ImpactAlpha Latin America | August 28, 2024

ImpactAlpha Latin America: Wealthy families seek social impact – and market-rate returns

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 this month’s ImpactAlpha Latin America, the seventh edition of our specialized newsletter. ImpactAlpha is the proud media sponsor of Latimpacto’s Impact Minds conference next month in Oaxaca. I’ll be leading a panel on “Climate intersections,” with Danone’s Facundo Etchebehere, Brigitte Baptiste of Universidad EAN and Taj Ahmad Eldridge of Include Ventures. Hope to see you there!

As always, I want to extend special thanks to our ImpactAlpha Latin America partners – FLII, New Ventures, Alterna, Latimpacto, Aliança pelo Impacto, Pro Mujer, Impaqto and GSG NAB Chile. They help keep us, and you, connected to the people and places driving impact in Latin America. ¡Empecemos! – Dennis Price

In this month’s newsletter:

  • Family office impact investing
  • Mercy Corps Ventures’ investments in climate resilience
  • Corporate strategies for impact
  • Supply chain financing for Mexico’s small businesses

The push and pull of impact investing for wealthy families in Latin America. The push: Next-gen family members nudging previous generations to tilt family portfolios toward impact. The pull: Large, overlooked markets, ample opportunities to mitigate risks, and a growing set of investable impact products and funds. The number of wealthy families with allocations for impact investments is increasing across Latin America. That is giving fund managers, high-impact startups and small and medium-sized enterprises a growing source of flexible capital. To wit: Latin America is one of the fastest growing regions for The ImPact, a global network of high-net worth families that do impact investing. CREO, a global syndicate of impact-focused wealthy families, is also recruiting members in Latin America. Latimpacto, a homegrown network of impact investors, counts dozens of family offices, multi-family offices and family foundations among its more than 200 members. “Long-term, I can have market returns with lower risk,” says Pablo Alonso of Eurocapital, a multifamily office with clients in Chili, Argentina, Peru and Uruguay, as well as Spain. “And I can help with climate change or education or reduce poverty.” Alonso will join Fernanda Camargo of São Paulo-based Wright Capital and other family offices, wealth managers and advisors at Latimpacto’s Impact Minds conference next month in Oaxaca, Mexico. ImpactAlpha is a media sponsor.

  • From experiments to experience. For some families, experiments in impact investing that began a decade ago are now embedded in portfolio strategies. “Families in the region have gone from making ‘experimental’ investments with these models to building robust and intentional impact investment portfolios,” The ImPact’s Linda Rincón told UBS and Latimpacto for a report that profiles the impact strategies of Latin American families. In Chile, the Mustakis family has dedicated 15% of the foundation’s endowment to impact investments. The Russo family in Brazil created Meraki Impact as an impact-focused family office. In Mexico, the Sánchez-Navarro family launched CO_ Capital, a debt fund that can take on outside capital, in addition to the family’s. A separate survey from The ImPact of 65 Latin American families with total assets of more than $1.2 billion found that 80% have at least small allocations for impact investments in their portfolios. Maria Hollan, a next-gen impact investor at Timke Ventures, a Mexico-based family office, helped her family lift impact out of the philanthropy bucket with two direct impact investments. “Then I realized you can have impact as a complete portfolio,” she told ImpactAlpha (watch her video interview).
  • Funds of funds. In the young but maturing market for impact investments in Latin America, intentions too often fall short of reality. Alonso says at least seven of his 32 clients now invest in private impact funds, such as Bogota-based EWA Capital, with ticket sizes between a half-million and $1 million. They are on the hunt for nature-based and regenerative opportunities, like Regenera Ventures in Mexico. But with fund sizes of local fund managers often too small, and track records still nascent, Alonso says, many families continue to move much of that money out of the region, to funds including TPG’s Rise Fund and Blue Earth Capital, an independent impact fund incubated by Partners Group. Funds of funds provide an attractive alternative. Alonso has found success with Santiago, Chile-based Fondo de Inversión Social, or FIS, and Sonen Capital’s Latin America Impact Fund, a fund of funds co-managed with Mexican private-equity manager Fondo de Fondos (for background see, “Grupo Bimbo anchors an impact fund of funds in Latin America”).
  • Infinite opportunities. Wright Capital’s Camargo manages the wealth of over 40 Brazilian families. In the country’s more mature capital market, she has stood up three in-house funds of funds of roughly $30 to $40 million each. By pooling capital and due diligence, the structure cuts the transaction costs of investing in smaller funds. Camargo’s clients have invested with Brazilian managers, including Vox Capital, MOV Investimentos, Positive Ventures, Rise Ventures, GEF Climate Solutions, Yunus Negocios Sociais and Estímulo. Brazilian families are “motivated by the impact,” says Camargo, who started Wright a decade ago with a requirement that families invest at least 1% of their assets in impact. Today, such allocations are closer to 4%; a handful of families have even begun to deploy impact-first and catalytic capital. Her clients see “huge” opportunities for risk-adjusted market rates of return in private credit and “missing middle” strategies. Wright’s next fund of funds will focus on nature-based solutions, regenerative agriculture and climate tech. “We have an infinite amount of opportunities in the bioeconomy,” Camargo told ImpactAlpha.
  • Keep reading, “The push and pull of impact investing for wealthy families in Latin America,” by Dennis Price on ImpactAlpha.

Dealflow: Climate Resilience

Mercy Corps Ventures highlights opportunities for climate resilience in Latin America. For nearly a decade, Mercy Corps Ventures has been ahead of the curve in backing emerging market impact technologies. With multiple vehicles and pots of capital, the venture investing arm of humanitarian NGO Mercy Corps can be more experimental and risk-taking than other early-stage impact investors. It’s not too late for Mercy Corps Ventures to be early to the next trend: climate adaptation. “Climate resilience isn’t the only shock and challenge facing underserved communities, but it’s a significant one,” Mercy Corp Ventures’ Dan Block told ImpactAlpha. “We see a lot of intersectionality between climate challenges and other issues.”

  • Climate portfolio. The thematic focus on climate resilience dovetails with Mercy Corps Ventures’ increasing engagement in Latin America’s tech scene. Last month, it invested in Mexico-based Popular Power, a developer of software that helps residential, commercial and industrial solar companies optimize the performance of solar hardware. In Argentina, it backed Satellites on Fire, which leverages AI and satellite imagery to detect wildfires so early that they may not even fill a full image pixel. And in El Salvador, it invested in Abaco, which tailors financial services to help small agri-export businesses adapt to climate change. “We’re seeing a deeper realization of the potential for climate solutions in Latin America, for one, because of the biodiversity,” Block said, “and also because of the significance of the climate realities facing the region, from wildfires in Argentina and Chile to droughts in Panama.”
  • Resilience framework. Mercy Corps Ventures’ tackles climate resilience through three themes: adaptive technologies for the food and agriculture system; climate data and insight systems; and green and inclusive fintech. Block has found the greatest stickiness and market potential in solutions “where users show the greatest willingness to pay for helping them adapt to a new reality.” The organization is developing a taxonomy to help investors navigate early-stage adaptation technologies for underserved communities (for a related taxonomy, see, “A market map of tech solutions for climate adaptation and resilience”). “We have seen a lot of models focused on the Series B, C and D stages of growth, but less for the early-stage climate solutions,” Block said. “That’s an area where we think we can be helpful.”
  • Share the full story. 

More deal activity:

  • Accelerating impact. The US International Development Finance Corp. and IDB Invest partnered on a $30 million technical assistance facility that will support investments for infrastructure and economic development in Latin America made under the Americas Partnership Platform.
  • Conservation finance. The World Bank’s Amazon reforestation-linked outcome bond attracted $225 million… Brazilian carbon developer Systemica acquired forest manager Arapuá… Agrion inked $50 million to fight water and coastal ecosystem pollution in Brazil’s sugarcane industry.
  • Financial inclusion. Mexican fintech startup Stori raised $212 million in debt and equity… International Finance Corp. and Citi Social Finance partnered to direct $500 million in supply chain financing to Mexico’s small businesses… Citi’s social finance unit also provided a $22 million loan to Banco Industrial to lend to small and mid-sized businesses in Guatemala. 
  • Impact management. Brazil’s ESG Now raised $310,000 for its software that helps companies manage their environmental, social and governance performance.

Impact Voices: Corporate Impact

How corporations are building impact strategies in Latin America. Corporations from Coca-Cola to AB InBev are tuning up their impact strategies. Companies in Latin America are deploying a growing set of impact vehicles, including corporate foundations, funds, accelerators, incubators and innovation areas, to mobilize the financing needed to meet the Sustainable Development Goals in the region. “The alignment of corporate business models and the actions of their corporate impact vehicles represents an active commitment to achieving the SDG targets,” write Juanita Nuñez Betancourt and Carolina Suárez Visbal of Latimpacto, which works with corporations on impact strategies to meet their business goals. 

  • Corporate impact. Roughly eight in 10 of companies in Latin America have adopted SDG targets; only 40% of these companies have set measurable commitments for how their actions contribute to the goals. Through entrepreneurship programs like Tenderas in Colombia, Belgian-Brazilian multinational AB InBev has strengthened the capacities of small store owners who sell the company’s beers and other products. Coca-Cola puts plastic collection points in stories, supports recyclers with cargo motorcycles, and each year collects and transforms more than 100,000 tons of plastic bottles into recycled resin, making Latin America its leading region for returnable packaging.
  • Keep reading, “How corporations are building impact strategies in Latin America,” by Juanita Nuñez Betancourt and Carolina Suárez Visbal.

Agents of Impact: Get in the Game

🏃🏽‍♀️ On the Move

Rodgrigo Gaspar named co-CEO of Sistema B Brasil… ProMujer’s Carmen Correa and Citi Social Finance’s Borja García Fernandez join the 2X Global governing board… CAIXA, the largest public bank in Latin America, partners with Aliança pelo Impacto, the Brazilian national advisory board on impact investing, to strengthen the impact economy in Brazil.

💼 Step Up

International Finance Corp. seeks a sustainability operations officer in Bogotá or Sao Paulo… Alterna seeks a technical assistant and a monitoring, evaluation and learning specialist for projects in Guatemala… PiiC is looking for a Central American impact platform executive coordinator.

Dalberg is on the hunt for a project manager in Mexico City. Cross Boundary is hiring an investment advisor in El Salvador…GAWA Capital is recruiting a Madrid-based investment manager/emerging markets and a climate expert… Community Investment Management is hiring an investment analyst in Bogotá.

🤝 Meet Up

Don’t miss these upcoming impact investing events: