Impact investments driving green growth

The late Microsoft co-founder Paul Allen, beyond the firm’s rich software portfolio, sought to transform remote Kenyan villages by setting up solar-powered mini-grids through his impact investment firm Vulcan. Through Vulcan, the late businessman wanted to connect off-grid homes and businesses to solar power as a social tool to transform lives, including in Kajiado, Turkana and Samburu. Besides directly impacting lives, he sought to use the pilot power projects to demonstrate business viability of rural mini-grids to investors and trigger interest among businesses to invest in off-grid power solutions.

After successfully building a business case for the technology, the mini-grid sites were last year reportedly acquired by RVE.SOL, a Portuguese firm operating similar sites in Busia. Smaller grids are enabling developing economies to decentralise electricity to off-grid areas, igniting rural economies ahead of the arrival of the national grid.

Besides energy, Vulcan has invested in a series of global innovative enterprises including Uber and Alibaba.

By investing in impact ventures like power projects in sleepy villages, the goal is to demonstrate business viability of relatively new projects, in the process empowering communities and triggering interest among other investors to invest in such projects for scale up. Impact investments could concurrently generate financial returns, social and environmental good. Beyond creating new paths towards a healthier planet, impact investing can help eradicate extreme poverty in the society, wipe out hunger and attain food and energy security, expand access to clean drinking water, healthcare and education. It could also spark a full-blown culture of responsible production and consumption, encouraging resourcefulness and efficient practices among corporations and households. Closer home, Kenya Climate Ventures (KCV) is walking a similar path. The agency recently funded three Kenyan enterprises – Exotic EPZ, Mace Foods and Ofgen – to scale up and create more sustainable opportunities in the economy. The three are the latest ventures in a growing list of impact enterprises to receive financial and technical leg-up from KCV – an independent subsidiary of the Kenya Climate Innovation Center (KCIC) domiciled at Strathmore University. Founded by three women entrepreneurs, Exotic EPZ is on a mission to empower rural smallholder farmers of macadamia nuts by linking them to export markets, fetching higher returns.

Mace Foods is on a similar path, linking farmers to markets, except that it deals in natural, sun-dried chillies, vegetables, herbs and spices. Like their counterparts above, thousands of farmers are benefitting from a ready market and higher returns across the value chain from this arrangement.

Ofgen, which is a spin-off from Strathmore University’s Energy Research Centre, operates in the solar energy space. The firm designs and constructs solar powered stations complete with back-up storage batteries for commercial and industrial businesses looking to make savings from energy costs and lowering their carbon footprint. At the same time, Ofgen has an eco-friendly mobility arm known as Solar E-Cycles through which it assembles solar-powered tricycles and four-wheeled cycles. Dozens of flower farms, factories and hotel establishments across the region have had captive solar plants installed through Ofgen, returning massive savings, with the cascading benefits enabling expansion and more jobs. The above three firms embody what KCV stands for. It seeks to accelerate development of clean technology solutions (cleantech) in the region around three pillars – renewable energy, agribusiness and water management – by investing in impact enterprises. Besides providing seed capital, the agency offers technical and management advisory services in the said fields, thereby facilitating attainment of social, environmental and economic goals in the society through private enterprises.

Most startups and small enterprises in Kenya and indeed the entire East Africa find it difficult to access flexible financing, tailored to the cash-flow nature of their businesses. The funding gap has particularly been more conspicuous for clean-tech projects, given that it is a relatively new field with lenders lacking a complete picture of its viability. It is for this reason that sustainability-inclined organisations such as KCV are stepping in and ignite a green projects revolution in the region through incubation, seeding and advisory services. There is need for creation of an ecosystem of innovators to implement projects with the biggest potential of turning around the socioeconomic and environmental fortunes of the society. In all this, sustainability and resilience should be at the heart of operations.

Beyond spinning off jobs across the economy and improving living standards, impact investments could enhance the society’s resilience against external shocks by innovatively offering solutions to crises. While modern-day global challenges — from climate change, epidemic outbreaks and rapid urbanisation and globalisation — pose an existential threat to humanity’s survival in the 21st century, it also presents a golden opportunity for impact investors.