Impact Investing: Strategies for Mobilizing Private Capital for Ghana s Transformation Agenda

Transcription

1 Impact Investing: Strategies for Mobilizing Private Capital for Ghana s Transformation Agenda Edward T. Jackson A Lecture and Panel Discussion, The Mövenpick Hotel, Accra, October 20, 2015

2 Impact Investing: A Definition Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return Source: Global Impact Investing Network 2

3 Core Characteristics Intentionality to create a positive social or environmental impact A financial return on capital, or at minimum a return of capital A range of return expectations and asset classes Source: Global Impact Investing Network 3

4 Impact Investing: Example 1 Business Partners Limited financing of SMEs in South Africa, including BEE transactions, technology firms and green businesses Source: Business Partners Limited 4

5 Impact Investing: Example 2 Cadiz Asset Management High Impact Bond Source: Cadiz Asset Management 5

6 Impact Investing: Example 3 OPIC guarantee for PAMIGA loan fund to MFIs in eight African countries to support the purchase of home solar kits and micro-irrigation systems in rural communities Source: Overseas Private Investment Corporation 6

7 Impact Investing: Example 4 Danish Climate Investment Fund financing of the Lake Turkana Wind Farm Project (300 MW) Source: Danish Climate Investment Fund 7

8 Impact Investing: Example 5 Heirs Holdings and the Tony Elumelu Foundation s equity investments in M tanga Farms in Tanzania and Africa Skills Development Limited in Nigeria Source: Tony Elumelu Foundation 8

9 Mozambique Malaria Performance Bond: Example 6 $25 M pay-for-success contract that will provide impact investors with a 5% return if malaria is reduced by 30% in a pilot area of Maputo province. If the target is not achieved, investors receive only 50% of their principal and no interest. Risks and returns are shared by Nando s, Anglo American, the Coca-Cola Foundation, Dalberg and the Ministry of Health. Source: deveximpact Business Transforming Development 9

10 Impact Investing: Ecosystem Source: Harji and Jackson,

11 Mapping the Impact Investing Industry The Sterling Group USA MEXICO BRAZIL UK GERMANY NETHERLANDS CHINA (HONG KONG) INDIA KENYA SINGAPORE SOUTH AFRICA AUSTRALIA Source: Harji and Jackson,

12 Impact Investing in Ghana: Some Key Players 12

13 The Size of the Impact Investing Industry Source: Global Impact Investing Network 13

14 Total Assets Under Management by Sector Source: JP Morgan and GIIN,

15 Preferred Instruments and Investee Business Stage Source: JP Morgan and GIIN,

16 Changes in Allocations Planned for Current Year Source: JP Morgan and GIIN,

17 Challenges in Growing the Impact Investing Industry When evaluating government policies, respondents indicated that the most useful policies would be those that improve the risk/return profiles of the investments, either through credit enhancement or tax credits or subsidies Source: JP Morgan and GIIN,

18 Afro-Barometer for Investing for Impact Annual survey of how impact, responsible, Shariah compliant, green and social responsible investment funds include impact criteria in their investment process In 2014, the project surveyed 132 listed funds and 93 private equity funds or holdings, managing some US$ 67 B in assets, in South Africa alone The same year, the survey identified nine listed funds and 26 private equity funds engaged in IFI in Nigeria, and managing US$ 2.3 B; the most prominent are Heirs Holdings and RegCharles Finance and Capital Limited Source: Giamporcaro,

19 Number of investment funds Target Geography by Number of Impact Investment Funds Target Geography by # of Investment Funds East Africa West Africa South Africa Central Africa Source: Brouwer,

20 Most Popular Countries by Region for Impact Investment Funds Region of Africa Top 2 countries Number of Funds East Kenya 13 Uganda 10 Central CAR 2 DRC 2 Southern South Africa 11 Namibia 2 Western Ghana 10 Nigeria 7 Source: Brouwer,

21 Impact Themes of Impact Investment Funds Impact Theme Number of funds engaged (n = 85) Percent of total funds engaged Access to Finance % Access to Basic Services % Employment Generation % Environmental Markets and Sustainable Real Assets % Sustainable Consumer Products % Green Technology/ Cleantech % Source: Brouwer,

22 Risk and Financial Expectations of Impact Investment Funds Financial Target Number of funds (n=85) Percent of total funds Total value (in millions USD) Percent of total assets Average fund size (USD) Finance First (Risk adjusted marketrate of return) Impact First (Below risk-adjusted market rate of return) 64 (48) 75.3% $ 3, % 21 (15) 24.7% $ % $63.5 million $34.8 million Source: Brouwer,

23 Development Finance Institution Direct Investments by Sector in East Africa Source: Open Capital Research,

24 Moderating Risk, Optimizing Return: the Capital Stack Common Equity Preferred Equity Mezzanine Debt Senior Debt 24

25 Structuring a Blended Finance Investment Fund Source: Global Climate Partnership Fund 25

26 Mission-Aligned Exits Impact investing funds report high rates of success in achieving exits with market rate financial returns and preservation of investee impact mission Possible explanations include the fact that the impact mission is already baked in to the investee business model, as well as investment documents that permit or direct fund managers to consider social and/or environmental issues Source: Social Impact Initiative, Wharton Business School,

27 Social Impact Measurement IRIS: A catalogue of generally accepted metrics used by impact investors to measure social, environmental and financial performance of their investments GIIRS: Global Impact Investing Rating System of a fund or company s social or environmental impact Other systems and tools: Pulse, Social Return on Investment 27

28 Theory of Change: Example Source: Samans and Solheim, 2015b 28

29 Impact Investment Results Chain Segment 1 Segment 2 Segment 3 Impact Investor Investment Fund Product - Debt (Loans, Guarantees) - Equity and Quasi-Equity SME in Poor/ Emerging Region Employee Income Household Access to Education and Training Social Enterprise (e.g., Education, Health) Owner Income Access to Health Services Financial Services Institution (e.g., Microfinance) Services to Beneficiary (e.g., Borrower, Smallholder, Consumer) Family Nutrition Green/Social Infrastructure (e.g., Wind Farms) Environmental Benefits Revenue from Other Businesses Real Value of Family Assets (e.g., Housing) Source: E.T. Jackson and Associates Ltd.,

30 Implications for Ghana s Transformation Agenda Learn more about impact investment: e.g., advisory group, seminars, research Engage with private equity funds, foundations, DFIs, investment platforms Identify priority sectors (e.g., agriculture, renewable energy, health, water, education, housing, etc.) and call for proposals from impact investment funds and vehicles Use a range of policy and program instruments to catalyze impact investments in support of the Transformation Agenda 30

31 THANK YOU 31