The Brief | February 11, 2021

The Brief: Outcome payments in Latin America, social impact bond in India, Kaepernick’s SPAC, clean steel, innovations for workers

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Greetings, Agents of Impact! 

Featured: ImpactAlpha Original

A little incentive goes a long way to change lending for small farmers in Latin America. Change the incentives, change the results. Those results are dramatic for the $11.5 million in loans that agricultural lender Root Capital made over two years to Latin American agribusinesses deemed too small or too risky for other lenders. The nearly three-dozen businesses went on to generate almost $50 million in revenue and paid $41 million directly to smallholder farmers in Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua and Peru. The catalyst: Just $1 million in “outcome” payments from the Swiss Agency for Development and Cooperation and IDB Lab, the innovation laboratory of the Inter-American Development Bank Group, that compensated Root for the additional cost of lending to smaller and higher-risk agriculture companies. The “social impact incentives” scheme, known as SIINC, incentivizes businesses to serve lower-income customers and lenders to serve earlier-stage enterprises otherwise unable to access finance. Root will now leverage an additional $750,000 in SIINC outcome payments to deploy roughly $6 million in loans to 25 early-stage businesses in Latin America.

“Impact-linked finance is getting massive traction now,” says Bjoern Struewer of German advisory firm Roots of Impact, which developed the SIINC. “It’s clear how to build this model based on achieving outcomes.” Years of studies demonstrate that agricultural businesses generate impact in rural communities. What they lack is the credit needed to be able to pay farmers on time, connect them to markets and build infrastructure. The model “is catalytic” says Root Capital’s Katie Naeve. Root received at least $22,000 per loan, with bonuses for additional impact. “High additionality” means no other lender would make the loan, while “medium additionality” indicates only government entities or other social lenders would lend. Loans to gender-inclusive businesses got a $1,000 bonus. “With that capital, which commercial lenders aren’t willing to provide, these businesses can generate that impact and grow,” Naeve says. “It’s about bringing in these businesses for the first time, providing them the resources and the services that they need to grow. And once they grow, they no longer need subsidy and support.”

Keep reading, “A little incentive goes a long way to change lending for small farmers in Latin America,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Indian government backs social impact bond to improve public health services. A public entity in the Indian city of Pune is partnering with the United Nations Development Programme on a social impact bond to boost public health services and facilities. It is the first government-backed social impact bond in India. No investors have yet been announced for the deal. 

  • Public health. Pimpri-Chinchwad Municipal Corp. operates 30 health facilities in Pune. It is supporting the bond to get more residents to use public services, which are notoriously under-resourced in India. (PCMC became the first civic body in India this week to vaccinate police personnel.) UNDP is supporting the bond via its technical assistance facility. Palladium Group is structuring the deal. 
  • DIBs vs. SIBs. In social impact bonds in the U.K., U.S. and elsewhere, government agencies repay investors when certain impact outcomes are achieved. Most impact bonds in emerging markets have been structured as “development impact bonds,” with philanthropies standing in as the “off-takers” who pay when programs generate positive results. UBS Optimus Foundation has backed DIBs in India for girls’ education and maternal health, as well as one for water access in Uganda. 
  • Bond launches. The European Bank for Reconstruction and Development and UNDP are looking to structure Armenia’s first impact bond to support agribusinesses. Uniting Communities and Social Ventures Australia are expanding to a third region a successful SIB focused on transitioning children out of foster care. The state government of South Australia is backing the regional program. 
  • Read on

Colin Kaepernick teams up with The Najafi Cos. to form a SPAC. The former NFL quarterback and civil rights activist is teaming up with a private equity firm founded by Phoenix Suns minority owner and businessman Jahm Najafi. Kaepernick and The Najafi Cos. are floating a blank check company, Mission Advancement Corp., to raise $250 million to acquire a company at “the intersection of consumer and impact.” An SEC filing indicates the SPAC is looking for enterprises worth more than $1 billion. 

  • SPAC attack. Blank check companies raised nearly $26 billion In January, a monthly record. Some of the action: EVgo, a Los Angeles-based electric-vehicle charging operator, is going public via a climate SPAC. A SPAC from Renewable Resource Group and Capricorn Investment Group is looking to acquire companies aligned with the U.N. Sustainable Development Goals and become a B Corp. Vancouver-based Ivanhoe Capital is looking to invest in companies supporting “the electrification of industry and society.” 
  • Executive team. Najafi is listed as CEO of Mission Advancement; he and Kaepernick will be co-chairmen. Among the directors: Google’s Attica Jaques, Birchbox’s Katia Beauchamp and Omar Johnson, ex- of Apple.
  • More.

Dealflow overflow. Other investment news crossing our desks:

  • Kindred Ventures raises $100 million second early-stage fund. The San Francisco-based fund will make incubation-stage, pre-seed and seed investments in tech startups. “COVID-19 has created once-in-a-generation crises and opportunities which make the world look brand new,” tweeted Kindred’s Kanyi Maqubela. “Inequality is a defining crisis of our time.”
  • Vale and Energy Impact Partners back Boston Metal’s ‘clean steel.’ The investment extends Boston Metal’s $50 million Series B round, which closed last month.
  • Incofin commits $1 million to farmers and micro-businesses in Uganda. The Belgium-based impact investor provided debt capital to Entrepreneur Financial Centre Uganda via its agriculture-focused fund agRIF.
  • Level clinches $1.5 million to offer income-based loans to gig workers. The fintech startup offers financing for gig workers that need to cover work-related costs, like paying for trucks or tools. NextView, Untapped, TechStars, Acumen and backed the pre-seed round. 
  • PasarPolis secures $5 million from the IFC. The fintech company is expanding its microinsurance offerings to underserved workers in Indonesia. PasarPolis raised $54 million in September, with backing from LeapFrog.

Signals: Ahead of the Curve

Workers Lab nurtures innovations for vulnerable workers. It’s a tale of two pandemics. Employees able to work from home have been shielded from both the virus and layoffs, while millions of low-wage service workers, particularly women and people of color, face lost jobs and increased exposure to the disease. The nonprofit Workers Lab in Oakland, Calif., is backing three ideas for supporting workers, families and a just recovery. The moment is ripe to “re-envision the gig economy so that it actually serves workers better today,” said Hays Witt of Driver’s Seat Cooperative, which will use a $150,000 grant to build an app that helps ride-hailing and delivery drivers pinpoint earnings to optimize their time across multiple on-demand platforms. Carina is creating a scalable, bilingual app to match families with real-time openings at unionized child care providers. The Warehouse Worker Resource Center is training displaced workers for jobs in green supply chains and logistics as warehousing has risen in importance for e-commerce giants like Amazon.

  • Worker empowerment. The Workers Lab’s Innovation Fund has awarded over $4 million to 60 ideas since 2016. The Lab was founded by Carmen Rojas, who was profiled in ImpactAlpha’s New Revivalist series. Now president of the Marguerite Casey Foundation, Rojas was featured this month on The Reconstruction podcast series (listen to Carmen Rojas on practicing truth in the service of freedom”).  The Workers Lab reviewed 558 submissions from across 46 states before settling on three winners of grants of up to $150,000 and a year of mentorship. 
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Agents of Impact: Follow the Talent

Maurice Jones is stepping down as CEO of the Local Initiatives Support Corp. to lead OneTen, a corporate initiative to advance the careers of a million Black Americans without college degrees. Jones will continue to serve on LISC’s board (see: “Agent of Impact: Maurice Jones”)… JPMorgan Chase hires former U.K. parliament member Chuka Umunna to lead its environmental, social and governance efforts… Vanguard appoints Fong Yee Chan, ex- of FTSE Russell, as head of ESG strategy in Europe… Ibrahim Rashid (University of Chicago), Trevor William Smith (University of Cincinnati) and Eileen Ung (U.C. Berkeley) are among TPP Capital’s place-based social impact investing fellows… TPG Capital’s Bill McGlashan will serve a three-month prison sentence and pay a $250,000 fine as part of a settlement struck with federal prosecutors for his role in the “Varsity Blues” college admissions scandal, Axios reports.

Oxford University, its research commercialization group Oxford University Innovation, and Global Accelerated Ventures launch the Oxford GAV Conservation Venture Studio to accelerate new technologies addressing environmental and climate challenges… The Global Impact Investing Network is hiring an institutional asset owners manager in New York… The Schumacher Center is hosting a Community Land Trust roundtable Thursday, Feb. 18, featuring Tony Hernandez of Dudley Neighbors, Janelle Orsi of the Sustainable Economies Law Center, and Çaca Yvaire of Northeast Farmers of Color Land Trust.

Thank you for your impact.

– Feb. 11, 2021