Charm Impact, a specialist investor focused on early-stage renewable energy and clean cooking businesses in Africa, has secured $6.25 million, just over half of its $12 million target for Hummingbird One, its latest fund. The round was backed by Oikocredit, the Dutch Good Growth Fund, the IKEA Foundation and Good Energies Foundation.
In African markets, that raise is meaningful, but in global climate finance, it is small. That contrast points to a structural gap. Capital is available for large, established projects, but far less is available to younger companies that need smaller, recurring funding to grow. Many early-stage firms remain stuck at this stage, not because of weak demand, but because the available capital does not match their scaling needs
Hummingbird One is designed to fill that gap by providing loans of $50,000 to $500,000 to renewable energy and clean cooking companies that fall below the typical ticket size of institutional investors.
Since 2018, Charm Impact has focused on this segment, backing locally owned businesses often overlooked by large funds. Its model focuses on short-cycle lending and follow-on financing to help companies stabilise and reach a point where they can attract larger capital.
Charm has tested this model before. It has deployed $5.4 million across more than 40 loans in eight African markets, all to locally owned firms, reaching over 350,000 people with improved access to energy. Hummingbird One formalises that track record into a fund structure capable of attracting institutional capital.
I spoke with Gavriel Landau, Charm Impact’s founder and chief executive, about the limits of current climate finance, the economics of small-ticket lending and what it will take to build a pipeline of companies capable of absorbing larger capital over time.
The interview below has been edited for clarity and length.
What default rates have you seen so far on these small-ticket loans?
Performance has been strong overall, with a small number of outliers, which is consistent with the realities of early-stage lending.
In this segment, the key is less about avoiding any underperformance and more about how early you identify stress, how closely you work with borrowers, and how effectively you respond.
That is why our model emphasises ongoing monitoring and repeat engagement. We typically work with companies at an earlier stage, so staying close to performance and proactively supporting them is a core part of managing outcomes.
How do you price risk for businesses with limited financial records?
We developed a proprietary credit risk assessment approach specifically for this segment, supported by internally developed systems and benchmarks built from our own lending experience. This allows us to assess businesses against a structured framework that reflects how companies at this stage actually operate.
Our assessment combines quantitative, qualitative and impact metrics to build a more complete view of risk. We look at a range of financial ratios alongside indicators such as demand visibility, unit economics, management quality and operating discipline, and compare these against our internal benchmarks.
We then assess the company’s long-term impact and incorporate this into pricing through a structured adjustment, so that higher-impact businesses can benefit from more favourable terms.
Pricing is ultimately determined by the overall credit score we assign. Importantly, that score is dynamic; companies that perform well over time can access follow-on financing at a lower cost, creating a clear incentive to strengthen both performance and impact.
What happens if companies fail after receiving repeat financing?
Repeat financing does not mean automatic follow-on capital. Each facility is assessed independently, with prior performance informing the next decision.
The benefit of working with companies over time is that we build a deeper understanding of how they operate, enabling more informed and disciplined capital allocation.
If a company begins to underperform, the first step is typically to engage closely to understand the underlying drivers and, where appropriate, support adjustments to stabilise performance.
Where performance deteriorates materially, we would take a disciplined approach to restructuring or recovery, depending on what best preserves value.
Conversely, when companies are performing well, we can deploy follow-on capital more quickly, allowing management teams to focus on operations rather than being trapped in a continuous fundraising cycle.
How much of this fund is expected to be recycled versus deployed as new capital?
Capital recycling is a core part of the model. The vehicle has been designed from the outset to redeploy capital as loans are repaid, allowing it to support a significantly larger volume of financing over its 7-year lifetime than the initial fund size alone would suggest.
While the exact balance between recycled and first-time deployments will depend on repayment timing and portfolio pacing, we expect recycling to meaningfully increase total capital deployed over the life of the vehicle.
Based on current assumptions, a $12 million vehicle is expected to support over $30 million of total deployment through a combination of initial capital and disciplined recycling.
At what point does a company graduate out of your model and into larger institutional funding?
A company typically graduates from our model when it reaches a level of scale, consistency and risk profile that makes it suitable for larger institutional capital deploying standard ticket sizes.
That point will vary by business model and market, but the objective is consistent: to support companies at a stage when they are often overlooked and help position them to access a broader pool of capital.
In many cases, success for us is when a company no longer needs a lender like us, because it has become a credible counterparty for a broader pool of institutional capital.
That said, because of the speed and flexibility with which we can deploy capital, we do see cases where companies that have effectively graduated still return for targeted capital injections between larger funding rounds.
As you may have read online, clean cooking has struggled with adoption, especially in Kenya, following Koko’s forced exit. What has actually worked on the ground in your portfolio?
Clean cooking is a very challenging segment, but the potential impact of scaling it is significant, which is why it continues to attract attention.
What has worked for us is focusing on businesses where the underlying unit economics and demand are strong enough to stand on their own and where carbon revenues can enhance the economics, but are not required for the business to function.
Many of the companies we work with are distributors rather than fully vertically integrated models. While they still face operational challenges, traction tends to come where customers are willing and able to pay, and the model is commercially viable without external support.
Where do most clean cooking startups fail today? Is it in distribution, pricing or behaviour change?
Clean cooking is a very difficult problem to solve at scale, which is why many models have struggled. It is rarely a single point of failure. The challenge is getting distribution, pricing and behaviour change to work together at the same time.
A business can have a strong product and still struggle if distribution is inconsistent, if pricing does not align with how customers actually earn and spend, or if adoption is slower than expected.
In practice, the difficulty is less about any one constraint and more about executing a coordinated model in a challenging operating environment.
How exposed are your clean cooking investments to volatility in carbon credit prices?
Our approach is to avoid underwriting businesses on the assumption that carbon revenues will fully carry the model.
Where carbon revenue exists, we treat it as supportive rather than foundational. That means focusing on businesses where the core unit economics and demand are strong enough to stand on their own — although, in practice, such companies are challenging to find.
As a result, our exposure to carbon price volatility is more limited. Changes in carbon markets may affect overall returns or growth trajectories, but they are not expected to determine the viability of the underlying business.
In your opinion, are carbon revenues still a reliable part of the business model, or are founders overestimating them?
Carbon revenues can be meaningful, but they are often treated as more predictable than they are in practice.
In reality, both pricing and verification can fluctuate significantly, especially in early-stage markets, and this volatility isn’t always fully reflected in business model design.
For us, it comes back to ensuring the core business functions independently. If customers are willing and able to pay, and the economics stack up, then carbon can strengthen the model, but it shouldn’t be what holds it together.
We have seen assumption-based models struggle in practice. What excites us more going forward is the use of digitally enabled verification, which offers a more reliable and transparent foundation for carbon-linked revenues.
What happens to these businesses if carbon markets tighten or verification standards shift?
If a business is heavily reliant on carbon revenues, such a shift can be very disruptive. It can affect pricing, working capital and, in some cases, the viability of the model itself.
That is why we place so much emphasis on ensuring the underlying business operates independently of carbon. Where that is the case, changes in carbon markets may slow growth or reduce upside, but they are less likely to undermine the business entirely.
It ultimately comes back to how much dependence is built into the model. The more carbon is treated as a bonus rather than a foundation, the more resilient the business is to such shifts.
