The Brief | April 30, 2024

The Brief: Puerto Rico’s inclusive economic revival

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ImpactAlpha

Greetings, Agents of Impact, and welcome to all of the new subscribers who signed up during our 10th anniversary celebration. The third edition of our specialty newsletter, ImpactAlpha Latin America, is out today. As a subscriber to ImpactAlpha, you get the top stories here first. For the full LatAm experience, opt-in at no additional cost. ¡Disfruta! – David Bank

In today’s Brief:

  • Turning disaster relief into economic and social revival in Puerto Rico
  • RSF’s social lending 
  • Impact investing at Latin American family offices

In Puerto Rico, mobilizing billions for economic mobility with capital from across the spectrum. Puerto Rico has a window in which to turn disaster recovery into economic revival. “We didn’t choose it, but this is our time,” declares Eduardo Carrera, founder of Platform for Social Impact, which aims to steer capital to Puerto Rico’s social infrastructure. In front of hundreds of social innovators and financial engineers in downtown San Juan earlier this month, Carrera unveiled a clock that is counting down to a 10-year deadline for progress. The urgency is a response to the frustration over the Caribbean island’s lingering economic woes years after Hurricane Maria and other disasters. Some $85 billion in US federal aid and recovery funds remain on the sidelines, even as nearly 60% of children live in poverty. Many proponents of a Puerto Rico with good jobs, safe neighborhoods and strong role models, Carrera says “have left intentionality to chance.” At the Platform for Social Impact’s Nexa Summit, Carrera laid out an economic agenda that centers children to end intergenerational poverty. “When children bloom, everybody benefits,” he says.

  • Stacking capital. Among the pillars of the strategy: Economic growth, good jobs, upskilling opportunities, supportive policy and sufficient capital. Impact investments that can help unlock federal funds and bring in commercial capital are key to building a more inclusive economy. Carrera is calling for a surge in credit enhancement and first-loss capital, bridge loans, venture and working capital. “If we are really going to do this at scale, it’s the whole spectrum of finance,” Carrera says, from philanthropy to commercial capital. The PSI team is demonstrating the model in Oasis, a development project in San Juan’s Villa Prades public housing community. To raise $43 million, the team stacked their own seed capital, along with philanthropic dollars, New Markets Tax Credits, low-income investment funds and a bridge loan. The effort unlocked nearly $30 million in federal aid.
  • Good jobs and affordable housing. PSI is bringing in seasoned organizations like Jobs for the Future to build career navigation services and access to startup capital. “This is not just about quality jobs,” says Kristina Francis of Jobs for the Future. “This is about a quality life.” To return many of the hundreds of thousands of abandoned homes back to the market as affordable housing, the Center for Habitat Reconstruction is helping municipalities set up community land banks to acquire homes and finance their rehabilitation. “We do have an affordable housing crisis, but we also have a big market of possible buyers,” says the center’s Edgar Gomez Cintron, who secured anchor funding from Oakland, Calif.-based PolicyLink for a loan fund to help rehabilitate housing across the island.
  • Deployment infrastructure. Puerto Rico’s underdeveloped capital infrastructure is slowing the deployment of federal funds. The USDA’s Max Trujillo says private philanthropy can stand up vehicles to provide the matching funds needed to unlock federal aid. “You match all those things together and you create a new environment,” he says. In San Juan, Joan Larrea of blended finance network Convergence says the next step after stacking capital around specific projects or fundraises is to “put some institutions behind those thoughts.” The funding for the Oasis project demonstrates more than the effective stacking of capital. “What it showcases is that you can, and that’s the hardest thing,” says PSI’s Ramphis Castro. “Now they don’t have to believe. Because they can see.”

Dealflow: Social Lending

RSF Social Finance adds trio of ‘high-impact social enterprises’ to its loan portfolio. The San Francisco-based fund manager drew capital from a social investment fund to allocate a combined $5.5 million to three organizations supporting alternative ownership, climate and the environment, and natural products, said RSF’s Michael Jones. RSF provided a $3 million loan to Cambridge, Mass.-based Sunwealth for a portfolio of solar installations in California, Maine and New Jersey. The solar projects are projected to save about $11 million in lifetime energy costs and to create more than 100 green jobs. Sunwealth, RSF’s biggest borrower with $13 million, is raising a $60 million solar justice fund for local solar developers and installers of rooftop and parking lot projects. In a separate deal, RSF purchased $1.5 million of a $2.5 million revolving line of credit from Walden Savings Bank on behalf of 88 Acres. 88Acres will use the loan to deliver on a contract with Delta Airlines for zero-waste, health-conscious snack bars. 

  • Ownership trust. Earlier this year, the founders of registered investment advisor Natural Investments sold the business to a purpose trust governed by a trust stewardship committee. The deal “made it possible for anyone working in our firm to steward it as a strategic leader without going into substantial debt to purchase an ownership stake,” wrote the firm’s Michael Kramer in a guest post on ImpactAlpha. A $1 million loan from RSF enabled the sale, which provided an exit to Natural Investment’s founders. The new trust stewardship committee, which votes on the strategic and financial planning of the firm, is made up of 43% women and 29% people of color.
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IMPAQTO Capital backs Ecuadorian healthy snacks company Cusi (video). Cusi sources quinoa, yucca, green plantains, cocoa and other local plants for its line of healthy snack foods from 60 smallholder farmers and their families in Ecuador’s highlands and in the Amazon. The woman-led company processes the foods into crackers, tortillas and baking ingredients for sale locally and for international export. Cusi’s goal is to support sustainable livelihoods for local farmers and encourage regenerative agriculture, while also encouraging good nutrition. Impact investor IMPAQTO provided a revenue-based loan to the B Corp. to ramp up production at its facility. 

  • Missing middle. IMPAQTO Capital is the investment arm of the Quito-based impact accelerator and ecosystem builder. It provides flexible, revenue-based finance to impact companies that are too small for institutional equity financing or bank debt in the Andean region, including Ecuador, Colombia, Peru and Bolivia. “As a local fund, we know the entrepreneurs well, we know the ecosystem well,” IMPAQTO’s Justin Schwartz told ImpactAlpha in a video interview. “We can be one of the first checks and help those companies have more visibility at the regional and global level.” In February, IMPAQTO extended a loan to Peruvian recycling company Sinba.
  • Check it out. 

Dealflow overflow. Investment news crossing our desks:

  • Pine Gates Renewables, an Asheville, NC-based developer of utility-scale solar and energy storage assets, clinched $650 million from Generate Capital and new investors HESTA and the Healthcare of Ontario Pension Plan. (PGR)
  • Lightsmith Group backed AiDash, which uses satellite imaging and artificial intelligence to make critical infrastructure climate resilient and sustainable, raised $58.5 million in a Series C round. (Lightsmith Group)
  • Nairobi-based Kubik, led by Ethiopian founders, raised $5.2 million in seed funding to convert “hard-to-recycle” plastic waste into bricks, columns, beams and jambs for low-carbon buildings. (TechCrunch)
  • Kotak Mahindra Bank acquired Sonata Finance, a microfinance institution serving female entrepreneurs in northern India. The deal gave an exit to Creation Investments. (Creation Investments)

Impact Voices: Beyond Philanthropy

Latin American family offices add investing tools to their philanthropic toolkits. The Gerdau Johannpeter family in Brazil has allocated 20% ​​of the family fund to impact investments. In Colombia, the Sesana family has created Asiri, an impact fund manager with investments in renewable energy, financial inclusion and agricultural technology. The Sánchez Navarro family in Mexico has complemented its traditional philanthropic approach with impact investments (Felipe Fernández Sánchez is a co-founder of CO_Capital). “The experiences of these family offices in the region strengthen the hypothesis that impact investing, far from replacing philanthropy, seeks to strengthen and complement it,” Latimpacto’s Manuela Jiménez López writes in a guest post. Three-quarters of Latin American organizations that prioritize impact also sought financial returns on their investments, according to a Latimpacto survey.

Agents of Impact: Follow the Talent

Ayah Abulghanam, previously with USAID, joins Mercy Corps Ventures as a program officer… Radhika Fox, previously with the US Environmental Protection Agency, is joining the Robert Wood Johnson Foundation’s impact investments team as a strategic advisor… Dalberg promotes James Eustace to partner and Europe regional director… New York Community Trust is on the hunt for an arts and culture and historic preservation program officer… New York City Economic Development Corp. seeks an assistant vice president. 

Climate Power is on the hunt for a communications project manager in Washington, DC… ImpactAssets is recruiting an impact measurement and management lead… Willow Growth Partners seeks an investment analyst in Los Angeles… Clearway Energy Group has an opening for a project development manager in San Francisco… Big Society Capital rebrands as Better Society Capital… Convergence will launch its 2024 State of Blended Finance report today at 9am ET.

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

Thank you for your impact!

– April 30, 2024