Emerging Market Private Debt

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This is a female-founded Fund Manager who seeks to generate competitive financial returns PLUS positive economic, social and/or environmental impact by providing financing to Small and Medium Enterprises (“SMEs”) in very select high-growth developing economies with stable political climates and reliable legal systems.

Why? – The Importance of SMEs

SMEs play a major role in the world economy, particularly in developing economies, where micro-enterprises and small-scale enterprises account for the majority of firms and a large share of employment and, accordingly, are believed  to be the “engines” of job growth.

The Problem – Access to affordable capital

SMEs are at a natural disadvantage to larger firms in accessing debt finance, due to various factors such as: 

  • asymmetric information
  • higher transaction costs
  • under-collateralization
  • limited credit history
  • and/or lack of skills to produce sophisticated financial statements

Additionally, in many developing countries, the global economic and financial crisis in 2007-2008 exacerbated the financial constraints experienced by SMEs.

The Opportunity – A compelling supply-demand mismatch

The Manger believes the underserved nature of such a large segment of the global economy, coupled with a strong demand for capital from the SMEs themselves, has created significant opportunity for investment. Because of the current investing environment, they believe that SMEs can offer attractive investment terms in the form of…

  • current cash yield
  • deferred interest and equity warrants
  • Plus more attractive security features in the form of loan covenants and quality collateral. 
  • Additionally, as compared to larger companies, SMEs often have simpler capital structures and carry less debt, thus aiding the structuring and negotiation process and allowing for greater flexibility in structuring favorable transactions. 

The Approach – Boots-on-the-Ground Investment Partner Model

The Manager’s unique boots-on-the-ground Investment Partner model is the primary differentiator, providing investors with…

  • lower risk access to the private investment opportunities available in developing economies
  • boots-on-the-ground to mitigate idiosyncratic local market risk
  • “double” underwriting to ensure adherence to risk standards and specific client mandates
  • emerging market exposure without the volatility of public markets 
  • comprehensive diversification such that no single macro-economic factor significantly affects the portfolio

The Fund Manger believes the investment opportunity to provide growth-stage financing to SMEs is significant, and with their Investment Partner model, the ability to scale is equally significant. They currently utilize 12 Investment Partners but they have the ability to add partners as opportunities arise in other countries and/or regions. In accordance with a risk management philosophy which emphasizes a comprehensive approach to investing and asset management, Investment Partners’ strategies are tailored to the characteristics of private financing of SMEs in developing economies. This strategy brings the benefits and diversification of a fund-of-funds, but, with greater ongoing oversight, customized investments and without the additional layer of fees.

Impact Performance Goals

100% of their loans and/or invested companies meet top-down Environmental, Social & Governance (ESG) screens and key benchmarks, including…

  • Aligned with the UN’s Sustainable Development Goals
  • Conform to the IFC Exclusion List
  • Meet local and international laws and respective practices
  • In compliance with local environmental, labor, health, safety and business laws
  • Represent in writing their company’s ongoing commitment to ESG practices
    • Environmental practices such as: energy savings, waste reduction and water conservation
    • Social policies for fair hiring, compensation, maternity leave, community service and corporate donations

Plus, 100% of their borrowers commit to identify and track various bottom-up impact metrics, as defined by the GIIN’s Impact Reporting and Investment Standards (IRIS) metrics that all track to at least one of the United Nations Sustainable Development Goals (UN SDGs)

UN Sustainable Development Goals

As of 9/30/20, this manager’s borrower companies have historically mapped to 14 of the 17 SDGs, including:

  • SDG 1: No Poverty
  • SDG 2: Zero Hunger
  • SDG 3: Good Health & Well-Being
  • SDG 4: Quality Education
  • SDG 5: Gender Equality
  • SDG 7: Affordable & Clean Energy
  • SDG 8: Decent Work & Economic Growth
  • SDG 9: Industry, Innovation & Infrastructure
  • SDG 10: Reduced Inequalities
  • SDG 11: Sustainable City & Communities
  • SDG 12: Responsible Consumption & Production
  • SDG 14: Life Below Water
  • SDG 15: Life on Land
  • SDG 17: Partnerships

The Track Record

Since launching their strategy in June 2013, and as of 9/30/20*, they have… 

  • deployed over $1.38B in private debt (including trade finance & term loans)
  • In 4 regions around the globe
  • in 37 developing economies
  • to 96 SMEs 
  • supporting 42,228 permanent jobs 
  • with zero default losses
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Additional Resources

  • Manager Name & Website – Upon Request
  • Pitch Deck – Upon Request
  • Term Sheet – Upon Request
  • Full Access to Data Room – Upon Request
  • 2019 Sustainability & Impact Report – Upon Request
  • Manager’s Network of Boots-On-The-Ground Investment Partners – Upon Request

Emerging Market Trade Finance

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This Fund manager is focused on facilitating trade finance by making short term private loans to private growth stage companies who are committed to responsible, sustainable management of their companies and to creating positive, measurable impact in their communities. The manager’s objectives are to provide current income, capital preservation and modest capital appreciation primarily through providing trade finance facilities to established, growth stage, middle market enterprises through a global network of institutional class investment partners in carefully selected developing economies where access to affordable capital is significantly limited. The shortage of capital helps create meaningful opportunity to generate competitive risk-adjusted returns and positive impact.

Investment Process

The manager employs a disciplined, scalable investment process in its goal to identify appropriate countries, access a robust pipeline of highly selective investment opportunities, and effectively manage risk.  Designed to identify countries with strong growth fundamentals, favorable legal and political frameworks, and unrestricted capital access, target countries are selected through proprietary top-down macroeconomic analysis, augmented with bottom-up expertise from our local market origination partners.  

Origination Partners

Origination partners have been carefully selected based on their demonstrated track records, years of experience in their asset class, independent risk controls and established networks in their specific regions, countries and local markets.  

The Portfolio

The portfolio will consist primarily of directly originated trade finance facilities for established, sustainable private companies in need of growth stage financing, who are also committed to creating positive impact in their communities.

Understanding Trade Finance

“Trade is the lifeblood of the world economy and a key driver of global integration, helping small and medium enterprises (SMEs) to grow and create jobs. Trade finance is the engine of an estimated $16 trillion in annual global commerce and is fundamental to the movement of goods at all stages of the supply chain, especially in emerging markets.”

Manager Overview

  • Track record since June 2013
    • $660 million in Trade Finance transaction (as of 6/30/20)
    • 56 Small & Mid-Sized Businesses supported
    • 22 Developing economies
  • Investment Partner Model
  • Comprehensive Diversification
    • Across Regions
    • Across Countries
    • Across Sectors
    • Across Investment Partners
  • Short Duration
    • Maturities less than 1-year
    • Average Duration ~0.33 years
  • Good Liquidity
    • 1-year Lock & 25% quarterly
    • Self-Liquidating SMA
  • 100% US Dollar Denominated
  • 3rd Party Collateral Managers
  • Insurance on 100% of Trade Finance loans
    • Two most common types of insurance include:
      • Asset Insurance for goods in the warehouse
      • Cost Insurance and Freight (CIF), which is basically transport insurance, in the event anything happens during transit.
    • Both types of insurance are relatively low cost and are based on the type of goods
    • Sovereign Risk Insurance
      • A bit more expensive, but still not that high since the approved countries have relatively low sovereign risk
    • Credit Insurance Risk
      • Rarely needed because Manager is generally in the lowest risk type of Trade Finance

U.N. Sustainable Development Goals

  • SDG 1: No Poverty
  • SDG 2: Zero Hunger
  • SDG 5: Gender Equality
  • SDG 8: Decent Work & Economic Growth
  • SDG 9: Industry, Innovation & Infrastructure
  • SDG 12: Responsible Consumption & Production
  • SDG 17: Partnerships

Transaction Details*

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Africa Sustainable Independent Power Producer

Power Africa

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This Independent Power Producer (IPP), is an energy solutions provider based in the USA with operations in West Africa. They have transitioned from heavy oil and diesel to Liquid Natural Gas (LNG) + their long-term ambition is to deliver energy solutions exclusively from low carbon resources. Their operations reflect their firm commitment to increasing access to reliable, sustainable and cost-effective electricity and natural gas in Africa + they are actively seeking to expand their operations across the African continent with a vision to be the leading sustainable energy solution provider in Africa.

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Established IPP with Successful Operating History*

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Mission

  • Develop sustainable energy solutions in Africa
  • Emphasize the training and development of local expertise
  • Utilize appropriate technologies in a safe, efficient and reliable manner

Vision

  • To be the leading sustainable energy solution provider in Africa

Existing Power Plants*

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Existing Midstream Assets*

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Sustainability

Basing their operations on transition technologies and fuels, as an interim step towards their long term objectives, allows this IPP to develop the basic energy infrastructure required to provide clients access to reliable, sustainable and cost-effective energy. Over the next decade, they plan to convert their assets from transition solutions to low carbon energy solutions.

  • Transition Phase
    • Expansion – Building and operating the basic energy infrastructure (natural-gas-fired power generation, natural gas midstream solutions and electricity transmission solutions) to deliver reliable, sustainable and affordable electricity and natural gas to their clients.
    • Conversion – Facilitating the conversion of clients’ equipment (stationary and mobile) from heavy hydrocarbons to natural gas fuels as a transition to hydrogen fuels.
    • Development – Developing wind and hydro-electric energy solutions to be built and operated during the Low Carbon Phase.
  • Low Carbon Phase
    • Renewables – Switching a majority (>85%) of their electricity solutions to PV solar, wind and hydro-electric solutions.
    • Hydrogen – Switching client equipment (stationary and mobile) to hydrogen fuels.
    • Batteries – Deploying alternative batteries such as cryogenic storage and pumped hydro.

Additional Sustainability & Impact Highlights

  • Over the past 13 years of operation, this IPP has transitioned from heavy oil and diesel to Liquid Natural gas (LNG). LNG is considered a cleaner option to other fossil fuel resources, as it releases up to 50% less CO2 than coal and 20-30% less than oil. Additionally, compared to other types of fuel, there are negligible sulfur dioxide (SO2), Nitrogen Oxide (NOx), mercury (Hg), and particulate emissions.-
  • This IPP has significantly reduced the stress to the National power grid, and is now a net contributor to the grid.
  • Community – By developing natural gas infrastructure they seek to improve the livelihoods of stakeholders in their communities through provision of reliable, affordable and sustainable energy.
  • Community Engagement – Their numerous community engagement activities enables them to develop strong relations with members and representatives of these municipalities, including:
    • Training of locals to work in our operation areas
    • Developing alternative livelihood programs for project affected persons
    • Donating to local community projects and organizations
    • Holding frequent youth career and empowerment workshops
    • As an expression of the firm’s commitment to the environment, they have planted over 150,000 teak stumps along their natural gas pipeline as of July 2020, in order to reclaim the land. The exercise engages the surrounding communities by recruiting and employing locals for the planting of the teak, showing the firm’s commitment to serving and positively impacting the communities in which it operates.
  • Employment – They are committed to supporting employment in their local communities and fostering a culture of accountability and transparency, which strengthen the organization and increases productivity.

Socio-Economic Influence

  • The pipeline project will greatly impact on the socio-economic status of the local communities, the municipal/district and the Western Region as a whole. The Western Region is one of the deprived regions of the country with low coverage of social amenities as well as a low standard of living. It is anticipated that social structures, income levels and economic wellbeing, infrastructure (roads, education, and health) will be significantly improved in the project areas.
  • As is common with the advent of any project, it is expected that the gas pipeline project will create employment opportunities directly and indirectly by stimulating the local economy. The hospitality industry, light industry, trading and banking are all likely to thrive during the implementation of the gas pipeline project. The catchment area competencies are needed, hence apart from the specialized areas dealing directly with oil and gas there is labor which will be sourced directly from these communities.

UN Sustainable Development Goals

  • SDG 5: Gender Equality
  • SDG 7: Affordable & Clean Energy
  • SDG 8: Decent Work & Economic Growth
  • SDG 10: Reduced Inequalities

Transaction Details*

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Additional Resources

  • IPP’s Name & Website
  • IPP’s Sustainability & Low Carbon Ambition Statement – Upon Request
  • Access to DATA ROOM – Upon Request
    • Draft Term Sheet
    • Information Memorandum
    • Financial Model
    • Sustainability & Low Carbon Ambition Statement
Location Map
Tarkwa Plant visit October 2018

Grain Processor

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – An investment alongside our EM Private Debt manager, this grain trading and processing company operating in Uganda has a vision to feed East Africa sustainably through a regionally-integrated formal system for grain production and exchange that helps transform rural lives and creates stakeholder value. Established in 2012, the company sources, processes, and stores maize before selling to off-takers, such as the World Food Programme, across Uganda, Kenya, and Rwanda. The company’s off-takers use the maize to produce products, including nutrient-enriched, therapeutic food, to meet the nutritional demand of the region’s growing population. Additionally, the company sources a portion of its maize from smallholder farmers through one of the company’s holdings, which maintains support centers in western and southern Uganda. These support centers drive tremendous social impact for disadvantaged Ugandan communities by offering farmers a location to sell their maize through a reliable process at fair pricing, as well as helping to provide them access to competitively priced and certified agricultural inputs, knowledge, demonstrations, extension services, and loans for working capital. To date, these centers have provided over 45,000 farmers with agricultural finance, markets and/or inputs.

Impact Themes / Objectives

  • Productivity / Competitiveness Empowerment
  • Job Creation
  • Wage Increases
  • Capacity Building
  • Agricultural Productivity
  • Food Security
  • Access to Financial Services

UN Sustainable Development Goals

  • SDG 1: No Poverty
  • SDG 2: Zero Hunger
  • SDG 4: Quality Education
  • SDG 8: Decent Work & Economic Growth

Transaction Details*

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Additional Resources

  • Issuer’s Name & Website – Upon Request
  • Pitch Deck – Upon Request

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