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Climate change is the risk on everyone’s radar.  Following high profile losses like the PG&E “first climate-related bankruptcy”, more investors are considering strategies to protect their portfolios. Great strides have been made in recent years to better assess and manage exposure to climate-related financial risks. But we see climate change as more than a risk to be managed. We see it as an unprecedented opportunity to successfully anticipate the technologies and services that are needed to adapt to and mitigate climate change. 

By focusing our investment strategy on projects and investments that support sustainable development, we can move beyond climate-proofing to investing for climate action. Read more about how we align our investment objectives with the Sustainable Development Goals (SDGs) here.

Together with the Responsible Investment Association (RIA) we convened leading impact investors Fernando Alvarado (CEO, Caribbean Basin Sustainable Energy Fund) and Sandra Kwak (CEO, 10Power) to learn more about investing for climate action in one of the planet’s most vulnerable regions: the small island developing economies of the Caribbean. We shared insights on how these investments are generating strong returns in green infrastructure and technology; replacing diesel with solar, facilitating energy efficiency by empowering the energy services industry, adding hydro capacity and creating high quality jobs. Here are some of our key takeaways from that session. 

Investing for Climate Action to Advance the SDGs: Views from the Caribbean
From left to right: Alexa Blain, Fernando Alvarado, Dustyn Lanz (CEO, RIA), and Sandra Kwak

1. The Caribbean offers unique opportunities for financially sounds investments that advance the SDGs

Caribbean energy markets are diverse, but most are characterized by continued reliance on imported fossil fuels, such as diesel, to generate power. This has two major effects: extremely high electricity prices (4 to 5x higher than prices in Canada) and dirty grids. By investing in renewable energy and energy efficiency projects in this region, impact investors can dramatically decrease the cost of electricity for retail and commercial customers (SDG 7 Affordable and Clean Energy) while at the same time displacing high carbon alternatives (SDG 13 Climate Action), and improving the air quality of indoor and outdoor spaces (SDG 3 Good Health and well-being).  Many of these projects also have important benefits for women and girls (SDG 5 Gender Equality), such as building street lighting for safer communities or training women to become solar installation specialists (SDG 8 Decent Work and Economic Growth). 

2. Experience and relationships are key to maximizing impact and achieving returns

Caribbean economies are relatively small, and renewable energy and energy efficiency projects often need to be “bundled” to make economic sense, especially for institutional investors. Fernando Alvarado shared several examples of investments made by the Caribbean Basin Sustainable Energy Fund (CABEF):

  • Small-scale solar rooftop systems for commercial customers in the Dominican Republic aggregating 12MW for Commercial & Industrial consumers. Expected to displace 120,000 tons of CO2 in a 10-year investment period.
  • Hybrid power solutions for remote telecommunications towers in Honduras. Expected to displace 150,000 tons of CO2 in 10 years while increasing reliability and reducing cost to customers.
  • Energy efficiency solutions and equipment upgrades for corporate clients in Trinidad and Tobago, particularly hotels and resorts. Expected to displace 30,000 tons of CO2 during a 10-year investment period and provide savings of 5-15% on customer energy bills.

Identifying and assessing these opportunities takes considerable experience. Local presence is critical, including a deep understanding of local culture and ways of doing business. Developing relationships that lead to serial investment opportunities is an important way of scaling the initial effort involved to bring opportunities to the investment-ready point. 

It is also important to identify strong local partners for environmental and social risk assessment. Not all renewable energy projects have the same impact, and in fact some can have negative community impacts (for example, run-of-river hydro projects that disrupt fish habitats). To manage these risks, experienced investors will go beyond what is required by the permitting process to apply international best practices such as IFC Performance Standards.

3. Blended finance is allowing a more diverse set of investors to participate in the sector

Sandra Kwak is building a solar development business in Haiti, the poorest country in the Western hemisphere. She was drawn to work in Haiti to demonstrate how compelling the investment case for solar has become; it is now economically viable in virtually all markets without the need for subsidies. She emphasized the tremendous strength and resilience of the Haitian business community despite the challenges of extreme weather events, poverty and political instability. 

Solar rooftop project in Haiti

Sandra’s company, 10Power, is a perfect example of how blended finance can create sustainable businesses and drive lasting impact. The company was initially financed with grants and “soft loans” (i.e., loans with flexible terms or a lower interest rate) until it was able to secure its first major client with a flagship installation at UNICEF Haiti. Now the company has a pipeline of over 50MW of projects representing over $100 million and is poised to raise its first commercial capital. 

10Power is an instance in which blended finance has been successfully used to absorb specific business risks and unlock private sector capital for investment in the region. Fernando Alvarado’s other managed fund Honduras Renewable Energy Financing Facility (H-REFF) that co-invests alongside CABEF has similarly benefited from blended finance innovation, including a $5 million “first loss” investment provided by the Scaling-Up Renewable Energy Program on Low-Income Countries (SREP), a program of the Strategic Climate Fund. H-REFF has also received a technical cooperation facility from the Inter-American Development Bank (IDB) designed to incubate opportunities and ready them for commercial investment.   

Now, a diverse set of investors is committing capital for climate action in the Caribbean, including development finance institutions, foundations, family offices, and individuals. The next wave of capital is expected to be from “mainstream” investors; pension funds, insurance companies, and listed investment vehicles. 

It was an inspiring conversation drawing the Responsible Investment Association’s largest crowd in Vancouver to date. The bottom line? If you’re ready to invest for climate action, the Caribbean offers a rich set of opportunities for knowledgeable and experienced investors that can obtain market returns while contributing to the Sustainable Energy Goals in a vulnerable region where the positive impacts are evident.



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Magali Lamyin, Director of Communications and Development for Deetken Impact

MAGALI LAMYIN

Director of Communications and Development

 

Magali brings extensive market intelligence, business development and marketing experience from her work at the Central Bank of Mexico, the Canadian Institute for Market Intelligence, and the IESE-PWC e-Business Centre in Barcelona. She also co-led national marketing campaigns for businesses in the hospitality and early childhood education sectors for almost a decade before joining Deetken. In her current role, she is responsible for leading Deetken Impact’s communications, marketing and branding strategy. She is also involved in the due diligence process for project selection with an emphasis in Mexico.

Magali holds a BA in Economics from Mexico's ITAM and a Master's degree in Economics from the University of British Columbia.

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Jose Lamyin, Managing Partner Deetken Impact

JOSE LAMYIN

Managing Partner

 

José has extensive experience as a business advisor for clients throughout Canada, Europe and Latin America in mining, telecommunications, and finance. Prior to co-founding The Deetken Group, José worked for Teck Cominco in Peru and Canada and Deutsche Bank in London (UK). José has spearheaded much of the strategic growth of Deetken Asset Management since inception and is currently focused on investment selection.

José received his BS in Engineering from the University of British Columbia and MBA from IESE School of Business (Barcelona). Born in Peru, José is fluent in English and Spanish.

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Alexa Blain, Managing Partner Deetken Impact

ALEXA BLAIN

Managing Partner

 

Alexa is responsible for finance, operations and investor relations at Deetken Impact. She brings over 10 years of experience in financial consulting and asset management, with specific expertise in company and investment analysis, business valuation and securities/corporate finance. Prior to joining Deetken, she spent three years with African Alliance, a pan-African financial services group, where she focused on expanding the firm’s retail financial services operations as well as on the origination and negotiation of new capital. In addition, Alexa has six years of asset management experience with the Canada Pension Plan Investment Board, the Macquarie Group and the Ontario Teachers’ Pension Plan.

Alexa is a CFA Charterholder. She has also completed an MA in Financial Economics and an Honours BA in Economics, both at the University of Toronto.

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Fernando Alvarado, Head of Deetken Impact Sustainable Energy

FERNANDO ALVARADO

CEO

Honduras Renewable Energy Managers (HREM) and Caribbean Renewable Energy Managers (CAREM)

 

Fernando Alvarado leads the General Partner and Investment Advisor of two clean energy and energy efficiency project finance and venture capital funds: Honduras Renewable Energy Financing Facility (H-REFF) and Caribbean Basin Sustainable Energy Fund (CABEF), which he structured and runs with a combined target capitalization of $100m.

Development Investment Banker with 28 years of international credit and investment experience and 18 years of direct experience assessing diversified renewable energy portfolios in Latin America & the Caribbean. He has participated in more than 50 syndicated credit and investment transactions for renewable energy projects in excess of $250 MM. He led the creation, structuring, fundraising, legal closing and portfolio construction of several specialized renewable energy funds.

Costa Rican, based in San Jose, Mr. Alvarado has an MBA in Banking and Finance cum laude from Universidad de Costa Rica.

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Carl Black, Portfolio Manager Deetken Impact

CARL BLACK

Portfolio Manager

 

Carl is a Portfolio Manager with Deetken Impact focused on analyzing and working with MSMEs, social enterprises, and renewable energy developers in Latin America and the Caribbean. His main responsibilities include supporting business development, managing technical assistance projects, leading investment due diligence, and monitoring portfolio performance. Prior to joining Deetken Impact, Carl worked for five years as a consultant, advising public sector clients an non profits in Canada and financial services companies in Latin America. He started his career at the Bank of Canada, where he researched issues related to household and business credit. 

Carl completed an Honours BA in Economics at the University of British Columbia. He also holds an MSc in Economics & Development from the University of Oxford, where he earned distinctions in quantitative and development economics.

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Cristobal Aguirre, Investment Analyst at Deetken Impact

CRISTOBAL AGUIRRE

Investment Analyst

 

Cristobal has over 6 years of experience in the asset management industry, where his responsibilities have ranged from asset allocation and portfolio management to risk analysis and software development. Before relocating to Canada, Cristobal worked as a senior investment analyst in AFP Habitat—Chile’s largest pension fund—where he led the tactical asset allocation and macroeconomic research for emerging markets.

Cristobal is a CFA Charterholder, and completed a BA in Economics at Universidad de Chile.

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Chad Parsons, Senior Investment Analyst at Deetken Impact

CHAD PARSONS

SeniorInvestmentAnalyst

 

Chad has worked as a consultant in business and technology for 20 years – often helping clients with their business transformation initiatives.    He has worked with start-ups, government, and established businesses to further their product and service offerings with a balanced approach.   After pursuing a research degree on leveraging technology for social and economic development; Chad has found a valuable alignment of his background with Deetken’s innovative impact investments. 

Chad completed a BS in Engineering from the University of British Columbia and has a MSc with distinction from the University of Manchester (UK).

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