The Brief: Impact practitioners on the perils and possibilities of artificial intelligence

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Greetings Agents of Impact!

🗣️ This Week’s Call: Unlocking impact and climate alpha in Brazil. With US climate policy in retreat, Latin America’s largest country is seizing global leadership both about climate and impact investing more broadly. ImpactAlpha has teamed with Brazil’s national advisory board for impact investing, Aliança pelo Impacto, to sketch out the investment landscape with Feira Preta’s Adriana Barbosa, Wright Capital’s Fernanda Camargo, Fama Re.Capital’s Fabio Alperowitch, Giselle Vianna of the Sustainable Social Economic Development Council, and other Agents of Impact in Brazil, this Wednesday, Jan. 29 at 10am PT / 1pm ET / 3pm São Paulo. RSVP today.

In today’s Brief:

• Equitable AI in the age of Trump
• Supporting first-time home buyers
• Embedded climate insurance

Featured: AI for Impact

The promise of AI for mission-based lending and equitable global development. “No one today really appreciates, truly, the level of disruption” that artificial intelligence is going to create, Khaldoon Al Mubarak of Abu Dhabi sovereign wealth fund Mubadala said from the World Economic Forum. In Davos, the Chinese lab DeepSeek stole the show with its free, open-source, large-language model that can outperform America’s best efforts more cheaply and with less power, while billionaires Sam Altman and Elon Musk feuded over the viability of the $500 billion Stargate data-center venture. As the AI arms race takes off, President Donald Trump is rewarding his new tech pals with a hands-off approach (venture capitalist Marc Andreessen’s interview with The New York Times’ Ross Douthat is essential reading). Among the torrent of executive orders, Trump revoked Biden’s 2023 order that had sought to ensure a measure of transparency, safety and fairness in the headlong rush to commercialize AI. The earlier order required tech firms to share tests of their AI models before unleashing them publicly, ensuring models are not racially biased and can identify deep fakes. Trump’s latest order called for AI systems “free from ideological bias or engineered social agendas.” In a pair of guest posts on ImpactAlpha, impact practitioners grapple with the new risks and opportunities.

• Predictive credit risk. Accessity, a community development financial institution formerly known as Accion San Diego, worked with Radiant Data to build a predictive credit risk model to automate underwriting and increase loans to underserved small businesses. “Once operationalized, these models have the potential to cut Accessity’s underwriting time in half,” write Mar Diteos Rendon and Nicole Jansma of the nonprofit small-business lender, and Sachi Shenoy of Radiant Data. The work was supported by a grant from Mastercard Impact Fund. The resulting model can predict with 87% accuracy the likelihood of a new loan being fully repaid. With a default rate of just 4.5%, Accessity had ample data for fully repaid loans over its three decades of lending. “Ironically, had Accessity’s historical data been closer to a 50/50 split between good and bad outcomes, we would have had a higher likelihood of building a model that could predict both with a high degree of accuracy,” the authors write.
• Safeguards and workarounds. To bolster its negative outcomes data, the team added proxies for defaults, such as loans that missed repayments or showed early signs of slippage. The team also built a bad debt model as a first screen; flagged applications are kicked to a human underwriter to assess. If the application moves forward, it is run through the main model. To protect against bias, Rendon, Jansma and Shenoy suggest building models for groups affected by bias. Their model for women applicants, for example, assesses them against other women. “It can often feel that the demands of data-hungry machine learning models are at odds with impact mandates, and left unchecked, are also at risk of perpetuating patterns of historical bias,” the authors write. “But it would be a shame if these constraints made mission-driven organizations reluctant to adopt AI-powered solutions.” Keep reading, “How machine learning and AI can be harnessed for mission-based lending.”
  
• From algorithm takers to makers. As the use and creation of artificial intelligence and other digital technologies shifts to developing economies, investors must help shoulder responsibility for industry standardization and ethical oversight, argues Dolma Fund Management’s Tim Gocher in a separate guest post. The first job is to protect what he calls “takers” – gig economy workers and end users of healthcare, criminal justice or government services who are at the mercy of algorithmic decisions. Second, “empower them to become ‘algorithm markers,’ not just ‘takers’.” Dolma invested in Kathmandu-based FuseMachines, which makes AI engines for global corporations. Microsoft and other tech giants are investing in AI training and job creation in Southeast Asia. “Collectively, these efforts represent a historic opportunity to open the economic benefits of the digital and AI revolution to developing economies,” writes Gocher. “Ultimately, it comes down to investors’ ability to approach these standards not as constraints, but as enablers of sustainable growth.” Keep reading, “Investor-led AI standards can lift developing economies from algorithm takers to makers.”  

Dealflow: Financial Inclusion

Accion Venture Lab backs Foyer to support America’s first-time homebuyers. Levels of homeownership, a key source of wealth in the US, has dropped with every generation since the 1930s. The decline is especially stark among Millennials, now in their late 20s to early 40s. Accion Venture Lab, a fintech investment firm that more typically invests in emerging markets, took a stake in savings startup Foyer to help US families buy their first homes. The New York-based fintech company offers first home savings accounts, or FHSAs, modeled on a product introduced in Canada in 2023. Foyer’s version helps Americans dedicate a savings account for their down payment on a first home. The FHSAs generate 4% interest, plus up to a 5% match, contributed by Foyer – similar to a 401(k) retirement savings account. Unlike 401(k)s, contributions to FHSAs aren’t tax deductible at the federal level, but a dozen states allow deductions. Foyer has signed up 10,000 customers since 2022. It makes money by connecting home buyers to real estate agents.

• Seed investment. Foyer works with account holders to identify down payment assistance programs. Accion Venture Lab joined Alpaca VC, Hometeam Ventures, Resilience VC and other investors in Foyer’s $6.2 million seed equity round. “Achieving homeownership can transform lives,” said Accion’s Amee Parbhoo, calling it “a vital pathway to economic mobility, especially for marginalized groups historically excluded from wealth-building opportunities.” Foyer is Accion Venture Lab’s sixth fintech investment in the US, out of more than 65 investments worldwide. Other US-based deals include Community Investment Management, a lender for other fintech firms; Self, which helps individuals build credit and savings; and Channel19, a financial provider for owners of refrigerated trucks.
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Naked tops up financing to add climate coverage to insurance policies in South Africa. The Johannesburg-based insurance startup has offered low-cost home, car and electronics policies since 2018. With climate change affecting its customers, the company is embedding protection against floods, hailstorms, wind and fire directly into its insurance policies. The protection is automatic – policyholders don’t need to opt in or undergo additional underwriting. “The key themes for insurance over the next decade are the increasing need for climate-related coverage and the use of digital tools to lower costs and increase access to insurance,” said Richard Hardy of BlueOrchard, which invested in Naked via its InsuResilience Investment Fund, an impact fund that invests in climate insurance solutions. International Finance Corp., German development finance institution DEG, South African insurance company Hollard and Johannesburg-based private equity firm Yellowwoods also backed Naked in the extension to its Series B financing, bringing the round to $38 million.

• Impact incentives. Naked links insurance customers to policy providers, offering online quotes in less than 90 seconds. The company collects a flat fee from policies sold, and pools premiums to settle claims. To remove financial incentives for denying claims, leftover money is donated to nonprofits and charitable organizations. Bypassing brokers and agents enables Naked to offer lower premiums, starting at just $3 rand per month. “As a result, insurance products become more affordable to lower-income segments of the population who previously could not afford these products,” said Hardy. In other African markets, where insurance penetration is lower than South Africa, brokers with community relationships are key to insurance adoption (see, “Inclusive fintech ventures cut in the middlemen and women“).
  
• Resilience finance. Climate resilience and adaptation solutions, especially in climate-vulnerable emerging markets, struggle to attract private capital. BlueOrchard, which launched its first InsuResilience Investment Fund in 2015, blends catalytic and commercial capital. Now on its second fund, BlueOrchard sees a pathway to fully commercial financing (see, “Blend, derisk, scale, repeat: BlueOrchard’s recipe for moving capital to emerging markets“). “We have developed a market for climate insurance in emerging markets where very often insurance doesn’t even exist,” BlueOrchard’s Maria Teresa Zappia told ImpactAlpha in a video interview. “The entire livelihood of these communities is impacted. So the impact that you can have is incredible.”
• Check it out.

Dealflow overflow. Investment news crossing our desks:

• Bedrock Ventures, a woman-led company in Austin, Texas, raised $12 million from Energy Impact Partners, Sustainable Future Ventures, Elemental Impact and other investors for its geothermal-powered heat pumps. (Bedrock)
• BNP Paribas raised €172 million ($179 million) for its Solar Impulse Venture Fund, an SFDR Article 9 fund that invests in European and North American tech companies supporting sustainable cities and clean energy. (BNP Paribas)
• GCM Grosvenor raised $800 million from California Public Employees’ Retirement System and other investors for its Elevate Fund, which invests in emerging managers. Private equity LPs are seeking out new managers for fresh ideas and portfolio diversification (see, The Liist). (Alternatives Watch)
• Boeing invested in Norwegian sustainable aviation fuel company Norsk e-Fuel to help the company build its first industrial-scale production plant. (Norsk e-Fuel)

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Impact Capital Managers promotes Andrew Garrett to member experience manager… Opportunity Finance Network taps Aisha Benson, president and CEO of Nonprofit Finance Fund, as board chair, and Henry Jiménez, president and CEO of Propel Nonprofits, as board vice-chair… Packard Foundation seeks an investment managing director in Los Altos, Calif… Echoing Green is looking for a capital manager in New York.

California Public Employees’ Retirement System is hiring a sustainable investment officer in Sacramento, Calif… The Hive Fund for Climate and Gender Justice has an opening or an administration and operations fellow… Common Future is recruiting a program director in Oakland, Calif… Candide Group is on the hunt for a San Francisco-based managing director for its Olamina Fund.

Emerson Collective is looking for a venture investing-focused MBA summer associate… WaterEquity seeks a legal and compliance vice president in Kenya or South Africa… CapShift is looking for a business development senior associate in Boston… The Aspen Institute and Asset Funders Network will host, “Building wealth through inclusively-owned commercial real estate,” Thursday, Jan. 30 at 1pm ET / 10am PT.

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

Thank you for your impact!

– Jan. 27, 2025