Mérida, Mexico – An increasing number of proof points are beginning to add up to a viable impact investing marketplace in Latin America.
In the past year, ImpactAlpha has tracked more than 50 impact investments in Latin American companies. Investors and entrepreneurs gathered here for the annual Foro Latinoamericano de Inversión de Impacto can point to Latin American and Caribbean ventures ventures that are generating financial returns through social and environmental impact – and raising capital and realizing exits.
“The mainstream is moving in your direction,” economist George Gray Molina told the crowd at the opening session of “the FLII,” held outdoors at an historic hacienda outside this city on the Yucatan peninsula.
For example, China’s Tencent invested $180 million in Brazilian credit unicorn Nubank, one of a raft of deals into Latin America ‘neobanks.’ The 100% digital banks are reaching previously under- and unbanked customers on mobile phones and personal computers.
China’s Tencent invests $180 million in Brazilian credit unicorn Nubank
TPG Growth’s Rise Fund, along with its co-investment partner Elevar Equity, doubled down on education in Argentina with equity investments in Digital House and Grupo VI-DA, which provides high-quality Spanish-language books to schools at a lower cost than physical books.
And Blue Like an Orange, which has raised $100 million for a mezzanine debt fund, has made its first two loans, to ride hailing firm Cabify and small-business lender Produbanco in Ecuador.
Proof points
Growth in impact investing assets (among 81 five-year repeat respondents) in Latin America and the Caribbean has outpaced growth in other regions, notching a 15% compound annual growth rate over the last five years (vs. an industry average of 13%), according to the Global Impact Investing Network. In the GIIN’s latest investor survey, investors reported $36 billion in impact assets under management in Latin America.
A separate report found Peru stepped past Mexico as the top destination in Latin America for impact investment capital over the previous two years.
Investors in the region continue to worry about the shortage of options to exit their investments and get their capital back. While funds seeking market-rate returns are increasingly active, early-stage and risk-tolerant “patient” capital is in short supply. And few funds are pursuing innovative deal structures to accommodate investors’ and investees’ needs, according to the GIIN survey.
Still, anecdotal evidence of successful exits is accumulating. Brazil’s Vox Capital scored a 26% return with the sale of its stake in affordable healthcare network TEM. In Ecuador, Oikocredit, Triodos and MicroVest Capital Management sold their stakes back to Banco Solidario, among the first banks in Latin America to specialize in microcredit. German venture capital firm Project A recouped its investment in the natural products ecommerce platform Natue when Brazil’s Mundo Verde acquired the company for an undisclosed sum.
Earlier, Adobe Capital exited NatGas, a fast-growing startup that converts taxis and buses to natural gas. All told, impact investors have notched more than 50 exits across Latin America, according to a report from Impaqto, a consultancy in Ecuador.
Among the highlights of impact investing dealflow in Latin America:
Climate-smart and sustainable. Ventures in Brazil, Mexico, Chile and Central America are raising capital to confront the mounting challenges of climate change.
- Incofin helped launch climate resilience insurance for Nicaragua’s farmers.
- European Investment Bank backed solar transition for Mexico.
- Spain’s BBVA bank led $400 million green loan for Mexican wind farms
- Fundación Chile backed two Chilean sustainability startups.
- Loan to Guayaki aimed to support jobs and preserve rainforest in Brazil.
- DiCaprio-backed Kingo secured $15.5 million in debt to expand off-grid solar.
- Beneficial Return financed Ecofiltro’s ceramic water filters for Guatemala.
- Richard Branson launched an accelerator to bolster Caribbean climate resilience
- Angel Ventures committed $2.5 million to Latin American smart city and clean tech startups.
- Catholic Relief Services targeted loans for clean, reliable water in El Salvador.
Missing middle. In Brazil, Mexico, Colombia and Ecuador, entrepreneurs are finding new ways to close the financing gap for small businesses.
- Adianta raised $2.2 million to expand access to working capital in Brazil.
- Blue like an Orange’s first loan went to small-business lender Produbanco in Ecuador.
- Sempli raised $5.7 million to support Colombia’s small businesses.
- Incofin committed $10 million to Mexico’s Financiamiento Progresemos.
- Quona Capital led a $5 million round for Brazilian small business lender BizCapital.
- Parcel shipping company Mandaê raised $7.1 million from IFC and corporate venture funds to serve Brazil’s small businesses.
- Tienda Pago raised $7.5 million for super-short small business loans.
- Visor’s alternative credit-scoring helps businesses get loans in Mexico, Brazil.
- Ecuador’s Banco Solidario buys out its impact investors.
Inclusive fintech. Brazil’s Nubank’s $180 million raise might have been the largest but fintech firms in Brazil, Argentina, Uruguay and Mexico are raising capital to expand access to financial services.
- China’s Tencent invested $180 million in Brazilian credit unicorn Nubank.
- Accion Venture Lab backed a “neo-bank” in Brazil
- Mexican digital bank Albo raised $7.4 million to boost access to finance services
- Brazilian fintech Creditoo raised $1.2 million for payroll lending.
- Elevar, Rise Fund backed Uruguayan fintech firm Bankingly.
- Argentinian fintech firm MONI secured $3 million for short-term lending.
- Endeavor Catalyst backed Brazilian lending platform Creditas.
Farmer finance. A growing group of ventures in Mexico, Nicaragua and Argentina are delivering products and services to the 15 million family farms (including 10 million subsistence farmers) in Latin America and the Caribbean.
- Solena raises capital from Kirchner Impact Foundation to support Mexico’s small farmers.
- Incofin helped launch climate resilience insurance for Nicaragua’s farmers.
- Argentine agtech startup Kilimo raised expansion capital.
- Sistema Biobolsa got working capital to bring biodigesters to smallholder farmers.
- Oikocredit, Alterfin, Incofin and Root Capital are among a dozen International social financiers that have doubled their annual lending to small farmers in Latin America and other emerging markets to $716 million over the last five years.
New schooled. Ventures in Brazil, Argentina, Mexico and Peru are creating new opportunities for education and training to reach the two-thirds of Latin America’s young people that don’t advance into higher education.
- Acumen’s Latin America fund backed Peruvian skills startup Crehana.
- Omidyar Network backed Brazil’s Agenda Edu.
- Elevar, Omidyar, Rise Fund backed Latin American literacy startup Grupo VI-DA.
- Vox Capital backed Sanar to train healthcare professionals in Brazil.
- Mexico’s Yogome raised $27 million for multilingual learning materials. (UPDATE: Yogome was shuttered at the end of 2018 amidst fraud allegations.)
Well Being. Brazil’s a hub for healthtech and healthcare delivery innovation.
- Hand Talk raised early funding for Brazilian sign language app.
- Brazil’s Vox Capital scored a 26% return in affordable healthcare network TEM exit.
- Vox Capital backed Sanar to train healthcare professionals in Brazil.
- Temasek backed low-cost healthcare chain Clinica SIM in Brazil.
- Argentina’s Puerto Asís backed uSound’s low-cost hearing tech.
Circular economy. Greening supply chains and reducing the textile industry’s environmental impact is a growing opportunity.
- Repassa raised capital to help Brazilians recycle used clothes.
- Brazil’s Mundo Verde acquired natural products e-commerce platform Natue.
- Trocafone in Brazil raised $3 million to find buyers for used electronics.
Stocking the pipeline. Larger, later stage impact investments started somewhere.
- Entrepreneurs from eight countries including Argentina and Ecuador joined Endeavor.
- Agora Partnerships graduated 30 Latam and Caribbean startups targeting the Global Goals.
- Richard Branson launched an accelerator to bolster Caribbean climate resilience.
- Accion, MetLife Foundation partnered on a financial inclusion incubator focused on three regions including Latin America.
Sustainable Development Goal champions. Accelerators are stocking the deal pipeline with ventures targeting the 17 U.N. global goals, while investors deploy capital to help them scale.
- Agora Partnerships graduated 30 Latam and Caribbean startups targeting the Global Goals.
- Blue Like an Orange’s $100 million mezzanine debt fund and TPG Growth’s $2 billion private equity Rise Fund deployed capital to ventures align with the the Global Goals.
