The Sector

Featured Impact Investor: ACTIAM

ACTIAM is a trendsetter when it comes to impact investing. They launched they’re first institutional funds in microfinancing as early as 2007 and 2008: ACTIAM Institutional Microfinance Fund I and II respectively. The firm’s strength is making investment opportunities scalable in high-impact themes. With a track record of over 12 years in impact investing, our team demonstrates a sound performance.

Making Impact Investing Scalable

ACTIAM offers capital and knowledge and develop small initiatives into scalable investments. They monitor the progress, measure the impact, prepare reports and safeguard the robustness of the process. The firm is also active in the professional development of the sector. In 2018, ACTIAM was the co-author of the ‘PRI Impact Investing Marketing Map’ of the United Nations Principles for Responsible Investments.

Track record ACTIAM Financial Inclusion Fund (previously ACTIAM Institutional Microfinance Fund III -AIMF III)

The fund was launched in December 2014 and provides debt capital to MFIs (microfinance institutions). The fund capital committed by the participants amounts to €106.5 million and has a net asset value of €116.3 million (Q4-2018). The fund invests in 47 entities divided over 25 countries (Q4-2018) and achieves an IRR since inception of 3.8%, year-end 2018.The average maturity of the loans is 2.5 years.

The ACTIAM Financial Inclusion Fund applies the sector-specific responsible principles of the Principles for Investors in Inclusive Finance (PIIF) and achieved the highest rating A+ (2018).

The ACTIAM Financial Inclusion contributes among others to meeting the Sustainable Development Goal 1 (no poverty), Sustainable Development Goal 8 (decent work and economic growth), Sustainable Development Goal 9 (Industry, innovation and infrastructure) and Sustainable Development Goal 10 (Reduced inequalities).

The fund has provided 230,000 employees (2018) with (improved) access to funding; almost 80% of these employees are women and more than half of them live in rural areas.

Continually Innovating

ACTIAM launched its first institutional funds in microfinancing as early as 2007 and 2008: ACTIAM Institutional Microfinance Fund I and II respectively. Both funds have continuously outperformed the SMX Microfinance Index. As a thought leader in impact investing, they keep looking for new solutions for example, in the area of food and agriculture. Due to a growing world population and increasing prosperity, the demand for energy and food rises accordingly.

Please read their case study on impact investing about a loan to Khan Bank in in Mongolia.

Source: Actiam: https://www.actiam.com/en/investment-solutions/impact-investing/

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The Sector

Featured Impact Investor: Vital Capital Fund

Vital Capital Fund is a private equity fund with approximately $350 million in assets. The fund invests in developing areas, principally sub-Saharan Africa, in businesses and projects designed to enhance quality of life, and also offer substantial investment returns. The primary investment focus of the Vital Capital Fund is on the development of infrastructure, housing projects, agro-industrial projects, renewable energy, health care, and education. Among the fund’s investments are the Luanda Medical Center in Angola and WaterHealth International (Source: Investopedia (https://www.investopedia.com/articles/active-trading/090115/top-5-impact-investing-firms.asp)).

Impact Mission

At the core of every investment and decision they make at Vital is impact mission. The firm’s goal is to improve economic, personal and social well-being for low and middle-income communities in sub-Saharan Africa.

An Outcome Based Approach

Refining their focus, the firm has broken down their mission into four distinct but interrelated outcomes. They believe that investing in businesses that tackle these four broad themes will feed directly into tangible improvements in the economic, personal and social well-being of target populations.

Vital Essentials

Increased access to food, clean water, healthcare, housing and other essentials which are currently inaccessible (unaffordable or unavailable) to target communities.

Vital Employment

Increased quality skilled and unskilled job opportunities to improve economic well-being and social mobility.

Vital Capabilities

Increased local capacity and know-how which will result in sustainable, long-term improvement in well-being.

An Outcome Based ApproachRefining our focus, we have broken down our mission into four distinct but interrelated outcomes. We believe that investing in businesses that tackle these four broad themes will feed directly into tangible improvements in the economic, personal and social well-being of our target populations.

Vital EssentialsIncreased access to food, clean water, healthcare, housing and other essentials which are currently inaccessible (unaffordable or unavailable) to our target communities

Vital EmploymentIncreased quality skilled and unskilled job opportunities to improve economic well-being and social mobility

Vital CapabilitiesIncreased local capacity and know-how which will result in sustainable, long-term improvement in well-being

Vital InfrastructureImproved infrastructure to provide for safe, connected and sustainable environments which facilitate economic growth and improved well-being

Managing Impact

Translating their approach into practice, they have established an investment process that integrates impact considerations at every stage. Industry-standard benchmarks as well as proprietary tools help Vital to evaluate each investment in terms of its potential and actual, short- and long-term impact.

Download Vital’s Impact Reports here: https://www.vital-capital.com/impact/

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The Sector

Featured Impact Investor: S3IDF

The Firm

S3IDF uses its Social Merchant Bank Approach (SMBA) to provide entrepreneurs with three bundled services: leveraged co-financing, technology access and knowledge, and business development support. By tailoring the approach to local conditions and markets, S3IDF enables the poor access to employment, asset-creation and ownership opportunities, and basic services. Our project portfolio includes solar, biomass and biogas, water, and other technologies for small-scale industries.

S3IDF’s Perspective on Impact Investing

“Doing well while doing good.” This unofficial slogan of the impact investing community, which indicates that it is possible and expected to achieve both financial returns and social impact through investments into companies, rarely encourages discussion of what is truly meant by “doing well” and “doing good.”

At S3IDF they believe that too often impact investors fail to explore what financial returns are realistic given the complexity of certain types of social problems. Addressing complex issues in the world’s most difficult-to-serve communities simply costs more. Why?

Among myriad reasons are inefficient supply chains, weak infrastructure, ambiguous or counterproductive regulations and policies, and lower ability-to-pay and education levels of target consumers. Entrepreneurs that take on the challenge of delivering products and services under these conditions need more, sometimes significantly more, money, time, and support to achieve impact.

The issue is not that these entrepreneurs need more resources but that there are too few impact investors willing to trade market rate financial returns for additional high-value social impact. Until this changes, too many of the world’s most intractable problems will remain underfunded and unresolved.

S3IDF, as a conscientious investor, supports pioneering early-stage entrepreneurs that aim to improve lives and livelihoods in underserved communities. We recognize that in order to do so, entrepreneurs need to re-make markets to be more inclusive – a process that often involves trailblazing new business models and building out enabling infrastructure. The benefit is that impact is achieved on both the community level as well as on the market level, laying a strong foundation from which further development can be pursued and additional impact can be realized.

Accordingly, they assess entrepreneurs’ business models by considering their potential financial return relative to their expected direct impact on customers’ lives and livelihoods and their ability to confer other benefits within the local economy. We call on others to do the same. Together we can push impact investing to its next logical evolution to truly ensure that we are “Doing well while doing good.”

Source: https://s3idf.org/what-drives-us/?gclid=CjwKCAjw2uf2BRBpEiwA31VZj0tusXTwBoWw-eqekBzaal218_ZqXpdUvhp1B_pHd6GVSfFHsaRAixoCwLsQAvD_BwE

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The Sector

The Landscape for Social Impact Investing – a White Paper

Excerpt taken from the full report, available here: https://thesectorinc.ca/wp-content/uploads/attachments/The-Landscape-for-Social-Impact-Investing-a-White-Paper-Links.pdf

Introduction:

“Opportunity for Impact Impact investing is a term that has recently been introduced into the investment community. It describes a range of finance and investment approaches that have the goal of generating both financial return and benefit to society. In the past five years, the impact investing industry has grown tremendously. In 2010, global assets under management in impact investing were estimated to be approximately $50 billion and are expected to reach at least $400 billion by 2020 (Source: Ibid).”

“The impact investing market in Canada is taking root and poised for significant growth in the coming years, with promising signs for new opportunities. In mid-2012, TD commissioned a team from Purpose Capital and the MaRS Centre for Impact Investing to develop a white paper on the subject to provide investors with a summary of the key trends, issues, and opportunities around impact investing (Source: Ibid).”

What is Impact Investing?

A relatively new term, “impact investing” has been applied to a broad range of activities. The most widely cited definition describes impact investing as “investments intended to create positive impact beyond financial returns”(2) for society. Impact investors put their investments to work to address pressing social and environmental challenges. Some of the impact investing sectors that have gained popularity include:

• Clean technology financing: green infrastructure, alternative energy and energy conservation;

• Community economic development investments: investments in community-based initiatives such as affordable housing, Aboriginal-led businesses, and social enterprises;

• Microfinance: the provision of financial services, such as micro-lending, to undeserved populations;

• Social impact bonds: financing tool for initiatives in the social sector that blend public and private investment.

However the parameters, and the terminology surrounding the concept, continue to evolve. Figure 1 shows TD’s perspective on where impact investing fits within the spectrum of investment approaches:

Source: https://thesectorinc.ca/wp-content/uploads/attachments/The-Landscape-for-Social-Impact-Investing-a-White-Paper-Links.pdf

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The Sector

Featured Social Financier: RBC Generator

The RBC Generator is a $10-million pool of capital for investment in businesses that tackle social and environmental challenges, while generating a financial return.

What They’re Investing In

The RBC Generator aims to generate market, or near-market, returns by investing in Canadian for-profit businesses and third-party funds tackling social or environmental challenges. Investment opportunities will be evaluated based on their potential to deliver long-term financial return, as well as benefits in at least one of our four strategic areas.

Global demand for energy continues to grow, while rising greenhouse gas emissions risk destabilizing our climate. Innovative, energy efficient solutions are needed to drive down costs and reduce environmental impacts.

How They Invest

The RBC Generator makes debt and equity investments from $100,000 to $1 million through a flexible range of structures. They will also consider follow-up investments for organizations with proven scalability that require additional financing.

RBC is looking for organizations with unique business models and third-party funds that drive economic growth while helping to create a more sustainable future. Our goal is to provide organizations with early-stage financing to help them to build success and attract commercial financing in the future.

Investee Support

They want our investees to reach their maximum potential, and will provide them with appropriate support to meet their business and community goals.

  • Legal support
  • We will help investees establish affordable relationships with external legal counsel.
  • Financial advice and mentoring
  • Investees have access to a network of RBC advisors offering expert financial advice. We will also invite investees and prospects to take part in networking opportunities with successful businesses and investors.
  • Skills for running a high-growth company
  • Investees will have the opportunity to participate in accelerator programs for social entrepreneurs.

Impact Metrics

The impact of an investee organization should be quantifiable and reportable. RBC will work with successful investees to measure community impact. In addition to regular financial reporting, all investees must report on the impact their business is making, or will make, in one or more of the following areas:

  • Reduction in energy use
  • Reduction in greenhouse gas or other emissions
  • Improvement in water quality
  • Reduction in water use
  • Change in number of people employed
  • Change in value of wages and benefits paid

Bring it to Scale

They value organizations committed to scaling their operations and taking their unique approach mainstream. To succeed, investee organizations must have:

  • A strong idea, product or service combined with a unique business model
  • The right management expertise
  • The ability to attract prospective clients
  • A foundation of strong governance
  • A track record of success
  • Revenue

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