Greetings Agents of Impact!
In today’s Brief:
- Amid funding cutbacks, Native lenders turn to Tribal Benefits Agreements
- Swiss loan fund for emerging markets growth firms
- Circulate Capital’s hunt for recycled plastic in Latin America and the Caribbean
- Tapping muni markets to eradicate lead water pipes
Featured: Community Finance
Native CDFIs are positioned to step up, even without promised federal funds. Native CDFIs were on the brink of a golden age. The community development financial institutions that are the main source of credit for farmers, small business owners, housing developers and other enterprises in Indian Country were poised for a historic infusion of federal funding to ramp up their lending activity. Now, much of that promised funding is being cut and clawed back. And yet, Native CDFIs are still poised to step up, with growing investor interest and creative financing structures that are helping the local lenders expand their impact. “There is a way to invest now to create alpha. And Indian Country is ready,” says Kate Finn of the Tallgrass Institute (formerly known as First Peoples Worldwide) at the University of Colorado in Boulder (for background see, “Mobilizing capital in Indian Country”). With the pullback by the federal government, Tribal Benefit Agreements have emerged as a key tool for ensuring Native voices dictate how project development unfolds and what long-term resources communities receive in return, according to a new report from Tallgrass. Finn urges investors to channel capital through CDFIs due to their strong community ties, flexible structures and outsized impact. “They can be the nexus of relationships and good investment,” she says. “They’ve been there from the beginning – when an entrepreneur needed $500 to buy cookware or repair a truck. They hold the relationship in a way that’s necessary for impact to happen.”
- Historic support. During the Biden administration, the Treasury Department invested $234 million in Native-owned and Native-majority shareholder depository institutions through the Emergency Capital Investment Program. In 2022, Treasury’s CDFI Fund launched a New Markets Tax Credit Native Initiative to increase allocations of the credits in Native communities. The Native CDFI Network was selected by the Environmental Protection Agency to receive $400 million under the Clean Communities Investment Accelerator, part of the Biden-era Inflation Reduction Act. The network is part of the litigation against Trump’s EPA for freezing those funds held in accounts at Citibank. That’s not the only funding the administration seeks to claw back. It also plans to rescind $24 million, the bulk of the Native American CDFI Assistance funds already approved for FY2025, and eliminate the NACA program, as it is called, altogether in 2026. Michael Ching of Spruce Root, a Native CDFI in southeast Alaska, told ImpactAlpha that the decline of federal funding could actually make CDFIs more attractive to private investors seeking the positive outcomes community lenders deliver.
- LP Scan. Spruce Root manages the Seacoast Trust, a $100 million fund supporting the Sustainable Southeast Partnership, a network focused on Indigenous-led stewardship. Governed by Tribal and community leaders, the trust provides flexible capital for land stewardship, workforce development, and ecological restoration. The Seacoast Trust raised anchor capital from Sealaska, The Nature Conservancy and the Rasmuson, Edgerton and Hewlett foundations.ImpactAlpha has identified more than two dozen asset owners and allocators that are investing in Indigenous communities through dozens of impact fund managers. Foundations that have backed Navajo Power, a public benefit corporation developing clean energy infrastructure on tribal lands, include W.K. Kellogg Foundation, Schmidt Family Foundation, Catena Foundation and Wallace Global Fund. Sorenson Impact Foundation, Full Spectrum Capital Partners, CREAS Ecuador, DF Impact Capital, Boosting Opportunities, WCCN, and UnTours Foundation have invested in IMPAQTO Capital’s first fund to support early-stage social ventures in the Andean region. Get our full LP Scan.
- Tribal voice. Native CDFIs can play a key role in structuring tribal benefit agreements, which outline how Tribes consent to and benefit from projects on their lands. The Tallgrass Institute report, “Designing for Sovereignty,” emphasizes the importance of such legally binding agreements between Tribes and developers. “TBAs and coordination with Tribal nations are critically important at this time – particularly as tools for project developers to de-risk a multi-year development process that can span administrations, states, and wide swings in policy,” the report says. “When investors can step in that way, it allows Native entrepreneurs to dream,” says Finn. “To dream past the next grant cycle. Past the next loan benchmark. And when you allow entrepreneurs to dream, that’s when the impact comes.”
- Keep reading, “Native CDFIs are positioned to step up, even without promised federal funds,” by Erik Stein on ImpactAlpha.
Dealflow: Catalytic Capital
Switzerland’s SECO Startup Fund relaunches with $6.3 million for emerging market businesses. The Swiss government launched SECO Startup Fund in 1997 to provide loans for startups in emerging markets that are Swiss development partners. The fund has relaunched with a 5 million Swiss Franc ($6.3 million) boost to better support startups with Swiss ties fostering decent work, climate-smart capacity, and access to goods and services. Swiss impact advisory and management firm iGravity and investor and accelerator Seedstars are taking over the fund’s management from Zurich-based FinanceContact. “We believe in the power of catalytic capital to drive inclusive growth, and this vehicle helps Swiss partnerships play a meaningful role in that story,” said SECO’s Christian Brändli.
- Growth capital. The revamped fund aims to address funding gaps for post-revenue startups, which make up the backbone of emerging market economies yet are often overlooked by traditional investors (for background see, “Now’s the time to be an emerging markets debt investor”). It will provide flexible senior secured loans up to 1,000,000 Swiss Francs ($1.2 million), with loan terms of two to five years. The SECO Startup Fund has disbursed more than $44 million in over 120 countries. The fund’s portfolio includes Kenya’s eWaka, which offers electric bikes and battery-swap services; Gebana Afrique in Burkina Faso, which processes and exports dried mango and cashew nuts to European markets; Swiss Fresh Water, which leases water filters to locals running water kiosks; Kenyan waste recycler TakaTaka Solutions and Uganda’s Bioconvision, which produces animal feed and fertilizers from organic waste.
- Gift this post.
Circulate Capital raises $75.8 million to recycle plastic in Latin America and the Caribbean. Plastic is piling up in the oceans even asdemand for high-quality recycled plastic is surging. Family offices, corporations and impact investors are driving capital into businesses with solutions to reduce plastic waste and dependency on virgin materials. The final close of Singapore-based Circulate Capital’s Latin America and Caribbean fund saw commitments from the LATAM Impact Fund, Heading for Change, Sea Forward and iAlumbra, a collective of organizations founded by philanthropist Christy Walton. Builders Vision, founded by her son Lukas Walton, had earlier anchored the fund alongside global corporations including Danone, Mondelez International, Unilever and Chevron Phillips Chemical. The Circulate fund has identified more than 100 recycling companies that require a combined $240 million in growth capital. “In a shifting macroeconomic landscape, Latin America’s high-growth markets are increasingly attractive for institutional and corporate investors alike,” said Circulate’s Rob Kaplan.
- Latam portfolio. Circulate has backed four companies in Latin America since 2023, including Mexico’s Omnigreen, a flexible plastic recycling company, and Colombia’s Recyclapet and Polyrec, two plastic waste recycling companies (see, “With investment in Colombia, Circulate Capital brings growth capital to plastics recycling in Latin America”). Cirklo in northeastern Brazil has multiple facilities that recycle approximately four billion plastic bottles per year. The companies have created more than 800 jobs in the region. “Our portfolio companies are tackling three challenges at once: waste reduction, job creation and cleaner communities across Latin America,” said Kaplan.
- Gift this post.
Dealflow overflow. Investment news crossing our desks:
- BlueEarth Capital, ResponsAbility, and Franklin Templeton Alternative Investments provided a 1.5 billion rupees ($19 million) loan to Indian education-focused lender Varthana to expand its school network and set up renewable energy infrastructure in its partner schools. (Entrackr)
- Helsinki-based Donut Lab, a maker of plug-and-play electric motors, batteries and software for EVs, raised €25 million ($29.2 million) in seed funding. The startup has signed over 10 commercial contracts with car and equipment manufacturers. (Electrive)
- Southeast Asia-focused investor Openspace Ventures and climate investor Radical Fund have invested $600,000 in a pre-seed round, for Indonesian B2B waste management startup Sirsak. The startup plans to strengthen its packaging waste traceability technology. (e27)
- Deeptech investors Earlybird, Protagonist and Visionaries Tomorrow led a €22.1 million ($22.7 million) seed round for Paris-based Arago. The startup develops energy-efficient AI chips powered by light to cut the energy used for AI computations by up to 10 times. (EU Startups)
- Spanish bank BBVA, via its in-house lender for enterprises and venture capital firms Spark, extended a $35 million credit line to Colombian fintech Addi. The startup plans to strengthen its buy-now-pay-later offering. (Forbes)
- Goodwell Investments and Alitheia Capital invested equity in Nigeria’s Hinckley E-Waste Recycling via their joint impact fund. The funding will help enable battery recycler Hinckley to recycle up to 30,000 tons of lithium-ion and lead acid battery e-waste annually. (Goodwell Investments)
Signals: Muni Impact
Chicago turns to low-cost municipal bonds to ‘get the lead out’ of its water pipes. Last month, the city of Chicago made a meaningful downpayment on changing the health trajectory for hundreds of thousands of children and women of childbearing age. To do so, the city used that oldest of impact financing tools: the general obligation municipal bond. Tucked away in the offering documents of $695 million in bonds is a declarative statement indicating that up to $76 million of proceeds will go toward replacing lead service lines in the city. Together with a recent loan of $336 million under the federal Water Infrastructure Finance and Innovation Act “there appears to be momentum, willingness and ability to meet the existential health crisis of lead water pipes in Chicago,” writes Eric Glass of Clarion Call Capital, which invested in the Chicago general obligation deal via its Series E.
- Tapping muni markets. “Municipalities are stepping up to protect their residents and invest in their futures,” says Glass, who previously led the municipal impact strategy at AllianceBernstein. Lansing, Mich., Madison, Wisc. and Newark, NJ have all succeeded in eradicating lead service lines. Alongside Chicago, Clarion Call has invested in lead service line replacement in Newark and Inkster, Mich. A 2019 municipal bond issued by Essex County, NJ helped finance the complete replacement of lead pipes in Newark, a majority Black city with a poor credit rating (for context, see “Muni investors see through mispriced risks to find alpha and impact”). The city completed the project, which has been hailed as a national model for lead replacement, seven years ahead of schedule.
- Environmental racism. More than 9 million homes across the country have water service lines made of lead, a neurotoxin that stunts and impedes the cognitive development of children. Chicago holds the dubious distinction as the most impacted city, with an estimated 400,000 lead service lines – more than double the next largest number, in Cleveland. The majority of Chicago’s lead service lines are on the west and south sides of the city, disproportionately communities of color. Nearly 70% of children under six in Chicago may be exposed to lead-contaminated tap water, a study from the Johns Hopkins Bloomberg School of Public Health found. Writes Glass, “There is no more generative and transformative impact investment than funding the replacement of lead service lines through municipal bonds.”
- Keep reading, “Chicago turns to low-cost municipal bonds to ‘get the lead out’ of its water pipes,” by Eric Glass on ImpactAlpha. Robert Wood Johnson Foundation supports ImpactAlpha’s Muni Impact coverage.
Agents of Impact: Follow the Talent
Phenix Capital Group spins off its investment advisory business as PCG Impact… 2X Global appoints Kshama Fernandes of Northern Arc Investment Managers as the new chair of its board of directors, replacing Sukhvir Basran… National Cooperative Bank welcomes Mark Tyler as a special asset manager and Elliot Cline as a fraud analyst associate… Mallory Webb, previously with Selux Diagnostics, joins BlueHub Capital as human resources director.
Capital Impact Partners is looking for a loan officer in Austin… Impact Capital Managers is recruiting an impact management and research manager in New York… Allstate is on the hunt for a climate research analyst in Chicago… Adtalem Global Education seeks a senior manager of flagship initiatives and community investment in Washington, DC… Energy and Environmental Economics is searching for a managing consultant in San Francisco… Broadstreet Impact Services seeks a manager, impact advisory in Chicago.
Liberty Mutual Investments is hiring an energy and infrastructure credit associate in Boston… Northpine Foundation is recruiting a refugees-focused impact associate in Toronto… Bank of America is looking for an analyst for its sustainable banking solutions group in London… European Venture Philanthropy Association has an opening for a financial controller in Belgium… Latimpacto seeks a global markets and partnerships manager in Bogotá… Illumen Capital is hiring fall interns.
- Add team members to your subscription. Save with substantial group discounts. Start here.
- Lead the conversation. Sponsor a beat, newsletters or calls with ImpactAlpha. Get in touch.
