Global Impact Pool Quarterly Investor Letter
Specifically, we aim to address the following impact themes:
- Basic needs & well-being: the provision of basic goods & services for the underserved including water and health & wellbeing;
- SME development & decent work: creating decent jobs with fair employment practices to eradicate poverty;
- Circular economy: Support sustainable consumption and production aimed at doing more and better with less, and;
- Climate & energy: Contribute to abundant clean energy and reduction of CO₂ emissions.
Bearing in mind our mission, there is also the explicit target to generate a market rate financial return.
Impact highlights
Financial return
The Kempen Global Impact Pool (GIP) achieved a return of -0.8% for the FA share class during the first quarter of 2022, resulting in a return of 18.6% over the last 12 months and an average annualized return of 5.4% over the last 3 years. Since the launch of the fund in the beginning of 2018, the fund realized an average annuallized return of 3.8% for its participants.
Following the excellent performance of the GIP during the last quarter of 2021, the return of the fund turned slightly negative during the first quarter of 2022. The core impact portfolio of the GIP, which largely consists of private market investments such as Private Equity and Infrastructure, delivered a slightly positive return. The negative return of the GIP can mainly be attributed to the Green Bonds allocation, where the rising interest rates on capital markets negatively influenced valuations. Due to the limited allocation of the GIP to Green Bonds, as this asset category is mainly used for liquidity purposes, the negative effects on a total portfolio level were limited. By switching to a portfolio of corporate Green Bonds during the first quarter, the management team of the GIP lowered the interest rate sensitivity of the portfolio.
Portfolio developments
The GIP continued its mission to pool capital and scale impact on behalf of its participants during the first quarter of 2022. Assets under management slightly declined to €146 million at the end of March 2022. This decline can be attributed to a decline in the value of the investment portfolio. On a net basis, there have been inflows of capital for the GIP during the first quarter of the year. We are furthermore proud to announce that an additional amount of €74 million has been committed to the GIP in March 2022, of which approximately 10% was called by the GIP shortly after the end of the quarter.
GIP’s portfolio management team has further enhanced its promising pipeline with new investment opportunities. During the first quarter of 2022, the team has been successful in deploying a significant amount of capital. The most notable addition to the portfolio is an investment through an Indian asset manager, which specializes in reducing the financial including gap in India by providing loans to subordinated householders or SMEs. In addition, the GIP has committed additional capital to an existing partner, which is investing early in fintech companies that drive financial inclusion in underserved emerging markets.
The overview below provides a brief summary of the most important developments in the portfolio this quarter per individual Impact theme.
Investments within the theme of SME development and decent work developed well during the quarter. In the first quarter of 2022, one of the investment partners of the GIP increased its investment in BIMA, a company that focuses on offering digital health and life insurance in several countries in Asia (including Bangladesh, Cambodia, and the Philippines). BIMA aligns perfectly with GIP’s goals for financial inclusion in emerging markets by providing essential insurance and health services to low-income customers. Currently, approximately 3 million undeserved consumers in emerging markets are reached with these impactful services. The same investment partner has also added a new name to the portfolio: HD Bank, a consumer bank operating in Vietnam with a strong focus on the retail and SME-segment of the market. This company also focuses on financial inclusion, for example by offering products that are affordable for consumers with a low income.
GIP’s investment partner that focuses on early-stage companies within this theme has taken an interest in Acasa, a Latin America based ‘proptech’ company. The property market for homewoners in this region is full of inefficiencies, including low levels of liquidity, little opportunities for bank loans, low levels of transparancy and often a time-consuming process to buy or sell a house. Acasa focuses on facilitating the buying and selling process of (small-scale) real estate for homeowners.
With its investments within the Climate and energy transition theme, the GIP contributes to the transition to more
sustainable energy sources. During the quarter, one of the investment partners of the GIP exposed to this theme continues to make good progress with the development of wind farms and solar energy parks. During the first quarter of 2022, capital was called for both funds from the existing investment partner, thus increasing the exposure to the Climate and energy theme. This capital was used, among other things, to finance a solar power plant in Italy. These investments will soon add a significant amount of renewable energy capacity to the energy network.
The impact case for this quarter focusses on Ampersand, a company from our investment partner within this theme with a focus on early-stage companies.. Ampersand is tackling fuel consumption and CO₂-emissions through the electrification of motorcycles in Rwanda.