Archive for the 'Impact Investing' Category
November 21st, 2011 by Tom Minney
Aureos Africa Health Fund invested $2.5 million in a Kenyan hospital and health insurance company, the Avenue Group (www.avenuehealthcare.com), which offers affordable healthcare cover, integrated with quality healthcare provision. It has a 70-bed full-purpose hospital in Nairobi, 7 clinics through Kenya as well as in-house clinics for corporate clients, a home-based care service for elderly, terminally ill or otherwise dependent patients, rental and sale of wheelchairs and other rehabilitation equipment for home use, and First Aid training schemes.
It combines healthcare cover with quality, affordable outpatient and inpatient medical services. The group’s corporate medical schemes are designed to be accessible to businesses with as few as 10 employees and around 70% of the staff covered are in non-managerial roles. With Aureos investment, Avenue Group will expand into other regions in Kenya, building 2 more clinics in smaller towns and expanding existing in-patient facilities in Kisumu and Mombasa. The funding will ensure the group can continue non-profit activities, such as free medical camps across Kenya and public health screening days at Avenue clinics.
Africa Health Fund is managed by private equity manager Aureos Capital Ltd (www.aureos.com), which specialises in socially sustainable small to medium-sized businesses in emerging markets. It has more than 20 local offices covering more than 50 markets. It has expertise in healthcare, with investments in hospitals and medical supply companies across Asia, Latin America and Africa. It builds environmental, social and governance performance into its investments as an integral part of managing risk and generating returns, particularly in Africa where managing employees’ health is a major challenge for many of Aureos’ portfolio companies.
Africa Health Fund was established by Aureos in June 2009 with the International Finance Corporation (www.ifc.org), the African Development Bank (www.afdb.org), DEG, and the Bill & Melinda Gates Foundation (www.gatesfoundation.org) as cornerstone investors. Subsequent investors include the Elma Foundation (www.elmaphilanthropies.org) along with private investors such as family offices and a major European retail bank. Committed capital in the fund now totals $75.4m. The fund aims to help low-income Africans access affordable, high-quality health services while providing investors with good long-term financial returns. It has invested in hospitals in Kenya and Ghana.
Shakir Merali, Partner at Aureos Africa Healthcare Managers Limited in Kenya, says: “Avenue has developed strong links with the Kenyan business community that are helping to bring health cover to a wider range of workers, even those who work in smaller firms. We are looking forward to helping the Group to pursue its plans for growth and to extend its successful model and high quality care, initially within Kenya, and eventually in neighbouring East African countries.”
Diana Patel, Executive Director at The Avenue Group, comments: “We are very pleased to be working with an investor with such extensive experience of the medical sector. The support from Aureos’ strong local team will be crucial in helping us to achieve our ambitions to make affordable health cover a reality across the whole of East Africa.”
Aureos was set up in 2001and has increased funds under management to US$ 1.3 billion with a footprint in over 50 emerging markets covering Asia, Africa and Latin America, by establishing 17 regional private equity funds.
November 3rd, 2011 by Tom Minney
East African venture capital firm InReturn Capital (www.inreturncapital.com) has entered a partnership with Hurlingham Eye Care Services group (HECS – hurlinghameyecare.co.ke), according to a press release issued on 2 November. InReturn Capital is an impact investing company which aims to generate positive social impact and profits by investing in small and medium enterprises (SMEs) in the East African region, from its offices in Nairobi, Kenya and Dar es Salaam, Tanzania. It has Jacana Venture Partnership (www.jacana.org) as an investor and key partner in fund management, and several Dutch and international partners.
HECS has been operating optical shops and a diagnostics centre around Nairobi since 2000 and in April 2010 opened the Eagle Eye Laser and Diagnostics Centre at the 5th Avenue Building on Ngong Road, close to the Nairobi Hospital. This aims to be a leading provider of eye-care surgery and diagnostics in East Africa, particularly long-term eye problems. The centre is the first clinic in East Africa to offer Lasik surgery, which is the most advanced type of laser surgery for vision correction. Other eye surgeries include cataract, glaucoma, multifocal refractive surgery, as well as a broad variety of eye diagnostics using modern technology. The founders, Dr. Ilako, Dr. Kimani and Dr. Kiumbura, all have a long track record in eye surgery and have teamed up with Dr. Gaeckle, one of the most successful and experienced eye laser surgeons in Germany.
InReturn already has investments in construction, infrastructure and energy and is keen to expand into healthcare. It linked with HECS in July 2011. It provides hands-on support to HECS in strategic focus, human resource management and marketing and financial administration processes, as well as joining weekly management meetings and being a member of the board. Its investment in the surgery centre will assist in expanding and improving operational capabilities while the centre prepares to expand within the region. The plan is also to set up a non-profit unit that will provide free eye-care health services such as free surgeries and consultations to the lowest income groups.
Dr. Kiumbura, CEO and co-founder of HECS commented: “There is a saying in my language that two are always better than one. The partnership with InReturn has just proven this to be true one more time! It has been a time of improvement in the organisation, from personal growth to organizational transformation, and to a more efficient and focused entity from the time we started working together. I have no doubt in my mind that together we will grow to unchartered heights in provision of quality affordable eye-care in this region in the coming years.”
Eelco Benink, Investment Manager of InReturn commented: “We are excited to invest in this state-of-the-art eye-care institute in Kenya. The doctors are amongst the best in their field and the technology available at the Eagle Eye Laser Centre is unparalleled in East Africa. Together with the optical shops it forms the only one stop shop for eye health care in greater East Africa. Our partnership will lead to further expansion of the HECS group, and it will contribute to the growth of quality medical industry in the region.”
Other InReturn investments include Vipingo Stone, Equator Shipping on Lake Victoria and an engineering company developing micro hydropowerplants.
October 31st, 2011 by Tom Minney
The Directors of the U.S. Government’s development finance institution, the Overseas Private Investment Corporation (www.opic.gov), decided on 27 October to provide financing up to $285 million to equity funds. These in turn should raise more than $875m, representing the largest commitment by the U.S. Government to impact investing in emerging markets so far.
“Impact investing” usually means private investing looking for investments that deliver social and environmental benefits while generating profits, and is a very fast-growing area of investment. OPIC called for impact investing proposals in March and received 88 applications from which it picked 6 funds. According to a OPIC press release, the response was “so positive that OPIC expects to announce additional approved facilities in 2012.”
OPIC President and CEO Elizabeth Littlefield commented in the press release: “This is a watershed day in the evolution of impact investing. These new funds, and the additional investment facilities we announce in 2012, will help to fill financing gaps and introduce more innovation into the impact investing space, helping it grow and mature.”
The 6 funds are:
Investment Fund for Health in Africa II (IFHA II): A private equity fund investing in companies that improve health for Africans with low and middle incomes. It expects to target investments in companies that operate in small and medium-sized hospitals and clinics, healthcare products import, distribution and manufacturing, insurance and supporting industries such as water and sanitation, food and nutrition, education and environmental services. The fund manager is Africa Health Systems Management Company B.V. The International Finance Corporation in 2007 invested in the Netherlands-based IFHA I. OPIC: $83m, target capitalization: $250m.
ManoCap: This fund will invest in small and medium enterprises (SMEs) in Sierra Leone, Liberia and other West African countries, with a focus on post-conflict nations. It will invest in sectors including agriculture, agro-processing, sustainable fisheries, services, healthcare, sanitation, construction and building materials, tourism, light manufacturing, and financial services. These SMEs are expected to have a direct effect on the standard of living of “base-of-the-pyramid” communities by providing employment and access to goods and services. Fund manager is ManoCap LLC. OPIC: $34m, target: $100m.
Latin Idea: Growth capital to Mexican SMEs within the technology, media, telecomms and services sectors. Fund manager Latin Idea Ventures III LLC. OPIC: $25m, target: $125m.
MPOWER Ventures: Unbanked and the under-banked populations in emerging markets through providing prepaid debit cards (or GPR cards), and related alternative financial services, starting with Mexico, Brazil, Colombia, Peru and Bolivia. Fund manager MPOWER Ventures III L.P.,OPIC: $15m, target: $50m.
Sarona: Fund-of-funds will invest in 12-18 private equity funds that target market-based returns while investing in SMEs in frontier markets. Fund manager Sarona Asset Management, Inc. OPIC: $87.5m, target: $250m
Terra Bella: Private equity fund will invest in projects that generate carbon credits through protecting and enhancing forests while generating valuable social and environment co-benefits. Terra Bella will generate returns through the sale of carbon on the growing voluntary, compliance and pre-compliance markets that are emerging in the forest and land-use carbon sector. Fund manager Terra Global Investment Management LLC. OPIC: $40m, target: $100m.
According to Ms. Littlefield: “Each of them promises a strong development impact —be it mobile banking for the unbanked, investing in small businesses in the post-conflict countries of Liberia and Sierra Leone, improved health care in Africa, preservation of highly vulnerable forests, or growing small businesses in Mexico. OPIC has a long history of investing for both social and financial returns and we believe impact investing will gain significant traction in the coming years. We are proud to support its development.”
October 28th, 2011 by Tom Minney
The UK’s regulator, the Financial Services Authority (FSA), has issued a warning on its website about unregulated “sustainable, ethical and alternative” investments. It says: “We are seeing an increasing number of overseas schemes that offer investment opportunities in tree and crop plots abroad, and other ethical investments.
“These schemes may be promoted by an operator ‘cold calling’ with an offer for you to buy a plot on a plantation which harvests agricultural commodities such as teak trees, jatropha, paulownia and biofuels. The investment is usually stated to be low risk but promising high, often guaranteed returns of around 15-25%. The investment period is typically about five years, after which your plot will be harvested and sold on your behalf and the profits forwarded to you.”
They note that some of the schemes being offered to UK investors are structured so they do not meet requirements and therefore then do not have to be registered. However, UK investors should know that the schemes are not covered and they will not be protected by complaints procedures or compensation if things go wrong.
According to the FSA: “We have heard reports of promoters using aggressive, high-pressure sales tactics, and often claiming we do not need to authorise the schemes, as they are not collective investment schemes (CIS). While we regulate CIS, we do not regulate the sale of land, trees or crops.”
The FSA (www.fsa.gov.uk) has been investigating and says that some tree and crop schemes seem to be structured to avoid CIS rules. In simplistic terms, a CIS would be involved if the investors do not have day-to-day control over managing their plot, where investors’ funds are pooled or where the operator is responsible for managing the scheme as a whole.
The regulator wonders how investors do have day-to-day control over business performance, when the plot is thousands of miles away. According to the FSA “We are continuing to look into several schemes to establish whether they are CIS, but we suggest investors treat such opportunities with caution.” It advises that if you think a scheme is suitable for you and you are aware that you may not be protected, you should consult an independent financial adviser or lawyer. It also offers a consumer helpline.
The FSA issued an earlier warning in July 2010 about the rise of unregulated CIS and says: “sustainable, ethical and alternative investment opportunities are increasingly being offered to investors without the protection of UK complaints procedures or compensation schemes if things go wrong.”
COMMENT: This blog supports sustainable, ethical investment 110% and strongly believes individuals have the right to choose what to do with their money and to follow their beliefs. But they need to be aware of the risks, to understand what they are investing in, and to be aware that social business can sometimes be harder to make succeed.
August 25th, 2011 by Tom Minney
Morocco’s Casablanca Stock Exchange (www.casablanca-bourse.com) is offering grants to small and medium enterprises to encourage them to raise capital. It is offering up to 500,000 MAD (approximately $63,740 at current exchange rate for Moroccan Dirhams) from 1 July 2011 to 31 December 2012. According to an announcement on the bourse’s website, the offer is because of important role played by SMEs in the development of the Moroccan economy.
The grant is given under certain conditions and the SME must be listed on the stock exchange’s Growth or Development boards and have equity of less than 50 million MAD. It also needs to issue at least 20% of its capital and to use the IPO to raise capital. Normally the cost of an IPO is 2.2%-5% of the capital raised and the stock exchange says this can be a barrier to raising more capital.
First listing for 2011
STROC Industrie S.A. (www.stroc.com) on 30 June became the first new listing on the Casablanca Stock Exchange in 2011. The company had planned to offer 288,515 extra shares at MAD357.00 each, raising a total of MAD 102,999,855 ($13 mn), with the offer dates from 20-22 June. However the offer attracted 7,229 bids for a total of 2,515,369 shares, 8.7 times oversubscribed, and was closed on 21 June.
STROC joins the “Engineering and Industrial Equipment” sector. Société de Travaux de Réalisations d’Ouvrages et de Construction Industrielle was founded in 1989. Al Istimrar Holdings has 57.7% of the shares and Nabil Ziatt a further 14.6% while the free float on the stock exchange is 23.1%. The company said it chose to raise capital for its development through the capital market as part of its strategy to be open and transparent to its customers and the financial community. It will use the capital to expand its plant and equipment and build a new headquarters.
August 25th, 2011 by Tom Minney
Tiny, small and medium businesses in Egypt and Tunisia, later Algeria and Morocco, are set to benefit from a new €30 million ($43.2 mn) SANAD Fund for MSME (www.sanad.lu). This was set up in August 2011 by German development bank KfW Entwicklungsbank with funding from the German Ministry for Economic Cooperation and Development and the European Commission and will offer debt and equity financing to partner institutions in the Middle East and North Africa (MENA) region that serve micro, small and medium enterprises (MSMEs). Other target countries include Middle Eastern countries such as Lebanon and Jordan.
The fund is expected to attract further investments from public and private bodies. The partners who will help invest the money will be banks, microfinance institutions, financial service providers, leasing and factoring companies, guarantee funds or venture capital funds. The fund will also offer them technical help to build their skills and reach.
Development finance alternative asset manager Finance in Motion GmbH (www.finance-in-motion.com) and Oppenheim Asset Management Services S.à r.l. (www.oppenheim.lu) will manage the new fund which will be structured as a Luxembourg-based Specialized Investment Fund, SICAV-SIF, involving different share classes.
By facilitating access to finance in the region, SANAD – literally “support” in Arabic – aims to strengthen the MSME sector and local financial markets in the MENA region in line with the principles of responsible finance.
July 29th, 2011 by Tom Minney
[SPONSORED STORY] A top conference in October will be “Investment & Innovation in Microfinance: Africa” (www.microfinance-africa.com, date 17-19 October, at Hilton Nairobi Hotel, Kenya). This will cover new regulations, loan products, technologies and social performance tools that would make microfinance institutions (MFIs) more profitable.
Microfinance is financial services aimed at the “bottom of the pyramid”, representing more than 100 million low-income Africans. Services, including financial products, can help them work themselves and their families out of poverty. Effective microfinance can make a huge difference – if done right.
The conference is themed “Transform Your MFI: Comply with Regulation, Strengthen
Governance, Increase Funding, Adopt New Technology” and is the tenth global conference on this topic organized by Hanson Wade. It has a top line-up, including 24 expert speakers, workshops and side events, plus an Investor Fair featuring more than 40 microfinance investors active in Africa, from social investors to banks. Leading MFIs will come from across Africa including Tanzania, Kenya, Malawi, Ghana, Nigeria and Uganda to show participants how to transform their MFIs and their investment strategies.
The meeting is billed as a 3-day intensive learning experience, covering:
• Regulatory update: Recent changes to policy and regulation – Prof Njuguna Ndung’u, Governor, Central Bank of Kenya on enhanced financial inclusion.
• Get ready to become deposit-taking: PRIDE Tanzania and Opportunity Ghana showcase steps they took to keep costs down, maintain client confidence and fulfil the regulator’s expectations. Learn how to strengthen governance, build capacity and infrastructure and commit to social performance measurement to encourage increased funding.
• Who is investing in your country? Hear directly from investors what they are looking for and how you can ensure you benefit from their capital.
• Increase reach through new financial products: Jamii Bora, The Kuyasa Fund, Tujijenge Tanzania and MicroEnergy International showcase how they are increasing access to housing, health, agriculture, education and energy at the “base of the pyramid” (large numbers of poor borrowers and savers).
• Tackle over-indebtedness effectively through credit bureaus, social performance measurement and training. An in-depth working group will confront the challenge of competition and under-cutting and maintain the balance between commercial and social goals.
• Meet the technology providers of the future: From Management Information Systems to mobile, pinpoint which software is most user-friendly and least hassle to implement, and how tomorrow’s biggest service providers help you grow.
Participants at the 2011 conference will be senior directors from MFIs; commercial, social and development banks; local and national governments; non-governmental organizations and foundations; advisory firms; investors; companies which specialize in “base of pyramid” services and products; bankers’ associations; development finance institutions such as the International Finance Corporation (IFC); and bilateral aid agencies including the UK’s Department for International Development (DFID).
The conference is organized by top international organizer, Hanson Wade. Stephanie Cohn Rupp (Principal: Investments at Omidyar Network) commented: “Hanson Wade are fast becoming the deliverers of content and networking in this space”.
The conference already has an excellent website, where you can get full details and make bookings www.microfinance-africa.com. Or call: +44 20 3141 8700 or email: info@hansonwade.com. For a 10% discount for readers of this blog, please quote the booking code: ACMN.
July 25th, 2011 by Tom Minney
Private equity fund management Aureos Capital (www.aureos.com) has become a founding partner of an emerging markets trade initiative called “Trade Out of Poverty”. Aureos specialises in investing in small and medium-sized businesses in emerging markets, and was a member of UK Prime Minister David Cameron’s recent curtailed trade mission to Africa.
Trade Out of Poverty aims to improve access of all least-developed and low-income countries to international trade, calling for the removal of trade barriers, simplification of trade rules and investment in infrastructure links to boost trade. It is supported by an All-Party Parliamentary Group co-chaired by Rt Hon Clare Short MP and Rt Hon Hilary Benn MP (both recent Secretaries of State for International Development), Rt Hon Peter Lilley MP (former Secretary of State for Trade and Industry), Lord (Michael) Hastings (KPMG Global Head of Citizenship and Diversity) and Sir Menzies Campbell (former leader of the Liberal Democrats).Other backing has come from former UN Secretary General Kofi Annan, CAFOD (the Catholic Overseas Aid Development Agency), Oxfam, Sir Bob Geldof and Dr Mo Ibrahim.
Aureos manages $1.3 billion invested in small and medium-size businesses in over 50 countries. It specialises in providing expansion and buy-out capital to small and medium sized businesses across Asia, Africa and Latin America and has extensive experience of helping its investee companies to develop trade with both major developed economies and other emerging markets countries.
Sev Vettivetpillai, Chief Executive of Aureos, will join the Trade Out of Poverty Advisory Council and said in a statement on 25 July: “Aureos has first-hand experience of the challenges companies in developing markets face, and we know that even extremely successful businesses in developing countries can find it difficult to access regional and international markets.
“Aureos can help our investee companies to grow and develop international connections. The benefits can be significant: creation of new jobs, increased cross fertilisation of valuable ideas and access to vibrant growing markets. This leads to greater provision of essential goods and services. Most importantly for us, it creates shareholder value in our portfolios and increases the financial upside for our investors, whose continued support for investment in these markets is critical.
“However, for large-scale transformation more must be done on a national and international level.”
Peter Lilley said: “We are very grateful for the generous support we have received from Aureos, which will go some way to helping us achieve our objectives and enable the world’s poorest countries to trade their way out of poverty.”
Aureos runs 17 regional private equity funds through its network of 28 offices worldwide, by a team of over 90 investment professionals who combine world-class financial and operational expertise with unrivalled local knowledge and experience. Investors in Aureos funds include institutional investors, bilateral and multilateral development finance institutions, pension funds, sovereign wealth funds, fund of funds, family offices and foundations and high-net-worth individuals.
July 25th, 2011 by Tom Minney
The Global Impact Investing Network (www.thegiin.org), the leading non-profit organization dedicated to developing a successful impact investing industry, has named Luther Ragin, Jr. as its first CEO. He will start in September.
Impact investing aims to address social or environmental challenges while generating financial returns.
Mr. Ragin’s previous career including serving as Vice President of Investments at F. B. Heron Foundation in New York, where he has been an impact investing pioneer, building a world-class institutional investment portfolio that demonstrates the ability to achieve consistently strong financial performance with substantial social impact through investments. He has been an effective advocate of impact investing among investment peers and a wider audience, including through his appointment as a William H. Bloomberg lecturer at Harvard University and as a regular commentator and writer.
Antony Bugg-Levine, the Board Chair, said in a statement: “The GIIN Board of Directors and staff are thrilled to welcome Luther Ragin, Jr. Under its early leadership, the GIIN has successfully built critical industry tools, provided essential market intelligence, and established a hub for collaboration and action among a growing group of the world’s most important impact investors, whose investments are already beginning to benefit the planet and poor and vulnerable communities.
“We have planned since the GIIN’s inception to hire a CEO after first establishing this strong set of industry-building programmes. With his track record as a high-performing asset manager and industry builder, Luther brings tremendous credibility, experience, and insight that will enable the GIIN to take off from this base under his leadership.”
Current challenges require innovative investments
Mr. Ragin commented: “There can be little doubt that current global challenges, from climate change to poverty, require the mobilization of investment capital in new and innovative ways. The GIIN is uniquely positioned to steward the burgeoning impact investing industry into its next phase of growth.
Mr. Ragin led the F.B. Heron Foundation’s endowment since 1999, building a portfolio of more than $260 million, steadily increasing the impact investing allocation to more than 40% while maintaining competitive, risk-adjusted financial returns. Before that, he was CFO of the National Community Capital Association, a trade association of community-development financial institutions that provide access to capital in low-income communities in the United States. He previously served as CFO of Earl G. Graves Ltd. and spent 7 years with Chase Manhattan Bank, including as a London-based manager of Scandinavian banking relationships. Mr. Ragin is a current board member of several non-profit organizations, including Rockefeller Philanthropy Advisors, and has previously served on the boards of ABFE – A Philanthropic Partnership for Black Communities, The Classical Theatre of Harlem, the National Community Investment Fund, and the South African-focused Thembani International Guarantee Fund. He is also a Director of the Threshold Group, a multi-client family office. He received a bachelor’s degree in economics and a master’s degree in public policy from Harvard University, and is a graduate of Columbia University’s Executive Program in Business Administration.
The GIIN Board also praised current leadership, and Bugg-Levine said: “The dedication and effectiveness of the GIIN team under the leadership of directors Amit Bouri and Sarah Gelfand have transformed the GIIN from a compelling idea into a leading organization that has surpassed our ambitious goals. As a seasoned executive, Luther brings additional strength to the leadership team and better positions the GIIN to address the needs of the rapidly evolving impact investing industry.”
The formal launch of the GIIN was in September 2009, by President Bill Clinton, JPMorgan Chase Chief Executive Officer Jamie Dimon, Rockefeller Foundation President Judith Rodin, and USAID Office of Development Partners Director Karen Turner. Omidyar Network, one of the founding members of the GIIN Investor’s Council, led the GIIN’s global CEO search through its human capital team.
About GIIN
The GIIN is a global, not-for-profit organization dedicated to increasing the scale and effectiveness of impact investing. It builds critical infrastructure and supports activities, education, and research that help accelerate the development of a coherent impact investing industry. This work is informed by the GIIN Investors’ Council, a diverse, global membership group comprised of more than 40 leading impact investment institutions.
To serve the needs of the greater impact investing community, the GIIN also oversees the development of IRIS, a common vocabulary and framework for measuring and reporting the social and environmental performance of impact investments, and launched ImpactBase, a database of impact investment funds, designed to reduce search and transaction costs across the impact investing industry.
June 11th, 2011 by Tom Minney
Giant UK development finance institution the CDC Group has announced a radical new business plan after a review of its organization and activities, following media and political criticism. Chief changes for the leading private equity investor are a return to direct investing from a fund of funds approach, and focusing only on low and lower-middle income countries in sub-Saharan Africa and South Asia.
At the end of 2010, CDC group was invested in a portfolio worth £1.9 billion ($3.1 billion), according to its website www.cdcgroup.com, invested in 143 funds managed by 71 managers and these funds had invested into 930 portfolio companies in 70 different countries. CDC had started investing into funds in 2004 after selling off stakes in Actis and Aureos funds. Like other leading development fund managers it aimed to build capacity among African fund managers.
The change comes after the review in 2010 by the Secretary of State for International Development, Rt Hon Andrew Mitchell MP. A new CEO is to be appointed.
Direct investments and ESG
According to the new business plan, as outlined in a press release, direct investments will be 20% of the portfolio by 2015, and CDC will target businesses with high potential development impact and manage these investments in a hands-on way to gain more expertise. Debt investments will be up to 20% of CDC’s total portfolio by 2015, so that CDC can target frontier markets where investment infrastructure is underdeveloped. Small and medium enterprises are a key target and it will offer guarantees to help businesses to obtain credit, commercial bonds and trade finance. CDC will also explore the role of technical assistance to make capital more developmentally effective. It will aim to match all its funding with equal amounts of third party capital.
In future CDC will concentrate exclusively on the low- and lower-middle income countries in sub-Saharan Africa and South Asia where 70% of the world’s poor live. In lower-middle income countries, CDC will focus on regions and sectors of need where capital is scarce and will avoid sectors which are already attracting capital from other investors.
The group will step up standards of environmental, social and governance (ESG) at investee businesses and there will be independent valuations of the development impact of funds. It says it will “lead the way among DFIs on openness and accountability”. CDC will update its investment code regularly and disclose more information about the organization, its investee businesses and its partners.
Innovation in deals and “appropriate” pay
It will also set up a new innovative finance division to explore opportunities in exceptionally challenging investment circumstances, which need innovation in deal origination and the ability to draw on a wide range of financing approaches.
It will also change the way it pays staff: “Remuneration will be appropriate for a publicly-owned body whose purpose is poverty reduction. CDC must be able to recruit and retain people with the right approach and skills to deliver the company’s development mission. CDC will follow applicable FSA guidance and EU legislation so that variable performance pay will be largely deferred and based on long-term performance.”
Andrew Mitchell MP, Secretary of State for International Development said: “This is a bold and exciting new departure for CDC. The reforms will help them direct their capital better, fostering economic growth in countries which need it most. CDC will be better able to drive investment into areas currently starved of capital. It will become more nimble, flexible and transparent, able to influence and control the impact of their capital and measure its success in reducing poverty, not simply in turning a corporate profit.”
The action begins
The new business plan is already in action. CDC this year invested $30 million in funds helping provide long-term loans and guarantees to address an acute shortage of capital for green energy in developing countries. CDC is investing $30m in a new agribusiness fund in Africa focusing on Zambia, Tanzania, Malawi and Mozambique. A further $30m has been invested in basic African infrastructure such as toll roads, ports, railways and energy.
Richard Gillingwater, CDC’s chairman says: “These reforms deliver a more versatile and pioneering CDC. Our ambition is make the biggest difference possible to lasting development.”
According to a story on the leading website www.privateequityafrica.com, CDC currently has an African private equity portfolio worth £877million, which includes the £122 million it invested in new businesses in 2010. The investor additionally committed funds to 8 Africa-focused managers in 2010, including a maiden fund Catalyst Principal Partners I focused on East Africa.