ERM's Low Carbon Enterprise Fund (LCEF), a program of The ERM Foundation, was established in 2008 and employs an impact investment model to provide finance and professional support for low carbon entrepreneurs in the developing world.
The small businesses we work with 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.
In addition to having a clear low carbon remit, it is also important that the businesses we invest in provide tangible social and economic benefits to the communities in which they operate, for example, creating sustainable livelihoods, improving health conditions and reducing the need to spend time gathering firewood.
The LCEF is able to draw upon the expertise of ERM's global network of consultants, who provide technical and management support to these ventures at no cost to the Fund. The majority of the Fund's management costs are covered by ERM and all monies we raise go direct to the low carbon enterprises that we support.
The DOEN Foundation
The LCEF is supported by the DOEN Foundation, which drives cultural and cohesive initiatives that help create a green and inclusive economy. DOEN has provided the LCEF with US $600,000 for investment funds and a $200,000 grant to support some of the Fund's management costs over a three-year period.
Speaking of their partnership with the LCEF, DOEN's Investment Manager, Alexander van der Have, said "DOEN is proud to be a key investor in the Low Carbon Enterprise Fund, whose work financing entrepreneurs supporting energy access for low-income groups fits very well with DOEN's renewable energy program.
The LCEF does not simply provide seed capital to these entrepreneurs; it also delivers expert financial, technical and management support and on-the-ground mentoring to help their businesses grow. Moreover, we value the fact that the LCEF is one of the few funds we know that is willing to take risks on early-stage energy entrepreneurs, with the objective of building replicable examples of successful base-of-the-pyramid (BOP), energy-focused small and medium enterprises (SMEs), not simply positive returns on their portfolio.
Through ERM's office network, the LCEF is able to provide a local presence and capacity, and this ability, coupled with the quality of its management team, board and professional employees, make it one of the most professional funds we have worked with, and a valued partner for DOEN."
Solar Lamps for Cambodian Villagers
Nearly 11 million members of Cambodia's 15 million population are not connected to the energy grid. This represents the lowest electrification rate in Asia at just 24 percent of the population. Most poorer, rural families rely on kerosene for household lighting, which is carbon-intensive and very costly, representing a significant portion of average monthly incomes.
According to the World Bank, the average price of electricity in Cambodia is among the highest in the world, which is a major barrier to further electrification. Access to affordable, renewable energy products and services is crucial to the future development of this country. We have completed an investment in a Cambodian solar lamp venture, Kamworks, that sells affordable solar lamps to off-grid communities helping them to reduce their expenditure on energy and reduce dependency on kerosene.
LCEF Shares Expertise with Impact Investment Professionals
Last year, the ERM Foundation's Low Carbon Enterprise Fund (LCEF) was awarded a US $50,000 grant from the Aspen Network of Development Entrepreneurs (ANDE) to produce a definitive report on how impact investors can overcome the knowledge limitation risks when conducting due diligence on low-carbon technology enterprises. The report was completed in September 2014.
This year-long research project, entitled "Demystifying Technological Due Diligence," addresses the technical knowledge barriers that may be inhibiting capital flows into energy-focused ventures. The LCEF team received pro bono technical support from ERM employees to complete the report. This grant represents a significant recognition of the LCEF's growing reputation as a key thought leader within the impact investing community.
You can access the full report here.
Clémence McNulty, Cape Town, South Africa
Supporting a Renewable Energy Startup in Cape Town
It has been a privilege to work with Khaya Power, a South Africa-based solar energy startup, which was selected as an LCEF Incubator Fund project. Khaya Power aims to power rural and townships homes in Africa, as well as charge low-powered devices like cell phones, with portable solar-powered batteries called "Juz Boxes" that can be leased from local franchises, thereby creating employment and sustainable income in local communities.
As part of the pilot plan and marketing strategy we created, we used some "lean startup" philosophies and tools with the two founding members of Khaya Power in order to help them refine their thinking and test their business model. In addition, we helped improve the impact of their web presence and sponsored one of their pilots.
Working with Khaya Power has been such a unique challenge, very distinct from our typical client work, but contributing even in a small way to the shaping of this transformational idea has been incredibly exciting and rewarding.