Archive for the 'Impact Investing' Category
January 19th, 2010 by Tom Minney
The Africa Health Fund, managed by private equity fund manager Aureos Capital (www.aureos.com) has made its first investment, acquiring a stake in the Nairobi Women’s Hospital (www.nwch.co.ke) for US$2.66 million. This is the first investment by the fund which was launched in June 2009 and aims to raise $100 million, with a final close this year (2010).
The fund is backed by International Finance Corporation (www.ifc.org), African Development Bank (www.afdb.org), DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH – www.deginvest.de, part of KfW banking group) and Bill & Melinda Gates Foundation (www.gatesfoundation.org). Together they have invested $57 mln. Aureos specialises in investing in small to medium-sized businesses in emerging markets.
The objective of the Africa Health Fund is to increase access to, affordability and quality of health-related goods and services for Africans, especially those at the bottom of the income pyramid. At the same time it hopes to provide investors with good long-term financial returns.
Nairobi Women’s Hospital provides health care services for women and children. It focuses on providing in-patient, out-patient and specialized services for women, including antenatal, gynaecology, obstetrics, breast cancer detection and surgery. Its Gender Violence Recovery Centre is believed to be the first in East Africa.
A proportion of the sum invested in NWH will be used to help fund a management buyout, with the balance going to the expansion of facilities such as clinics, beds, ambulances and operating theatres in the East Africa Region.
Sev Vettivetpillai, CEO of UK-based Aureos Advisers says: “Whilst we were setting up a unique HIV/AIDS risk management programme for our East African portfolio companies in 2008 we started to realise just how fragmented and under-capitalized the healthcare sector is in Africa.
“Many of the causes of the high costs and inefficiencies of the healthcare sector in Africa are essentially business issues that we hope the Fund, and the input of Aureos executives, will help to resolve.
“We believe the Africa Health Fund will make a valuable contribution to helping low-income Africans get access to affordable, high-quality healthcare services whilst at the same time providing satisfactory returns to our investors.
“Through the Africa Health Fund, we look forward to helping populate Africa’s private healthcare sector with growing, profitable businesses, well positioned to attract further domestic and foreign investment.
Healthcare in Africa and private equity
An IFC study “The Business of Health in Africa” finds that private sources fund 60% of healthcare financing in Africa and about 50% of total health expenditure goes to private providers. The report says that “the vast majority of the region’s poor people, both urban and rural, rely on private healthcare.”
Davinder Sikand, Regional Managing Partner of Aureos in Africa says: “The provision of capital to SMEs operating in the health sector in conjunction with professional private equity support will certainly increase the efficiency of the African health market. Aureos is well aware of the effects that health issues and under-resourced health services have on businesses because we work very closely with our investee companies. The economic, productive and emotional cost of workforces in poor health can be devastating on businesses. We have regularly helped our investee companies to devise remedial strategies.”
In 2007, Aureos wIth support from Norwegian Investment Fund for Developing Countries (www.norfund.no) did an analysis of healthcare provision in East Africa, including where the critical deficiencies in the African healthcare system lie. Given its extensive experience working with dynamic SMEs in emerging markets, Aureos identified how SMEs can plug the gaps in the African health market.
The Aureos study showed that much of the African healthcare sector suffers from severe structural and systemic bottlenecks. There is severe market fragmentation; inadequate, inefficient distribution channels; high manufacturing costs; price distortions in the market; lack of effective supply chains; absence of economies of scale; low productivity levels; and, in many cases, dependence on large international health providers.
Aureos researched the structure and segmentation of the African healthcare market. In doing so, it has determined trends in consumer demand, appropriate product pricing and market gaps which suggest investment opportunities. It identified market failures as well as the scope of the distribution chains as challenges in the environment. In drafting the strategy of deploying the Africa Health Fund, Aureos expects to work in innovative new partnerships with public and private organizations, entrepreneurs as well as domestic and international regulators.
Davinder Sikand adds: “We are very well placed to support solutions to the issues we have come to understand in the African healthcare market. Having worked in emerging markets for almost two decades, Aureos understands how production facilities, distribution systems and networks can be mobilized to reach under-served and low-income groups. This particularly applies in domains vital to healthcare, such as healthcare financing, medical manufacturing, healthcare training, telemedicine and pharmaceutical manufacturing.”
January 19th, 2010 by Tom Minney
Agricultural private equity fund Agri-Vie (www.agrivie.com) will reach its target of raising $100 million for investment in agricultural projects by February or March, according to an interview with Reuters newsagency on 14 January. It says there is plenty of potential and plans a second fund of up to $300 million.
Earlier in January the fund, launched in March 2008, made 2 investments totalling $10 mln in 2 agricultural projects in Ethiopia and across the region, and it is close to finalizing a $4 mln investment in Tanzania.
Izak Strauss, executive director and chief investment officer, told Reuters they are also considering a second fund: “There is definitely an opportunity to do a second fund substantially larger than the first fund… probably (in the region of) $200 to $300 million.” This could launch in 2013 or 2014.
Agri-Vie, based in Cape Town, focuses on equity investments in a wide range of agribusiness in Sub-Saharan Africa, including processing and distribution. It is backed by the Development Bank of Southern Africa (www.dbsa.org) and private entities including W.K. Kellogg Foundation (www.wkkf.org).
Agriculture in Africa appears set for transformation from unproductive and undeveloped subsistence farming to more commercial farming as investors from Europe, Asia and the Middle East get large tracts of land and launch projects, often to tackle food insecurity in their own countries.
In the interview, Mr Strauss said Agri-Vie plans to invest up to $25 million into five new projects during 2010, including a new $4 million eco-tourism project in Tanzania.
Agri-Vie forecasts fast economic growth in East Africa, which it calls an “investment hotspot”.
He said Agri-Vie this month invested $6.7 million in New Forests Company (www.newforestscompany.com), a UK-based sustainable and socially responsible forestry company with established, rapidly growing plantations and prospects of diversified products for local and regional export markets. It has operations in Uganda as well as Tanzania, Rwanda and Mozambique. East Africa has been a net importer of sawn timber and electrical poles and NFC aims to replace these imports with locally-produced goods. NFC’s overall aim is to “deliver both attractive returns to investors and significant social and environmental benefits”, according to its website.
The company also invested $3.5 million in africaJUICE (www.africajuice.com), run by European and African entrepreneurs and establishing fruit production and processing operations to capture share in European and the Middle Eastern juice markets. The first farm is in Upper Awash in the Oromia region. africaJUICE claims the combination of ideal growing conditions in the area and Ethiopia’s closeness to target markets should help displace European companies’ reliance on importing fruit products from South America.
The company website says: “We plan to establish at least three production locations across Africa by 2014 and become a premier supplier of Fair Trade juice to the European market.”
Strauss said: “Its first operation is in Ethiopia, growing yellow passion fruit, mango and papaya… The first exports will happen from mid-this year.” africaJUICE is making a capital investment of some €12 million to rehabilitate and expand an existing state-owned fruit farm (“Tibila Farm”) to create a high-technology modern tropical fruit plantation and build a new processing facility, operating under Fair Trade principles.
According to africaJUICE’s website: “Our plan is to plant approximately 600 hectares of yellow passion fruit and 600 hectares of other tropical fruits such as mango and papaya over a period of four years. At the same time we will support the development of over 1,200 hectares of outgrowers (contract farmers) to supplement the supply and extend community participation. Our new fruit processing facility will produce pure juices, concentrates and purees which will be transported to market via established export routes.”
David O’Halloran, Director of africaJUICE, told African Capital Markets News: “Having started operations on the ground early in 2009, we are pleased with the progress so far on the new fruit plantings, infrastructure, operating approach and the processing plant and looking forward to juice production from mid-2010 onwards. We have also made substantial progress following our sustainable development philosophy with a number of initiatives underway or already executed and are excited that this new approach to development and investment is progressing well. We are also progressing well on the second and third projects and expect to be considering funding options for those in the coming 12-24 months”.
January 6th, 2010 by Tom Minney
South Africa’s Nedbank (www.nedbank.co.za) has announced an agreement with international non-governmental organisation Wildlife Works Incorporated (www.wildlifeworks.com) to launch an African carbon credit scheme.
Nedbank is to acquire carbon credits which stem from Wildlife Works’ efforts sustainably to prevent the deforestation of the Kasigau Corridor. The project will monetize the biodiversity assets of a 200,000 hectares dryland forest and savannah grassland strip called Kasigau Wildlife Corridor until 2026. It was awarded gold-level approval under the Climate Community and Biodiversity Alliance’s forestry protection standard and is apparently Africa’s first approved large project under the international Reduced Emissions from Deforestation and Degradation (REDD) scheme, which pays for projects which prevent further deforestation sustainably and measurably in areas which has seen previous deforestation. It is seeking registration with the Voluntary Carbon Standard registry. Business and people in developed countries can “off-set” carbon emissions through buying carbon credits from developing countries, which are preventing deforestation and conserving their natural resources and helping the world climate.
Over 2.5 million tonnes of carbon is expected to be released into the global carbon trading market through the Kenyan REDD carbon project partnership. The Kasigau project applies market-based solutions to conservation of biodiversity and should benefit local communities through education, job creation, environmental protection and direct financial rewards.
The investment banking division Nedbank Capital will make the Kagisau credits available. Head of carbon, Kevin Whitfield, reportedly says: “The carbon market provides a mechanism for linking Africa to the global green economy, while simultaneously conserving its rich natural heritage and safeguarding the livelihoods of its people. We hope this partnership will prove Africa can fight climate change, uplifting both rural communities and protecting wildlife by connecting them to the global carbon market.”
Saliem Fakir, Head of the WWF in South Africa reportedly confirms: “Rukinga and the associated Kasigau Wildlife Corridor project are world-class examples of projects that are making a tangible difference to both communities and the environment. It is innovative finance solutions, like carbon financing, which makes them possible.”
Wildlife Works applies innovative market-based techniques to conserving biodiversity and forest habitat. It sees the emerging Global Carbon Marketplace as a logical and exciting extension and its website gives a useful rundown of the theory (How It Works). According to WW, the Rukinga community was being forced to destroy their magnificent wilderness in order to survive. In the last ten years WW has restored a huge piece of land to a healthy vibrant ecosystem with elephants, lions, and 50 other species of large mammal. At the same time, the community has received 18 new classrooms for their children, and the employees and their families have received full health care benefits in a community with incredibly high HIV incidence. Wildlife Works also provides jobs, including through founding an organic greenhouse to promote healthier farming practices, providing local farmers with cash-generating citrus trees and free agroforestry trees to use for building and fuel wood. WW is exploring the extensive and expensive preparation for a new REDD project to save the Ngoyla-Mintom Rainforest (2 million acres) in Cameroon from being logged.
Wildlife Works Carbon is a new joint venture between Wildlife Works and Colin Wiel Investments LLC formed to pursue the emerging Reduced Emissions From Deforestation and Degradation (REDD) marketplace for Carbon Offsets as a sustainable and scaleable funding mechanism for biodiverse forest protection.
Nedbank, a subsidiary of the Old Mutual Group, is one of South Africa’s oldest banks and listed on the JSE Ltd. since 1969. The project further boosts the bank’s “green” credentials after the bank announced in October that it had won the National Business Initiative (NBi) 2009 South Africa Carbon Disclosure Project (CDP) Report Leadership Index. Other leading corporates included Bidvest Group, Woolworths Holdings, BHP Billiton, Goldfields and Sappi. It is also reportedly the only African bank included in the Dow Jones Sustainability Index.
The Global CDP is the largest source of transparent information on carbon emissions in the world. Nedbank is moving towards becoming carbon neutral and is cutting its “carbon footprint” through a robust entrenched carbon management programme including awareness, energy efficiency targets, paper and waste reduction initiatives, travel reduction, and various other methods of internal carbon reduction. Tom Boardman, Chief Executive, Nedbank Group, says: “Our position as a truly environmentally aware organisation is not the result of ad hoc environmental interventions. Rather, the external realization of our green credentials is the natural consequence of a deeply ingrained commitment to a culture of sustainability – one that runs throughout our operations and is embraced as a value by our staff members, business partners, suppliers and other stakeholders.
“Nedbank is serious about influencing others to follow our lead, by linking environmental considerations to all our financing activities, an aggressive green procurement policy that encourages suppliers to operate in an environmentally friendly manner, and a Green Affinity that raises awareness among our clients of the need to be environmentally aware and affords them the opportunity to contribute towards conservation projects simply by utilising affinity-linked Nedbank products.”
January 4th, 2010 by Tom Minney
If you want to learn about the new field of impact investing the Rockefeller Foundation has issued a helpful field manual. “Impact investing” involves using a broad range of investments including capital and private sector expertise with a view to making a difference to development including social and environmental problems and not only to gaining profits for the investor and has the potential to channel large amounts of funds to Africa.
The new guide is Solutions for Impact Investors: From Strategy to Implementation, written by a team of practitioners, advisors and academics and published by Rockefeller Philanthropy Advisors.
It is aimed at investors developing this new field and gives practical guidance on tightening the link between investment decisions and impact. It also helps investors who may have made social purpose investments but not yet connected them to an overall investment strategy, and traditional investors struggling with whether and how to integrate impact investing into existing asset allocation models. This includes philanthropic foundations and endowments trying to boost their knowledge of social, mission- and programme-related investments, and individual and institutional investors and their advisors.
Melissa A. Berman, President and CEO of Rockefeller Philanthropy Advisors (RPA), says: “As techniques and options in this kind of investing continue to evolve, there is great potential to deploy much more capital into the social sector, which is especially needed in this difficult economic climate. Government and traditional philanthropy do not have sufficient funds to address the world’s most serious problems, so commercial capital and market forces must be part of the solution. Impact investing will build the kind of partnerships that we need for the current crisis, and will lay the groundwork for real change in the coming years.”
Steven Godeke, a noted independent advisor and a lead author, adds: “The possibilities for social change through impact investing are limitless, but it is not charity; it can be used across all asset classes and requires the same discipline as traditional investing”.
Fellow author Raúl Pomares, a vice president of Guggenheim Partners, explains: “Our intent is threefold: to attract more capital to impact investing; to assist investors as they move to executing and refining their investment decision-making processes; and to narrow the gap between foundations’ programme and investment professionals, which would contribute to a mutual understanding and implementation of a portfolio approach to impact investing.”
Other contributors include technology entrepreneur and pioneering impact investor Charly Kleissner; Patrick Guerra, founder of Lions Peak LLC; and Albert V. Bruno and Hersh Shefrin, social investment experts and professors at Santa Clara University.
The authors emphasize that investors need not choose between social impact OR financial return but can harness what author Jim Collins calls “the genius of AND” as opposed to the “tyranny of OR”. Investors can:
• Create new impact-related processes AND operate within strict investment policy discipline;
• Optimize for impact AND apply rigorous investment management tools;
• Invest in new markets and asset classes AND continue traditional investment strategies;
• Embrace new business models AND adhere to recognized financial theory;
• Evaluate impact performance AND subject investments to recognized financial benchmarks; and
• Expand the scope and scale of philanthropic capital AND adhere to fiduciary responsibilities.
The book covers the key role that behavioural finance plays in impact investing, and includes examples of investment processes, case studies and resources that focus on specific themes or investment vehicles. The book highlights examples from RSF Social Finance, the KL Felicitas Foundation and the Calvert Social Investment Foundation. Finally, the authors prepared more than 40 profiles to demonstrate the range of impact investments available in the marketplace today. While not intended to serve as investment guidance or as a comprehensive list of the industry, additional profiles will be added on an ongoing basis and are available at www.rockpa.org/impactinvesting.
Major support for the publication was provided by the KL Felicitas Foundation and the Rockefeller Foundation. Solutions for Impact Investors: From Strategy to Implementation is available at no cost by contacting info@rockpa.org or calling 212-812-4369. A PDF can also be downloaded from www.rockpa.org/pdfs/impactinvesting.pdf.
For more information and links on impact investing, check out the website of the Global Impact Investing Network (www.globalimpactinvestingnetwork.org).
October 2nd, 2009 by Tom Minney
The Global Impact Investing Network (www.globalimpactinvestingnetwork.org) was launched on 25 September. It is a not-for-profit organization dedicated to building infrastructure, activities, education, and research to enable more effective impact investing around the world.
“Impact investing” means a growing trend to use “for-profit” investment to address social and environmental problems. The GIIN’s programmatic agenda is rooted in the challenges investors face and it is a forum for identifying and addressing the systemic barriers that hinder the efficiency and effectiveness of the impact industry. The two largest initiatives are the Investors’ Council and Industry Infrastructure Development.
• Investors’ Council: The GIIN’s Investors’ Council is a group of leading impact investors representing different institutions from around the world. The Investors’ Council will provide leadership in the industry, serve as a platform for disseminating the latest research and best practices, and support the creation and adoption of industry infrastructure, including ways of measuring the effectiveness of impact investments.
• Infrastructure Development—IRIS: The GIIN will serve as a platform for coordinating the development of industry infrastructure that can benefit all impact investors by creating a more efficient marketplace and addressing common challenges. The core initiative is the Impact Reporting and Investment Standards (IRIS), a common framework for measuring social and environmental impact of investments. IRIS addresses a major barrier to the growth of the impact investing industry—the lack of transparency and credibility in how funds define, track, and report on the social and environmental performance of their capital. IRIS provides a standardized approach that leads to lower transaction costs and an improved ability to understand the impact of investments.
In addition to these core initiatives, the GIIN will also support education, research, and targeted outreach to help foster a coherent impact investing industry that channels investment capital efficiently to solutions to pressing social and environmental problems.
On 25 September, in the launch at the Clinton Global Initiative (www.clintonglobalinitiative.org) annual meeting in New York, GIIN announced the founding members of GIIN Investors Council. Founding membership is offered to investors who volunteered their time and energy in support of the GIIN: Acumen Fund, The Annie E. Casey Foundation, The Bill and Melinda Gates Foundation, Calvert Foundation, Capricorn Investment Group, Citigroup, Deutsche Bank, Equilibrium Capital, Generation Investment Management, Gray Ghost Ventures, IGNIA, J.P. Morgan, Lundin for Africa, Lunt Family Office (Armonia), Omidyar Network, Prudential, The Rockefeller Foundation, Root Capital, Shorebank/NCIF, Trans-Century, Triodos Investment Management, and Wolfensohn & Company.
GIIN will add more active impact investors to the Investors’ Council. For information on Investors’ Council membership contact Amit Bouri, Director of Strategy and Development, at abouri[at] globalimpactinvestingnetwork.org.
September 4th, 2009 by Tom Minney
The Social Capital Markets 09 conference in San Francisco (for instance, www.socialcapitalmarkets.net) is attracting a lot of interest, with nearly 900 attendees and 100 speakers.
Social capital and impact investing are signs of a major shift, as some top skilled investors start seeing how management and finance can be brought to bear to change lives for the better. Development, at heart, is about developing people, and in many cases it means developing them to run “sustainable” (that can only mean “profitable”) businesses. One organization I have met here in Ethiopia and been very impressed by is Technoserve (www.technoserve.org).
Another organization, just gearing up and well worth watching is Global Impact Investing Network (GIIN), with the website GIIN. For a flavour of what’s happening in San Francisco, here is one blog, from www.worldchanging.com:
Social Capital Markets 2009: Investing at the Intersection of Public Good & Market Discipline
WorldChanging Team, 2 Sep 09
by Shital Shah
How can a blend of capital and partnerships help address a market failure? During the session on “Investing at the Intersection of Public Good & Market Discipline: The Case of Agricultural Finance,” a diverse set of panelists came together to explain the case of agricultural finance and Root Capital’s www.rootcapital.org approach to providing public goods using market discipline. Moderated by a leader in the field, Antony Bugg-Levine (Managing Director, Rockefeller Foundation www.rockfound.org), the panel included Namrita Kapur (Vice President of Strategic Partnerships, Root Capital), Richard Lautch (Treasurer, Starbucks www.starbucks.com), Preston Pinkett (Head of Prudential’s Social Investment Program www.prudential.com) and Robert Schneider (Senior Alliance Advisor, USAID Global Development Alliance www.usaid.gov).
Ms. Kapur explained Root Capital’s three-pronged approach to finding the right mix of public good and financial investments. Root Capital offers a lending model for the “missing middle” using the strategy of “finance, advise, and catalyze” for clients that range from coffee farmer cooperatives to artisan associations. An example she offered was on cocoa farming in Tanzania. Cocoa farmers received assistance from local NGOs, but were still missing credit. Root Capital did their due diligence and found that all was well with the cooperatives, except that farmers were not good at bookkeeping. Before investing (finance), Root Capital offered training on technical services (advice), and worked with a range of global organizations (catalyze). The result of these efforts was 1,000% (!) percent growth in sales by the end of the second year.
The range of organizations that Root Capital catalyzes includes partners that have a natural interest in their work with a segment of their clients, such as Starbucks, to organizations that are looking to add social impact to their financial investments, such as Prudential Financial. In fact, Starbucks just announced [SS1] an additional $2 million investment into Root Capital to improve the quality of life for farmers in Africa and Latin America, according to a statement of founder William Foote at another session during SoCap. For Prudential, as Mr. Pinkett pointed out, investing in Root Capital makes sense because they offer a business model to move people out of poverty and have the ability to see something where a commercial lender would see nothing. Finally, USAID sees Root Capital as an appropriate partner as part of their effort to create public private partnerships, and can offer credit guarantees to make sure that the capital evolves.
Part of an emerging theme throughout SoCap seems to focus on metrics, measurement, and monitoring, and this breakout session was no exception. Mr. Lautch explained that certain metrics, such as number of farmers, average holding size, and growth plans can be measured, but it would be useful to know the end impact to farmers and their families. Pulling the various partners onto the same panel provided an interesting perspective that each one needed to make the link for their organizations on why investing in Root Capital would bring the right mix of financial and social return. For each individual organization, the link was slightly different, but collectively, the importance of partnerships highlighted a common theme.
The debate on metrics and the healthy tension in discussion around the proper rates charged for risk revealed that numbers are an obvious driver in decision making; however, it was not lost that every organization on the panel was also raising questions on the level of social impact that their investments could have. Mr. Pinkett made the simple but crucial statement that you want to actually care about who you are lending money to – they are not just clients, but an important population to bring out of poverty.
While this particular breakout session focused on agricultural finance, the same blend of capital and partnerships could go a long way for many other issues. As Mr. Bugg-Levine touched on, the key is about addressing the conflicting agenda of building bridges to entry and simultaneously receiving money on return – a feat that organizations like Root Capital, along with their partners, are learning to accomplish around the world.
This piece originally appeared on http://www.nextbillion.net