mitigation and adaptation initiatives. Yet the continent of 1.2 billion people attracts just $30 billion, or about 2% of global climate funding. One potential source of climate financing: the $2 billion global market for voluntary carbon credits, reports Lucy Ngige for ImpactAlpha from Nairobi. Carbon credits have been criticized for greenwashing and poor quality projects, but African leaders see an opportunity to boost oversight and fund sustainable development. Kenya’s President William Ruto has called carbon credits Kenya’s “next significant export.” The Carbon Credit and Benefit Sharing bill, now making its way through Kenya’s parliament, splits carbon proceeds among project owners, local and national governments, and communities. Another bill, the Climate Change Amendment, would regulate trading and engagement in carbon markets. Ruto helped launch the Africa Carbon Markets Initiative at last year’s COP27 summit in Egypt to help African nations unlock up to $120 billion from carbon markets and create more than 110 million jobs by 2050. The world has “a golden opportunity,” Ruto said, to develop carbon markets that “can yield attractive income and development opportunities for communities at the frontlines in the fight against climate change.”  

  • Everyone in. Malawi launched an initiative in June to regulate carbon projects on its land and ensure the government and local communities benefit. In May, Zimbabwe abruptly declared that it will take a 50% cut of all carbon projects in the country. One of the largest and earliest forest conservation projects, the Kariba Project in Zimbabwe, was the subject of a July investigation by Follow The Money that found that communities received very little from the $100 million generated from the sale of credits to buyers like Gucci and Volkswagen. 
  • Carbon capture. Kenya issued more than 20% of all carbon credits in Africa between 2016 and 2021. The nation has the potential to mobilize up to $600 million per year by 2030, based on an average price of $20 per ton, according to the Africa Carbon Markets Initiative. Nairobi-based direct air capture startup Octavia Carbon is working with New York-based Cella Mineral Storage to remove carbon from the air and store it in mineral rock in Kenya’s Great Rift Valley.
  • Get the scoop. 

Agents of Impact: Follow the Talent

Jeff Waters, ex- of Maxeon Solar Technologies, will replace Geoffrey Brown as CEO of Portland-based Powin, a provider of energy storage systems… Rockefeller Foundation is on the hunt for a managing director to manage its Food is Medicine program… Social Finance is hiring a VP for investor relations… The city of Ithaca, NY seeks a sustainability planner.

Inspire Investing is looking for a research analyst… KKR Global Impact is recruiting an associate in Singapore… Finance in Motion has an opening for a senior officer in Nairobi… Applications are open for the 2024 Future Leaders Climate Summit to be convened next March by the Future Leaders Climate Initiative and the Aspen Institute’s Energy and Environment Program.

Thank you for your impact.

– Aug. 16, 2023