19 AUG 2022
Charm Impact and iGravity have collaborated to launch a blended finance impact bond to unlock capital for early-stage local clean energy entrepreneurs in Africa.
The Charm Impact Bond (CIB) is a $12.5 million blended finance vehicle that aggregates multiple small clean energy companies into a single vehicle and is sponsored and seeded by iGravity through its Impact Investment Index. This will enable impactful entrepreneurs to access capital that would otherwise be unattainable due to their size and stage.
This investment approach allows for the creation of a financially inclusive instrument, where entrepreneurs will be able to access loans that range from $12,530 – $438,443 for up to 36 months. Companies with a higher impact are rewarded with lower interest rates.
Gavriel Landau, CEO and co-founder of Charm Impact said, “We see CIB as a much needed vehicle to crowd in more commercial capital to the earliest stage of the market. Local entrepreneurs in sub-Saharan Africa are financially excluded from scaling their businesses due to a lack of available capital sources to grow their high impact solutions.
“To enhance the likelihood of achieving SDG 7 (affordable and clear energy) by 2030, several new generations of energy access companies are desperately needed to create competition in the marketplace, reach underserved geographies and cater for last-mile customers. Without the commercial funding to enable these companies to grow, it will be impossible to achieve these targets.”
CIB’s “blend” contains a unique mixture of private investor capital and subordinated capital (junior debt on each private loan or a first loss coverage at the bond level). The subordinated capital de-risks the private investor capital, allowing more risk-averse investors to consider these early-stage companies. Diversification criteria, impact and return as well as de-risking requirements are set up between Charm (as the manager of the Bond) and iGravity (responsible for risk monitoring).
Initial recipients of the bond include Winock, a locally owned solar business system distributor in Nigeria, Biomassters, a female led and part locally owned pellet cooking company in Rwanda and Powerstove, a locally owned clean cookstove manufacturer in Nigeria.
Frédéric Berrney (Head of Products and Risk at iGravity): “The blended characteristics of the CIB allow us to make a difference and achieve high impact and returns. Within the structure of the bond, investors benefit from a diversified portfolio of direct loans in a variety of sectors of renewable energy. Diversification criteria, impact, returns and de-risking requirements are set up to meet individual investor needs. Convinced by the opportunity we actually led the structuring of an investable security that allows investors to pursue a tangible and traceable impact combined with an attractive financial return.”
The core terms of the CIB include a net target return of 7% p.a., a minimum investment of $125,284 and carries a local ownership target of 85% and female ownership / leadership of 40%. This will be listed in the Dusseldorf stock exchange. This bond has been structured by Encore Issuance with pro-bono legal support generously provided by Hogan Lovells.
See the original press release on ESI Africa here.