MARCH 20, 2013 • TIM FREUNDLICH
Financial advisors take note: your impact investing offerings will soon define whether you are ahead of the curve or whether you will be trying to catch up in years to come. JP Morgan’s recent Perspectives on Progress report, released in partnership with the Global Impact Investing Network (GIIN), found that impact investing among the fund managers interviewed will grow 12.5 percent to reach $9 billion in 2013.
But it’s just the sector’s expected growth that’s important, it’s how the shifting mindset of clients is already changing the landscape for financial advisors.
Last year’s Gateways to Impact survey of financial advisors found that nearly half of them already have clients engaged in sustainable investing, while 72% of advisors expressed interest in recommending sustainable investments to their clients.
“We’ve seen firsthand the growing interest in investments that have both financial and social ROI,” says Kathy Leonard, a financial advisor with UBS Financial Services and head of the Boulder, Colo.-based Leonard Social Investment Group,. “Impact investing has emerged as the dominant global trend that will drive future financial market opportunities.”
While the term “impact investing” is relatively new, it’s based on more than 40 years of evolution in socially responsible investing. Impact investments are investments made into organizations and funds that generate measurable social and environmental impact as well as financial returns.
Going beyond the definition, impact investing is about investor intention to create real and measurable positive outcomes for the world. As individuals seek “blended value” investment options that combine economic and social value creation, and as fund managers develop track records that support the claim of a range of positive outcomes including––but not limited to––market rate returns, impact investing is poised to attract significant capital going forward.
To successfully direct a portfolio of investments to achieve its full potential, investors must do two things:
• First, they and their wealth managers must reconceive the overall investment strategy to allow for consideration of more than just financial performance.
• Second, investors need a more comprehensive understanding of, and access to, the array of investment instruments available to them to construct their portfolios.
For financial advisors who are ready to incorporate impact investing, here are some tactical ways to get started:
Become more knowledgeable about the field. Several resources are readily available, including:
• The Global Impact Investing Network (GIIN) is a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. Their website includes an online impact investing resource center that features research, news clippings, events, useful links, and GIIN publications about impact investing.
• The ImpactAssets 50 is a screened roster of private debt and equity fund managers offering impact investment strategies across a variety of asset classes, issue areas, and geographic areas. The IA 50 is available online at www.impactassets.org and focuses on filtering for track record and commitment to impact investing at the firm level and is a starting place for investors and their advisors who are looking for credible firms across thematic areas of impact investing.
• Impact Investing: Transforming How We Make Money While Making a Difference, co-authored by Jed Emerson and Antony Bugg-Levine, is the first book on the topic of impact investing and charts the growth of the field while explaining the “blended value” proposition for investors, funders, and entrepreneurs.
Know what is available to your clients:
• Find out if your firm offers sustainable investment products. These may be ESG (environmental, social, governance) or socially responsible mutual funds, community development bond funds, or Calvert Foundation’s Community Investment Note.
• Identify a community development bank in your area. Using these institutions for basic checking and savings can be an easy first step to put a client’s money to work for positive local impact.
• For clients with philanthropic capacity, there are donor-advised funds such as ImpactAssets’ Giving Fund that specialize in impact investing and offer a range of private debt and equity impact investment options. These funds interface directly with financial advisors, allowing them to maintain management of assets.
• Talk to peers who have been helping clients incorporate impact investing into their portfolios and learn from their experiences.
Talk with your clients:
• By asking your clients about their interests and overall portfolio objectives you can determine if impact investing is a good fit and if so, what kinds of products will align with their interests.
• Discuss your client’s comfort with liquidity or lack thereof, intended impact area and/or geographic focus, and their expected risk and return to help narrow the field of appropriate impact investments.
Rather than investing capital for simple financial returns, an investor engaged in pursuit of multiple returns will need to be directly involved in working with his or her asset managers to ensure that their portfolio reflects the desired impact strategies. And asset managers and advisors will increasingly provide leadership to their clients in constructing solutions that meet this appetite.
Impact investment approaches are gaining momentum and will be the baseline for the next generation of investors. This year that will see impact investing expand beyond high-net-worth investors and have a greater presence among mainstream retail investors.
Financial advisors who are receptive and informed when clients seek a broader definition of ROI will be positioned to take advantage of this growing market opportunity and will go a long way in ‘future proofing’ their client relationships.
Tim Freundlich is president of ImpactAssets, a nonprofit financial services firm that increases the flow of capital into investments that deliver financial, social and environmental returns. Its impact investment strategies, donor-advised fund and knowledge resources provide a dynamic platform for wealth managers and the clients they serve to advance social or environmental change through investment. ImpactAssets seeks to shed light on—and drive capital to—the field’s most promising organizations and initiatives, helping to build the field of impact investing.
By SPECIAL CORRESPONDENT Rwanda Today
The microfinance institutions (MFIs) sector registered growth last year as a result of increased issuance of loans last year compared with 2011.
The sector’s growth is also attributed to impressive performance of Saccos that were launched in every sector as a campaign tool to have the rural masses access financial services while widening financial inclusion of the population.
The microfinance sector in the country comprises of 490 institutions of these 11 are limited companies.
According to the latest monetary policy and financial stability statement, the assets of MFI sector increased by 28.8 per cent from 2011 to 2012.
In 2011, the assets in the sector were worth Rwf77.42 billion while in the following year, the value of assets rose to Rwf99.69 billion.
The gross loans and deposits that were the main drivers of the growth increased by 44.7 per cent and 18.1 per cent moving from Rwf40.72 billion to Rwf58.9 billion and Rwf45.8 billion to Rwf54.15 billion respectively in same period.
The monetary statement also indicates that the Umurenge Saccos recorded a growth of 25.8 per cent in deposits, reaching 28.2 billion in 2012 from Rwf22.4 billion the previous year.
Loans for the Saccos also increased to 13.8 billion in 2012 from Rwf4.8 billion in 2012.
“Similarly, the financial soundness indicators of the microfinance sector indicated a significant improvement,” said Claver Gatete, then Governor of the National Bank of Rwanda, while presenting the monetary statement.
The non-performing loans ratio to the measure of asset quality also reduced from 12 per cent in 2011 to 8.5 per cent in the previous year.
The improvement in NPLs by the MFI sector, was mainly due to the good performance of the Saccos that recorded a NPL rate of 5.3 per cent in 2012 from 5.6 per cent in 2011.
The NPL for other MFIs besides the Saccos stood at 9.5 per cent as of December 2012, decreasing from 12.9 per cent in December 2011.
“The Saccos realised an impressive progress in terms of building their own premises and equipping themselves with necessary IT skills paving the way for their computerisation and consolidation process,” added Mr Gatete.
Besides the MFIs, the non-bank financial institutions comprised of insurance and pension sectors and they, too, registered significant growth.
Grameen Koota raises $10 million USD (or 532 million INR) in its 3rd round of equity funding lead by Creation Investments
Grameen Koota raises $10 million USD (or 532 million INR)
in its 3rd round of equity funding lead by Creation Investments
February 27, 2013 – Bangalore, India: Grameen Financial Services Pvt Ltd (GFSPL), popularly know as Grameen Koota today announced its third round of equity funding of $10 million USD (or 532 million INR) lead by Creation Investments Capital Management (Creation Investments Social Ventures Fund II, L.P. USA. Two current investors also invested in this round – Incofin Investment Management (IIM Impulse 2, Mauritius) and MicroVentures (MVHS.p.a, Italy and MV SICAR, Luxembourg).
GFSPL has been working with poor and low-income households for the past 13 years and has provided these households with diverse financial and developmental services that caters to all life-cycle needs of its over 350,000 clients spread across three states of Karnataka, Maharashtra and Tamil Nadu. The equity funding comes close at the heels of the instiution receiving $3.9 million USD (or 210 million INR) in debt funding through unsecured, redeemable, non-convertible debentures (NCDs) from Global Commercial Microfinance Consortium II B.V., Netherlands, a fund managed by Deutsche Bank.
Speaking on the new equity infusion, GFSPL Managing Director Suresh Krishna, said “The newly infused funding will add to the growth of the company and help Grameen Koota achieve its target of reaching out to over 10 lakh poor and low income households. The capital will also strengthen our vision towards extending and expanding our loan operations to other neighbouring states.”
GFSPL understands that micro-lending cannot happen in isolation and therefore has rigourously engaged in social development activities including entrepreneurial education, health, sanitation, etc. Commenting on the equity raised, Founder-Chairperson, GFSPL Vinatha Reddy, added “Ours has been a constant endevour towards being a well run MFI with a firm social purpose and we are happy that existing investors have reposed their faith in Grameen Koota’s work by increasing their stake, as we welcome Creation Investments, our new investor. ”
For Creation Investments, the equity funding is just the beginning of a long relationship with GFSPL. Speaking about the capital infusion, Creation Investments co-founder/director Ken Vander Weele said “We are excited in partnering with a leading MFI like Grameen Koota that has brought about innovative loan products and are constantly evolving themselves to cater to the financial needs of the poor in India.“
Paolo Brichetti, Chairman of MicroVentures, a veteran in the social capital investment space in developing countries such as India, believes that the equity raised will only benefit the company and further enhance its activities towards accomplishing its vision. He said, “Our relationship with Grameen Koota has deepened a further notch and we are glad that we continue to back an MFI like Grameen Koota that continues to remain a benchmark within the Indian Microfinance sector.”
Speaking on the follow-on investment in GFSPL, Aditya Bhandari (Regional Director, Incofin South Asia) stated “Grameen Koota’s instant brand recall amongst clients and its strong focus on client relationship makes it as one of the best MFIs in the world. We are excited to once-again support GFSPL in its vision to create long term sustainable value for all stakeholders (clients included).”
About Grameen Financial Services Private Limited:
Grameen Financial Services Private Limited (GFSPL), a microfinance institutions headquartered in Bangalore, popularly known as Grameen Koota has over 350,000 clients with 1300 employees working out from 168 branches in Karnataka, Maharashtra and Tamil Nadu. It had loan outstanding of about $84 million USD (or 4.5 billion INR). Being socially focused Microfinance Institutions; Grameen Koota has over a decade of experience in micro lending towards Joint Liability Groups formed exclusively of women from poor and low income households with other support products like Water, Sanitation, Health Care, Energy Efficient Cook Stove etc. For more information, visit www.gfspl.in
About Creation Investments Capital Management
Creation Investments is an alternative investment management company with over $100 million in assets under management. Named a leading Impact Investment fund manager by ImpactAssets50 in 2011, Creation Investments Capital Management, LLC currently manages 4b Capital Fund A, L3C, Creation Investments Social Ventures Fund I, and Creation Investments Social Ventures Fund II, with a focus on private equity and control equity investments in Microfinance Institutions, Small-and-Medium Enterprise lenders, BOP Financial Services Providers, and other Social Ventures in emerging markets seeking to maximize financial and social returns on investment. Investments in microfinance and social ventures create opportunities through access to capital and needed products and services for those living in poverty to engage in small-business activity, income generation, and significantly impact those living at the bottom of the economic pyramid.
The MicroVentures initiative was started-up in Italy by a group of private social entrepreneurs with previous experience in the field of social venture capital and business cooperation with the Developing Countries. The initiative has gradually expanded into an international network of affiliates, which includes the Bangalore-based MicroVentures India (specialized in providing debt to indian MFIs), Bina Artha Indonesia and MicroVentures Investments SICAR, a specialized investments fund based in Luxembourg, which provides equity and debt financing to promising Microfinance Institutions in Asia and Latin America.
About Incofin Investment Management
Incofin Investment Management (www.incofin.com) is a specialized fund management company with more than 10 years of experience in microfinance and currently more than 350 M EUR assets under management. Incofin IM manages the following funds and facilities: Incofin CVSO (40 M EUR), Impulse (46 M EUR), Volksvermogen (10 M EUR), VDK (75 M EUR), Rural Impulse Fund I (30 M EUR), Rural Impulse Fund II (120 M EUR), BIO (10 M EUR) and Fair trade Access Fund (20 M EUR). Investors are mainly Western Europe and US based, including ~50% public investors (DFIs such as IFC, KfW, EIB, FMO, BIO etc) and ~50% private (institutional investors such as banks, pension funds etc). The total investment portfolio includes over 100 MFIs in more than 44 countries around the world. Incofin IM has a strong track record, having executed more than 566 transactions since 2003.