Let There Be (Sun)light

Ryan Levinson, Founder of SunFunder and Head of Emerging Market Energy Transition at Mirova, charts his journey from crowdfunder to large-scale debt finance provider, funding emerging markets’ clean energy transition. 

An estimated 675 million people globally still live without access to electricity, 80% of whom are located in sub-Saharan Africa. Yet, last year marked a halfway point to the SDG 7 goal of ensuring access to affordable, reliable and sustainable energy to the world’s population.

According to the World Health Organisation, the world remains off track to achieving this and other goals, such as global access to clean cooking, by 2030.

It is with such challenges in mind that Ryan Levinson decided to co-launch SunFunder over 10 years ago. First founded in 2012 as a crowdfunding platform aiming to finance decentralised solar energy projects in Africa, the firm rapidly became a success story, progressively turning into a sizeable private debt management company financing renewable energy projects across emerging markets.

That success culminated in 2022 with the acquisition of SunFunder by Mirova, an impact-led investor owned by Natixis Investment Managers. The merger was a major step in the platform’s development, and one that enabled it to significantly expand its financing capacity.

“This was a big moment for us, shifting from being an independent startup company to being part of a larger asset manager that could provide much more resources and support, but also really shared our vision and mission,” said Levinson, who has since become Head of Emerging Market Energy Transition at Mirova SunFunder. “It’s great for us to be part of a larger group that does more than just talk about sustainability: you can see in its businesses and actions the work that Mirova already does in nature capital.”

For Mirova, SunFunder’s business objectives aligned perfectly with its ambition to become a global leader in energy transition financing, complementing its impact investment offering with debt financing expertise and an in-depth knowledge of emerging markets.

Scaling up

When the merger happened, the two groups said their first objective was to launch a solar energy debt fund with an investment capacity of US$500 million, aiming to support 70 projects across Africa, Asia and Latin America.

This week, that goal got a few steps closer to reality, as the Mirova Gigaton Fund reached over half of its targeted size, having gathered US$282 million in funding. This followed a first closing at US$171 million in March last year, in which the US International Development Finance Corporation (DFC) had contributed US$100 million.

“For the past decade, we’ve been managing blended finance funds whereby we raised capital from a mix of different types of investors, but development finance institutions (DFIs) historically have been our largest contributors,” said Levinson. “We also work with investors in the donor community, both public and private, who often provide important subordinate or first-loss capital that gives risk protection to conservative investors.”

For this latest round, a major contribution came from the European Investment Bank (EIB), which made a senior commitment of US$75 million – becoming the fund’s second largest investor after the US DFC – alongside a €5 million ($US5.4 million) catalyst junior investment under the Luxembourg-EIB Climate Finance Platform.

“We’ve been in discussions with the EIB for a few years,” said Levinson. “I was initially introduced by one of our former investors when we were independent, but Mirova also had a deep relationship with the EIB, which had already invested in some of its natural capital funds.”

Aiming to mobilise institutional investor support for high-impact climate mitigation and adaptation, social development, economic infrastructure and gender equality, the Mirova Gigaton Fund will seek to accelerate the energy transition in regions spread across Africa, Latin America, the Middle East and Asia.

“A big part of our mission is to work with private investors, with goals to mobilise private capital into this sector as we understand this is very important to truly scale over time,” said Levinson. “Natixis, our parent company, has invested in the most senior tranche of the fund and we have a few other private investors – mostly impact-oriented family offices. We are currently fundraising for other private investors.”

Managed by Mirova and supported by Mirova SunFunder East Africa as investment advisor, the vehicle will provide debt financing to businesses active in the solar power for homes, agriculture, telecommunications, mini-grids, and green energy sectors. Funded projects will include electric vehicles, storage, climate-smart food systems, and energy-efficient solutions, with the overall goal of increasing access to reliable and affordable energy sources and promoting viable alternatives to fossil fuel in emerging markets.

SunCulture, Solar Panda and Energy Vision – all based in Nairobi, Kenya – have been designated as the first three projects supported by the fund.

“SunFunder’s mission has always been consistent with pioneering and scaling financing for clean energy in developing markets, with a focus on impact around climate change and energy poverty,” said Levinson. “In our history, we’ve deployed over US$200 million of capital to over 50 clean energy companies through our loans, and have helped over 10 million people get access to clean energy.”

In addition to funding renewable energy projects, Mirova SunFunder said it would strive to improve the livelihoods of women through the Gigaton Fund. As part of the Group of Seven’s 2X Challenge initiative – which aims to encourage DFIs, international finance institutions and the broader private sector to invest in women – the fund will support access to finance for female entrepreneurs in emerging markets, and increase their access to clean energy and equitable employment.

“This is important to us, because the impact is not just about climate mitigation, but also adaptation from a food insecurity standpoint,” said Levinson. “While we started mostly with off-grid and solar home systems, we’ve expanded and diversified from a segment standpoint. We have five core segments: solar systems, mini-grids, commercial and industrial (C&I) solar, solarisation of telecom towers, and agriculture projects.”

The size of the new fund has also significantly expanded SunFunder’s capacities, with the ability to now provide long-term funding and longer tender loans and fund project finance-type transactions, increasing alignment with the objectives and needs of institutional investors. SunFunder’s largest fund was previously US$70 million.

“East Africa was our first primary market and remains a core market for us, but over the years we’ve expanded our activities,” Levinson continued. “At this point, we’ve closed transactions in more than 20 countries around the world, mostly in Africa, including in all regions of sub-Saharan Africa. We don’t make equity investments: we provide debt for distributed clean energy projects by raising private, blended-finance debt funds.”

Emerging transition

Despite funding efforts produced by SunFunder and other investors in the sector, the transition to renewable and clean energy in emerging markets continues to lag compared to other, wealthier parts of the world.

Recent analysis from the Cambridge University Institute for Sustainability Leadership (CISL) evidenced a US$1.8 trillion funding gap to support the transition to a low-carbon economy in Africa.

“Africa is at an inflexion point,” said Professor Richard Calland, South Africa director at CISL. “It has the potential to be the growth story of the 21st century, but only if it transitions away from an extractive and exploitative approach to the economy and onto an economic development pathway that is regenerative and redistributive.”

This, Calland added, will require massive investment and “finance with purpose”. The CISL report also showed that tailor-made climate finance solutions would be necessary for each African country, due to varying levels of existing green infrastructure and energy reliance across the continent. In total, an estimated US$2.5 trillion will be needed by 2030 to meet global climate commitments.

“Emerging markets are definitely at different inflexion points – for utility-scale, clean energy and C&I solar, South and Southeast Asia are now much larger,” said Levinson. “If you look at installed capacity, it hasn’t scaled as quickly yet in Africa, although we are now seeing an enormous amount of growth in these sectors.”

In other sectors, including energy access, mini-grids and solar home systems, there are also more growth opportunities in Africa than in other markets, largely due to the continent’s development stage.

“Energy access is still a need there, while electrification rates in Latin America and Southeast Asia are very high at this point,” Levinson explained. “There might be some small pockets of off-grid regions, but they’re much smaller.”

In India, too, things have changed dramatically since SunFunder was launched. Back in 2012, hundreds of millions of Indians were still off-grid, Levinson recalled, while the majority of the country now has electricity access.

While the Mirova Gigaton Fund will continue to target growth opportunities in Africa primarily, the intention is for it to be a global emerging market fund, responding to different needs in different regions.

“We’re going to continue to stay very committed and focus on all the segments and places we’re already active in, with the added capacity to expand into Asia-Pacific and Latin America,” said Levinson. “Over the last couple of years, we’ve been building a team in Southeast Asia, based in Singapore. Having a strong ground presence with a local team that has strong market and sector expertise has always been part of our ethos.”

South and Southeast Asia should make up around 30-35% of Mirova Gigaton Fund investments. Next, the asset manager will look to build its presence in Latin America over the next two years, with goals to fund projects there too.

“This is a very exciting time for us,” Levinson highlighted – in case that wasn’t already obvious.

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