The Brief | February 26, 2024

The Brief: Latin America’s growing impact ecosystem

ImpactAlpha
The team at

ImpactAlpha

Greetings, Agents of Impact! Say hello to ImpactAlpha’s Dennis Price at the Neighborhood Economics gathering in San Antonio. And look out for him and ImpactAlpha’s Cesar Chavez at the Latin America Impact Investing Forum in Mérida – and raise a toast to ImpactAlpha Latin America, or new monthly newsletter. ¡Salud!

In today’s Brief:

  • Showcasing Latin America’s impact ecosystem
  • Maine green bonds for sustainable buildings
  • Structuring flexible and blended loan products

 This Week’s Call: How fund managers drive alpha through impact. Private fund investments typically attract the most attention when a deal is first closed, and again at exit when returns are realized. But it is in the five to seven years between those events that dedicated asset managers can create value – and impact – for companies. Join Tideline’s Ben Thornley, Impact Capital Managers’ Marieke Spence, Bain Capital’s Larissa Quinn, and Aaron Rudberg of S2G Ventures, in conversation with ImpactAlpha’s David Bank, to explore the levers for effective and financially-material impact value creation, Wednesday, Feb. 28 at 10am PST / 1pm EST / 6pm London. RSVP today.

Featured: Growth Markets

Latin America’s impact ecosystem, built over decades, is primed for takeoff. ImpactAlpha Latin America launches today to amplify the robust Latin American ecosystem of asset owners, fund managers, entrepreneurial support and policy expertise that has grown up in the past decade as impact assets under management and venture capital and other investments in the region have surged. Also key:blended financing that leverages public funding to crowd in private capital for Latin American efforts to address Sustainable Development Goals such as poverty reduction, climate resilience and access to clean energy and quality health care. That impact investing ecosystem will be on display this week at the Latin America Impact Investing Forum, known as the FLII, the region’s annual confab in Merída, Mexico. Top of the agenda: Nature-based solutions, AI for good and European investments in Latin America’s progress. “The problems and solutions are here in the Global South,” says FLII’s Carolina Puerta, even if financial resources are concentrated in the Global North. 

  • Impact infrastructure. Assets allocated to impact in Latin America and the Caribbean have grown at an annualized rate of 21% over the last five years, second in emerging markets only to East Asia, according to the GIIN. Nearly 300 funds now target the region, including 89 funds with $6 billion in assets that have an exclusive focus on the region, reports research firm Tameo. At least 18 Latin America-focused funds have actively raised capital over the last 18 months, according to ImpactAlpha’s Liist, including Colombia-based EWA Capital, Maya Capital in Brazil, Amplifica Capital in Mexico, Acceso Impact Fund in Guatemala, and Impaqto Capital in Ecuador. And the region now boasts seven National Advisory Boards, or NABs, for impact investing, including for Argentina and Uruguay, Brazil, Colombia, Mexico, Central America, Peru and Chile.
  • Brazilian showcase. This year, Brazil assumed the presidency of the G20 and next year will host COP30 in Belém, Pará. “The international agenda and Brazilian leadership present significant opportunities for the impact investing industry,” Vox Capital’s Gilberto Ribeiro told ImpactAlpha. President Luiz Inácio Lula da Silva has given Brazil’s impact economy a boost. Last year, his administration issued an updated National Impact Economy Strategy, or Enimpacto, that aims to boost impact investing tenfold to $120 billion over ten years. Last year the country issued $2 billion in sovereign green bonds; roughly three-quarters of the buyers were international investors in Europe and North America, says Vitoria Junqueira of Aliança pelo Impacto, the Brazilian advisory board for impact investing, “We are well-positioned to support the implementation of solutions for societal and environmental transformations.”
  • ImpactAlpha Latin America. ImpactAlpha has been telling Latin America’simpact investing stories for over a decade. We’re ramping up to tell more stories – and engaging you to reach further and dig deeper, with the help of our launch partners FLII, New Ventures, Alterna, Latimpacto, Aliança pelo Impacto and Pro Mujer. Our first edition later this morning coincides with this week’s FLII. You’ll also find us on the ground at Pro Mujer’s GLII Forum Latam in June, Latimpacto’s Impact Minds in September and Alterna’s FLII Central America and the Caribbean in November. Opt-in to ImpactAlpha Latin America.
  • Keep reading, “Latin America’s impact ecosystem, built over decades, is primed for takeoff,” by Dennis Price on ImpactAlpha.

Dealflow: Inclusive Fintech

Blue like an Orange provides $18 million in financing to Mexican lender Fuentebuena. Monterrey-based Fuentebuena works with more than 150 municipalities in Mexico to provide payroll loans to unbanked and underbanked city workers. Through a separate product line, the lender offers lease-to-own financing for ride-sharing vehicles that run on natural gas, as opposed to crude oil-derived gasoline and diesel. Blue like an Orange provided $18 million in debt financing to support the expansion of Fuentebuena’s worker loan and vehicle leasing books. The company has deployed over 2.75 billion Mexican pesos (around $160 million) to more than 130,000 borrowers. Fuentebuena promotes “positive social impact in Mexico by increasing access to finance and promoting self-employment opportunities for underserved populations,” said Rashad Kaldany of Blue like an Orange.

  • Mexico footprint. Fuentebuena is Blue like an Orange’s eighth deal in Mexico since it launched in 2017 to unlock mezzanine debt for businesses advancing the United Nations’ Sustainable Development Goals in Latin America. The firm’s Mexico portfolio includes Financiera Contigo, which provides loans and insurance to female micro-entrepreneurs from rural and marginalized communities. Clinicas de Azucar, based in Monterrey, operates a large network of diabetes clinics for low-income patients.
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Maine rolls out $5 million in green bond series for resilient and sustainable buildings. The state of Maine wants to be carbon neutral by 2045 and 100% renewably powered by 2050. To support these goals, the state’s Governmental Facilities Authority plans to issue $64.5 million in green bonds to fund the construction and upgrades to buildings that house agencies for fisheries and wildlife and environmental protection and hazardous waste cleanup on state-owned properties. The first issuance in the series, for $5 million, has received a green bond designation. HIP Investor gives the state agency a 79.5 rating on a 100-point scale, connoting “highly sustainable,” for the issuance’s impact agenda. 

Dealflow overflow. Investment news crossing our desks:

  • BlackRock-Temasek partnership Decarbonization Partners led a $150 million Series B round for thermal battery maker Antora Energy. The Sunnyvale, Calif. company heats blocks of carbon with clean energy to provide industrial-level heat. (Reuters)
  • India’s Varaha, which specializes in helping smallholder farmers generate nature-based carbon credits, secured $8.2 million in a Series A round backed by Norinchukin Bank, one of Japan’s largest institutional investors. (Varaha)
  • Lafayette Square provided debt financing for Houston-based waste manager Ironclad Environmental Solutions to complete the acquisition of DenBeste Water Solutions, a California-based equipment rental company for liquid and solid waste. (Lafayette Square)
  • SK Siltron CSS bagged $544 million from the Department of Energy’s Loan Programs Office, led by Jigar Shah. The Michigan-based company will use the loan to make silicon-based semiconductors for electric vehicles and create hundreds of local green jobs. (DOE)

Three Impact Voices: Flexible and Blended Capital

Designing catalytic loan products for impact companies in Latin America. Mexico City-based CO_Capital began in 2019 offering off-the-shelf long-term credit, including revenue-based financing, to stable enterprises looking to scale. The investment firm soon found that long-term loans did not fit the needs of early-stage enterprises, and revenue-based financing was too complex. The redesigned strategy, detailed by CO_Capital’s Alberto Gómez-Obregón in a guest post, includes term loans with a mezzanine-like risk tolerance and flexible terms, such as an interest-only grace period. A “first loss” guarantee from the US International Development Finance Corp. allows CO_Capital to take on risk while protecting LP capital. “We do not have to worry about exits,” says Gómez-Obregón, “and we can reach ‘real-economy’ companies,” including cooperatives.

How Estímulo is blending finance for Brazil’s small businesses. Since its launch as a small business COVID relief fund, São Paulo-based Estímulo has disbursed $40 million in credit to more than 3,400 small- and medium-sized enterprises, predominantly in low-income regions. In 2021, the firm broadened its financing reach by adopting a blended finance structure with the creation of a credit rights investment fund backed by loan receivables that could accept both philanthropic contributions and investment capital seeking competitive financial returns. By blending capital, Estímulo’s Lucas Conrado writes in a guest post, the fund “offers small businesses more favorable terms than those typically available through traditional financial institutions, which often categorize these businesses as high-risk.”

Five reasons Latin America and the Caribbean are attracting impact investors. Latin America and the Caribbean are key to the global energy transition. The region contributes one-sixth of the world’s food production and hosts roughly 40% of the world’s biodiversity and almost half of its forests. As much as 60% of the region’s electricity is generated from renewables. Investors are paying attention, writes Carolina Suárez of Latimpacto in a guest post. Roughly half of investors in Latimpacto’s annual impact survey invest in climate change and the environment. With investments in the region, writes Suárez, “investors can mitigate climate change and preserve the region’s natural resources for future generations.”

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Dalberg promotes Jagjeet Sareen to partner… Fareeda Abdulkareem, a former inclusive growth senior associate with Palladium, joins Mercy Corp Ventures as insights manager… Nuveen is on the hunt for an impact investing associate in New York… Also in New York, Citi Impact Fund seeks a program assistant… Builders Vision is looking for a private investments director in Chicago. 

Inyova Impact Investing is recruiting a compliance analyst in Frankfurt… IFU, Denmark’s Development Finance Institution, is hiring an investment manager… Temasek is looking for an impact investment associate in Singapore… Morgan McKinley has an opening for a Tokyo-based sustainability and environmental impact consultant.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Feb. 26, 2024