SOCIAL IMPACT

what we did

Scale

Project

Sunbox

Location

Palestine

Completion

2017-2021

Designing a Renewable Energy Social Impact Bond for Refugees

Enabling refugee camps with access to electricity with solar panels and blockchain-enabled energy distribution

Our partnership with Sunbox started with a series of crowdfunding campaigns to raise funds, proposals won with Action Against Hunger, The World Bank, and other International Development Agencies. Since it's founding, Sunbox has been dedicated to empowering powerless communities and our team has worked closely to raise awareness about Gaza's shortage of electricity which has decreased the availability of water, sanitation and health services, along with undermining Gaza’s fragile economy, particularly the agriculture and manufacturing sectors.

Over the years, our teams have explored ideas that would generate profit to subsidize the cost of electricity in disenfranchised communities. In 2019, we traveled to Saudi Arabia together with Majd Mashharawi to do a market analysis. We analyzed the renewable energy sector in Egypt, Turkey, and East Africa before proposing an entry strategy for medium-size installations in Saudi Arabia. Impact Gym's business development team helped implement a go-to-market strategy targeting 110,000 mosques which cost the government $40,000/each in electricity costs per annum. The profit generated from these installations across 3-5 year NPV models would cover the installations in disenfranchised communities. We worked with Sunbox to design the business model and the founder relocated to explore this market. In addition to implementing a cross-subsidization model, Impact Gym is working on designing a social impact bond that would directly target refugee camps. The intention behind this proposed structure is to bring dignity to communities that are perceived as a burden on society.

The proposed structure of a Social Impact Bond (SIB) consists of an Special Purpose Vehicle (SPV), which acts as an investment vehicle/holding company registered in a Double Taxation Avoidance Agreement (DTAA) country to avoid double taxation issues. This SPV invests in a non-banking finance company (NBFC) registered in the country where the project is implemented, using the Foreign Portfolio Investment (FPI) route. The impact investor will invest in the SPV. The SPV will subscribe to the listed or unlisted Social Impact Bond which is issued by the local NBFC. The NBFC will then either lend to sustainable energy projects or will evaluate the existing portfolio and will go for an off-balance sheet funding. These projects will make the principal and interest (coupon) payments to the NBFC that are then passed on to the investor as agreed in the term sheet between the NBFC and the investor. Impact investors get returns though coupon payments on the NCD. The proceeds of the issuance and repayments are managed by a trustee. Impact reporting using pre-decided indictors is done by the NBFC to the investor at a mutually agreed frequency.

A key feature of the SIB structure is an impact assessment mechanism that standardizes impact measurement and reporting. The NBFC that issues the SIB does the  impact reporting by using data obtained from sustainable investment projects, at predetermined intervals throughout the project lifetime. Some of the indicators used for impact measurement and reporting include: renewable energy capacity installed, increase in hours of electricity available, reductions in emissions and pollution, private investment catalyzed, number of beneficiaries to increased energy access, and number of new jobs created.

We are re-imagining the manner in which a refugee camp can limit electricity use to peak hours (12:00 - 3:00 PM) to maximize the amount of kwh they can sell back to the grid decreasing the overall cost for local neighborhoods. This is possible with blockchain backed smart contracts that streamline the process of selling energy back to the grid. IMPACT GYM is currently exploring partnerships with EnergyWeb and Powerledger to make this possible. Beyond the narrow outcomes of enabling access to electricity and energy independence, Impact Gym and Sunbox seek a multiplier effect - to empower refugees with the ability to make a positive impact on their host countries. This dynamic - we hope - augments the culture of what it means to seek refuge in another country.

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"Impact Gym helped us develop a go-to-market strategy and implement a cross-subsidization model that enabled us to serve our community more effectively."
Sunbox

Our approach

Impact Gym is working with the Portland Trust and Social Finance to implement Social Impact Bonds in refugee camps across the Middle East and North Africa to establish a track record for mainstream debt investors to invest at a later stage, by channeling impact investments and raising the confidence of other classes of investors. In the long run, these bonds will provide an aggregation model that can streamline investment into small-scale projects, which will lower transaction costs. Impact investors are in some cases willing to trade lower returns for measurable data on sustainable energy impact metrics and are a good potential source of initial investment to catalyze additional mainstream investors.
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01

The Challenge

Since many sustainable energy projects are small-scale projects, the transaction costs associated with investments in small ticket size projects are higher, which also deters impact investment.
02

The Outcome

Social Impact Bonds will drive impact investment to sustainable energy in the Middle East and North Africa by offering debt exposure, sufficient returns, and standardized impact measures.
03

The Impact

Since 2019, Sunbox has built partnerships with Ministries of Energy across the MENA region, raised over 500k in impact investment, generated 600,000 kwh, illuminated several street lights, revamped 20 water treatment plants with solar systems and created jobs for many young engineers.
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