ImpactAlpha Latin America | May 29, 2024

ImpactAlpha Latin America: Climate on the ballot in Mexico

Dennis Price

Follow the money and people powering Latin America's impact economy.

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ImpactAlpha Editor

Dennis Price

Saludos, Agents of Impact! Welcome to the fourth edition of ImpactAlpha Latin America. I’ll be in Buenos Aires next week for Pro Mujer’s GLII Forum Latam (use code 2C2S53 for 25% off). Drop me a note if you’d like to connect!

👋 Get full access. Our special newsletter, ImpactAlpha Latin America, helps our global audience connect with the Agents of Impact powering Latin America’s impact economy. To access ImpactAlpha’s full global coverage of impact investing and sustainable finance, we’re offering a special $99 individual subscription for the first year. Or, give everyone in your Latin America-based teams full access for only $499. Join today.

A special thanks to our ImpactAlpha Latin America partners – FLIINew VenturesAlternaLatimpactoAliança pelo ImpactoPro MujerImpaqto and GSG NAB Chile – for keeping us in the know and connected to so many Agents of Impact. 

¡Empecemos! – Dennis Price

In this month’s newsletter:

  • Climate on the ballot in Mexico
  • Restoring forests and carbon markets
  • Fund managers seeking ‘impact alpha’ in Latin America
  • Diversifying across impact asset classes

Mexico chooses a new president amid extreme heat – and little urgency on climate action. Mexico’s vote on Sunday will grab headlines for the election of the country’s first female president. Less prominent will be the climate crises facing the country, even amid raging wildfires, extreme heat, and a water crisis in the country’s largest city. Neither of the women leading the polls, Claudia Sheinbaum of the leftist governing party and Xóchitl Gálvez of the center-right opposition party, have made climate policy plans and ambitions central to the campaign. Mexico counts as a laggard on climate action in both Latin America and the G20 group of large economies (Mexico has the 12th-largest economy in the world and second-largest in Latin America). Climate Action Tracker ranks Mexico’s climate policies and goals as “critically insufficient.” Without a leader committed to climate action, “We will hardly be able to get on the path to compliance,” warned Sandra Guzmán of the Climate Finance Group for Latin America and the Caribbean. “This is the most important six-year period to achieve climate goals.”

  • Scientist-in-chief. On paper, Sheinbaum, the protege of President Andrés Manuel López Obrador, has an almost ideal resume for putting Mexico on a more ambitious climate path. Sheinbaum, an environmental engineer, contributed to the Intergovernmental Panel on Climate Change reports that won the 2007 Nobel Peace Prize. As the leading candidate, however, she has sent conflicting messages. She’s called for 50% renewably-sourced power by 2030, but her plan makes no mention of a net-zero target and includes new gas-burning power plants. The tell may be her support for Pemex, the state-owned oil company and longtime political power center. Sheinbaum has proposed that Pemex diversify revenue streams, into lithium, geothermal and renewable energy, doubling-down on the debt-laden oil giant. “The pattern that I see is that governments that tend to consolidate and monopolize industries end up not innovating at all,” says Rogelio de los Santos of Monterrey-based Dalus Capital, which invests in early-stage climate ventures in Latin America.
  • Keep reading, “Mexico chooses a new president amid extreme heat – and little urgency on climate action,” by Jessica Pothering on ImpactAlpha.

Elsewhere on ImpactAlpha:

  • Restoring forests and carbon markets. A scramble is on to fix the voluntary carbon markets. An unlikely hero is emerging: tech giants like Apple and Microsoft are not only investing in nature-based carbon offset projects, they’re pushing to improve the integrity of carbon credits, reports forest veteran Shaun PaulRead the full post.

These Latin American fund managers are seeking alpha in climate tech, edtech and impact (videos). From Mexico through Central America’s Northern Triangle to Chile and Argentina, fund managers in Latin America are finding overlooked opportunities for impact – and returns – in the region. Battling a venture capital correction in Latin America, managers are betting on the region’s entrepreneurial talent, youthful population and homegrown solutions to climate and inclusive growth. Larger venture firms such as Softbank and General Atlantic have delivered strong returns on the Latin America investments, notes Ana Maria Aristizabal of Winnipeg Ventures, an edtech and future of work fund. “A new generation of emerging managers is building on those positive trends to deliver high returns.” Hear the perspectives of five fund managers in these video interviews from this year’s FLII in Merída, Mexico. 

  • Ana Maria Aristizabal of Winnipeg Ventures is investing in the future of education and work in Latin America (video interview). Education and workforce startups in the region have mostly been limited to more general funds. Winnipeg, which has backed 13 companies, is actively raising the “go-to fund that can actually lead rounds, that can support them in their own way, that can connect the dots, that can bring other investors from the region or overseas to support their growth,” says Aristizabal.
  • Christian Quiñones of Innogen Capital is backing impact startups in Central America’s Northern Triangle (video interview). The San Salvador-based fund manager raised one of the earliest impact funds in Central America and is actively raising its third fund with catalytic funding from the U.S. International Development Finance Corp. to invest in Guatemala, Honduras and El Salvador. The fund aims to help reduce migration, create fairly paid jobs, and generate a bigger ecosystem, says Quiñones. “It’s the last uncharted territory for venture capital in LatAm.”
  • Aldo Soto of Amazonia Impact Ventures is providing sustainability-linked loans to indigenous producers in the Amazon (video interview). The impact-first fund manager is raising its first fund to promote sustainable land use, forest restoration and improved livelihoods in the Amazon. By lending through cooperatives, Amazonia can reach thousands of Indigenous farmers and producers, who Soto calls “strategic actors to address climate change and biodiversity loss.”
  • Andres Baehr of Savia Ventures is unlocking Latin America’s climate tech opportunity (video interview). The Mexico City-based climate tech VC is actively raising and has backed five startups from its first fund. Latin America “is the largest untapped climate market opportunity right now,” says Beahr, citing lower valuations, abundance of natural resources and nearshoring trends in northern Mexico and Central America. “All of that will need solutions that reduce the amount of energy, optimize logistics and use better processes,” he says. “And all of that is climate tech.”
  • Justin Schwartz of Impaqto Capital delivers revenue-based finance for Andean impact businesses (video interview). IMPAQTO Capital provides flexible, revenue-based finance to impact companies that are too small for institutional equity financing or bank debt in the Andean region, including Ecuador, Colombia, Peru and Bolivia. “As a local fund, we know the entrepreneurs well, we know the ecosystem well,” says Schwartz. “We can be one of the first checks and help those companies have more visibility at the regional and global level.”
  • In other moves… Juan Jardon-Pina joins Predistribution Initiative as senior associate and will be based in Mexico City… Former Barranquilla mayor Jaime Pumarejo becomes executive director of Breathe Cities… Carolina Pastrana Ardila joins One Drop Foundation as senior manager, strategic partnership development of the Lazos de Agua program.
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Impact Voices: LP / GP

How Vox Capital diversified across asset classes to meet impact investor demand. Some 70% of impact investments in Latin America are concentrated in private equity. Across the world, with a more diversified base across asset classes, that number is more like 20%. “This shows not only the need but also the opportunity of diversification in Brazil,” and across Latin America, argue Daniel Izzo and Daniel Brandão of São Paulo-based Vox Capital, one of Brazil’s earliest impact asset managers. In a guest post on ImpactAlpha, Izzo and Brandão detail Vox’s evolution from a VC-only firm. Vox now manages seven venture funds totaling around $200 million in assets. In 2021, the firm launched a fixed-income fund (currently managing $10 million) that invests in high-grade bonds of Brazilian public companies contributing to Sustainable Development Goals. This year, Vox established a foothold in nature-based solutions when it structured a $10 million bond for sustainable livestock after a regenerative agriculture fund failed to gain traction with investors. By integrating asset classes, Vox “helps investors achieve their impact goals while mitigating market fluctuations,” the partners write.

  • Stabilizing returns. Diversification is a time-tested investment principle that mitigates risk by spreading investments across various asset classes. In impact investing, write Izzo and Brandão, diversification “allows for a broader spectrum of impact themes and sectors, enhancing the ability to address a range of global challenges while promoting portfolio resilience.” To critics who expect managers to be hyper-specialized, they counter: “We are specialists in positive impact, without compromising on professional and rigorous management.”
  • Keep reading, “How Vox Capital diversified across asset classes to meet impact investor demand,” by Vox Capital’s Daniel Izzo and Daniel Brandão.

In Brazil, ‘empathetic capital’ is preserving investee impact and investor returns. Generating financial returns and taking impact-first organizations to the next level requires going above and beyond patient capital. It requires ‘empathetic capital,’ argues Bruno Girardi of Sitawi Finance for Good in a dispatch from Rio de Janeiro. With an approach that combines blended capital with venture philanthropy, Sitawi has supported over 3,000 projects in Brazil, benefiting 14 million people. The default rate on its portfolio is only 4.27%, with financial returns above inflation. In the case of Na’kau, a chocolate company in the Amazonas state, empathetic capital has meant providing a loan, a Covid-related grace period and re-calibrated interest rates to align with the new payment capacity of a post-pandemic organization.

Dealflow: Financial Inclusion

Jeeves secures $75 million to expand cross-border payments in Latin America. San Francisco-based debt investor Community Investment Management provided the financing to Jeeves, a Mexico City-based fintech for small and medium-sized businesses in Mexico, Colombia, Brazil and at least 17 other Latin American countries. The new credit facility will support Jeeves’ push into Brazil, where 60% of businesses lack sufficient access to credit. The funding will also help the fintech company further expand Jeeves Pay, its latest product that enables cross-border payments from Mexico, Colombia, and Brazil to dozens of countries, including China and the USA. Jeeves’ payment volumes have jumped by more than 150% year to date.

  • Credit access. CIM provides asset-backed credit facilities for financial technology companies that have achieved product market fit and are ready to scale. Additionally, fintechs in the portfolio are using data to better access risk and serve underserved parts of the market. CIM has made at least eigtht investments in Latin America, predominantly in Mexico, and plans to double or triple its exposure to the region over the next five years. “The gap in credit access in the region is still very large,” CIM’s Elena Amato told ImpactAlpha in an earlier video interview. “There’s so much to be done, not only from the angle of impact and financial inclusion, but also there are a lot of aggressive returns to be made in the region.”
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More deal activity:

Climate techMovener clinched $2 million from SQM Lithium Ventures, the venture capital arm of Chilean lithium producer SQM, to retrofit diesel-powered trucks into hybrid-electric trucks… Chilean startup Reuse raised $4.5 million to expand its refurbished electronics marketplace in Mexico… Brazil’s Smartbreeder, which uses data and AI to help companies adopt more sustainable agricultural processes, raised $2.9 million from EcoEnterprise Fund

Conservation financePonterraMicrosoftRubicon Carbon and Carbon Streaming launch a 10,000 hectare nature-based carbon removal project in the Azuero Peninsula of Panama… BTG Pactual’s Timberland Investment Group secures $1.2 billion for timberland in Latin America.

Inclusive economy. Colombia’s Magneto scored $7 million to help companies recruit talent in Latin America… donated $200,000 to ProMujer’s Emprende Program in El Salvador.

Get in the Game

💼 Step up

Principles for Responsible Investment (PRI) is hiring a Specialist in Stewardship and Nature in Distrito Federal, Brazil… Plataforma de Inversión de Impacto Centroamericana (La PiiC) seeks an executive coordinator… Alterna is accepting applications for its Impact Fellowship program. Alterna is also looking for a business development officer… Promotora Social Mexico is recruiting a communication and strategic alliances director based in Mexico City… New Ventures is hiring a senior finance analyst. Send resumes to [email protected] and [email protected]… GAWA Capital seeks a Madrid- or Latin America-based climate expert in impact investing, and a climate expert and senior investment officer

ClimateWorks Foundation needs a Latin America associate director of its global energy transition initiative… International Finance Corp. is recruiting an associate operations officer and an associate investment officer in Mexico City, Panama City or Bogotá… ALIVE Ventures seeks a senior investment analyst/associate. The deadline is June 10th… IDB Invest seeks an investment analyst consultant in agribusiness. The hire will be based in Mexico, El Salvador, Argentina or Uruguay…  PlantWorks is recruiting a regional director in sustainable development in Brazil… Savia Ventures seeks ambassadors, advisors and collaborators for the Lotus Award for the best Latina founder in climate.

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