ImpactAlpha, March 30 – BTG Pactual started making environmental, social and governance, or ESG-focused investments six years ago. Now, the Brazilian investment bank is launching an impact fund through its private capital division to make equity investments in mid-size businesses across Latin America.
The fund will focus on resilient cities, climate change adaptation and mitigation and access to basic services. BTG will take minority stakes in eight or so companies each generating revenue of less than 300 million Brazilian reals ($52 million). BTG will commit 5% of the funds from its balance sheet.
Small and mid-size businesses in Latin America are underserved by traditional financial institutions, including BTG. In the COVID crisis, large companies secured relief financing while smaller businesses struggled. “We see that as an opportunity for private capital,” BTG’s Patricia Genelhu told ImpactAlpha.
BTG will look to make about eight minority-stake investments in companies generating less than 300 million Brazilian reais ($52 million) in revenue. Examples of target investments include software companies that are helping farmers and agribusinesses simplify and digitize their operations, and edtech companies that are helping individuals prepare for healthcare worker or public servant exams.
Latin America has been slower than other regions to develop sustainable investing products and practices, Genelhu says. BTG’s efforts to align with global trends include becoming signatories of the U.N. Principles of Responsible Investing and the Equator Principles, and joining the Global Impact Investing Network and Nasdaq Sustainable Bond Network.
Last year, BTG’s Timberland Investment Group, which manages $4 billion in timberland, launched Landscape Capital to move capital to regenerative land use. The bank also launched its first ESG-focused ETF, and it secured a $140 million loan from international development finance institutions for its climate finance lending activities.
More progress can be made: the nonprofit Global Canopy, which fights deforestation globally, ranks BTG Pactual 53 of 150 financial institutions for its anti-deforestation practices and policies. Genelhu says the bank is making deliberate progress.
“We were really careful on structuring the impact division,” she explains. Impact is “sometimes is seen as opportunistic for traditional players,” she adds, “but we ourselves want to be really committed to our sustainability and impact goals.”