But the real benefit lies in the social impact
February 17, 2015: Large financial institutions, such as Bank of America and Deutsche Bank, and private investors launched a $100 million fund to ease access to clean and efficient cookstoves and fuels at the Cookstove Future summit in New York on November 21, 2014.
The Global Alliance for Clean Cookstoves (GACC), a non-profit organisation based in Washington D.C. and supported by the United Nations Foundation, organised this event to support the scale-up of clean cooking enterprises.
Business leaders and policy-makers also invested $413 million for three years in this sector. Inefficient and highly polluting cookstoves are a key environmental and health issue. More than four million people die from indoor air pollution every year.
“With 2.7 billion people relying on open fires and traditional biomass stoves to cook their food, the market potential for change is huge and the impact we can have on people’s lives is just as big,” said Baroness Lindsay Northover, Parliamentary Undersecretary of State for International Development in the United Kingdom.
GACC aims to provide clean and more efficient cookstoves and fuel to 100 million households by 2020. Since its inception in 2010, GACC and its 1,000 partners raised $50 million to boost the clean cookstoves sector.
“We need to keep developing the right technology: it has to be available, readily accessible and attractive enough so that people want it in their home,” said former Secretary of State Hillary Rodham Clinton who co-hosted the two-day summit.
The clean cookstoves sector, in developing countries in particular, offers vast economic opportunities for investors around the globe.
In Bangladesh, for example, 95% of people use traditional cookstoves, said Nasrul Hamid, the country’s State Minister of Power, Energy and Mineral Resources. Bangladesh has recently developed an action plan to distribute 30 million cookstoves.
“From an African perspective, our governments are less in a position to finance these initiatives than in the Western world,” said Hanna Tetteh, Minister of Foreign Affairs and Regional Integration of Ghana.
Over 17% of the Ghanaian population relies on solid fuels and charcoal.
Funding from large financial institutions provides the opportunity to venture into the clean cooking sector of developing markets.
Deutsche Bank, one of the investors in the GACC fund, had plans to launch an additional $4 million fund in December 2014 to facilitate access to clean and efficient cookstoves.
“The purpose of the fund is to offer small and medium-sized enterprises that are growing and that have the potential to increase their sales through debt, the opportunity for working capital or to purchase assets,” explained Moya Connelly, Senior Consultant at Deutsche Bank.
The type of cookstoves they invest in ranges in price from $10-$15 to $80.
“Less expensive cookstoves are purchased through cash. But $80 ones need to be financed through a financial institution, as it is expensive for someone in Africa or Asia,” she added.
Despite numerous market opportunities, impact investors have to be aware of the challenges of putting money in an immature and highly fragmented sector such as clean cooking.
They need to be ready to invest fund and offer technical and business development assistance to small companies. The focus is first on capacity building.
“For the moment, the returns are harder to justify because there are more emerging businesses,” said Jacob Moss, Director of the United States Cookstoves Initiatives at the United States Department of State.
Yet, impact investors are increasingly interested in this challenge.
For instance, Carlo Figa Talamanca, an Italian entrepreneur, took over the clean charcoal company two French non-governmental organisations set up in Cambodia.
“Their business was not financially sustainable,” he explained. “But I really believed in it. I lost money the first year but now I am making a profit,” he said.
Carlo is the Chief Executive Officer of the zero-smoke charcoal production company Sustainable Green Fuel Enterprise.
As in many emerging markets, he had to convince consumers of using his new technology, although he was selling it at the same price or slight more expensive than regular, highly polluting charcoal depending on the season and the area.
Cambodians were suspicious of a technology that replaces traditional cooking methods and solid fuels.
Two birds, one stone
Investing in clean and efficient cookstoves and fuels is a means to develop a business while making a positive impact on people’s lives, such as significantly reducing greenhouse gas emissions.
Clean cookstoves promotion is an under-covered area in investment and development. Yet, the smoke from open fires and traditional cookstoves is the fourth killer in the world, ahead of HIV and tuberculosis. Traditional cookstoves produce the same amount of smoke 400 cigarettes do in one hour.