Publications

The Connecticut Green Bank, established as the first green bank in the U.S., garnered acclaim for its innovative approach to financing clean energy. Despite its successes, including mobilizing $910 million in private investments and reducing CO2 emissions by 2.6 million tons, the organization faced significant challenges in 2017. The major hurdles stemmed from the Connecticut legislature's decision to divert $16.3 million annually from the Green Bank's budget, impacting its projects and partnerships. This funding cut created immediate operational difficulties, notably freezing a $10 million project due to the uncertainty it introduced among private partners.

Connecticut's broader fiscal crisis compounded these issues, with a notable $3.5 billion state deficit largely attributable to unfunded pensions and a shrinking tax base. In response, the Green Bank's leadership grappled with securing sustainable funding sources to lessen dependence on public funds, which amounted to nearly 90% of its operating budget at that time. The dilemmas involved balancing the bank's mission to drive private investment in clean energy, create jobs, and mitigate climate change while navigating altered funding structures. Additionally, considerations around maintaining the bank’s inclusive prosperity goals, demonstrating the efficacy of clean energy finance, and addressing energy poverty amidst financial restructuring were critical. The need to reassess product interest rates, the retention of financially unviable projects for their social impact, and redefining success metrics to align with a new operational reality presented ongoing strategic challenges for the management team.

Tom Bird, founder of the early-stage impact investment nonprofit The FARM Fund, settled into his seat for a flight from Boston to Amsterdam in February 2016. The seven-hour transoceanic flight would give him plenty of time to mull over two dilemmas – one a long-term question of the future of FARM and the other an investment opportunity FARM had recently been presented.

Bird and some like-minded associates had founded FARM in 2011 to invest in for-profit enterprises that were looking to make a positive social contribution with their work, an area called impact investing. Overall, the portfolio the fund assembled was strong: financially, the fund had outperformed traditional venture capital benchmarks, and its companies were generating meaningful social impact across the globe in the areas of health, education, energy, and poverty reduction. Bird was considering the next chapter for FARM. He managed the fund’s growing portfolio without dedicated full-time staff. Bird felt stretched thin and was considering other options in his life.

Over the preceding year, Bird had put together a number of ideas about how the fund might proceed. The flight would provide much needed time to ponder the options. Bird also had more a pressing decision to consider. He had to decide whether FARM would invest in OnFrontiers, a company that was approaching its fundraising deadline.

Founded in 2014 by Anne Kroijer, OnFrontiers provided its clients with access to a broad network of experts in emerging markets to serve as ad-hoc, short-term consultants. Despite the company’s strong traction to date, Bird had doubts about the investment. From a financial standpoint, the outlook appeared to be attractive – OnFrontiers offered a unique service and had put together a robust customer pipeline. However, FARM’s mission had been to invest in companies that would help serve the nearly 4 billion people living on less than four dollars per day and OnFrontier’s customers primarily consisted of well-heeled western companies.