Investment readiness for climate or nature enterprises - Sefa
SEFA plays an enabling and coordinating role as an impact investor, seeking to establish replicable models. Community led solar farms and eco-tourism ventures can be funded via a combination of impact-first debt alongside crowdfunding, infrastructure grants and other debt sources.
- Investor: Sefa
- Source of finance: Impact investment
- Financial instrument: Debt facility
- Sector: Climate and Nature social enterprises
- Geography: Australia
Sefa (previously known as Social Enterprise Finance Australia) sits between philanthropy and institutional capital and acts as an intermediary closing the gap between philanthropy and bank finance. They manage a $20 million impact-first evergreen fund. They screen for a clear impact thesis and aim to preserve capital while matching risk and return within transactions. These can be direct contributions from $200,000 to $2 million, often working in partnership and unlocking various other sources of finance.
Sefa plays a role nurturing social purpose organisations, working with them to become investment ready through capability building. In many cases, they work as an enabler, being the first backer to help proof of concept. They then act as a bridge to fill the financing gap until a transition to institutional capital reached, sometimes through sale and sometime through replication of a successful model.
A project that demonstrates Sefa’s enabling role is the Conservation Ecology Centre’s (CEC) Wildlife Wonders enterprise. CEC wanted to set up a tourist attraction that drew people to the natural habitats of the Otways on Victoria’s Great Ocean Road while creating a source of income to provide additional finance to the Centre’s charitable conservation work. They wanted to raise $2.5 million to start up by securing iconic land on the coastline. CEC had intangible assets such as team commitment, buy-in from local council and community. They also built on long-standing ecology know how, having managed a small eco-lodge for over 10 years. Sefa provided a cornerstone loan of $1.2m as part of a $1.7m loan syndicate with a trust alongside a junior loan of $700k from a a private family foundation as a layered impact investment structure to support this venture.
Blended impact investment were essential to getting this project kick started and set Wildlife Wonders up for success, attracting Commonwealth and state grants of over $3.5m to progress site construction and establishment of operations which was then followed by further financial support. In its second year of operations, Wildlife Wonders has been named as one of the state’s best new tourism businesses, awarded the Silver Medal in the “New Tourism Business” category at the at the 2022 Victorian Tourism Awards. A project that demonstrates Sefa’s ability to support investment readiness in underserved markets is a community led solar farm project in Goulburn that the local community had been driving since 2014. Sefa was prepared to step into this transaction to fill an arisen finance gap, complementing a blended finance solution totaling $5.2m which used a combination of a government grant from the Regional Community Energy Fund (RCEF) and equity crowdfunding raised from local community members in a co-operative structure. This 1.4 MW Solar Farm with 2.3 MWh battery capacity is small-scale with moderate profitability and therefore not attractive for institutional debt funding. On the back of Sefa’s offer of finance, the local community decided to fill the finance gap with additional debt crowdfunding. The project is currently under construction and is expected to be one of Australia’s largest community-owned solar farms. This transaction was the second time that Sefa worked closely with Komo Energy, a subject matter expert in developing community solar farms. Sefa facilitated a loan syndicate of third-party impact investors to support the construction of the Grong Grong project which hosts Australia’s first large-scale solar garden and following completion secured a purchase power agreement with IAG (Insurance Australia Group).
Impact investment is an important contribution in blended capital stacks that fall outside the investment appetite of mainstream finance. Impact investors can benefit from technical expertise of sector specialists to support different delivery mechanisms and innovations within renewable technology.
Final Insights
Impact investment can play a key role in blended finance solutions for start-up enterprises focused on renewable energy generation or environmental enterprise within a local community. Intermediaries such as Sefa play a critical role in the creative design of blended finance solutions and backing transactions at critical stages of their life cycle.
These projects, once demonstrated, can be replicated in other communities to accelerate the climate transition.
Impact Investment
Impact investments are made with the intention to avert the worst consequences of climate change. Impact investors vary in their return expectations, their patience and flexibility.
Sustainability for Strategic Advantage
Strategy & Transformation
Sustainability for Strategic Advantage
A one-day program for senior and mid-level executives, this course is distinct in approaching sustainability as a strategic issue, with a particular focus on climate change.