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BFD Expert Voices - Climate Deals

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Philanthropy organizations are putting their money where their mouth is, but they expect a return.

Why it matters: Historically, nonprofits, NGOs and foundations haven't made returns a primary motive of their investments, which are typically grants for expensive and risky projects. 

Driving the news: That's changing, Sustainable Capital Partners senior vice president Victor Rojas tells Axios.

"Philanthropy is focused on returns in a way they weren't before," Rojas says.

Though money from philanthropic organizations is still used to de-risk large complex projects, it comes with terms more similar to other private investors rather than those that accompany grants.

Background: Grants are often the first money in for technically complex climate companies that are unable or unwilling to raise money from private investors. 

For instance, Leaft Foods relied on grants for years before raising outside capital, some of which also came from nonprofit organizations.

Australian reforestation startup Lord of the Trees similarly relied on grants and bootstrapping to get started before taking on $1.25 million in outside funding from a traditional VC firm. 

The bottom line: Expect to see more philanthropies dipping their toes into the world of climate investing. 

1 big thing: Philanthropic capital

Illustration of hands holding money up towards Earth

An Indigenous group in Colombia has partnered with a multinational renewable energy developer on a $120 million project that will fund the community's effort to buy and protect land from unwanted development.

Why it's the BFD: This unusual project, named Terra Initiative, may create a new revenue model for land preservation — one that other companies may look to deploy in the U.S. and other nations. 

The details: Greenwood Energy, a subsidiary of Libra Group, is installing 144 megawatts of utility-scale solar arrays across six remote sites. 

Groundbreaking is set for the fourth quarter of 2022, with the first site set to start generating electricity next year, the company tells Alan.

The Confederación Indígena Tayrona, the organization representing the Arhuaco people in Colombia, will be paid for each kilowatt-hour of power that the solar arrays generate.

Those funds will be used to buy and preserve about 460 square miles in the Sierra Nevada de Santa Marta.

By the numbers: Greenwood is pursuing multiple power purchase agreements (PPAs) to sell electricity from the panels to the grid.

The Confederación will, in turn, be paid a 5% "environmental fee" — akin to a typical commercialization fee — by Greenwood Energy.

Once the projects are operational, the funds will be sufficient to buy about 3 square miles per year.

The rate will be indexed to account for inflation, Greenwood tells Alan.

What they're saying: "This opens whole new possibilities of infrastructure structuring," Greenwood Energy CEO Guido Patrignani tells Alan. "The project is specifically addressing Indigenous communities that protect the environment."

Of note: Greenwood will be constructing town buildings for the Arhuaco people, with space for about 50 families per town. 

The program also calls for job training and donating the panels to the community to own and operate after 25 years.

2. The BFD: A solar PPA to protect Indigenous lands

Illustration of a solar panel with a map of Colombia overlaid.

As the climate market continues to evolve, we will regularly feature expert voices on current market issues.

Today, we're talking to Katie Rae, the CEO of The Engine, an early-stage venture fund started by MIT. 

Why she matters: Prior to The Engine, Rae was managing director and co-chair of tech accelerator TechStars in Boston. She also invests through pre-seed fund Project 11 Ventures and advises young companies through the Startup Institute.

Many of The Engine's companies have just emerged from academic or lab settings. Nearly half of them focus on climate tech, including Commonwealth Fusion Systems and Form Energy. 

What was this week’s big story, in your view?

The UN IPCC Report, which paints a very clear picture of the incredible need to simultaneously deploy existing solutions while investing in new technologies that will get us further down the decarbonization road faster.

What do you feel is being under-covered or under-noticed?

Reducing carbon emissions in electricity and transportation dominate the dialogue, rightfully so. However, the importance of decarbonizing sectors beyond that has been under-covered. 

There’s an enormous economic impact and opportunity — particularly here in the U.S. — for jobs, security and equity that will be associated with efforts in sectors like manufacturing, industrial processes and beyond.

Like the rest of the world, the Russia-Ukraine conflict is something I’ve been watching with alarm. The energy circumstances are particularly important. 

In three words, what one change would you make to accelerate investment in sustainable energy/climate tech?

3. Expert Voices: The Engine's Katie Rae

Photo illustration of Katie Rae with abstract shapes.

Photo illustration: Shoshana Gordon/Axios. Photo: The Engine

Another climate record: Equity capital for sustainable companies hit an all-time high in the first quarter of 2022, a new report from Refinitiv found. 

Sustainable companies raised $13.6 billion in the first three months of the year, with most of that activity coming from Asia. 

What goes around comes around: Companies playing in the circular economy are having a moment, according to a report from prize competition company Xprize (seriously).

The report found that 105 "circular" companies raised a combined $816 million in 2021, with a corresponding hike in valuations. Investors are seeing green.

On another note, Xprize is currently running a prize competition for carbon removal funded to the tune of $100 million thanks to Elon Musk.

4. 🌡️ Temperature Check

Illustration of three emojis: a thermometer, a hot face, and a cold face.

 Ardian, a Paris-based private investment house, launched its open-ended Ardian Clean Energy Evergreen Fund. More than half the fund's €1b (~$1.6b) target is invested in a seed portfolio of wind and solar assets in Europe and the Americas. AXA is the cornerstone investor. http://axios.link/mF0l 

Aclarity, a water-treatment startup working to eliminate the forever-chemicals PFAS in water and wastewater, closed a $3.3m seed financing round led by Burnt Island Ventures, with participation from DCVC, MassVentures and the UMass Maroon Fund. http://axios.link/9XcF

Proton Green, LLC has partnered with Lone Cypress Energy Services to launch a helium exploration and carbon capture and storage project in the U.S. Southwest. http://axios.link/rvrh

Highland Electric Fleets, a provider of school-bus electrification subscriptions, and Synop, an AI-based, single-platform management service for commercial electric vehicle (EV) fleets, have entered into a long-term partnership to manage complex EV fleet charging, grid connection and fleet operations. http://axios.link/C3eE

Accenture (NYSE: ACN) has agreed to acquire Avieco, a U.K.-based sustainability consultancy. http://axios.link/g1hr

ClimateTrade, a blockchain-based climate marketplace, is operational in the European Union’s mandatory carbon market after completing its admission with the European Energy Exchange. http://axios.link/J10J

5. Hot deals

ChargePoint Holdings, Inc. (NYSE: CHPT) has appointed Ekta Singh-Bushell to its board of directors. Before joining the charging network, Singh-Bushell held leadership roles at the Federal Reserve Bank of New York and Ernst & Young. She currently serves on the boards of TTEC Holdings, Inc., Huron Consulting Group, Inc., Net1 UEPS Technologies, Inc., Designer Brands Inc., and Datatec Limited. http://axios.link/Sufq

6. It's Personnel

🎉 Happy Friday! We made it through another week. Here's your final helping of deals before heading into the weekend.

🌵 Megan is playing tour guide all weekend with her visitors. A few of her fun facts: The rocks in Joshua Tree National Park are a granite composite that give the park its hallmark rough feel. Also, Joshua trees are closely related to cacti, and are not actually trees.

📝 Alan is seriously relieved that Axios didn't administer a Meicho Shimbun-style exam for its prospective reporters. Relatedly, the first episode of Tokyo Vice on HBO Max is 👌. 

Thanks for reading Climate Deals! Please share with your co-workers, peers, and visitors.

April 08, 2022

1 big thing: Philanthropic capital