FMO recently invested US$ 2.8mn into Acumen’s Pioneer Energy Investment Initiative (PEII), surpassing the PEII’s goal of raising US$20mn to bridge the funding gap in off-grid energy and accelerate energy access across the developing world.
With the PEII, Acumen’s aim is to reach 2.8 million new customers through its portfolio of early-stage clean energy companies by 2026. Since launching the initiative in 2017, Acumen has invested more than US$7mn into eight pioneering companies. These investments, which include PEG, Easy Solar, KopaGas, PowerGen, RVE.SOL, Promethean Power Systems and Simusolar have together reached more than 675,000 people.
FMO invested from its Access to Energy Fund (AEF), a fund FMO manages on behalf of the Dutch government. “Acumen is excited to partner with FMO, a development finance institution that recognizes the importance of using catalytic capital to help close the ‘Pioneer Gap’, the early stage of growth where companies experience the greatest challenge attracting financing,” says Leslie Labruto, Global Energy Lead at Acumen.
“Acumen has proven to be a very unique impact investing partner in the off-grid energy space. This partnership assists in bringing electricity to the still more than 800 million people lacking access to energy. Acumen’s involvement will help the growth of innovative early-stage companies that are too risky for bank financing,” says Idsert Boersma, Director Partnerships for Impact at FMO.
As part of its commitment, FMO will join the PEII advisory board, adding its several decades of energy access investing experience. “Beyond financing, more is needed to create a sustainable private sector. With our Capacity Development Program, we transfer knowledge and skills to our clients to augment their business model and strengthen their organizations,” adds Boersma.
Since launching the PEII, Acumen has worked across every rung of the energy ladder, and seen important trends validating the momentum FMO’s partnership will enable us to continue:
- The Pioneer Gap is closing. In Acumen’s 2018 report on gaps in the energy-access investment space, it was reported that just $16.5 million was invested annually over the last five years in Seed and Series A deals. In 2018 and 2019, this number increased to over $26.5 million. Four new funds have also emerged that are willing to take earlier bets, validating Acumen’s approach of early-stage, pioneer investing. This is because investors are increasingly comfortable with off-grid energy business models, like PAYG. While more work to facilitate exits needs to be done, more pioneer capital is becoming available to pioneering companies as investors like Acumen recycle their capital via exits.
- Acumen is increasing its percentage of poor customers served. Acumen’s newest investments have a higher percentage of products and services reaching low-income customers (44 percent, on average, of customers living under $3.10 day reached) compared to its broader energy portfolio (33 percent). Since Acumen introduced Lean DataSM, a low-cost impact-measurement approach, during its due diligence process, Acumen has improved its ability to assess how well a company reaches low-income customers as well as understand customer satisfaction, value for money, challenges and more, before making an investment.
- There is momentum, but some challenges in productive-use energy. While Acumen has made two investments in the productive-use sector, energy companies that offer technologies like solar water pumps, refrigerators, cold storage and mills, that can generate income and improve livelihoods, few investors are willing to invest due to challenges such as end-user affordability, distribution and product-market fit. As a result, Acumen, in partnership with CLASP, created the Efficiency for Access Investor Network to understand why just two of 31 investors in the network have made productive-use investments, and determine how to attract more capital to the sector.
Looking to the future, Acumen is more committed than ever to creating impact for low-income communities by investing in pioneering clean energy companies. With FMO’s support, along with other PEII Partners including IKEA Foundation, DFID, Signify Foundation, Autodesk Foundation and more, the opportunity to collectively move the needle in closing the Pioneer Gap in the energy-access sector is finally within reach.
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