Global Impact Pool Quarterly Investor Letter
Specifically, we aim to address the following impact themes:
- Basic needs & well-being: Healthy the provision of basic goods & services for the underserved including water and health & well-being.
- 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 Global Impact Pool (GIP) achieved a return of 0.6% for the FA share class during the first quarter of 2023. The positive return in the first quarter emphasizes the diversified nature of the GIP’s investment portfolio, as the performance of underlying asset classes differed significantly. Following a challenging 2022, the GIP’s investments in Private Equity (PE) and Venture Capital (VC) continued to face some headwinds in the current macro-environment. Investors have become more risk averse as interest rates have soared, supply chains continue to be distorted and rising inflation continues to be a theme, resulting in a challenging environment for companies to raise new capital in order to grow their businesses. As a result, valuations have come down which also has an impact on the GIP’s portfolio of PE/VC investments.
Portfolio developments
The GIP continued its mission to pool capital and scale impact on behalf of its participants during the first quarter of 2023. Assets under management increased significantly to €195 million at the end of March 2023. This increase can be attributed to both positive performance and called capital from investors in the E-share class (commitment share class) in order to fund new portfolio opportunities. On a net basis, there have been inflows of approximately €16 million for the GIP during the quarter. This fresh capital allows the GIP and its investment partners to deploy capital in a market that offers many opportunities at relatively attractive valuations.
During the quarter, capital was called by nearly all of GIP’s investment partners, with most capital drawn by the following partners:
– KGAL: ESPF 5, European sustainable infrastructure
– LeapFrog: Emerging Consumer Fund III, Emerging Market Private Equity
focused on underserved low-income consumers
– Ecosystem Integrity Fund (EIF) IV, US Venture Capital focused on the
energy transition and circularity.
The overview below provides a summary of the most important developments in the portfolio this quarter per individual impact theme.
Basic needs & well-being
During the quarter, the GIP has increased its exposure to the Basic needs and well-being theme by allocating additional capital. Our investment partner LeapFrog, called capital to amongst others finance follow-on investments in Medgenome and Goodlife. Medgenome is the market leader in South Asia for genetic diagnostics, and plans to expand into other markets across Southeast Asia and Africa. The company has three focus areas: (1) providing diagnostics services to hospitals and clinicians, (2) providing next-generation sequencing research to global pharmaceuticals and academia, and (3) licensing the unique genetic database to external parties. Goodlife Pharmacies is the largest pharmacy and healthcare chain in East Africa. It aims to improve access to quality and affordable healthcare products and services in the fragmented East African retail pharmaceuticals market. Since the firm was added to the portfolio, it has grown from 19 stores to currently more than 100 stores. Another noteworthy development for this theme is the completion of GIP’s first co-investment in HealthifyMe, the largest consumer health application in India with over 30 million downloads as of today. Through its app, the company provides affordable digital health services to consumers in India, Southeast Asia and the broader Indian Diaspora. The solutions addresses the growing issue of obesity and non-communicable diseases like Parkinson’s and diabetes. The company has experienced a steep growth path over the years, both in financial terms (e.g. revenue growth) as well as the impact it is achieving (e.g. increased the health of a growing number of emerging consumers).
Within the theme of SME development and decent work, our investment partners made good progress by completing new or follow-on investments. Quona Capital, our investment partner focusing on early-stage fintech companies in underserved economies, called capital to finance the purchase of new and existing companies for their investment portfolio. The funds were used for follow on investments in Kanastra, Broom, Alami and Turno and most notably for a new investment in Neofin. Neofin is a Brazilian embedded financing platform which is solely focused on providing a Business-to-Business payment solution for underserved SME’s in Brazil.
Circular economy
ResponsAbility, one of the GIP’s investment partners within the Circular economy theme, focuses on providing working capital to (cooperatives of) smallholder farmers in developing countries. Most activity during the first quarter of 2023 occurred in Sub-Saharan Africa, where loans were disbursed to cooperation’s representing smallholder farmers involved in the production of cashew and macadamia nuts. These smallholder farmers need the working capital in order to harvest their crops. In Latin America, ResponsAbility financed several institutions focused on the production of coffee. The Fund also provided financing to several financial institutions with agricultural portfolios in Eastern Europe. EIF, our US based venture capital investment partner, completed follow-on investments in Ambient Photonics and For Days. Ambient Photonics produces photovoltaic cells which can generate energy from e.g., LED, fluorescent or diffuse sunlight, and therefore can be a replacement for batteries in e.g. (small) home appliances. For Days is a direct-to-consumer manufacturer of essential clothing which produces basic clothing with a highly sustainable production
process and, most importantly for this theme, a closed loop system in which used clothes are recycled into new apparel.
Climate & energy
With its investments within the Climate and energy transition theme, the GIP contributes to the energy transition towards more sustainable energy sources. EIF called a significant amount of capital during the quarter, this funding was used to finance follow-on investments in ThinkIQ and Vibrant Planet. ThinkIQ provides tracking and analytical solutions for industrial food manufacturing systems, addressing the significant waste problem which is currently present in the food supply chain. Vibrant Planet uses advanced technologies to make its customers (i.e., federal agencies, state parks, local counties, fire districts) more resilient to the effects of climate change; this can entail a land-management tool which assists landholders to restore important ecosystems. KGAL, our German investment partner focusing on renewables (solar and wind) infrastructure continued to make good progress with the development of its projects during the quarter, resulting in a significant amount of capital calls during the quarter. As a result, the GIP’s exposure to the Climate and energy theme increased considerably. This capital was used, among other things, to finance the construction of solar power plants in Italy, Spain and Germany. Funds were also used to finance the acquisition of a stake in a Polish project which focuses on the development of a mixed solar and wind project. All these investments will soon add a significant amount of renewable energy capacity to the electrical grid.