Spark+, a $64m blended finance fund, invests in scalable companies offering clean cooking energy solutions to the mass market in sub-Saharan Africa.
Clean cooking is not the first subject that comes to mind when talking about climate – or health – in emerging markets. But here are some stunning figures: over 50% of the loss of African forests is due to firewood and charcoal production for cooking. The total carbon footprint from cooking in developing countries is equivalent to that of the aviation industry. There are more premature deaths caused by indoor air pollution in developing countries each year than from malaria, HIV and tuberculosis combined.
Fortunately, innovative business models and technology are rapidly advancing, furthering the adoption of clean and modern cooking solutions.
The Spark+ Africa Fund was launched to respond to these new opportunities and catalyse the growth of what remains a nascent industry. The fund was in development for several years and proudly claims to be the first impact investment fund specialised in clean and modern cooking energy in developing markets.
Due to COVID, as well as the complicated nature of creating a partnership of 15 development finance institutions (DFIs), foundations, family offices, and pension funds in this challenging sector, it took some time to get off the ground.
During the first year since its launch in March 2022, Spark+ has made five investments, and it is in the process of receiving its last investor commitment, after which a final closing at some $64m is expected, well in excess of its original target of $50m.
No longer an NGO issue
Talking to Impact Investor, Xavier Pierluca and Peter George, who together led the development of Spark+ and now co-manage the fund, emphasise that the clean cooking sector is evolving rapidly.
Pierluca is a managing partner at Enabling Qapital (EQ), a Swiss impact investment advisory company, and veteran of the impact investing industry. George spent the past several years of his career in energy and development finance consulting for the United Nations Foundation’s Clean Cooking Alliance (CCA) to oversee its private sector initiatives, and now serves as chairman of the Netherlands-based foundation Stichting Modern Cooking (SMC) which shares ownership of the general partner of Spark+ with EQ.
George notes: “For a long time, it was seen as an NGO issue. That is really shifting. There is a much greater focus now on the need to invest in alternatives. We, as a fund, are the result of development finance institutions as well as institutions like the European Commission, saying ‘we actually need to do something. And we have to do this in a more commercial, sustainable way that can scale’.”
“Visionary entrepreneurs as well as new business models and technologies are poised to allow Africa to leapfrog the more centralised technologies of the 20th century in favour of innovative distributed energy solutions,” adds Pierluca.
Public support for the fund comes from the African Development Bank’s Sustainable Energy Fund for Africa (SEFA), the European Commission, and the DFIs from Denmark (IFU) and Belgium (BIO). Private capital partners are foundations and family offices, including Ceniarth, VRM Foundation, Osprey Foundation, Fundación Netri, ImpactAssets, and the Ashden Trust. Four Swiss pension funds have also invested in Spark+, including the pension fund of insurance company Baloise Group, and GastroSocial, the pension fund of the Swiss hospitality industry.
In addition to its investors, the fund received development support from the governments of the Netherlands via its Ministry of Foreign Affairs, Norway via Norad, and Luxembourg via its International Climate Finance Accelerator (ICFA) programme.
Across the value chain
“We’re fortunate to have attracted private investors to engage in clean cooking,” says George. “It is a sector that is rapidly developing but still young and unproven to some extent, particularly from a financial standpoint. To engage more private investors, we need the continued support of public capital and at a much larger scale.”
Spark+ will engage with a mix of financial instruments, from long-term quasi-equity capital to shorter-term senior secured debt, accelerating the growth of clean cooking companies across the value chain. Pierluca adds: “We invest in the designers and manufacturers directly, all the way to the distributors and financing intermediaries offering credit to end users to make products affordable. And we are engaged with a range of fuels and technologies like liquified petroleum gas (LPG), biofuels such as ethanol and pellets, electric appliances, and efficient biomass stoves.”
The fund’s first investment was in BURN Manufacturing – a pioneering company which has to date sold more than 2.3 million super fuel-efficient biomass appliances in East Africa. The company’s vertically integrated solar-powered manufacturing facility in Kenya, the first and only one of its kind, currently has a capacity of 200,000 stoves per month and employs 1,000 people. With support from Spark+, the company is now expanding to other African countries, launching new products, and increasing its production capacity.
Other companies Spark+ is focusing on include microfinance institutions and carbon project developers.
“Without financing through the carbon market this can’t be done,” says George. “Of course we are aware of the recent discussions around the integrity of the carbon markets, both at a macro level and with regard to specific projects, and welcome these debates. But let’s be careful not to throw the baby out with the bathwater, so to speak.”
George adds: “Carbon credits are an essential source of funding for the business models we support by making clean cooking solutions affordable for individuals who can’t afford them on a purely commercial basis. Because of that, the integrity of the carbon credits our investees generate, and the long-term sustainability of the market, are of paramount importance to us.”