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Burgess COMMENTARY

Peter Burgess

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Micro-franchise job creators, the low-carbon future, housing gets impact investment
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ImpactAlpha: The Brief Tue, Jan 31, 2017 at 6:34 PM
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The Brief: Jan 31, 2017

Hello ImpactAlpha readers!

Micro-franchises offer global entrepreneurs a proven business-in-a-box

Developing-world entrepreneurs are creating their own jobs without having to start their own companies. Instead, they are adopting proven models in education, health care and renewable energy and building badly needed distribution channels as franchisees.

Micro-franchising is emerging as a resilient and more reality-based alternative to standalone startups as a way to create jobs and scale solutions for the world’s poor. One Rwandan entrepreneur, Henri Nyakarundi, aims to recruit more than 50,000 women, refugees, disabled and other unemployed people to spread his solar-powered Internet kiosks across Africa.

Read the full story from Dennis Price at ImpactAlpha.

#Deaflow: Follow the Money

Chugach Alaska, New Forests and Nature Conservancy strike forest-carbon deal. The Dakota Access oil pipeline dispute set Native Americans against fossil-fuel interests. In contrast, the Chugach Alaska Corp. has struck a deal to generate income for indigenous people by keeping coal in the ground and managing timber sustainably. Chugach will sell its coal rights along the Bering River to New Forests, which will give them to The Nature Conservancy to retire. New Forests will help Chugach maintain high carbon stocks in its forests near the Copper River Delta and sell greenhouse gas credits on California’s carbon markets. That deal shows that “the combination of creative private investment and a price on carbon pollution can deliver positive financial, environmental and social returns,” said New Forests’ Brian Shillinglaw.

Investor demand makes France’s Green OAT the largest green bond ever. The French government raised $7.5 billion, more than double its planned $3.2 billion, on a 2039 bond to fund energy efficiency, solar roads, biodiversity protection and renewable energy research. The 1.75 percent, 22-year “Obligation assimilable du Tresor” is one of the longest green bonds ever issued (the World Bank issued a 30-year, €30 million green bond in 2015). Paris, of course, was the host of the 2015 conference that reached the global climate agreement and is eager to become a climate-finance hub. Globally, green bond issues totaled $93 billion in 2016 and are expected to more than double again, to $206 billion in 2017, according to Moody’s Investor Services.

Gates Foundation makes a bet on chickens and farmers in Africa. “It’s pretty clear to me that just about anyone who’s living in extreme poverty is better off if they have chickens,” Bill Gates wrote on his blog last summer. “In fact, if I were in their shoes, that’s what I would do—I would raise chickens.” The notion of the billionaire musing on living on less than $2 a day drew some criticism, but his foundation is undeterred. The Bill & Melinda Gates Foundation has granted $21.4 million to the World Poultry Foundation to provide technical assistance and better market access to chicken farmers—particularly women—in Nigeria and Tanzania. The four-year program aims to reach 2.5 million households.

Community Development Trust invests to preserve affordable housing in rural California. Housing has become a hot topic among impact investors (have a listen to ImpactAlpha’s podcast, “Sustainable Housing: What’s the Impact When Private Equity Moves In?”). A $16 million deal between CDT and Southport Financial Services will preserve three buildings in Yuba County north of Sacramento and keep them affordable for families earning less than 50 percent of the area’s median income. California faces an extreme shortage of affordable housing; families in the state pay $50 billion more for housing than they can afford, according to McKinsey.

#Signals: Low-carbon future edition

Will oil riches finance the clean-energy transition? Saudi Aramco, the Saudi state oil company and the world’s largest company, is seeking $5 billion in renewable energy deals as part of its $50 billion commitment to get 30 percent of its power from renewable sources by 2030. That kind of mandate has banks like HSBC, JPMorgan Chase and Credit Suisse eager to show their green-energy chops. Still, the Saudi commitment is a fraction of the $163 billion commitment by the United Arab Emirates, which is aiming to generate close to 50 percent of its energy from renewables by 2050. The UAE already has given the go-ahead to Marubeni Corp. to build the world’s largest solar plant, a $868 million, 1.18 gigawatt solar farm in the desert. At 2.4 cents per kilowatt-hour, Marubeni’s solar-energy bid was among the lowest-ever.

Fossil-fuel divestment is not just prudent asset-management. It’s the law. Or could be soon in Ireland. The Irish Parliament voted 90 to 53 to pass a bill requiring its public investment fund, the Ireland Strategic Investment Fund, to divest its €8 billion ($8.6 billion) in coal, oil and gas investments over the next five years. The bill is likely to become law in a few months, and would make Ireland the first country to fully divest from fossil fuel holdings. Norway’s sovereign wealth fund, heavily supported by Norway’s oil revenues, has taken strides to divest from coal. Globally, nearly 700 institutions in 76 countries, representing $5 trillion in assets, have committed to some form of divestment from fossil fuel companies.

Institutional investors are demanding climate-risk disclosure. Big investors are flagging climate change as a threat to financial security. The latest: State Street, one of the largest asset managers in the U.S. with $2.47 trillion under management. State Street is sending a letter to companies it invests in asking them to disclose their preparedness strategies. The Boston-based firm has supported nearly half of climate-related proposals during shareholder meetings over the past year. Washington state’s public pension fund was an early mover on the issue, calling for greater transparency on climate change risk back in 2014. The Industrial and Commercial Bank of China, the world’s largest bank, announced last year that it would implement environmental screening. 'Climate change may be the poster child for risk out there,” said State Street’s Ronald O’Hanley.

#2030: Long-Termism

Who’s driving solutions to youth unemployment? Young people. There will be nearly 1.3 billion youths between 15 and 24 in 2030. India, for example, will need to create 12 to 17 million new jobs every year -- that’s more than a million each month -- to keep up with the growing labor force. In the next decade alone, 600 million young people will compete for 200 million jobs, according to the U.K.’s International Development Committee, which forecasts widespread social unrest if “the ticking timebomb” of youth unemployment is not diffused.

It’s a challenge, yes, but also an opportunity. Today’s global youth are more likely to be in school than their parents were. They are more connected through technology and social networks than any generations before them. Millions are the move, moving from countries to cities to cities abroad.

As Henri Nyakarundi’s solar-powered kiosks show, micro-franchising offers one model of job creation for self-motivated young people. Kenya’s efforts to connect its youth to online freelancing sites and prepare them for the gig economy is another. Sharing sites can connect electricians, mechanics and other tradespeople with clients. Online learning, including massive open online courses (or MOOCs) let youth access low-cost courses worldwide. “As young people develop entrepreneurial skills and as digital technology becomes more ubiquitous,” NextBillion reports, “we are likely to see more youth using technology to create their own jobs rather than relying on someone else to create opportunities for them.”

Onward! Please send any news and comments to editor@impactalpha.com.

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