The Brief | April 7, 2021

The Brief: Board diversity and ESG in emerging markets, Kiva’s refugee fund, sustainable soap, e-rickshaws, crowdfunding surge

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Greetings, Agents of Impact! 

A White House initiative on inclusive economic growth? The U.S. Impact Investing Alliance, B Lab and nearly 50 impact-oriented private organizations are pressing to elevate inclusive economics in the Biden-Harris administration. Andrew Kassoy, Fran Seegull, Ford Foundation’s Darren Walker and Guild Education’s Rachel Carson will launch the effort today, Apr. 7 at 9am PT / 12pm ET. Tune in and have your say.

Featured: ESG in Emerging Markets

Companies in emerging markets are getting on board with ESG and board diversity. The new drivers of business value are gaining traction in corporate boards and investment committees across Africa, Asia and Latin America. Gender diversity and environmental, social and governance, or ESG, performance are not boxes to be checked in emerging markets, either. 

  • In Africa, business leaders are responding to demands for impact. Investors, non-governmental organizations and civil society groups are increasingly pressuring African businesses to adopt impact and ESG practices. “Citizens want responsible companies, period,” Simon Wafubwa of Kenyan pension fund manager Enwealth Financial Services tells ImpactAlpha correspondent John Njiraini, in Nairobi. “This means that even for us fund managers, we have to invest sustainably.” Limited partner investors, from pension funds to family offices, are asking general partners to adopt ESG principles, reports Abi Mustapha-Maduakor of the African Private Equity and Venture Capital Association. “Impact investment is likely to feature more prominently in Africa.” Keep reading, “Africa’s business and investment leaders step up to meet demands for impact and ESG,” by John Njiraini on ImpactAlpha.
  • On boards in emerging markets, an uptick in gender diversity. The slow path to parity in board seats is ever slightly less slow in emerging markets. Last year, the percentage of board seats held by women globally increased to 20.6%, up just 0.6%; in emerging markets women held 13% of seats, a 0.9% rise (emerging-market companies also have had a higher percentage of female CFOs than developed-market companies, and the gap is widening.) “Companies with more women on their boards are more likely to take proactive climate action and risk-mitigation measures,” writes Kate Ahern of Cartica Management, a public-markets investor in emerging markets. India, Pakistan and the United Arab Emirates require companies to appoint at least one woman to their board. Turkey and Malaysia have requirements for public companies to report on diversity and to explain low diversity metrics. Publicly listed Korean companies face a government mandate to end male-only boards by next year. Writes Ahern, “It is a good sign when we see board members demonstrate that they will go beyond their bubble to find expertise that is different and additive for the company.” Keep reading, “Companies in emerging markets are getting on board with board diversity,” by Kate Ahern on ImpactAlpha.

Dealflow: Follow the Money

Kiva closes $32.5 million fund to promote financial inclusion for refugees. San Francisco-based Kiva launched in 2005 and soared to prominence as a microfinance crowdfunding platform. In its second act, “I think there’s an opportunity for us over time to become a multi-billion dollar fund manager,” Kiva’s Neville Crawley told ImpactAlpha in 2019 when the organization launched Kiva Capital Management (see, “Q&A: CEO Neville Crawley wants Kiva to change systems as well as lives”). Kiva Capital has closed the Kiva Refugee Investment Fund at $32.5 million to provide interest-free – and risk-tolerant – debt capital to microfinance and other intermediaries promoting financial inclusion for underserved refugees in the Middle East, Africa and Latin America. “With the addition of Kiva Capital, alongside, the scale and the ability to truly drive innovation and awareness changes,” Kiva’s Will Jacobsen told ImpactAlpha. 

  • Refugee lens. Kiva has loaned $20 million to refugees since 2016 through a pilot program. The upshot: Refugee populations are often perceived as risky, but they repay their loans at similar or higher rates than non-refugees. “Democratizing fair access to capital for the most vulnerable and underserved among us is more critical than ever,” said Kiva’s Julie Hanna. The vision: Refugees can get bank accounts, single mothers can start businesses, and local banks can finance emergency repairs in rural villages.
  • Fund management. The refugee fund is Kiva’s third impact fund. Kiva Capital manages the California Rebuilding Fund, launched with Calvert Impact Capital and state officials, to buy loans from community development financial institutions (see, “California Rebuilding Fund strengthens regional community development financing infrastructure”). With Google, Kiva created a $26 million Small Business Resilience Fund to support small enterprises in 10 countries.
  • Impact-first. The cohort of investors in the Kiva refugee fund included Soros Economic Development Fund, Sobrato Philanthropies, ImpactAssets, Ceniarth, Missionary Sisters of the Sacred Heart of Jesus, Tiedemann Advisors, Shapiro Family Foundation, Dunn Family Charitable Foundation and Fairmount Foundation. The U.S. Development Finance Corporation and Mercy Investment Services provided debt financing.
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Bain Capital Double Impact backs personal-care brand Hand in Hand. The Boston-based private equity firm made the investment via its second, $800 million Double Impact fund, which is targeting environmental sustainability, health and wellness, and workforce development and education (see, “Bain Capital raises $800 million for second Double Impact fund”). Hand in Hand makes vegan and palm oil-free bar and liquid soaps, hand sanitizers, and lotions and donates soap to Haiti and Cambodia. Bain Capital’s Cecilia Chao told ImpactAlpha the investment in Hand in Hand is “an opportunity to build awareness and expand channel distribution and product categories” for sustainable personal care products.

  • Eds and meds. Hand in Hand is the fund’s third investment. Bain backed Seattle-based TeachTown, which makes software for educators, clinicians and parents of students with special learning needs, and Baltimore-based health provider Multi-Specialty Healthcare, which treats injuries for low-income, under-insured workers and their families.
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Dealflow overflow. Other investment news crossing our desks:

  • Gurgaon-based Oye Rickshaw, an electric rickshaw ride-hailing service, secures 240 million rupees ($3.3 million) from venture debt fund Alteria Capital.
  • Agri-chemical giants Bayer, FMC and Wilbur-Ellis invest in precision agtech venture Guardian Agriculture.
  • São Paulo-based fintech Cora raises a $26.7 million Series A round to lend to Brazil’s small businesses.
  • Y Combinator backs Singapore-based fintech Friz, which offers financial products, services and guidance for freelancers and gig workers.

Signals: Ahead of the Curve

Crowdfunding’s awesome month. “Regulation crowdfunding” investments raised $60 million last month, led by offerings like Arlan Hamilton’s Backstage Capital and online digital marketplace Gumroad (see, “Retail investors demonstrate the power of the crowd”). The total was nearly double the capital raised in February, itself a record. Behind the jump: New rules that boost the amount startups can raise to $5 million, up from $1.07 million. The updated rules let companies group crowdfunding investors into “special purpose vehicles,” to keep their cap tables simple. The new rules are drawing more and better startups, as well as individual investors eager to get in on the action for as little as $100.

  • Y not? Nearly 40 Y Combinator companies launched campaigns on Wefunder (itself a YC alum) this week. On the roster: Airthium, a startup developing long-duration, low-cost batteries that use ammonia and molten nitrate salt; Unschool, an upskilling startup based in India; and Macromoltek, a women-led firm using data modelling to create custom antibodies.
  • Funding the funders. Wefunder has raised nearly $6 million on Honeycomb Credit, a Pittsburgh-based crowdfunding portal that itself recently raised a $1.7 seed round. Crowdfunding platform Republic raised $36 million to fuel its growth last month (see “Republic rides growth of crowdfunding to its own $36 million financing”).
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Agents of Impact: Follow the Talent

Bella Gangnes, ex- of Lighter Capital, joins Founders First Capital as director of investments… Caitlin McLaughlin, ex- of PNC Financial Services Group, joins Lafayette Square as chief people officer… The Gates Foundation is recruiting a principal of life sciences venture capital in Seattle… Zebras Unite is looking for a part-time, remote executive assistant… Fitch Solutions is hiring an ESG product strategist, for its ratings data and research team in New York… CECP’s CEO Investor Forum seeks a sustainable finance intern in New York… TBLI is hosting a discussion with Catherine Coleman Flowers of the Center for Rural Enterprise and Environmental Justice on Thursday, Apr. 8 at 9am ET.

Thank you for your impact.

– April 7, 2021