The Low Carbon Enterprise FundSupporting low carbon social enterprises around the world

Annual Review 2015

A program of the ERM Foundation

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About the Low Carbon Enterprise Fund

The Low Carbon Enterprise Fund (LCEF), a program of the ERM Foundation, is an impact investment fund that provides financial, technical and management support for innovative low carbon entrepreneurs who operate in developing countries. Our first fund, LCEF I, was a $1.1 million impact fund and is fully invested. We are currently investing our second fund, LCEF II. LCEF II is a $1.2 million impact fund jointly funded by ERM partners and the DOEN Foundation. Across both funds, the small businesses with which we work are bringing affordable, low carbon products and services to some of the world’s poorest communities – reducing dependency on kerosene, firewood and other unsustainable sources of energy. Our ventures help alleviate poverty, by creating sustainable livelihoods, improving health conditions and freeing up time for education and entrepreneurship.Kamworks in CambodiaPhoto credit: Mathieu Young

The LCEF provides financing of up to $200,000 to low carbon ventures. We look for ventures that demonstrate the following:

• A low carbon remit and the ability to deliver broader social benefits, contributing towards poverty alleviation within disadvantaged communities

• A realistic and credible business plan• A location in a country where ERM has an office or significant

working presence• A willingness to work closely with the LCEF team.

Since 2007, the LCEF has drawn upon the expertise of ERM’s global network of consultants, who provide technical and management support to these ventures through pro bono consultancy time contributed by the ERM Foundation.

The LCEF is supported by the ERM Foundation and the DOEN Foundation.

The LCEF is a registered charity in the UK and has 501(c)(3) non‑profit status in the US.

All figures quoted in US Dollars

ERM is a leading global provider of environmental, health, safety, risk, social consulting services and sustainability‑related services. Sustainability is at the heart of ERM’s global strategy and the company is dedicated to supporting socio‑economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs. For more information visit www.erm.com

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The Low Carbon Enterprise Fund (LCEF) occupies a unique space in the impact investing world – sometimes referred to as the ‘missing middle’ – funding early-stage entrepreneurs whose ventures are too large for microfinance and too risky for commercial capital. Central to our mission is providing start-up capital and technical support for innovative low carbon businesses that are unable to obtain investment from traditional sources.

This year we have made three new investments. Kingo is a Guatemala‑based venture that provides affordable pre‑paid solar energy systems for some of the country’s three million people who are not connected to mains electricity. In India, we have invested in two businesses. The first, Karma, is an e‑waste recycling company that reconditions old mobile phones and other electronic equipment for lower income communities to re‑use. The second, Ehands, provides wind and solar energy products for off‑grid communities across India.

Chairman’s foreword

We are fortunate to be able to leverage ERM’s global network of consultants to provide technical, professional and capacity‑building support for the small businesses with which we work. This pro bono support is mutually beneficial, as it also offers ERM employees rewarding opportunities to work with ‘non traditional’ clients and develop new skills. We continue to share our experience with other funds and encourage greater investment into the low carbon technology sector. This is viewed by many as a difficult area in which to invest given the complexities involved and an often‑demanding due diligence process. Supported by the Aspen Network of Development Entrepreneurs (ANDE), we completed a study last year on how investors faced these challenges. This involved discussions with more than 30 impact funds, whose insights fed into a report which is available on ERM’s website: Demystifying technology based ventures for impact investors

We would like to thank everyone who has supported our work during the past year and look forward to your continuing involvement in the year ahead.

Robin Bidwell Chairman, Low Carbon Enterprise Fund

Robin Bidwell, Chairman, Low Carbon Enterprise Fund

Aamir Jariwala, Founder, Karma, LCEF Investee

LCEF provided the financial vote of confidence to see our mission become a reality when few conventional investors understood Karma’s purpose. Their deep understanding of environmental stewardship coupled with their investing acumen made them the ideal knowledge partner for Karma.

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Investments since 2007

Countries/Territories with ERM offices

Forest friendly livelihoods

Energy access

Clean cooking

Drinking water

Recycling and reuse

Our portfolio

Investments since 2007.

Key

PeruWindAid

GuyanaIwokrama

United StatesPachamama

GuatemalaDoña Dora

Kingo

EcuadorArtParqet

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IndonesiaArsindo Nazava

NepalFuture Now

IndiaEhandsKarma

ServalsSustaintech

CambodiaKamworks

South AfricaKhaya Power

BurkinaFaso

Nafoore

KenyaTigo

TanzaniaNBBC

MadagascarJSB Biofuels

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Funds invested by the LCEF since 2007

Recycling and reuse$97,000 Forest friendly livelihoods

$325,000

Energy access$1,090,000

Drinking water$100,000

Clean cooking$281,000

Financial instruments used by the LCEF

Debt$613,000

Equity$426,000

Hybrid$854,000

Our portfoliocontinued

Investment since 2007

$1.9 millioninvested in start-up ventures

The LCEF has made equity, debt and hybrid debt investments. The choice of instrument depends primarily on the stage, risk profile and financing needs of the venture, and forms part of our due diligence process. Given our broad geographical remit, the choice of instrument is also influenced by the local laws and regulations on foreign investment in the countries in which we invest.

19ventures supported since inception

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Our impact

Impact measurementWe are grateful to the ERM consultants who have developed a new impact measurement framework for the LCEF, which is improving our understanding of the social, environmental and economic impacts of our investments. We have started to roll out this framework for new investees, with ERM consultancy support. Over the coming year we plan to work with select investees to refine the framework, and continue the implementation across the LCEF portfolio to existing investees. For more information on our impact measurement approach, please see page 17.

In aggregate, across the year covered by this 2015 (FY15) review1, LCEF ventures helped avoid 87,000 tonnes of CO2. These small ventures did this while providing permanent employment for 240 people, and improving livelihoods for 1.25 million disadvantaged customers or suppliers.

1 FY15: financial year ending 31 March 2015.

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New investmentsLCEF II Kingo, Karma and Ehands

Kingo’s electricity services allows rural Guatemalans to replace kerosene with lights

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In Guatemala, half of the population of 15 million people live below the poverty line. Around 20 percent of households are not connected to the national grid and remain dependent on expensive and polluting kerosene for their energy and lighting needs.

This year, the LCEF invested in a social enterprise called Kingo. Kingo has created a smart technology solution to provide affordable, prepaid solar energy for the rural poor. Kingo’s systems present a cheaper, cleaner and safer alternative to candles or kerosene. Kingo provides each customer with a solar home system and installs it in their home at no upfront cost. Each system is fitted with Kingo’s prepaid technology, and customers buy activation codes from a local

LCEF IIOur $1.2 million second impact fund is supported by the DOEN Foundation, other external donors and ERM partners. Three new investments were closed in FY15. Six investments have now been made out of LCEF II.

Kingo: pay-as-you-go solar electricity, Guatemala

Kingo’s impact since investment

distributor. Customers have complete control to buy what they need, when they need it. Kingo’s customers can buy solar energy by the hour, day, week or month.

Beyond providing many communities with access to electricity for the very first time, Kingo creates employment and income opportunities for local shopkeepers and distributors. These shopkeepers often make more money selling Kingo credits than any other product.

Kingo’s vision is global. You can find out more about their work at:

http://www.kingoenergy.com

2,300installations, prepaid household systems

96%of customers are more productive

54full-time Kingo employees

92%of customers save money

81%of parents say their children now perform better in school

11,500 beneficiaries

350%increased study time for children

56%of customers previously experienced burns with candles and kerosene, now safer

62distributors of Kingo credits

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More than 75 percent of India’s 1.3 billion population owns a mobile phone, making India the second largest user behind China. The latest smartphones tend to be the preserve of the middle classes, who account for less than one-third of India’s population. As in other parts of the world, mobile technology develops very quickly and old handsets are often disposed of when new models enter the market, wasting valuable resources and embedded carbon. This contributes to India’s e-waste challenge.

Karma Recycling has found an innovative way to address the twin problems of managing e‑waste safely and making smartphones more affordable for India’s less affluent communities. Karma offers a pickup‑and‑cash service for more than 3,000 models of smartphone, tablets and laptops. These devices are then repaired, wiped of old data and refurbished by

skilled engineers in safe environments. The reconditioned devices are then re‑distributed for sale through Karma’s network of dealers, often at less than half the price of a brand new device.

By extending the life of devices, Karma help save scarce resources and embedded carbon that would otherwise go into manufacturing new devices.

Mobile technology has an enormously important role to play in developing countries, enabling people to access a range of important services, manage their money, stay connected and engage in entrepreneurial activity. Karma’s reliable, second‑hand devices improve access to technology for low income groups, while keeping hazardous e‑waste out of the informal waste management sector, with its very poor working conditions.

Karma: e-waste recycling and re-use, India

ERM people profile

Working with Karma fascinated me. It enabled me to explore an innovative business model designed specifically for developing nations with new laws, while working directly with entrepreneurs. Through the LCEF, I was able to assist a start-up venture with strong environmental and social messages to incorporate Environment, Health and Safety (EHS) concerns in its life cycle right from the beginning. This included many discussions with the management and an on-site visit at their facility located in New Delhi in India.

Ishikaa Sharma, Delhi, India

Karma employ and train skilled engineers at their HQ

New investmentscontinued

09The Low Carbon Enterprise Fund Annual Review 2015

400 million people in India are not connected to the electricity grid, which fuels dependency on kerosene, firewood and other unsustainable, and often unhealthy, sources of energy.

Ehands was established to create access to affordable, clean energy products for off‑grid communities across India. Ehands’ products range from simple solar home lighting to more sophisticated wind‑solar hybrid systems, which are particularly suitable for remote locations. At the heart of these solutions are partnerships with world‑class renewable energy manufacturers and an experienced team of technology professionals.

Ehands’ current installations are spread across 100 cities and towns in 14 Indian states. There is a total installed capacity of over 250kW, stretching from Kashmir to Kanyakumari, reaching 5,000 people across over 100 communities.

The LCEF’s investment in Ehands is being used to pioneer a new product: affordable solar home systems (SHS) through the micro‑finance institution (MFI) channel in the state of Tamil Nadu.

Within six months of the product launch, the SHS is already benefitting more than 1,000 families and village entrepreneurs. The benefits of reliable electricity are significant and wide‑ranging. For example, customers report that children are able to study during power cuts and kirana (local shop owners) recorded a substantial increase in their revenue due to longer working hours enabled by the improved energy supply.

Ehands: renewable energy in off-grid areas, India

Ehands systems change the lives of their off‑grid customers

Impact in FY15

5,000people with access to sustainable energy

>100communities served

250kWcapacity installed

14permanent jobs created

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Earlier investmentsLCEF II Nazava, Kamworks and WindAid

Kamworks, Mathieu Young

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Almost half of Indonesia’s population does not have access to a clean water supply. For millions of people, this means having to boil water, often using firewood, to remove dangerous pathogens. This process can be costly for low income families and also contributes to carbon emissions and deforestation.

Nazava is an Indonesia‑based social venture that sells affordable household water filters through a series of resellers in Indonesia. These filters allow families without access to safe drinking water to purify local dirty water supplies without boiling or employing chemical treatment. To date, Nazava’s filters have improved the health of 185,000 people in Indonesia. Last year, units sold grew by 46 percent from just under 9,000 filters to more than 13,000. The carbon savings associated with reduced used of firewood is 3,500 tonnes CO2 annually.

Nazava’s recent growth and 2013 Tech Award — given to companies applying technology to benefit humanity, position the company well to secure further growth funding this year. As a seed investor, this is a fantastic outcome for both the LCEF and for the venture itself, and we are proud to have been part of this journey.

WindAid is a Peru-based social enterprise that manufactures and supplies wind turbines for off-grid rural communities in Peru. The turbines are continuously improved by engineering students from across the world, who benefit from practical field experience under WindAid’s unique model.

WindAid now holds the Guinness World Record for the highest elevation wind generator. Officially certified this year, the turbine provides electricity to the community near the shrinking Peruvian glacier of Pastoruri at 4,900m above sea level. The remarkable project involved fabricating and installing a 2,500W wind generator system to provide light and power to the people of Pastoruri, and is growing into a long‑term sustainability project for the Catac community in the Peruvian Andes.

The village is located far from the national electricity network and so businesses and homes previously relied on expensive gasoline‑powered generators or other inefficient sources of energy for their energy needs.

More than 50 wind turbines have now been built and installed by the international WindAid team with their volunteers, since their launch.

Kamworks designs, assembles and manufactures solar home systems in Cambodia. FY15 saw the launch of a new partnership with Kiva.org to provide consumer finance to their customers, which has grown rapidly.

The moonlight solar lantern, Kamworks’ first product, is also now being exported via a tie‑up with LCEF investee Ehands, bringing a product that has been very successful in Cambodia to a much larger market in India.

Nazava: household water filters, Indonesia

WindAid: wind turbines, Peru

Kamworks: solar home systems, Cambodia

WindAid securing the Guinness World Record

Nazava’s impact in FY15

185,000customers using Nazava’s filters

$1.4msavings on fuels previously used for boiling water

11permanent jobs created

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Earlier investmentsLCEF I Pachamama

Pachamama Coffee Cooperative: small-holder farmers, Latin America and Africa

ERM people profile

My work with Pachamama has allowed me to learn about how small businesses launch and operate, while also giving me an opportunity to contribute to ERM’s commitment to low carbon ventures. I’ve had the opportunity to participate in the company’s strategic planning through conference calls, board meetings, and even planning and launching a Kickstarter campaign. It’s a privilege to be able to help Pachamama achieve their mission, and also rewarding to watch the venture grow and succeed.Josh Hancock,

Seattle, US

In 2009, the LCEF made an investment into Pachamama Coffee Cooperative. Pachamama is uniquely backed as a cooperative, 100 percent owned by small-holder farmers from across Ethiopia, Guatemala, Nicaragua, Mexico and Peru. The cooperative sells coffee to consumers in North America, direct from the farmers who produce it.

Pachamama’s 150,000 member‑farmers practice sustainable, forest‑friendly livelihoods, cultivating shade‑grown coffee,

while taking control of their supply chain right through to the end consumer.

Last year, Pachamama decided to invest in a coffee roaster, the final element of the supply chain still outsourced. Therefore, calender year 2014 became the year that 150,000 small‑holder farmers, with support from ERM, took to Kickstarter to finance capital expenditure by pre‑selling Pacha‑roasted coffee.

With strong ERM support and external expertise secured by the LCEF, Pachamama made a funding video and launched the project, which quickly made Staff Pick on Kickstarter and was fully funded.

Kickstarter is a global crowd funding platform in the United States that circumvents traditional models of investment by aggregating small pledges by funders at a global scale in return

for rewards packages. Project creators choose a deadline and funding goal. If the funding goal is not met by the deadline set, no funds are collected.

Our congratulations to the venture, to the small‑holder farmers backing it, and to all the customers who made this happen.

You can find out more about Pachamama here:

http://www.pacha.coop/about

and buy their coffee here

http://www.coffeecsa.org/

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Pachamama’s suppliers and shareholders are all small‑holder farmers

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Estufa Doña Dora designs fuel‑efficient stoves differently for Guatemalan families

15The Low Carbon Enterprise Fund Annual Review 2015

Earlier investments LCEF I Servals, Sustaintech, Estufa Doña Dora and Iwokrama

Our earliest investment, Servals, designs and manufactures fuel-efficient kerosene burners and biomass gasifiers.

Their products, used by millions of customers across India, now help to reduce more carbon than any other LCEF investee company. Revenues at Servals grew solidly once again during the past year as they continued expanding to new areas of India, improving fuel efficiency and creating substantial savings for millions of rural India consumers.

Sustaintech is a spin-out from TIDE (Technology Informatics Design Endeavour), an Indian organization devoted to promoting sustainable development through technological interventions.

Sustaintech designs, manufactures and sells fuel‑efficient, smokeless stoves for street food vendors in India. The stoves require up to 50 percent less firewood than traditional models, and come with a smoke extraction chimney to offer a safer working environment for street‑side cooks. Sustaintech continues to grow steadily and is designing new products to suit cooking styles in the north of India and Myanmar.

In Guatemala, industrial designer David Evitt is on a mission to design and manufacture the world’s best low-carbon household stove with the Guatemalan customer in mind.

Disappointed by many non‑profit initiatives to install smokeless stoves that beneficiaries didn’t like and didn’t use, David and his team worked closely with rural households to create a stove design that isn’t just efficient and smokeless, but also practical – made with the customer in mind. Tiled wings that allow the family to eat right where the food is prepared and larger planchas (stove tops) suit the local cooking styles. Estufa Doña Dora’s stoves also offer significant carbon savings, as they are far more efficient than traditional stoves or open fires.

The Iwokrama International Centre (IIC) was established in 1996, under a joint mandate from the Government of Guyana and the Commonwealth Secretariat.

IIC’s objective is to manage the 371,000‑hectare Iwokrama forest reserve in a manner that will lead to lasting ecological, economic and social benefits to the people of Guyana – and to the world at large. Our investment helped expand and update the facilities at the reserve, enabling IIC to attract new visitors and increase revenue, demonstrating that conservation, environmental balance and economic use can be mutually reinforcing.

Servals: fuel-efficient burners, India

Sustaintech: clean cooking, India

Estufa Doña Dora: clean cooking, Guatemala

Iwokrama: forest conservation, Guyana

Estufa Doña Dora’s impact in FY15

385stoves placed with households

1,890beneficiaries from cleaner cooking

963 tonnesCO2 avoided

$47,400customer savings on fuel

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Partners and partnerships

As part of our commitment to sharing knowledge and making a positive contribution within the impact investing community, the LCEF team participates in joint working, partnerships and international initiatives.

This year we are pleased to have joined, as a founding member, the Beyond the Grid initiative under Power Africa, a multi‑stakeholder partnership led by the United States Government, the governments of a number of African countries and select public and private sector entities. The aim is to accelerate universal energy access in Africa over the next several years.

In addition, we have joined the Asian Development Bank’s Sustainable Energy for All initiative as an investor. Partners to this initiative commit to working together to improve access to sustainable energy for

the 1.2 billion people globally who still don’t have access to mains electricity.

We remain members of the Aspen Network for Development Entrepreneurs (ANDE) and continue to enjoy many other strong relationships with co‑investors and incubators around the world.

We are delighted this year to have found a strong partner in the Thomson Reuters Foundation. Through the Thomson Reuters Foundation, we have been able to access pro bono legal support to assist with transactions. In particular, we are especially grateful to Skadden, Arps, Slate, Meagher & Flom LLP, and Kochhar & Co. These firms have provided us with excellent advice, enabling us and our investees to start our relationship on a firm and professional footing.

International development networks

ERM people profile

I feel proud to be a part of an organization that is making a difference by adding ‘real value’ to the community. Through the LCEF, I have had the opportunity to participate in an international conference on impact investment and support a business case for a start-up company. Professionally and personally, this has helped me realize that someday we all need to ‘pay-it-forward’.

Sreemoyee Bhattacharyya, Mumbai office

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This year the LCEF published its report ‘Why the technology matters: Demystifying technology based ventures for impact investors’.

Recognizing the LCEF’s unique positioning as an early‑stage investor with access to ERM’s consultancy resource, the Aspen Network for Development Entrepreneurs (ANDE) selected the LCEF to author a publicly available report, on the role of technology due diligence in impact investment.

The report is available on the ERM website: Why the technology matters

The LCEF helped evaluate start‑up challenge competitions across the developing world. We served on the International SEED Awards Jury and the Vietnam Climate Innovation Centre Judging Panel. We also participated on the judging panel at Sankalp Africa and acted as an external expert reviewer for the White House’s Power Africa competition. We also contributed to business workshop support for the Ashden Award winners.

The LCEF presented perspectives at key industry conferences in Asia, America, and Africa and learned from other panelists and delegates in our space.

As part of a growing network of global impact investors, this year we are pleased to have shared insights with others at:

• Asia Impact Investment Exchange (IIX) – Singapore

• Asian Development Bank’s Asian Clean Energy Forum – The Philippines

• Foro Latinoamericano de Inversión de Impacto (FLII) – Mexico

• Sankalp Africa – Kenya

Thought leadership and learning from others

Impact measurementWe are standardizing our impact reporting across the portfolio according to the IRIS metrics https://iris.thegiin.org/metrics. IRIS is the catalogue of generally accepted performance metrics that leading impact investors use to measure the social, environmental, and financial performance of their investments.

Our internal methodology allows us to measure, on a consistent and rigorous basis, the positive environmental and social benefits that arise as a result of our ventures’ work. We do this by using data generated by the venture in the ordinary course of business as far as possible.

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Servals products reach nearly a million India beneficiaries

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Our supporters

We would like to thank the DOEN Foundation, which has provided $800,000 to the LCEF over a three-year period, enabling us to support more low carbon entrepreneurs and also cover some of our support costs.

We would also like to thank ERM, which funds the majority of the LCEF’s management costs and, through the ERM Foundation, enables ERM employees to provide technical and management expertise to the ventures we support.

The DOEN Foundation ERM

The Low Carbon Enterprise Fund (LCEF) finances and advises start-up entrepreneurs that realize renewable energy access for low-income groups. This focus fits very well with DOEN’s renewable energy program. As the LCEF is able to provide specific financial, technical and management support to these entrepreneurs, also in cooperation with their strong ERM network and expertise, the LCEF complements DOEN’s investment priorities. An additional strength of LCEF is its possibility to provide smaller amounts of money to entrepreneurs. This need in the market is often difficult to fulfil, and LCEF is a strong partner for this.

Daphne Pit, Team Manager, DOEN Foundation

ERM employees supporting LCEFERM employees assist on the origination, due diligence and post‑investment support of LCEF ventures

Aditi JoshiAna Sofia AmorAnn ChiltonAnn Elise DeBelinaBarret CieutatBhavana SharmaBruce DavidsonBryan HartlinCarlos PereyraChaitanya KrishnaCourtenay PinderCourtney GrantCristina PellegrinoEimear GormallyFirdaus Anuar

Giulio MarinHS RawatIndrani GhoshIshikaa SharmaJaideep DasJaimlyn KorolJames JoyceJim PerazzoJohn SimonsonJohn StipaJosh HancockKaren BrodyLauren CotterLeonas ChatimLinden Edgell

Maarten CuypersManuel Ortiz‑MonasterioMarc WilliamsMark FraserMasood MallickMichael O’ShaughnessyMiguel CortesMike EverettNuttachai SuwanruskRizwaan AbbasRodrigo IbarrolaRoy BurrowsRupam RajaSabine HoefnagelSam McCrea

Sarah BonhamShahila PerumalpillaiShona KingSreemoyee BhattacharyyaStefano LasaponaraTejaswini RavalTrevor HarrawayVitor CostaZoe Parr

Supporting low carbon social enterprises around the world

Low Carbon Enterprise FundERM FoundationExchequer Court33 St Mary AxeLondon EC3A 8AAUnited Kingdom

ERM Low Carbon Enterprise Fund Foundation75 Valley Stream Parkway, Suite 200Malvern, PA 19355United States

foundation@erm.com

The Low Carbon Enterprise Fund is a registered charity in the United Kingdom: 1113415The ERM Low Carbon Enterprise Fund Foundation is a registered 501(c)(3) non‑profit in the United States

Enquiries: foundation@erm.com

www.lowcarbonenterprisefund.com www.erm.com/foundation

Front cover photo by Kingo