Category Archives: Impact Investing

Strengthening Private Investment in Africa


Norton Rose Fulbright law firm was the scene last Tuesday for the Africa Alternative Investment Intensive. The forum was part of a series of conferences on the African investment landscape organized by Africonomie.

Investors such as Abraaj, Capri Africa, and Sarona Asset Management were represented. In addition, several important players in the African financial ecosystem were in attendance. These include PWC’s Mauritius office, IGD Leaders and PAN Diaspora Capital Management.

The AAII was a gathering of practitioners bringing their real world experience. It was an opportunity to share ideas and insights aimed at fostering a healthier African investment climate. Here are some of the topics:


Attracting American Capital to Africa

Obi McKenzie of Black Rock had constructive recommendations for fund managers. A fund’s track record is a big selling point. New funds without much of a record are encouraged to pursue funds of funds. A useful sources of leads is the National Association of Investment Companies.

Encouraging US pension fund managers to consider African investments

Donna Sims Wilson, president of the National Association of Securities Professionals gave a presentation on the NASP Africa Initiative. It is a USAID funded initiative known as Mobilizing Institutional Investors to Develop Africa’s Infrastructure, or MiDA. The goal is to expose US public pension plan sponsors to co-invest with African fund managers in Africa’s infrastructure.

Risk mitigation

Several times during the conference presenters pointed out various risks that must be managed either with insurance products or deal structuring. Currency risk was a topic of particular concern. Risk management in African investments will be address in more detail shortly in a subsequent post.

Startups & smaller deals

This is a segment of the market that the financial community has not really addressed. There were audience questions during the day about funding the “missing middle” deals of roughly $500k to $1 million. A panel on Smart Capital and the future Innovative Technologies in Africa identified several themes such as mobile technology.

Impact investing and ESG issues

Panels on ESG related risks and delivering sustainable energy addressed social an developmental impacts of investing. The very definition of ESG and how it is measured were among the topics discussed.

Last week’s Africa Alternative Investment Intensive continues the conversation and sets the stage for the next AAII gathering next month in London.


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Small Biz Challenges

In the Kokolemle section of Accra, I met a group of female farmers and entrepreneurs pondering a move into agribusiness. Their issues—access to capital, access to markets, finding affordable office space, defending intellectual property—are all issues my small business clients in Boston have wrestled with. Some of the obstacles are a bit more extreme. However, many of the same skills, along with a dash of cultural sensitivity can address these problems.

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3 Things I Learned Today in Ghana

1. It’s great to have friends in country

Not only for the hospitality, or the insights and view from inside, the ability to trust people to do what they say they’ll do is invaluable.

2. Projects are not always what they seem to be

A simple capital raise can reveal a need for a variety of consulting services.

3. There’s nothing like on the ground presence.

I spent most of today with the management team of a Nigerian construction firm setting up in Ghana. Today they were looking for office space. Tomorrow they meet key decision makers whose influence can determine who wins contracts. American companies need to show this level of commitment or else be beaten to the punch by bold competitors from Africa, Asia, and Europe.

I was also reminded why I made this trip. I’m grateful for the opportunity to see first hand the changes that say much more than the macroeconomic statistics. Now I’m  better prepared to explain this exciting and growing market.


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These are issues that I believe impact investment professionals will grapple with for the foreseeable future:

Impact Measurement. There is still no clear consensus on how to measure the social impact of impact investments. A number of methodologies have been developed, each seeking to create a standard that can be used across a wide range of investments.

  • IRIS is a catalog of impact metrics managed by the Global Impact Investor Network. IRIS is intended to provide a common language for measuring social, environmental and finance performance.
  • GIIRS ratings, developed by B Analytics uses the B Impact Assessment to rate the impact of a given investment or portfolio. The GIIRS rating includes an Overall Impact Business Model Rating, Overall Operations Rating and a Fund Manager Assessment.
  • The UN Global Compact measures companies’ performance in meeting universally recognized standards of human rights, labor, the environment, and anti-corruption. The Global Compact also encourages alignment with the UN Sustainable Development Goals.

In addition, several organizations have their own impact measurement methods tailored to suit their specific circumstances. Impact investors and social enterprises will need people who can sort through these methodologies, and understand how to apply them to their organizations.

Mainstreaming” of Impact Investments. When will impact investing become the norm? Will companies ever report social results alongside financial results as a matter of course?

Based on my experience at the IBL workshop, much of impact investing mirrors the startup world, involving relatively young and small companies whose value proposition includes some form of groundbreaking innovation. One sign of mainstreaming will be when we see larger, institution-sized impact investments. In addition, one wonders if we will see established, Fortune 500 companies reporting social impact results. These are companies that have tremendous influence on the global economy, the global workforce, and on communities and municipalities. They usually discuss their interactions with stakeholders in their annual reports, but that is not the same as an objective measurement of impact. How will impact influence executive compensation? Firm value? Corporate governance? Professional recruitment? These questions are being asked and discussed but the answers are still some distance away.

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Recently, I along with a group of mid career professionals participated in a 3 day workshop entitled “Break into Impact Investing.”

The workshop consisted of seminars from leading practitioners in the field. They represented organizations such as Village Capital, Accion Venture Lab, Infodev (World Bank), and the Calvert Foundation.

Impact investing is a broad category that addresses many topics of concern around the globe. This workshop devoted much attention go early stage ventures in the developing world.

  • The Village Capital seminar for example focused on a case study featuring an a successful entrepreneur turned investor who need to allocate investment dollars between two mission driven startups, and Village capital’s own investment fund and a donation to Village Capital’s non-profit entity.
  • Infodev provides funding and support to entrepreneurs in the developing world. The seminar featured a startup in Kenya and dealt with several issues faced by impact investment funds such as how to define success, fund structure, and governance.
  • The Accion Venture Lab presentation offered insights on assessing a social venture at its earliest stage.
  • The Calvert Foundation discussed fixed income investments in the impact investment context, using vehicles such as the Community Investment Note to fund several kinds of loans to social enterprises, and the Ours to Own campaign to raise capital to revitalize urban centers including Denver, Baltimore, and the Gateway Cities of Massachusetts. The Calvert Foundation is a bit of a departure in that it uses debt instruments for impact investing.

All the presenters gave us frameworks to guide the process of impact investing. They had in common the identification of a value proposition or unmet need, development of a business model, and building a strong management team. It seem the elements of a promising startup are the same regardless of whether or not social impact is a factor.

It is also interesting to note that most of the cases and enterprises discussed were in Asia and East Africa. It was pointed out that Kenya is considered one of the more attractive countries for impact investing. East Africa’s popularity among the impact investment community is largely due to the advanced startup ecosystem in East Africa compared to other parts of the continent. The concerted effort to make Nairobi an African technology hub, plus the impressive regional integration efforts of the East African Community have attracted investment of all kinds including impact investment.

Careers in Impact Investing

In addition to learning about the industry, the workshop included insights on career options in impact investing.

The workshop organizer, Impact Business Leaders is in the talent development business, so the workshop was very much about career development and creating the talent pool for the impact investment industry.

Throughout the weekend career paths were revealed both implicitly and explicitly. Some of them include:

  • Portfolio manager – working with financial statements, managing relationships with portfolio companies.
  • Analyst/CFO – Overseeing accounting and financial analysis, being a resource to management for understanding financial issues.
  • Adviser/Consultant – working directly with entrepreneurs providing advice and technical assistance.
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I. Jobs Created

  • We of course want to know the total number of jobs created by startups. In addition we need to understand the type of jobs created and how that fits with the profile of the national labor force. What are the salary levels and how do they compare to the local statutory minimum wage? Will these startups have a significant impact on their local labor markets?

II. Capital Raised

  • Are these startups attracting new capital to Africa?
  • Are they attracting foreign capital from other African countries?
  • Are they attracting capital from within their own countries?

III. Increase in Skills and Know-How

  • Are the startups introducing new technology or management practices
  • Are skills and know-how spreading beyond the universities to the general population?

IV. Return on Capital Invested

  • Have investors in African startups experienced favorable outcomes?

V. Export Revenue Within and Outside Africa

  • Are African startups exporting?
  • Are African startups enabling exports by other companies in their home countries?

VI. Supportive of African Business

  • In what other tangible ways have these startups helped foster the growth of African businesses?
  • Training
  • Access to customers
  • Access to capital

VII. Social Impact

  • Environmental
  • Education
  • Poverty reduction
  • Financial inclusion

VIII. Intangibles

  • Inspiration – Is there a 12 year old girl in a village saying “I want to be an entrepreneur too!”
  • Positive influence on government – Is there a community of entrepreneurs who can make their voice heard in the halls of government to strengthen the entrepreneurial ecosystem?
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3 Lessons from the 2015 Africa Business Conference at Harvard Business School

As usual there was a palpable spirit of optimism at this year’s Africa Business Conference at Harvard Business School. While the facts on the ground may not be as rosy, I did come away with several observations that will be helpful in current tasks as well as in plotting strategy in the medium and long term.

1. Storage and transportation of both inputs and goods for sale are critical to improving farm performance.

2. Institutional Private equity is well entrenched in Africa and the characteristics of a successful deal are increasingly well known. In the second panel on closing the electricity deficit the parameters for funding power projects were clearly laid out:

  • A quality PPA deal is required. This is the guarantee of cash flow that investors look for. They’re not all created equal. For example, local currency denomination is a deal killer since it adds currency risk to the equation.
  • The PE folks will also need a sovereign guarantee as an indication that the government supports the project.
  • As always a strong management team makes the deal much more attractive.

3. Startup capital especially for non-tech ventures is extremely difficult to find. Angel investors and venture capitalists are slowly finding their way to tech-related, high growth startups. For others, it’s tougher but there are a few possibilities:

  • Impact investors. If one can demonstrate measurable social benefit in addition to financial returns then a new set of potential investors becomes available. Many impact investors use the IRIS standard to assess social benefit. African companies would be wise to seek out experts who can help the make their case using IRIS
  • Multilateral/DFI capital. Organizations such as the African Development Bank and International Finance Corporation sometimes have special programs for ventures with attractive features such as environments sustainability.
  • Trade promotion agencies. Agencies such as the U.S. Export-Import Bank can often provide funding or lean guarantees for capital purchases that meet certain requirements.

As always the Harvard Business School Conference showed us an Africa on the move—not without its issues, but with opportunities for businesspeople to benefit themselves, their organizations and the African continent. Successful entrepreneurs will assemble a skilled team that can execute on their vision and achieve financial and social results.

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Reflections on the UN Climate Talks (Guest Post)

The pledges are a good sign if followed up with action. Meanwhile there is a role for the private sector in promoting and implementing renewable energy, as well as energy saving and monitoring products and services. This is a huge opportunity for impact investors to achieve measurable, tangible results.


Indi Mclymont-Lafayette (L), Journalist and the Regional Director of Panos Caribbean Indi Mclymont-Lafayette (L), Journalist and the Regional Director of Panos Caribbean

COP 20 wrapped up in Lima, Peru last week and many attendees are reflecting on the negotiations. Today Caribbean Climate features a review by Indi Mclymont-Lafayette, a Journalist and the Regional Director of Panos Caribbean – a non-government organisation that focuses on development communication.

Soo… what has been achieved after two weeks of talks?

That was the question one of my friends whatsapped me – knowing that I was attending the 20th United Nations Climate Talks in Lima, Peru from December 1-12.

I hesitated before answering.

Truth to tell, if you followed the achievements highlighted by the United Nations – then a lot had been done. The achievements included:

  • Country pledges to the Green Climate Fund (GCF) pushing it past a US$10 billion start up target.
  • Germany pledging and giving 55 million Euros (roughly US$68 million) to the Adaptation…

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This 2nd installment of our private equity series looks at how investors have succeeded this past year. While these tactics are well known by major private equity institutions we also consider the smaller investor and those investors new to emerging market investing. This investor could be a family office, or an accredited individual investor or investor group that prefers direct investing over the limited partner role. [We will use the term “small investor” to encompass all of thee groups realizing that they are not always small in dollar terms] The approach we advocate comes under the general heading of value enhancement or value creation.

Successful emerging market investors contribute more than money to the success of their portfolio companies. With their own resources and by marshaling expertise in their networks they can enhance the value of these companies leading to a more favorable outcome at exit. This is typical of the large PE firms whose senior staff often have operating as well as financial experience.

Although not all investors will have this kind of expertise on staff, those with strong networks can mimic the kind of value enhancement that is standard procedure at the large institutions. There are professionals with region or sector specific expertise that can deliver on an outsourced basis what they cannot do in house.

Here are three value enhancement strategies:

1. Upgrading business processes


The investors’ due diligence should include an assessment of the company’s strengths as well as any challenges that would impede its ability to implement its business strategy. Process improvements can occur in any of several areas:


  • Distribution

  • Strengthening the management team

  • accounting/finance/risk management

  • ESG (Environmental, Social, and Governance) upgrades such as social impact measurement using IRIS, implementing a diversity strategy, or improving environmental sustainability


Small investor’s approach: Engage advisors with background in: the portfolio company’s industry, accounting and/or finance, ESG reporting & measurement.



2. Help portfolio companies open new markets


Within their region – especially important in African countries where it makes sense to combine several small country markets into larger regional ones.


In investor’s home market. There are companies that assist international firms in entering and selling in the US.


Essential for companies with small domestic markets. Opening new markets is key for Caribbean companies who need to go outside their small markets in order to scale.


Small investor’s approach:


Use investor’s network to link portfolio company to export opportunities.


Engage business development & marketing firms that specialize in helping foreign firms enter the US market



3. Provide constructive influence to portfolio companies even with a minority share


Small investor’s approach:


Work with companies where entrepreneurs’ managers’ and investor’s interest are aligned. Use the due diligence period to assess the mindset and culture of management. Look for:


  • Management teams and shareholders with a long term outlook

  • Shareholders with skin in the game, cash or mortgageable real estate for example.

  • In some cases it is feasible and desirable to have a level of decision making authority written into the deal.


Create alliances with like minded shareholders.


These are some of the ways in which a small PE investor can be helpful to emerging market portfolio companies to the benefit of all stakeholders.



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Emerging Market Investing – Lessons from 2013




Investors from large institutions to family offices are showing considerable interest in investing in emerging and frontier markets. The slowdown in emerging market growth is seen as a short term detour in a long run growth story. This post is the first of a three part discussion of private equity investing in today’s emerging markets.


As background we begin with highlights of private equity activity in 2013, culled from various reports from The Emerging Markets Private Equity Association, Alternative Emerging Investor, and Ernst & Young, with our particular focus on Latin America and Africa:


  • Total emerging market PE investing in 2013 was $224 billion in 883 deals, a 7% decrease in dollar volume from the prior year.

  • Most of the growth in capital deployed occurred outside the BRICS—on the so-called frontier. Several of these deals were in East Africa and Latin America (not including Brazil). These economies are growing during a time of relative sluggishness in the BRICS.

  • One non-BRIC, Mexico reached a five year high in capital deployed in 2013. Mexico was also the scene for Axis capital’s buyout of Oro Negro for $200 million, one of the ten largest emerging market deals of the year.

  • One fast growing sector within the private equity universe is venture capital. VC investing made up 43% of the deal activity in 2013 vs 17% in 2009. Many of these deals were in emerging Asia where the tech sector is more developed and more connected to the western tech ecosystem. Most of the major investors have been US based firms like Sequoia Capital and other familiar names from Boston and Silicon Valley. That said, one of the biggest emerging market VC deals was online language school Open English of Panama. A burgeoning tech sector is also developing in Africa with hubs in Kenya, Nigeria and Ghana. We discussed the growing African startup ecosystem in an earlier post. Many of the companies are of a type that can scale across borders and would be attractive to VC investors.

  • 2013 Deal volume in Africa reached its highest level in five years, up 43% to $1.6 billion according to EMPEA.

  • In Africa these industries saw the most deal activity in 2013:

  • Oil & gas
  • Electric power
  • Financial Services
  • Telecommunications


One sector where we do not see a large private equity presence is housing and property. Yet there are vast housing shortages in the most attractive countries. One possible reason could be the emphasis on affordability which requires holding prices down which would of course depress potential returns to investors. We have nevertheless seen that with the right mix of properties, a project can be structured in a way that satisfies investors and contributes to the availability of housing. Investors with a model oriented toward project financing should find attractive deals in the housing and property sector.


It has also been noted that African deals have tended to be smaller than those in other regions. It is possible that the bigger PE shops are passing on deals simply because they are too small or have less opportunity to scale or to grow a pan-African enterprise. For this reason we believe there is an opening for smaller PE firms, family offices and other direct investors.


In the next post we will explore the lessons from 2013 from the investor’s perspective, focusing on the smaller direct investor in a family office or small fund.



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