Impact Finance Bulletin: Gfanz growth sees 40% of world’s financial assets committed to net zero target

Our regular impact finance bulletin brings you the latest funds, deals and programmes in the world of investing for good. Read on for some of the past month's headlines, and scroll down for more detail.

 

 

COP26: Gfanz growth sees 40% of world’s financial assets committed to net zero target 

More than 450 financial institutions representing 40% of the world’s financial assets have joined the Glasgow Financial Alliance for Net Zero (Gfanz), committing to meeting the goals set out in the Paris Agreement.

The signatories, which collectively manage $130tn of private capital, have pledged to reach net zero carbon emissions by mid-century, and to reduce their emissions by 50% by 2030 in order to limit climate warming to 1.5C above pre-industrial levels.

Gfanz was first launched in April by the UN special envoy for climate action and finance Mark Carney, then attracting financial institutions with a total of $70tn in assets. The COP26 commitment almost doubles this figure.

Make no mistake, the money is here. If the world wants to use it - Mark Carney

Carney told COP26 on 3 November: “Up until today there was not enough money in the world to fund the transition… Right here, right now is where we draw the line. The $130tn is more than is needed for the net-zero transition globally.”

He added: “Make no mistake, the money is here. If the world wants to use it.”

Last month, developed countries revealed they would only meet their promise to provide $100bn a year to help developing countries finance climate mitigation and adaptation by 2023, not 2020 as previously agreed.

 

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COP26: IFRS Foundation to create global sustainability disclosure standards

The IFRS Foundation announced at COP26 the formation of the International Sustainability Standards Board (ISSB) to develop global sustainability disclosure standards for companies. 

The IFRS Sustainability Disclosure Standards will enable investors to access high-quality, comparable information on companies’ impact on climate and social sustainability worldwide.

The standards will be developed to facilitate compatibility with requirements that are jurisdiction-specific or aimed at a wider group of stakeholders (for example, the European Union’s planned Corporate Sustainability Reporting Directive as well as initiatives in the Americas and Asia-Oceania).

Richard Sexton and Robert K Steel, co-chairs of the IFRS’s Value Reporting Foundation Board, said the announcement was “a reflection of the changed world we live in – a world in which sustainability and long-term thinking are increasingly at the heart of business and investor decision-making.” 

 

 

COP26: CDC Group to invest £3bn in climate action in emerging markets 

The UK’s development finance institution is to invest over £3bn in emerging markets to help them meet their Paris Agreement goals and to adapt and build resilience to the effects of climate change.

CDC Group will invest in sectors including renewable power, infrastructure and agriculture over the next five years – making the 70-year-old organisation one of the world’s largest climate finance investors in Africa and some south Asian markets, according to a statement.

The £3bn includes £200m for a new Climate Innovation Facility to scale up technologies that help people in developing countries to deal with the impacts of climate change. This is double the amount of climate finance CDC invested in 2017-2021.

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COP26: More announcements you may have missed

  • USAID announced a target to mobilise $150bn in public and private climate finance by 2030. The US government’s development bank will catalyse the majority of this funding from private and public sector investments (including from partner country governments). It  aims to mobilise $10 of private sector financing for every $1 of USAID public funding invested.   
  • A new partnership between France, Germany, the UK, the US and the EU will mobilise $8.5bn (grants, concessional loans, investments and risk-sharing instruments) to help South Africa move away from coal. The partnership is expected to prevent up to 1 to 1.5 gigatons of emissions over the next 20 years.
  • A group of philanthropic funders, including Rockefeller Foundation, IKEA Foundation, and Bezos Earth Fund, and development banks launched the Global Energy Alliance for People and Planet (GEAPP) to accelerate investment in green energy in developing and emerging economies worldwide. The alliance includes Rockefeller Foundation, IKEA Foundation, and Bezos Earth Fund, plus international development banks. It aims to unlock $100bn in public and private financing to fund projects relating to access to clean energy, climate mitigation and job creation.
  • The government of Germany and the Inter-American Development Bank (IDB) launched a $20m fund to strengthen green fiscal policies in Latin America and the Caribbean. The trust will finance country-specific technical assistance projects and help create a regional knowledge-sharing platform for finance ministries.
  • Meanwhile IDB Lab, IDB's innovation laboratory, launched the $30m Small Farmers Climate Change Adaptation Fund to provide microfinance loans for climate change adaptation in rural areas of Mexico, Ecuador, Peru, and other Central American countries.
  • Amazon founder Jeff Bezos told COP26 his foundation, the Bezos Earth Fund, would spend $2bn on initiatives to restore nature. The foundation plans to spend $10bn fighting climate change overall.
  • The European Investment Bank launched its first dedicated Climate Adaptation Plan. The plan will increase the proportion of its climate funding going towards climate adaptation, from 4-5% on average in the past decade to 15% in 2025. 
  • Major philanthropic organisations including the Skoll Foundation committed more than $223m to drastically reduce methane emissions around the world. 
  • CDC Group, Finnfund, Norfund and global investment manager New Forests are to co-develop investment strategies to support the sustainable forestry sector in sub-Saharan Africa. The partners aim to raise up to $500m over the next three to five years.

 

 

UK: Esmée Fairbairn Foundation to spend £10m on impact investing “experiments”

One of the UK’s largest independent funders will allocate £10m to impact investing, in addition to its existing £45m allocation for social investment.

In a statement this week, the Esmée Fairbairn Foundation said it would use the money to “experiment with impact investing opportunities, and to test the potential for achieving financial returns by investing into impact funds that align to our impact goals”. 

The foundation also allocates £25m of its endowment to ESG investing; the new impact investing pot aims to bridge the gap between this and its social investment activity, which is impact-first and accepts concessionary returns.

Esmée Fairbairn will invest exclusively into funds rather than make direct investments, and investments will not need to have a UK-only focus.

Ben Smith, head of social investment at the foundation, said that testing impact investing could inform “how we invest our endowment and, we hope, influence others, whilst having a positive benefit to society and the environment”.

 

 

Global: Blended finance market bounces back after pandemic-driven slump

The global blended finance market is expected to nearly recover to its pre-pandemic levels after it dropped to its lowest in 10 years in the wake of Covid-19, according to a report published last month.

The State of Blended Finance 2021, published by network and research body Convergence, shows that blended finance flows fell to $4.5bn in 2020, less than half its five-year average. 

The number of deals (54) was similar to previous years, suggesting that fund managers postponed or reduced fundraising targets in 2020, choosing to hold smaller closes until markets stabilised and investor appetite resumed, according to Convergence. Funding that would have backed blended finance investments may also have been diverted towards pandemic response funding, the authors suggest.

But the blended finance market is expected to climb back to around $10bn this year, compared with $11bn in 2019, with 18 deals already closed and 71 fundraising as of September 2021.

Sub-Saharan Africa remains the region attracting the most blended finance, and the sectors most benefitting from blended deals are energy, financial services and agriculture – which has experienced increased momentum over the past few years: agriculture-focused transactions represented 28% of blended finance deals in 2020, compared with 16% between 2015 and 2017.

 

 

Global: 2021 sees record number of new impact unicorns

As many as 52 impact startups have become unicorns in 2021 so far, the biggest increase on record, according to new data from Dealroom.

A unicorn is defined as a rapidly scaling company driven by tech innovation that has reached a $1bn valuation. There are now a total of 146 impact-driven unicorns globally.

Worldwide, impact startups – broadly defined as ventures that have a positive social or environmental impact, and including companies such as Tesla – raised a record €39bn in venture funding so far this year, a 70% increase on 2020 figures, according to the data.

Europe is the region with the highest share of impact investing as a total of venture capital investment (14%, compared with 10% in North America). North America attracts the highest amount of impact funding overall ($22bn), followed by Europe ($11bn), while South America is the fastest growing region. Impact startups in emerging countries attract the smallest fraction of capital, according to the data.

Impact venture capital funding is unevenly distributed across the different Sustainable Development Goals (SDGs). Companies focused on climate action and affordable and clean energy attract the most funding, while people-focused goals tend to be underfunded.

 

 

Latin America/Caribbean: IDB Lab raises $4m to fight plastic water pollution

The innovation lab for the Inter-American Development Bank Group, IDB Lab, announced a $4m investment commitment to support early-stage startups and SMEs that tackle plastic waste pollution in oceans and waterways in Latin America and the Caribbean.

The investment, backed by large corporations including Danone and Unilever, will be managed by Circulate Capital, which has been managing the $106m Circulate Capital Ocean Fund since 2019, a fund that aims to prevent ocean plastic waste in South and Southeast Asia.

On top of the $4m commitment, IDB Lab is providing a technical cooperation grant of $500,000. The capital will be invested primarily in early-stage startups and SMEs that develop plastic-waste reduction solutions and is intended to catalyse further investment from institutional investors.

Irene Arias-Hofman, CEO of IDB Lab, said: “This initiative is an example of how IDB Lab can work together with the private sector to leverage funding from corporates to contribute to SDGs, emissions reductions, the circular economy, and a green recovery.” 

 

 

Netherlands: Rubio raises €110m for second impact fund, smashing targets

Netherlands-based impact fund Rubio Impact Ventures announced the closing of its second impact fund at €110m, €30m and almost 40% above target.

The fund aims to invest in at least 30 companies with potential for systemic impact in the areas of circular economy, community empowerment and healthy living. 

Rubio now manages a total of €150m of impact capital. It has invested in 11 companies since the second fund was launched, including ethical coffee brand Wakuli and cultivated meat producer Mosa Meat.

Helmer Schukken, managing partner at Rubio, said: “With our first fund, we proved that impact and financial return can reinforce each other. And that is why we stepped up the pace with the second fund, to make even more impact in areas that are vital to the world.”

 

 

UK/India: British Asian Trust launches $14.4m Skill Impact Bond

The British Asian Trust has launched the $14.4m Skill Impact Bond, which will fund skills and vocational training for 50,000 young Indians. Some 60% of the beneficiaries will be women. 

Research quoted by the British Asian Trust shows that women are seven times more likely than men to have lost their jobs during India’s lockdown, and that between November 2019 and November 2020, the urban Indian female jobs market contracted by 27%.

Abha Thorat-Shah, executive director, said the employment challenges faced by women in India could be turned “into an investable opportunity and can help put India back on track for meeting its gender and employment-related UN Sustainable Development Goals, post-Covid-19.”

The risk investors of the impact bond, India’s National Skill Development Corporation and Michael & Susan Dell Foundation, have committed $4m for upfront working capital; outcomes funders include Children’s Investment Fund Foundation, HSBC, JSW Foundation and Dubai Cares. 

The British Asian Trust says this bond is the first development impact bond to specifically focus on skills development. It follows the $11m Quality Education India bond, launched in 2018 with the aim of improving learning outcomes for 200,000 primary school children.

 

 

UK: Women in Safe Homes Fund secures five new investors, reaching £26m

Casey Family Programs, the Church of England, Snowball and Joseph Rowntree Foundation and another unnamed investor are backing a gender-lens social impact property fund launched in late 2020

The Women in Safe Homes (WISH) fund is a joint venture from UK impact investment firm Resonance and real estate manager Patron Capital, and was developed with expert organisations including Women’s Aid. It announced its first close of £15.5m in December 2020. 

The fund aims to tackle women’s homelessness, providing safe, good-quality and affordable homes, as well as specialist support, to help transform women’s lives. It has a target size of £100-£200m, aiming to provide 650 homes across the UK for over 6,000 women over its lifetime.

Fourth close investors have raised £6m. They join earlier investors Guy’s & St Thomas’ Foundation, Barrow Cadbury Trust, Monday Charitable Trust, City Bridge Trust, The Clothworkers’ Foundation and Comic Relief who have pledged around £5m between them. 

 Commitments from these additional investors bring the total raised to date to over £26m, the majority of which is already allocated to pipeline investments in charity partners.

 

 

Global/UK: LSE’s Marshall Institute to launch £50m social impact accelerator

The London School of Economics and Political Science will open the Marshall Impact Accelerator in spring 2022, kickstarted by a donation of £50m from investor and philanthropist Sir Paul Marshall.

The accelerator will support the “world’s most promising social ventures” to scale up and tackle global challenges in areas such as health, the environment and social inequality, according to the LSE Marshall Institute, which will host the new initiative.

The Marshall Institute was established in 2015 with a £30m gift from Sir Paul. In 2017, it launched the world’s first MSc in Social Business and Entrepreneurship, as well as developing other graduate and executive courses.

Sir Paul said his donation would “support visionaries from every continent as they create groundbreaking new innovations and change the world”.

This will support visionaries from every continent as they create groundbreaking new innovations and change the world

 

 

Global/Germany: B Corp search engine Ecosia launches €350m green tech VC fund

Green search engine Ecosia has launched the World Fund, an impact venture capital fund investing in tech startups focusing on decarbonisation. The fund targets a first close at €350m in the first half of 2022; half of the funding has already been committed by more than 60 investors.

The World Fund will invest in ventures helping to reduce carbon emissions in the energy, transport, food, agriculture, manufacturing and building sectors.

Ecosia is a search engine that uses the profits from advertising to plant trees. It currently funds a new tree every second, and has planted more than 125 million to date. The Berlin-based social business was founded in 2009 and became Germany’s first B Corp in 2014.

 

 

UK: Investment-readiness Reach Fund to provide £10m more in grants

Social enterprises and charities in England will be able to access grants totalling £10m for an additional four years to help them get ready for investment. This will be the second extension of the Reach Fund, first launched in 2016 and provided by the Access Foundation and Social Investment Business. The additional £10m will support up to 1,000 organisations. 

To date, the fund has awarded a total of 628 grants worth over £8.5m, with an average grant size of £13,600.

An independent evaluation published in September 2021 describes the Reach Fund as “a small, flexible and responsive programme” which is “getting good investment deals over the line, at relatively low cost”. It also found that the fund compares favourably with previous similar programmes such as the Big Potential programme and the Investment and Contract Readiness Fund in getting finance to the places and communities where it is needed most. However, the same evaluation revealed there was lower uptake of the fund by organisations from marginalised groups. Neil Berry, director of programmes at Access, said there was “more to do” to reach such groups.

 

 

UK: RRLF successor Recovery Loan Fund launches, targets £25m

Social Investment Business (SIB) and Fusion 21 Foundation are launching the Recovery Loan Fund to support social enterprises and charities with flexible repayable finance as they recover from the Covid-19 crisis.

The fund will work under the terms of the British Business Bank Recovery Loan Scheme – which supports access to finance for UK businesses as they recover and grow following the Covid-19 pandemic. SIB targets a size of at least £25m for the Recovery Loan Fund. 

Nick Temple, CEO of SIB, said: “Charities and social enterprises continue to need patience, flexibility and responsiveness in the post-Covid recovery. This fund aims to meet those needs, providing the right finance at the right time for those that need it.”

The Recovery Launch Fund is the successor to the Resilience and Recovery Loan Fund, which approved £28m in total funding to 77 charities and social enterprises across the UK, including £24m in loans and £3.9m in grants. 

SIB will work with experienced social investor partners on the delivery of the Fund, including Big Issue Invest, Charity Bank, Key Fund, Resonance, Wales Council for Voluntary Action and Social Investment Scotland.

Charities and social enterprises continue to need patience, flexibility and responsiveness in the post-Covid recovery

 

 

Scotland: Eight social ventures selected for £500,000 Power Up scheme 

Big Issue Invest has announced the eight social ventures to receive investment and business support through its Power Up Scotland scheme

The scheme offers £500,000 of total investment, with each social enterprise able to pitch for up to £50,000. Power Up Scotland will also provide the enterprises with three months of mentorship from a team of corporate professionals. 

The chosen social ventures are: Ayrshire Women's Hub, Bikes For Refugees, Brave Strong Beautiful, Coffee + Clay, Common Ground Against Homelessness, Lochend Football Academy, MyPickle and Wee Seeds. 

Big Issue Invest’s Power Up Scotland was launched in 2018. It is funded by abrdn, University of Edinburgh, Experian, Places for People and the Scottish government with legal support from Brodies LLP.

 

 

UK: SASC housing fund invests £2.65m in Hull and East Yorkshire Mind

Hull and East Yorkshire Mind (HEYM), a mental health charity and a registered provider of supported housing, has received its first social investment loan from Social and Sustainable Capital (SASC).

The loan of £2.65m, which comes from SASC’s Social and Sustainable Housing Fund, will be used to purchase properties and improve the accommodation the charity provides for people experiencing poor mental health. 

Founded in 1976, HEYM operates as part of the wider Mind Federation, supporting adults and young people across Hull and East Yorkshire. It provides support for mental health problems such as anxiety, depression, and more complex needs, like bipolar disorder and psychosis. HEYM housing services include short and long-term housing, a service for young people at risk of homelessness and a specialist provision for people leaving hospital.

The Social and Sustainable Housing Fund was created in 2019 and provides flexible secured loans of between £2m and £5m. It has invested just over £40m in 11 organisations to date.

 

Header image: In the Philippines, Jesus Seno Cortes, a driver now involved in urban farming, tends his garden, which uses recycled materials to reduce waste (credit: Mark Linel Padecio / Climate Visuals Countdown)

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