Editor’s note: This guest post is sponsored by Variant Investments.
Access to financing shapes which companies are able to grow, who builds them and which communities get left behind.
As Antony Bugg-Levine recently noted, “Capital, like water, follows the path of least resistance toward large companies, familiar borrowers, established markets. That leaves vast stretches of the economy on parched ground, where talent and hard work are not enough because the financing never arrives.”
This parched land leaves ideas, entrepreneurs and businesses unable to grow. Many businesses that provide necessary services remain underfunded simply because they fall outside the comfort zone of conventional lenders.
Nourishing parched opportunities
Variant Investments was designed to reach this gap: the lesser-explored spaces where conventional capital does not naturally flow. We focus on niche, asset-based lending in underbanked markets that are too small or too complex for traditional capital, yet where demand is real and cash flows are sound.
When we launched the Variant Impact Fund, or IMPCX, in 2021, we did not simply attach an impact label to existing deal flow. Instead, we recognized the need to build a framework that would rigorously interrogate our goals for additionality, intentionality and measurability — and articulate those results in ways both investors and investees could appreciate.
With the support of Tideline, we built a seven-step impact assessment framework centered on financial inclusion, equitable growth and society’s responsible consumption needs. Each investment must align with at least one UN Sustainable Development Goal and its underlying targets, with impact outcomes tracked and reported through the GIIN’s IRIS+ framework. Every investment must also pass through our impact investing committee before it reaches the investment committee. Impact is embedded in how we underwrite from the beginning.
IMPCX opens private credit impact investing to retail investors who have had limited access to this asset class. Structured as an interval fund, it enables daily ticker purchases at low commitment minimums and provides quarterly liquidity at 5% of the fund’s net asset value.
The portfolio spans 36 strategies across 13 IRIS+ impact themes, with a US domestic-leaning footprint and select exposure to emerging markets where the structural gap between available capital and real economic need is widest.
Conventional lenders often pass on borrowers in this gap not because the underlying economics are unsound, but because the assets are unfamiliar, the markets are niche and the ticket sizes are too small to justify the overhead. Private credit, structured correctly, can close that distance..
Putting it into practice
Consider Jali Finance, a fintech lender operating in Rwanda that provides lease-to-own financing for motorcycle taxi drivers while transitioning the fleet from petrol-powered to battery-powered electric vehicles. Jali’s borrowers are gig workers who cannot access traditional financing, especially women. As CEO Felix Nkundimana noted, “in this male-dominated driving profession, we’ve significantly increased the number of women drivers from just 3 women in Kigali before Jali’s intervention to over 150 women drivers today.”
Variant extended a senior revolving credit facility backed by the motorcycle assets and underlying loan receivables. Within that facility, we introduced an environmental covenant requiring a portion of the fleet to transition to electric vehicles, making decarbonization a condition of the credit agreement rather than an aspiration. Jali’s fund capital is now financing 5,036 motorcycles, and more than 65% of them are electric.
The EV covenant attracted additional capital allocators, including two development finance institutions that were able to offer lower-cost funding on competitive terms because of the decarbonization provision. Variant’s impact did not arrive alongside the capital. It was delivered because of how the capital was structured.
Drapo tells a similar story. Contractors who complete home energy efficiency renovations, such as new environmental heating systems, insulation upgrades, and clean infrastructure improvements, are often owed government subsidy reimbursements that take months to arrive. Drapo advances that working capital against the receivable, keeping contractors moving and renovations completing. Variant’s capital financed almost 2,000 of these projects, including approximately 150 for low-income households, with an estimated 212,000 metric tons of CO2 emissions avoided over the projects’ useful lifetimes.
Variant also provides bridge capital to Castellan Real Estate Partners to secure properties, fund predevelopment costs and obtain state and local approvals in the early, often unbankable phase that determines whether a housing project gets built at all. The result is 100% affordable housing units across California: 75% are occupied by residents from underrepresented groups, often with female heads of household. Every unit is built green and offset with solar, paired with on-premises social support services, and rented at a weighted average discount of 40–50% to market.
Behind these statistics are real people like Mary Lisa Wright, a 71-year-old retiree who lost her home in the 2018 Camp Fire and moved six times before Castellan’s Apartments in Chico gave her a permanent place to land.
This impact was delivered not only because of access to capital, but because the credit agreements were written in a way to encourage it. Covenants, advance rates, collateral structures and borrowing base structuring are not just risk management tools. Deployed with intention, they are the mechanisms through which we align capital around shared outcomes that persist long after the capital is returned.
From framework to function
Five years in, we still believe that access to capital is the bedrock of stability for families and communities. Essential services like health, safe housing and clean energy — and opportunities for education and stable livelihoods — all sit downstream of financing. But every product and service must receive capital that matches its operational realities.
As private credit investors, we see the benefits of tailored capital firsthand, not just in how well it matches the operational realities of borrowers, but in how it can serve as a non-extractive tool that rewards quality, consistency and sustained impact. This approach allows founders to avoid the pursuit of growth at any cost and instead build wealth within communities without sacrificing ownership or agency.
I will leave you with one last example. Dee Mula is a Memphis-based artist who received growth capital through Connect Music. The Black-owned music fintech, backed by the Variant Impact Fund, funded Mula’s project without forcing him to surrender his ownership rights. Mula went on to release “Blow My High,” which earned RIAA Gold certification within six months and accumulated over 200 million streams. The returns did not leave Memphis. They stayed with the artist, his community, which is what we hoped for and what the structure was designed to produce.
Variant’s Impact strategy starts from a simple premise: If private credit is structured thoughtfully, around real economic activity, inventory turning, homes being built and receivables being collected, then alignment follows, parched land is nourished and livelihoods are improved.
We can design pathways and build a system that determines, intentionally, where capital flows. Behind every dollar, we hope to surface what is possible through our and other teams’ efforts and bring more investors and investees to the table.
To see the full results from our 2025 Annual Impact Report, download it here. To speak with our team about the Variant Impact Fund, feel free to connect with [email protected].
Drake Hicks is the vice president and head of impact at Variant Investments, an alternative credit investment manager focused on income-generating assets in niche markets across financial inclusion, equitable growth and responsible consumption.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
Important Information:
Statements and opinions expressed are those of the presenter(s). Any discussion of investments and investment strategies represents the presenter’s views as of the date created and are subject to change without notice. Information presented is for general purposes only and is not intended to forecast future events, guarantee future results, or provide specific advice or recommendations for any individual. Holdings are subject to change at any time, and the reader should not assume that an investment in these securities was or would be profitable in the future.
The Variant Impact Fund (the “Fund”) is a continuously-offered, non-diversified, registered closed-end interval fund with limited liquidity. The investment objective of the Fund is to seek to provide a high level of current income. Capital appreciation is considered a secondary objective. The Fund will also seek to generate positive social and environmental impact by targeting investment opportunities that are both aligned with the United Nations Sustainable Development Goals (“UN SDGs”) and consistent with the Fund’s impact investing framework. There is no guarantee the Fund will achieve its objective. An investment in the Fund should only be made by investors who understand the risks involved, who are able to withstand the loss of the entire amount invested, and who can bear the risks associated with the limited liquidity of Shares.
Important Risks: In implementing the Fund’s impact investment strategy, the Investment Manager may select or exclude certain investments for reasons other than investment performance. For this reason, the Fund’s impact strategy could cause it to perform differently compared to funds that do not have such strategy. There is no guarantee that the Investment Manager’s definition of impact investing, security selection criteria, or investment judgment will reflect the beliefs or values of any particular investor. Currently, there is a lack of common industry standards relating to the development and application of environmental, social, and governance (ESG) criteria, which may make it difficult to compare the Funds’ principal investment strategies with the investment strategies of other funds that integrate certain “impact” criteria.
The substantial investment by the Fund in private securities, there is no reliable liquid market available for the purposes of valuing the majority of the Fund’s investments. There can be no guarantee that the basis of calculation of the value of the Fund’s investments used in the valuation process will reflect the actual value on realization of those investments.
Shares are an illiquid investment. You should generally not expect to be able to sell your Shares (other than through the repurchase process), regardless of how the Fund performs. Although the Fund is required to implement a Share repurchase program only a limited number of Shares will be eligible for repurchase by the Fund.
The investment in the Fund is speculative, involves substantial risks, including the risk that the entire amount invested may be lost, and should not constitute a complete investment program. The Fund may leverage its investments by borrowing, use of swap agreements, options, or other derivative instruments. The Fund is a non-diversified management investment company, meaning it may be more susceptible to any single economic or regulatory occurrence than a diversified investment company. In addition, the Fund is subject to investment-related risks of the underlying funds, general economic, and market condition risk.
Alternative investments provide limited liquidity and include, among other things, the risks inherent in investing in securities, futures, commodities and derivatives, using leverage and engaging in short sales. The Fund’s investment performance depends, at least in part, on how its assets are allocated and reallocated among asset classes and strategies. Such allocation could result in the Fund holding asset classes or investments that perform poorly or underperform. Investments and investment transactions are subject to various counterparty risks. The counterparties to transactions in over the-counter or “inter-dealer” markets are typically subject to lesser credit evaluation and regulatory oversight compared to members of “exchange-based” markets. This may increase the risk that a counterparty will not settle a transaction because of a credit or liquidity problem, thus causing the Fund to suffer losses. The Fund and its service providers may be prone to operational and information security risks resulting from breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption, or lose operational capacity.
BEFORE INVESTING YOU SHOULD CAREFULLY CONSIDER THE FUND’S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. THIS AND OTHER INFORMATION IS IN THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED FROM (877) 770-7717 OR WWW.VARIANTINVESTMENTS.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
The Fund is distributed by Distribution Services, LLC. Variant Investments, LLC (the “Investment Manager”) serves as the investment manager of the Fund. Distribution Services, LLC is not affiliated with the Investment Manager, ImpactAlpha, or any other
individual referenced.
