VWB #4: ¿Cómo se dice "ClimateTech Leader"?

News Spotlight 🗞️

Milei’s Election + LATAM Energy Transition

Latin America’s third largest economy will have a new leader sworn into office in two weeks, and his policies may be even more provocative than his appearance. Until recently, Javier Milei was primarily known as a radical right-wing television talking head. As a self-proclaimed anarcho-capitalist Libertarian, “The Wig” or “The Madman” as his many (mostly young, male) supporters call him has espoused some wild commitments throughout his campaign, including replacing the Argentine peso with the US dollar, abolishing Argentina’s central bank, and doing away with Argentina’s Ministries of Education, Environment, and others. Milei’s stratospheric and surprising rise to fame exudes whiffs of Donald Trump’s ascension in the US, particularly with his campaign slogan of “que se vayan todos,” or “get rid of them all.” Sound familiar?

His impact on Argentine society—as well as on the region as a whole—remains to be seen, but perhaps most threatening is his stance on environmental issues. Milei is a noted denier of anthropogenic climate change, going so far as to call it “a socialist lie.”

Over the past 20 years, Latin America has quite literally led the renewable energy transition. Much of Central and South America is a renewable energy paradise due to its rich geothermal resources, abundant wind and sun, and diverse water sources. Beyond its natural advantage, the region has seen tremendous cross-border governmental and business alignment in the effort to transition the region’s energy system. As an example, The Renewables in Latin America and the Caribbean (RELAC) initiative, signed by 15 countries, established that by 2030, 70% of the region’s electric energy consumption would come from renewable sources. The region is well on its way to acheive these goals, as The Economist notes that in 2014, the latest year for which comparable data exist, Latin America as a whole produced 53% of its electricity from renewable sources, compared with a world average of 22%. Additionally, there has been a growing interest in climate investments in the region, particularly from foreign players such as China. 

Our Translation 🕵️

Milei’s election is a major threat to the incredible progress that Latin America has made in the pursuit of a just energy transition. His popularity illustrates how the region is conflicted between left- and right-wing parties. In addition, Milei’s popularity suggests that climate change and other social issues still play second fiddle for many everyday citizens, who are more interested in securing a “healthy” economy in the short-term.

On a more positive note, other countries in Latin America continue to push hard for sustainability and climate action. In particular, we are pleased to note that Colombia has introduced a new fund called the Fund for Life and Biodiversity. This fund is anticipated to oversee an impressive sum of almost $1 billion by 2026. The financial mechanism, designed to protect national ecosystems, will allot funding towards environmental initiatives, in the process making a tangible commitment to wildlife protection.

Startup Spotlight: Solfácil ☀️

Continuing our exploration of Latin America's commitment to renewable energy, this edition of VWB turns its spotlight on Solfácil, a remarkable Sao Paulo-based company leading the charge in financing the shift to solar energy across Brazil.

Founded in 2018 by entrepreneur Fabio Carrara, Solfácil started as a fintech platform offering credit lines to facilitate the installation of solar panels in homes, small and medium-sized businesses (SMBs), and rural production facilities. This innovative approach allows individuals to transform their monthly electricity expenses into a strategic investment in solar systems. 

This is how it works: Solfácil offers a specific loan for residents to install solar panels on their house roofs. Residents then can repay the loan by redirecting their usual electricity payments to Solfácil (plus a modest interest rate). Within a span of 5 to 6 years, the loan is completely settled, granting residents effectively free electricity—powered by solar energy.

More recently, the company has expanded its vision with the launch of a B2B marketplace for solar installations, insurance coverage against equipment damage, and delivery services for solar-related products. These strategic initiatives have successfully positioned Solfácil as a one-stop-shop for professionals in the solar panel industry. Since its founding, the company has grown eight-fold.

One of Solfácil’s key insights is understanding the symbiotic relationship between fintech and the facilitation of positive climate impact. Solfácil recognized the interest from 90% of Brazilian residents to integrate renewable technologies into their homes, and aligned incentives to enable this transition. Today, Solfácil stands as one of Brazil's largest lenders in the solar energy sector, having disbursed $1.5 billion reais (approximately $300 million USD) in solar loans and actively operating with over five thousand partners in all Brazilian states.

Win-win for climate and personal finances

While Brazil has emerged as a frontrunner in commercial solar panels, experiencing a remarkable 70% growth in 2020, the adoption of solar panels in Brazilian homes remains surprisingly low, with less than 1% of households embracing this technology. This stands in stark contrast to Australia and some U.S. states such as California, where 31% and 8.2% of homes, respectively, have incorporated solar panels. Solfácil cleverly bridges this gap by providing financing options for residents to install solar panels at home. Thanks in part to Solfácil’s activities, estimates show that by 2026, 40% of Brazilian residential units will have the potential to install solar panels on their roofs.

The transition into solar energy promises significant economic upsides for Brazilian residents. As Carrara asserts, investing in robust solar energy systems can yield residents a return of 10x the initial financing costs. Moreover, Solfácil offers an accommodating repayment schedule of up to 10 years, coupled with a favorable low-interest rate. The result aims to empower Brazilian residents to generate additional savings from solar panels, and utilize the extra income for other demands. 

Beyond being a financial facilitator, Solfácil’s contributions to the reduction of carbon emissions are equally remarkable. According to their website, the company has prevented the emission of almost 60 thousand tons of CO2, roughly the equivalent of what 230 thousand trees could offset over 20 years. Solfácil’s solar financing has had a significant impact on fostering a cleaner and more sustainable energy landscape in Brazil.

Our Translation: The Region to Watch in 2024 🕵️

Latin America's potential, particularly in the spaces of climate tech and financing, has captured the attention of an increasing number of American and other non-regional VCs. Indeed, Solfácil's Series C round last year, which totaled $130 million USD, drew participation from big names, including SoftBank, VEF, and Valor Capital. This made Solfácil the third-largest recipient of investment in Brazil for the year 2022.

The substantial investment in Solfácil not only highlights the confidence that major VCs have in this particular company, but also signals that investors are recognizing Latin America’s potential to drive innovation and progress in solving climate challenges. Equally important, we hope that these trends are evidence that VCs understand how important Latin American markets are, not just for climate-related investments but also in other areas as well. 

Also in the news… 📰 

Sam Altman back as OpenAI CEO

OpenAI has been front and center of the news cycle over the past several weeks, but not for reasons that you would expect for the hottest and most transformative startup of recent memory. Sam Altman, OpenAI’s co-founder and CEO, was ousted by the company’s board last week. Howver, his absence was short lived, as the company has announced that he has been reinstalled as CEO. In addition, OpenAI’s board of directors is being reshaped, with Altman relinquishing his board seat and Salesforce CEO Bret Taylor and former US Treasury Secretary Larry Summers joining the group. Spirits seem to be high in the organization, as employees set off a smoke machine in reaction to the news that triggered a fire alarm and San Francisco fire department dispatch to their offices. Altman’s co-founder Greg Brockman probably said it best, tweeting “We are so back.”

Binance CEO Pleads Guilty

Ah, another day, another crypto company scandal. Binance, the world’s largest crypto exchange by trading volume, is this week’s culprit with its founder and CEO Changpeng “CZ” Zhao pleading guilty to violating US anti-money-laundering laws. As part of his guilty plea, he has agreed to step down from his role as CEO and pay a $50 million fine. Binance as a firm will also pay $4.3 billion in penalties. Zhao still retains majority ownership of the company, but will be unable to return to the company in an executive capacity for three years. It’s great to see US regulators score a win and show some teeth in reigning in corporate malfeasance.