Impact Investing News
- Calvert Foundation says all investors set to include impact investments in portfolios 9 March 2013
A major shift is coming in which all investors, individual and institutional, will commit at least a portion of their investable assets to social impact and investing in harmony with their values. Lisa Hall, President and CEO of Calvert Foundation (www.calvertfoundation.org), recently wrote in a blog post: “In 20 years we will look back and consider these past few years as the turning point in an economic movement”. She says she is seeing “a change in cultural norms and expectations”.
Investing for a return that is both financial and social, in other words impact investing, has gained popularity in the last few years, since about 8 years ago when it was still dubbed “community investing.” This remains a core part of socially responsible or sustainable investing, investing into organizations which help people to improve their lives through affordable housing, jobs, community services such as daycare and healthcare, and more, not into publicly-traded companies.
For example, Calvert Foundation offers impact investments so everyone from individual investors in increments of $20 to large corporations in as much as $20 million can invest in low-income communities and provide capital where there is none. The Community Investment Note (CI Note) pays a return of up to 2% to investors and directs capital to help finance affordable housing, charter schools, health centres, Fair Trade coffee co-ops, and job creation. She says: “These investments in the future of our country and our world are helping to transform the lives of individuals and families.”
The mood is changing in how investors think about risk, return and rewards. Calvert Foundation recently commissioned a study involving 1,065 financial advisors: 72% said they had interest in offering products that provide sustainable investment to their clients, while 38% expressed strong interest in being able to offer those products now. The advisers surveyed indicated that they were willing to recommend impact investments to one-third of their clients, dedicating 10%-20% of their portfolios to this type of investing. Based on these numbers, the study estimates a sustainable investment market of about 2.5% of advisers’ assets under management, or $650 billion. “The change that these dollars can make is both monumental and within the scope of our imagination, our expectations and our ability.”
Calvert works with financial advisors and multiple brokerage firms so investors can include the CI Note in their investment portfolios. Microplace (www.microplace.com), an eBay company started in 2007, helps investors purchase Notes online from as little as $20. Hall says: “We are also developing strategies to bring new investors into the fold. For example, we want to engage the millennial generation through partnerships with colleges and universities, social media outlets and networking events. We are also embarking on efforts to connect diaspora communities and enable individuals to invest in their countries of origin. Other special initiatives that we envision for the future include regional initiatives.”Business – Starbucks backs jobs
The business community is also getting more interested and large corporations are beginning to understand the power of uniting investment and social conscience. Starbucks Foundation in US has teamed up with the Opportunity Finance Network (OFN) to help create and sustain jobs with a $5m seed investment into Create Jobs for USA programme provides capital grants to select Community Development Financial Institutions (CDFIs), including Calvert Foundation, which provide loans to under-served community businesses. The goal of Create Jobs for USA is to bring people and communities together to create and sustain jobs throughout America.“Food to my soul”
An investor may see impact investing as just a part of the portfolio until she or he understands the social impact. Marta Santiago, a New Mexico resident and CI Note holder since 2005 said: “Calvert Foundation offered me a great opportunity to give food to my soul when it came to switching from Wall Street to an organization that is entirely devoted to helping the community, especially the needy, in a varied, fruitful, and meaningful manner.”
As US government grants for non-profits gets shut down, they turn to impact investors so they have funds to continue providing critical services. The Nonprofits Assistance Fund (NAF), a Calvert Foundation borrower, stepped in to offer emergency bridge loans, providing credit to cover cash flow delays for groups such as the Northern Lights Community School of Warba, Minnesota, a well-managed and incredibly successful school catering to students who have faced difficulties in traditional public school settings. Since 1980, NAF has provided over $75m in loans to more than 1,700 non-profits.
Calvert Foundation’s partner The Paradigm Project, also accessible to investors through our CI Note, invests in clean-burning stoves that reduce wood consumption and toxic smoke, saving village women in northern Kenya long and often treacherous journeys to collect wood. Although the stove is a solution to just one problem, it is part of restoring dignity to women for whom mercy has been in short supply.
Hall is President and CEO of Calvert Foundation. She has more than doubled the portfolio she managed from $76m to $190m while keeping losses under 1.2% during one of the most economically challenging periods in recent history. Follow Lisa on Twitter @LisaGreenHall - Jacana merges with InReturn Capital, launches $75m private equity fund for SMEs 29 January 2013
Entrepreneurs running small and medium-enterprises (SMEs) in West and East Africa stand to benefit from a new $75 million private equity fund. The announcement follows the news on 29 Jan that two long-term partners are merging.
InReturn Capital (www.inreturncapital.com) is a private-equity company based in Nairobi (Kenya) that invests in SMEs across East Africa, and it plans to close a legal merger in the first quarter of 2013 with London (UK)-based Jacana Partners (www.jacanapartners.com), a private equity specialist in SME investments, which has been building capacity in private equity managers in Africa.
The new partnership will offer a significant boost for East African entrepreneurs seeking value-add expertise and growth capital. InReturn was investing in transaction size of $0.5m-$1.3m and the partnership with Jacana will mean increased access to private equity investment, dedicated investment teams on-the-ground coupled with international private equity expertise and larger deal sizes of between $1m-$5m.
InReturn has rebranded as Jacana Partners. The two firms have been working together for 3 years. Jacana’s West African operations (previously Fidelity Capital Partners) rebranded in August 2012. This creates a leading pan-African SME private equity firm with pan-African coverage which will manage the new $75m SME fund expected to close later this year.
Jacana currently operates in 6 markets (Ghana, Kenya, Liberia, Sierra Leone, Tanzania and Uganda) and intends to move into 2 new countries with the new fund, possibly Ethiopia, Nigeria and/or Francophone West Africa. It is the only pan-African private equity company with a permanent commitment to the SME sector.
Jacana has invested over $20m to date in 20 portfolio companies employing over 1,300 people. In East Africa, 5 investments have been made to date in a stone quarry, an eye care centre, a supplier of tarpaulins to the relief sector, a serviced office provider and a logistics company and several other transactions are contemplated in the next few months.
Professor Njuguna Ndung’u, Governor of the Central Bank of Kenya commented in a Jacana press release: “East Africa is undergoing a period of rapid economic growth largely fuelled by the expansion of our small-to-medium sized enterprises – key generators of job creation and GDP growth. The merger being rolled out today brings scale to the financing of SMEs which will boost their contribution to East Africa’s economic growth. It is my expectation that we shall see more similar initiatives to scale up financing to SMEs that lie at the heart of development blueprints for governments in the region.’’Passionate about Africa’s entrepreneurs
Getting closer: Ezra Musoke (left) and Anthony Gichini (right) of InReturn Capital flank Simon Merchant CEO of Jacana Partners.
Anthony Gichini, Partner at InReturn Capital said: “The merger of InReturn Capital with Jacana Partners represents a big step forward in private equity investment for SMEs in East Africa. Jacana’s unique model combines international private equity experts with highly-experienced local teams, meaning our entrepreneurs benefit from strategic advice from international business experts as well as dedicated African investment managers on-the-ground who can add-value and provide hands-on management support. This combination is our winning formula which helps us build strong businesses and deliver superior returns.”
Simon Merchant, CEO of Jacana says: “Jacana Partners is a pan-African private equity firm that invests in entrepreneurs, builds successful SMEs and delivers sustainable financial and social returns. We do this because we are passionate about entrepreneurs as the key drivers of job creation and long-term economic development in Africa. Jacana is uniquely structured to overcome the challenges of private equity investing in SMEs in Sub-Saharan Africa. Combining internationally experienced private equity veterans with highly skilled teams on-the-ground, Jacana has the experience, knowledge and resources to structure great deals, grow sustainable businesses and deliver superior returns.
“By merging our African and European operations, we are consolidating our business into a single fund manager, operating under the Jacana brand. As well as investing the remaining capital from our existing funds, the new Jacana will deploy a new $75m SME fund that we are currently in the processing of raising from international investors.
“The new fund will allow us to significantly increase the scale and geographic reach of our operations and will be invested in SMEs in up to 8 countries in East and West Africa. We firmly believe that a unified Jacana operating under the unique Jacana identity is the optimal platform upon which we can fulfill our mission of building the best SME private equity team in Africa, creating sustainable jobs and supporting long-term economic growth.” - Social Stock Exchange to launch in London 14 September 2012
A London-based Social Stock Exchange (SSE) aims for launch in the second quarter of 2013. It plans to partner with a Recognised Investment Exchange to create an investment exchange authorised and regulated by the Financial Services Authority (FSA) for trading in securities of social enterprises and other social purpose businesses. The SSE team are building the trading platform, the pipeline of companies who wish to list, the market-maker and broker communities, and the community of impact investors and have offices in central London, UK.
The goal is to build a securities exchange that lists social businesses from around the world and attracts capital from individuals, private clients, family offices, foundations and institutional investors who are seeking both a financial and demonstrable social return. The target is to become the premier trading venue for social businesses wishing to raise risk capital and for social impact investors who wish to find global businesses that reflect their values.
The team brings together stock-exchange professionals, investment bankers and asset managers. Its offices are based in London Bridge, London UK. The exchange will be open to a wide range of retail investors, including tax-efficient schemes and personal pensions.
Target sectors for listings are smaller high-growth health, educational and environmental companies and also enterprises seeking to finance social and affordable housing, social transport, green and ethical consumerism, clean-tech, green-tech, waste, water, recycling, regeneration, education, public health, sustainable forestry and organic agriculture. It will also help enterprises that work with large numbers of poor (“base of the pyramid”) to help them build economic activity. It is firming up commitments from companies to list and from investment banks to work in partnership and as advisors.
Co-founder and CEO Pradeep Jethi told African Capital Markets News: “Many of the larger City brokers and law firms are working with us, as are social-impact auditors from the ‘big four’ down to smaller niche organisations.”
The SSE aims to become a deal-aggregation platform with global visibility aimed at impact investors across private wealth managers, family offices, foundations and institutions. Ordinary investors will also be able to pick and invest in SSE-listed social ventures, using traditional stock-broking services. Jethi explained: “The main advantage is that the social enterprise’s shareholder base becomes dominated by impact investors who share the mission of the company as well as its growth and financial prospects. By having an aggregated trading venue of social enterprises with common and high standards of regulation, governance and social reporting, this lowers the cost of search and cost of due diligence for investors and therefore provides the advantage of ultimately lowering the cost of capital for a social enterprise.”
The Social Stock Exchange was initially funded by the Rockefeller Foundation as part of their programme to develop global impact investing infrastructure, which also includes the Global Impact Investing Network (GIIN), BLabs/BCorporations, the IRIS impact metrics taxonomy, and GIIRS (the Global Impact Assessment Ratings System). Partners such as international banks and foundations, including J.P.Morgan, Prudential, Deutsche Bank, Triodos Bank, UBS, Calouste Gulbenkian Foundation, Doen Foundation, Ford Foundation and W.K. Kellogg Foundation, are committed to promote impact investing and have contributed research or direct interventions to stimulate the impact investing marketplace.
The SSE company was registered in 2007 and the earliest work commenced with nef (New Economics Foundation), Community Action Network and Office of the Third Sector (now Office of Civil Society).
It raised £250,000/$500,000 from the Rockefeller Foundation; completed extensive market scoping and testing work in 2008, and did research which showed that social enterprises and social investors were positive to the SSE concept. It continued to build support and networks until 2012 when it raised £2m in a second round of funding from a syndicate of strategic investors to provide the working capital to build, market and launch the exchange and to cover up to 6 years of operating costs.
- Impact Exchange (iX) gets closer to launch on Stock Exchange of Mauritius 8 September 2012
A partnership between the innovative Stock Exchange of Mauritius and social enterprise Nexii is making great progress towards setting up the Impact Exchange (iX) board on a globally recognized stock exchange. This will enable businesses that have social impact to list debt and equity securities, as allow impact investment funds to list. According to a report on Forbes.com, so far 6 companies have gone through the iX board listing process and the board expects to start trading in the third quarter of 2013.
SEM is a member of the World Federation of Exchanges and one of platforms for trading debt, equity and derivatives, and it can also trade and settle in many currencies, including USD, GBP, Euro, Mauritian Rupee. SEM is regulated by the world-class Financial Services Commission of Mauritius and has automated trading and settlement services. It is a recognised stock exchange by Her Majesty’s Revenue and Customs in the UK, and an approved stock exchange by the Cayman Islands Monetary Authority. SEM’s data is live on all major international data vendors – including Bloomberg, Thompson Reuters, Financial Times, Factset and I-Net Bridge – provided significant global access for listed companies and investors alike.
Nexii was created by Tamzin Ractliffe, a South African pioneer in impact investing marketplaces. The new marketplace is aimed at the retail market, so that any investor will be able to buy and sell shares not just qualified specialist investors. Ractliffe initially set up a platform for unlisted securities 12 years ago. In 2009, she worked with the Rockefeller Foundation to bring together a group of social entrepreneurs/impact investors interested in creating social stock exchanges and marketplaces. She spent 18 months researching the market and, in May, 2011, she received formal regulatory approval from the FSC to launch the iX.
For all of the 6 companies that will launch the iX, this will be their first listing. Forbes.com correspondent Anne Field quotes Ractliffe: “Going to the market for money is not something they’re used to. The process of encouraging companies and getting them to understand the value of being part of a marketplace – that’s been quite a lot of work.” To be eligible for listing, companies need a clear social or environmental mission and need to have in place a reporting system for non-financial impact. The also need to work with intermediaries, known as Authorized Impact Representatives (AIRs), who are accredited to NeXii. Nominated Impact Advisors help the social enterprise during the listing process. Once the company is listed, Impact Verification Agents work with the business to make sure it meets ongoing reporting requirements and audits impact reports. Ractliffe says she’s accredited a handful of impact advisory firms so far.
The process can be costly and Ractliffe says she is discussing creating a technical assistance advisory fund that would help finance the cost of the listing process with “a number of development financing institutions”. This fund would also have a financial and impact return.
The new stock exchange was launched in May 2011 at the first Social Capital Markets (SOCAP) Europe Conference at the Beurs van Berlage in Amsterdam – the site of the creation of the capital markets where the first stock was traded in 1602.
According to the NeXii website: “We believe that this board is a powerful tool for facilitating the flow of investment capital to social businesses. The iX represents the next generation of stock exchanges and how these established financial institutions can help transform the capital raising opportunities available to social businesses. The iX provides mission protection for listed social businesses. This means that your reputation as a social business is maintained even though you are issuing public securities. The iX is fully committed to all stakeholders in the impact capital market and it is an effective platform to coordinate information, build intermediary activity and enable analyst coverage of impact investments. The iX is how we connect social businesses to public capital and mainstream investors to change.” - Uganda’s power distributor Umeme says it plans Nairobi and Uganda IPOs this year 12 July 2012
Uganda’s only power distributor, Umeme, said it plans to raise capital to invest in Uganda’s electricity sector through an initial public offering (IPO) on the Ugandan and Nairobi securities exchanges later in 2012. Umeme is a distribution company and is 100% owned by private equity firm Actis, according to this report on Reuters.
The news came on 6 July at the switching of 5 turbines to add 50MW to the power grid as part of the $860 million Bujagali 250MW hydropower project, one of Africa’s largest power schemes. Umeme has a 20-year electricity distribution concession. Managing director Charles Chapman says the company has opted for the IPO as electricity is now available – Uganda had been suffering power cuts before Bujagali capacity was added – and there was agreement on regulatory targets.
The company would not say how much it hopes to raise and has not finalized plans for the IPO, but Reuters suggests it could be 20% of the shares. The report quotes Chapman: “The initial public offering (IPO) will support Umeme’s capital raising initiatives to finance the continued development of the electricity distribution network, including projects such as prepayment metering and energy loss reduction. We believe that Umeme will be stronger, more transparent and accountable with the input of our customers and employees as shareholders.”
He adds that customers are up to about 460,000 in 2011 from 354,839 in 2009. After power sector unbundling, power in Uganda is generated by the Uganda Electricity Generation Company and transmitted to Umeme by the Uganda Electricity Transmission Company.
According to this blog story, Umeme has already put in its application to the Capital Markets Authority in Uganda and has appointed Stanbic Bank (Uganda) as Transaction Advisor and African Alliance (Uganda) as Sponsoring Broker. Writer Angelo Izama comments: “The company is a safe investment given its monopoly and demand from customers. Many who worry about the risks it faces will look to political risk something to which we will return. Suffice to say that a great degree of the risk will likely be offset when the company lists given the divesting of its ownership to locals.”