Kick-starting the elea Latin America Hub in Mexico

Earlier this year, I spent two months in Mexico City kick-starting the elea Latin America Hub with my colleague Tina Ruchti. After fifteen years operating in the region, including ten investments in local impact ventures, elea has developed a wealth of experience in it. Setting up a hub in Mexico represents the strategic next step to securing a regular presence at the very heart of the impact investing scene in Latin America.

The official start of the elea Latin America Hub in April 2023 was a special moment for Tina (who heads the hub) and I, as we formed the first elea team to operate in Mexico City. Our team knows that leveraging local know-how, networks, and communities is crucial for finding and investing in new impact ventures. That’s why it’s so important for elea to conduct regular scouting tours in all regions of interest. However, in setting up the hub, we wanted to enhance our contribution to the local and regional ecosystem as well as deepen our partnership with portfolio ventures. Our first goal was therefore to bridge the gap between being an international partner and becoming an immediate, local one.

With this ambition in place, our first tasks were set: to dive headfirst into the impact space; meet with investors, entrepreneurs, and key ecosystem players alike to spread knowledge about the local expansion. These conversations would also support us in further pinpointing where and how philanthropic capital can make the most significant difference.

My work in Mexico pushed me to explore the impact landscape with fresh eyes. In the search for potential partners, I was determined to find organizations that are striving to have an impact within the realm of elea’s new investment topic, “climate and livelihoods”. This led me to meet with an extremely varied group of organizations. I spoke with banks, fund managers and venture capitalists, consumer goods companies and consultancies as well as NGOs, policymakers, and academics alike. Encouragingly, despite the diversity of this group, all organizations shared examples of their own sustainable development initiatives. A common topic of discussion was nonetheless the lack of coordination between actors in this field. Ongoing communication frictions between industries prohibit the effective pairing of impactful ventures and projects with funding sources. For elea, this reinforces the need to focus on selective partnerships with the most critical stakeholders and impact multipliers.

I am passionate about elea further developing the new investment topic “climate and livelihoods” in Latin America. Within this area, elea invests in innovative businesses that either enhance the climate resilience of communities or help to mitigate the adverse effects of climate change on the livelihoods of people living in absolute poverty.

Latin America is extremely rich in biodiversity. In fact, despite covering only 13% of the Earth’s land surface, it contains more than 25% of the world’s forests and 40% of its species (see The Nature Conservancy). However, these vital resources are increasingly under threat. Given this trend, we are seeing the development of innovative impact models that value nature-based solutions to climate change and empower local communities to be stewards of their natural heritage. Some of the most exciting models I came across involved landscape regeneration, sustainable fishery management, and forest restoration.

The circular-economy industry is also developing in parallel, such as clothing brands that produce stylish outfits from recycled materials. With so many impact organizations realizing the potential of climate-resilient models, I am confident that elea can find high potential and worthwhile investments in this area.

Across the impact venture space, there is a shared impression that social enterprises globally are struggling to raise funds in the current investor landscape. In Latin America, this challenge is compounded by the weakness of governmental institutions, which fuels investor distrust in corrupt, volatile, and insecure economies where private and public interests are too commonly muddled. Beyond funding, many start-ups need support to expand their businesses. In this regard, greater coordination between actors in the impact space would help to maximize the success that can be achieved with existing funds.

There is a strong need for more philanthropic investments, such as those provided by elea, to fill in the “missing middle” funding gap. Addressing this gap requires a specific strategy that enables investors to support impact entrepreneurs and their ventures in a comprehensive way, i.e., one that is directly linked to managing high and specific investment risk on the continent. This might also imply that elea needs to further innovate and evolve the range of investment instruments used and adapt them to the local contexts.

Since starting at elea three years ago, I progressively became more involved in our Latin American operations. As an elea Talent Program participant, I spent my first year honing my business knowledge at our office in Zurich before embarking on my first on-site visit to Lima, Peru, in September 2021. I remember being struck by the severity of the damages of the Covid-19 pandemic on the country: the lengthened lockdowns, the missed educational opportunities, and the resulting infrastructure deficiencies. It was also my first experience working directly with impact entrepreneurs. I admired their passion, enjoyed the working culture, and quickly picked-up some Spanish fluency. I then launched myself into as many projects related to Latin America as I could. This included collaborating with our long-term partner FUNDES in the design of Voalá, a Guatemalan beauty sector micro-franchise for female entrepreneurs. The experience I acquired during subsequent visits to Peru, Guatemala, and Ecuador greatly enriched my knowledge of, as well as my enthusiasm for, the region. Therefore, I was thrilled to be chosen as part of the team that would kick-start the Latin American Hub in Mexico.

Author: Katya Duncan, former Senior Associate (September 2020 to July 2023) at elea