Moving Assets Into the Future: A closer look at Impact Investing Funds Pt. 1
Moving Assets Into the Future: A closer look at Impact Investing Funds Part 1
The previous installment of this series introduced the fundamentals of impact investing, what it is, how it works, what it means and what its implications are. This two-part series will include a breakdown of six various Impact Investment funds, their strategy, their investments, and their successes. These examples demonstrate the potential that Impact Investing can have, both financially and socially.
Sunfunder Beyond the Grid Fund
The Beyond the Grid Fund, managed by Sunfunder, specializes as a financial intermediary for companies working in the ‘off-the-grid’ solar energy industry. The $47M fund is motivated by providing energy solutions to the 2.5 billion people still lacking safe and reliable electricity. Investing primarily in sub-Saharan Africa, India, and the Pacific’s Sunfunder hopes to speed up the current rate of energy investments, which are both coal based and which by 2030 will still leave over one billion people without reliable electricity.
The fund is organized by dividing investments in line with targeting the three distinct end users:
1. Pico-Solar Distributors and Suppliers (0-10W Solar)
Sunfunder in this instance invests (by offering corporate loans) in companies that offer solar solutions for small energy needs, such as simple lighting and mobile phone charging. One of these companies is Greenlight Planet, providing solar lanterns and home systems to over 27 million people, in over 50 countries.
2. Pay-as-you-go Solar Home Systems (0-1kW Solar)
These home systems are used to generate electricity for multiple lights and various appliances. In 2016 Sunfunder created a Structured Asset Finance Instrument*, for SolarNow, a Ugandan producer of modular solar home systems.
3. Commercial, Industrial, and Micro-Grids (1kW-1MW Solar)
These kinds of electricity solutions offer full electricity access for a multitude of homes and businesses. Sunfunder offers the necessary project and construction financing for these large-scale developments. Quest Works, for example, an engineering, procurement, and construction firm focuses specifically on delivering solar rooftop systems to Nairobi, usually to credible businesses such as education or hospitals.
Sunfunder’s success is measured through two metrics: how many people have gained access to electricity, and how significantly CO2 emissions have been reduced. 4.5 Million people have gained improved energy access and 412,000 tonnes of CO2 have been mitigated due to Sunfunder’s investments.
Founded in 2007, Leapfrog invests in financial & healthcare services to low-income population primarily in Africa and Asia. With investments ranging from $5-50 Million, the private equity firm focuses on small to medium-sized businesses seeking growth, profit, and social impact. As a private equity firm, Leapfrog will hold investments from four to seven years, exiting through IPO, trade sale, or management buyback.
One of these investments was into Express Life, founded by a Ghanaian entrepreneur in 2007. In 2012 Leapfrog purchased a $5.5M majority stake in the company, which provided health insurance in Ghana, which at the time was a severely underdeveloped industry. With less than 2% of the population having coverage, Express life needed to improve its operations, management, product offerings, and sales force to capitalize on the prospective growth of the industry. Leapfrog and Express life worked collaboratively to attain various goals; such as a new senior management team, simpler life insurance models, and expanding from 42 agents to 251 by 2013.
By the time the stake was sold to Prudential (UK’s largest insurer) in 2014, Express Life had experienced massive growth. Express Life grew from 68 full-time employees in 2012 to 320 by the end of 2013. In the same period, revenue grew by approximately 400%. More importantly, the company was able to provide its now 860,000 customers with monthly rates as low as 70 cents, for health and life products sold via mobile phone.
It should be noted that there was careful consideration granted towards the sale of Express Life. Leapfrog analyzed Prudential’s ability to recognize the social impact of Express Life, as well as their resources to facilitate its continued growth.
Pearl Capital Partners
Pearl Capital Partners independently manages assets on behalf of 3 separate funds: the $25M African Agricultural Capital Fund, the $5M African Seed Investment Fund, and the $9M African Agricultural Capital. Pearl invests between $2.5M and $250.000M in growing small to medium sized agriculture businesses by using both equity and debt investments for social impact and financial returns. The fund has successfully expanded local business in the region to the benefit of the community, whilst performing financially well. Currently, its African Agricultural Capital Fund targets a return of 15% annually compounded. The following are three examples of positions held within Pearl Capital:
Bee Natural Uganda collects honey from local farmers around the West Nile Region, processes, packages and sells the final product over the East African Market. Pearl’s investment has been used to purchase additional processing equipment and has thus been able to increase honey production to more than 100 MT per annum, becoming the largest processor in East Africa.
In 2007 Pearl Invested in Western Seed, a Kenyan seed developer, marketer, and distributor. The investment has allowed Western Seed to embark in a serious capital expansion program, specifically regarding seeds for maize. Currently, the company employs over 200 people and supplies 200,000 smallholder farmers in Kenya, whilst additionally exporting to Uganda, Rwanda, and Tanzania.
Africado was established in 2007, producing avocados in West Kilimanjaro in Northern Tanzania, and exporting to the EU. Pearl Capital financed Africado’s start-up as well as the first two years of operations.
In 2009, Africado successfully raised additional capital from the Norwegian Development Finance Institution, NorFund. This investment enabled the business to complete the development of its 110-hectare nucleus plantation and its packing-house. Africado has also established a contract farming scheme which will benefit 3-4,000 small-scale farmers covering a total of at least 200 hectares.
Thus far companies from the energy, insurance, and agriculture industry have been discussed. Additionally, their investment efforts have been directed towards the African continent. In the continuation of this article, the Asset Management firms in question operate in the tech, education, and real estate industry, whilst the specific case studies will regard the North-American Continent.
Structured Asset Finance Instrument (SAFI): a detailed outline on this specific financial vehicle can be found on the following site: https://sunfunder.com/news/syndication