The Brief

The Brief: US funding freeze upends private investment in Africa

ImpactAlpha · February 6, 2025
Credit: Prosper Africa

Greetings Agents of Impact!

In today’s Brief:

  • US funding freeze upends private investment in Africa
  • Climate insurance fund
  • Energy-efficient plastics recycling
  • Catalytic capital for food waste reduction

US development financing freeze puts private investments in Africa in peril. It’s not just USAID. The Trump administration has frozen investments and grants approved by the US International Development Finance Corp., which helps secure private sector investments in emerging markets. Africa-based fund managers have been told by the DFC that their commitments are on hold pending a review of their projects, ImpactAlpha has learned. Local small business lenders have had to drastically slow loan disbursements because pledged capital from the DFC for on-lending will not arrive on time – if at all. In South Africa, a fund for small businesses is concerned that commitments from local funders, which were contingent upon an investment from the DFC, will be jeopardized. Regional funds of funds in several parts of Africa were slated to receive grants from the DFC; they are also in limbo. “What was small money for the DFC was enormous for us and the companies we would have funded,” the general partner of one small business fund tells ImpactAlpha, one of more than a dozen people who shared the status of their projects on the condition of anonymity.

  • Local capital. The extension of the funding freeze to the DFC has caught many by surprise, since the Trump administration created the institution in 2020 specifically for private investment. Given its private-sector mandate, commitments made by the DFC would seem to align with the priorities of the second Trump administration, says Drew von Glahn of the Collaborative for Frontier Finance, a network of more than 100 fund managers investing in startups and local businesses in Africa and Asia. “The local capital providers in our network are driving job creation, business development and local solutions that are helping their economies become more resilient and self-sufficient,” von Glahn tells ImpactAlpha.
  • Trade promotion. Among the frozen USAID programs is the Africa Trade and Investment initiative, set up in 2021 to partner with the private sector to increase trade between the US and Africa. The planned five-year program is part of Prosper Africa, which was started in 2018 in the first Trump administration. So far, the African Trade and Investment initiative’s work in 50 African countries has leveraged more than $200 million in grants and subcontracts into more than $400 million in co-investments from the private sector and more than $1.6 billion in trade deals. Now, many of those deals are falling apart, costing local communities essential businesses and jobs. “It’s been a train smash for some of our investees,” says the general partner of a small business investment fund in Southern Africa.
  • Limited options. The sudden funding gaps are spurring fund managers and other local investment-ecosystem players to find workarounds. African institutional investors, for example, hold about $2 trillion in assets – “virtually none of which is invested in the small business sector,” says von Glahn. Private, corporate and philanthropic partners of one USAID-backed climate and gender initiative are keeping dollars flowing to approved grantees. A loan fund for small businesses in East Africa secured bridge financing from one of its investors, backstopped with a guarantee from another investor. Businesses that can’t secure alternative funding could shut down. Furloughed and laid off workers could be forced to find new jobs. “There will be ripple effects,” says one financial advisor on global development projects. “When you shut it all down, it won’t just restart.”

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The growth and formalization of impact investing in Asia. When the Japanese government cleared the way last November for the Government Pension Investment Fund, the world’s largest pension fund, to allocate a portion of its funds to impact investments, the move signaled a coming of age for impact investing in Asia. Momentum has been building in Asia, led by institutions like Temasek and providers of flexible capital like RS Group and District Capital in Hong Kong, and the Tsao Family Office in Singapore. The market is growing quickly. Investors in East and Southeast Asia account for 7% of the more than $1.5 trillion of impact investments globally, according to the GIIN, and are establishing pillars of formalization like policymaking, events, networks, standards and verification.

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Dealflow: Climate Tech

Presto raises $15 million to streamline EV charging for Uber drivers and fleet operators. Until December 2022, Ashwin Dias and JJ Raynor were building out Uber’s electrification program, incentivizing ride-hailing drivers to adopt electric vehicles as part of Uber’s goal to electrify its fleets in the US and Canada by 2030. Inadequate charging infrastructure has been a major obstacle to Uber’s goal, as well as to broader EV adoption in the US. Raynor and Dias co-founded Presto in 2023. “We became so frustrated on behalf of drivers [who] often had to juggle multiple apps, and often the chargers recommended by those apps were unreliable,” Raynor told ImpactAlpha. “We told our bosses at Uber, ‘We’re gonna go build this and it’d be great if you would use it someday. But frankly, someone has to solve this problem.’” Presto partners with EVgo, ChargePoint and other charging operators to collect real-time information on thousands of fast-charging public stations across the US. The San Francisco-based company serves EV driving customers of Uber, Avis, Hertz, Zipcar and other fleet operators. Uber drivers using the app get a discount on EV charging. 

  • EV charging access. “Presto has made onboarding new fleet customers easy for us,” said Kate Gridley of EVgo, which manages a network of over 1,000 EV fast-chargers in more than 35 states. “Easily accessible electric vehicle changing is crucial for a smooth member experience and to drive sustainable transportation further,” said Will Sowers of Boston-based car-sharing company Zipcar, which early last year launched a nationwide initiative to deploy EVs in transit deserts. Presto’s seed round was backed by Union Square Ventures, Congruent Ventures, Powerhouse Ventures and Jetstream. Dias hopes to expand Presto’s reach to Canada this year.
  • Dive in.

BlueOrchard clinches second climate insurance fund at $100 million. Swiss impact investor BlueOrchard has reached a $100 million final close for its second InsuResilience private equity fund. UK asset manager Schroders Group, which owns a majority stake in BlueOrchard, and an unnamed European reinsurer with broad climate mandates, were among the fund’s private investors. They joined development finance institutions including Germany’s KfW, the Nordic Development Fund and British International Investment. Many investors are still getting comfortable with climate insurance as an asset class. “Forty percent of investors in the fund are private investors who are benefitting from first-loss provisions,” BlueOrchard’s Martin Diaz Plata told ImpactAlpha. 

  • Insuring climate risk. More than half of the second InsuResilience fund has been deployed into seven companies, including South Africa’s Naked, which embeds climate coverage into existing insurance policies, and Brazilian parametric insurance provider Newe. The fund has expanded its strategy from working solely with local insurance companies to backing financial intermediaries that on-lend to small businesses, insurance tech startups, and enabling technologies such as climate data analytics companies that offer risk assessments. “We thought that climate insurance was something that local insurance would sell,” said Plata. “Now we’re taking a more holistic, value-chain approach of how climate insurance is sold to our targeted populations in emerging economies.”
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MacroCycle scores $6.5 million for energy-efficient waste recycling. Polymer chemists and plastic engineers at MIT have developed a process to break down and recycle plastic and polyester waste into high-quality “virgin-grade” resins for use in new products. The technology is powered with renewable energy to lower its carbon footprint and make it cost-competitive with other waste upcycling methods. “MacroCycle’s superior unit economics, energy efficiency and ability to upcycle low-grade feedstocks gives them a critical competitive advantage in a sector that calls for innovation,” said Catia Cesari of Volta Circle, which led MacroCycle’s seed financing round with Clean Energy Ventures. MacroCycle will scale a pilot plant for recycling plastic bottles and polyester textile waste. The company is targeting luxury and fast-fashion clothing brands and other companies with large packaging waste footprints. It expects to produce the first bottles and garments made entirely from its recycled resin later this year. 

  • Plastic circularity. MacroCycle has touted its technology as a cost-effective solution for the $30 billion plastic waste management industry, which is beset by high costs due to intensive labor and energy needs. It can also help recycle plastics with complex chemical compositions, which typically get incinerated or rerouted to landfills. “Global plastic waste is expected to triple in the next 40 years, and current mechanical and chemical recycling methods are not able to deliver viable solutions to process plastics and textile waste streams,” said CEV’s Temple Fennell. With early support from Bill Gates’ Breakthrough Energy Fellows program, MacroCycle says it has scaled up its technology by 100x from lab-scale beakers to a pilot plant reactor running at The Engine’s accelerator facilities in Cambridge, Mass.
  • Check it out.

Dealflow overflow. Investment news crossing our desks:

  • Swiss impact investor Blue Earth Capital made a $9 million equity investment in India’s Apex Kidney Care to expand kidney care in the country. (Your Story)
  • Sweden’s Froda raised €100 million ($105 million) from the European Investment Fund to scale small business lending across all 27 European Union member states. (TFN)
  • The Santander InnoEnergy Climate Fund, AlbionVC and others participated in a $17 million Series A round for London-based IONATE, which creates hardware and software solutions to optimize existing power grids and integrate renewable energy sources. (ESG Today)

Impact Voices: Catalytic Capital

How ReFED is bridging the ‘catalytic capital gap’ to accelerate food waste solutions. Innovative technologies like Ottawa-based Food Cycle Science’s FoodCyclers are emerging to address the pressing issue of food waste. But perceived financial risks, the long-term nature of food waste solutions, and the systemic nature of the problem have created a $5 billion “catalytic capital gap,” according to ReFED, a nonprofit looking to curb food waste. ReFED’s $20 million catalytic fund provides recoverable and non-recoverable grants to de-risk early stage food waste solutions. In 2023, ReFED gave a $100,000 recoverable grant to Food Cycle Science to support distribution of the company’s FoodCyclers that convert food waste into soil. The funding helped Food Cycle Science expand into the US. Another benefit: Increased visibility in the US helped Food Cycle Science secure a strategic investment last year from Toronto-based Power Sustainable Lios.

  • Bridging gaps. ReFED’s flexible finance and post-investment support “helped bridge the investment gap and accelerate the development and adoption of food waste solutions in municipal communities,” writes Toniic’s Dario Parziale in the latest of a series of catalytic capital case studies on ImpactAlpha. “As the food waste sector continues to evolve, the role of catalytic capital will be increasingly important in seeding and scaling solutions.” ImpactAlpha’s series with Toniic examines the impact of investments that intentionally accept disproportionate risk and/or concessionary returns to close capital gaps. The case studies are from Toniic’s database of catalytic capital transactions.

Agents of Impact: Follow the Talent

Jenny Everett of Everett Interests, EO+WD’s Mark Hand, and Brenna Davis of Organically Grown Company are among the founders and board members of the Purpose Trust Ownership Network, a new organization supporting the growth of purpose trust ownership in the US. The network is hiring a program manager.

IMPACT Community Capital appoints Leah Mele-Bazaz, previously with Arden Group, as an investor relations and capital raising senior associate… Aligned Climate Capital welcomes Megan Neligan, previously with Irradiant Partners, as director of its Aligned Solar Partners team… Kamal Cheema joins Impact Capital Managers as a communications and policy analyst… ING seeks an energy and renewables corporate finance associate in London.

Developing World Markets is looking for an emerging markets private debt intern in New York… The Environmental Law Institute has an opening for a philanthropic partnerships director in Washington, DC… Bezos Earth Fund has ended its support for the Science Based Targets Initiative, one of the world’s most influential corporate climate action organizations (see, “Science Based Targets Initiative meets realpolitik on the path to Net Zero”). 

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Feb. 6, 2025