Darby International Capital Latin American Fund IV

Equity : December 2023

BIO has invested USD 10 M in equity in the Darby International Capital Latin American Fund IV, a closed-end private credit fund focusing on Latin America.

Amount

$ 10,000,000.00

Type of investment

Equity

Development impacts

Local economic growth
Fight against climate change and preservation of natural resources
Promotion of ESG best practices

Beneficiary locations

Latin America and Caribbean: Brazil, Colombia, Peru

Investment field

Investment Companies & Funds

Activity

KK.64.300 SME Fund

Organisation

Darby International Capital Latin American Fund IV

Website

https://darbyinternational.com/

Domicile

Canada

The Darby International Capital Latin American Fund IV LP is a 10-year closed end debt fund. It is the successor of the 2017 Darby Latin America Private Debt Fund III in which BIO has invested. The fund will largely follow the same strategy as the firm’s previous fund, providing senior debt and mezzanine hybrid secured loans to 10-12 mid-sized companies active in various sectors including infrastructure and logistics, natural resources and agribusiness industries, manufacturing, healthcare and consumer products.

Fund IV will include a target to invest a min. of 40% of the total commitments in projects related to climate mitigation and/or adaptation.

Geographically, the fund will focus on 4 primary markets (Brazil, Colombia, Peru, Mexico), with the possibility to seize opportunities in 4 other pre-defined secondary markets (Chile, Dominican Republic, Ecuador and Uruguay).

The fund will be managed by Darby International Capital LLC, which has experience in managing debt funds in Latin America since 1999.

Development impacts

Local economic growth
SMEs in the target markets continue to face major issues to obtain adequate and affordable long-term financing from local banks, which prevents them to fund their growth and expansion properly. In many cases, Darby has been refinancing shorter-term financing through debt with a longer tenor, better tailored repayment scheme and terms, and greater flexibility for the security package than local banks.
Fight against climate change and preservation of natural resources
Minimum 40% of the total fund commitments will be invested in projects with a positive climate impact aspect, i.e. climate change mitigation or adaptation. The sectors identified include renewable energy, waste management, energy storage solutions, led lighting, electric vehicles financing, and agriculture.
Promotion of ESG best practices
ESG & Climate standards are integrated into the investment cycle according to a proprietary framework based on national and international standards. Actions and targets will be included in the loan documentation for monitoring by the ESG & Climate expert. The participation of Darby on boards, as full member or observer, helps enforce ESG standards and improve the governance.

E&S Impact

The fund will establish an ESG and Climate Committee, promote gender equality at portfolio level (based on 2X Global), develop a system in accordance with the IFC Performance Standards to register and process external complaints related to the Fund’s projects and adapt its ESG reporting to include additional climate metrics (GHG scope 3). A dedicated ESG Officer will be hired.

Situation at the time of investment

The fund has an Environmental and Social Management System in place to ensure E&S risks are assessed and mitigated at all steps of the investment process. It is supported by a set of dedicated E&S policy, tools and climate policy. All portfolio companies will be subject to the ESG & Climate Action Plan to address risks, monitor performance evolution, and achieve positive results.

Risk Category: B