Editor’s note: This guest post is sponsored by Variant Investments.
Access to financing shapes which companies are able to grow, who builds them and which communities get left behind.
As Antony Bugg-Levine recently noted, “Capital, like water, follows the path of least resistance toward large companies, familiar borrowers, established markets. That leaves vast stretches of the economy on parched ground, where talent and hard work are not enough because the financing never arrives.”
This parched land leaves ideas, entrepreneurs and businesses unable to grow. Many businesses that provide necessary services remain underfunded simply because they fall outside the comfort zone of conventional lenders.
Nourishing parched opportunities
Variant Investments was designed to reach this gap: the lesser-explored spaces where conventional capital does not naturally flow. We focus on niche, asset-based lending in underbanked markets that are too small or too complex for traditional capital, yet where demand is real and cash flows are sound.
When we launched the Variant Impact Fund, or IMPCX, in 2021, we did not simply attach an impact label to existing deal flow. Instead, we recognized the need to build a framework that would rigorously interrogate our goals for additionality, intentionality and measurability — and articulate those results in ways both investors and investees could appreciate.
With the support of Tideline, we built a seven-step impact assessment framework centered on financial inclusion, equitable growth and society’s responsible consumption needs. Each investment must align with at least one UN Sustainable Development Goal and its underlying targets, with impact outcomes tracked and reported through the GIIN’s IRIS+ framework. Every investment must also pass through our impact investing committee before it reaches the investment committee. Impact is embedded in how we underwrite from the beginning.
IMPCX opens private credit impact investing to retail investors who have had limited access to this asset class. Structured as an interval fund, it enables daily ticker purchases at low commitment minimums and provides quarterly liquidity at 5% of the fund’s net asset value.
The portfolio spans 36 strategies across 13 IRIS+ impact themes, with a US domestic-leaning footprint and select exposure to emerging markets where the structural gap between available capital and real economic need is widest.
Conventional lenders often pass on borrowers in this gap not because the underlying economics are unsound, but because the assets are unfamiliar, the markets are niche and the ticket sizes are too small to justify the overhead. Private credit, structured correctly, can close that distance..
Putting it into practice
Consider Jali Finance, a fintech lender operating in Rwanda that provides lease-to-own financing for motorcycle taxi drivers while transitioning the fleet from petrol-powered to battery-powered electric vehicles. Jali’s borrowers are gig workers who cannot access traditional financing, especially women. As CEO Felix Nkundimana noted, “in this male-dominated driving profession, we’ve significantly increased the number of women drivers from just 3 women in Kigali before Jali’s intervention to over 150 women drivers today.”
Variant extended a senior revolving credit facility backed by the motorcycle assets and underlying loan receivables. Within that facility, we introduced an environmental covenant requiring a portion of the fleet to transition to electric vehicles, making decarbonization a condition of the credit agreement rather than an aspiration. Jali’s fund capital is now financing 5,036 motorcycles, and more than 65% of them are electric.
The EV covenant attracted additional capital allocators, including two development finance institutions that were able to offer lower-cost funding on competitive terms because of the decarbonization provision. Variant’s impact did not arrive alongside the capital. It was delivered because of how the capital was structured.
Drapo tells a similar story. Contractors who complete home energy efficiency renovations, such as new environmental heating systems, insulation upgrades, and clean infrastructure improvements, are often owed government subsidy reimbursements that take months to arrive. Drapo advances that working capital against the receivable, keeping contractors moving and renovations completing. Variant’s capital financed almost 2,000 of these projects, including approximately 150 for low-income households, with an estimated 212,000 metric tons of CO2 emissions avoided over the projects’ useful lifetimes.
Variant also provides bridge capital to Castellan Real Estate Partners to secure properties, fund predevelopment costs and obtain state and local approvals in the early, often unbankable phase that determines whether a housing project gets built at all. The result is 100% affordable housing units across California: 75% are occupied by residents from underrepresented groups, often with female heads of household. Every unit is built green and offset with solar, paired with on-premises social support services, and rented at a weighted average discount of 40–50% to market.
Behind these statistics are real people like Mary Lisa Wright, a 71-year-old retiree who lost her home in the 2018 Camp Fire and moved six times before Castellan’s Apartments in Chico gave her a permanent place to land.
This impact was delivered not only because of access to capital, but because the credit agreements were written in a way to encourage it. Covenants, advance rates, collateral structures and borrowing base structuring are not just risk management tools. Deployed with intention, they are the mechanisms through which we align capital around shared outcomes that persist long after the capital is returned.
From framework to function
Five years in, we still believe that access to capital is the bedrock of stability for families and communities. Essential services like health, safe housing and clean energy — and opportunities for education and stable livelihoods — all sit downstream of financing. But every product and service must receive capital that matches its operational realities.
As private credit investors, we see the benefits of tailored capital firsthand, not just in how well it matches the operational realities of borrowers, but in how it can serve as a non-extractive tool that rewards quality, consistency and sustained impact. This approach allows founders to avoid the pursuit of growth at any cost and instead build wealth within communities without sacrificing ownership or agency.
I will leave you with one last example. Dee Mula is a Memphis-based artist who received growth capital through Connect Music. The Black-owned music fintech, backed by the Variant Impact Fund, funded Mula’s project without forcing him to surrender his ownership rights. Mula went on to release “Blow My High,” which earned RIAA Gold certification within six months and accumulated over 200 million streams. The returns did not leave Memphis. They stayed with the artist, his community, which is what we hoped for and what the structure was designed to produce.
Variant’s Impact strategy starts from a simple premise: If private credit is structured thoughtfully, around real economic activity, inventory turning, homes being built and receivables being collected, then alignment follows, parched land is nourished and livelihoods are improved.
We can design pathways and build a system that determines, intentionally, where capital flows. Behind every dollar, we hope to surface what is possible through our and other teams’ efforts and bring more investors and investees to the table.
To see the full results from our 2025 Annual Impact Report, download it here. To speak with our team about the Variant Impact Fund, feel free to connect with [email protected].
Drake Hicks is the vice president and head of impact at Variant Investments, an alternative credit investment manager focused on income-generating assets in niche markets across financial inclusion, equitable growth and responsible consumption.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
Important Information:
This material is for informational purposes only and reflects the views of Variant Investments as of the date of publication. It is not investment advice or a recommendation to buy or sell any security. Statements are subject to change and are not guarantees of future results.
The Variant Impact Fund (the “Fund”) is a continuously offered, non-diversified closed-end interval fund with limited liquidity seeking income and capital appreciation while pursuing positive social and environmental impact. There is no assurance the Fund will achieve its objectives or that investments will deliver expected outcomes.An investment in the Fund is speculative and involves substantial risks, including the possible loss of the entire amount invested. Shares are an illiquid investment and are not listed on any securities exchange, are traded freely, and repurchase opportunities are limited.
The Fund’s focus on impact investing and private credit may cause its performance to differ from other funds, and there is no guarantee its investments will align with any investor’s personal values or be comparable due to lack of common industry standards. The Fund invests heavily in illiquid private securities that can be difficult to value, and realized results may differ from reported valuations. As a non-diversified fund, it may be more vulnerable to risks tied to individual investments or specific economic or regulatory events.
BEFORE INVESTING YOU SHOULD CAREFULLY CONSIDER THE FUND’S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. THIS AND OTHER INFORMATION IS IN THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED FROM (877) 770-7717 OR WWW.VARIANTINVESTMENTS.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
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