Annual Impact Report 2019 Kempen Global Impact Pool
Investing towards an inclusive, sustainable and resilient future
Table of Contents
‘Because of the size, scope and pace of the pandemic, and the sizable capital outflows from developing countries, there is currently a significant risk that most political capital and limited financial resources be absorbed by the response and diverted away from the implementation of the Nationally Determined Contributions to achieve climate targets and the Sustainable Development Goals. It is vital that in the response to the crisis, countries keep the sustainable development goals and climate commitments in focus to hold on to past gains, and in the recovery, to make investments that propel us toward a more inclusive, sustainable and resilient future’
MESSAGE FROM THE TEAM GIP IMPACT RESULTS LOCAL IMPACT FINANCIAL RESULTS IMPACT MANAGERS THEORY OF CHANGE GIP IMPACT MANAGEMENT APPROACH IMP IMPACT MATRIX GIP CONTRIBUTION TO THE SDG
SDG 3: Good Health & Well-being SDG 6: Clean Water & Sanitation SDG 7: Affordable & Clean Energy SDG 8: Decent Work & Economic Growth SDG 12: Responsible Consumption & Production
3 4 7 8 9 10 11 12 14 15 16 17 18
FUND & COMPANY IMPACT CASE STUDIES
Emerging Consumer Fund III Enhanced Sustainable Power Fund 4 Agriculture Fund Green Bond Fund Inclusion Fund Organic Growth Fund
Shared responsibility, global solidarity report: Responding to the socio-economic impacts of COVID-19 United Nations March 2019
IMPACT TARGETS AND DILEMMAS THE YEAR AHEAD IMPACT METHODOLOGY & LIMITATIONS SOURCES AND FOOTNOTES Impact Report 2019
20 24 27 31 34 37 40 41 42 43 \2
Dear Investors, We are issuing this annual impact report in the midst of the COVID-19 pandemic, the economic and social ramifications of which will shape 2020 and likely years to come. Pandemics cause massive disruptions and challenge the way the world operates. COVID-19 will test the preparedness and ability of our fund managers and investees to adapt. We believe the Global Impact Pool (GIP), our fund managers, and our investees are well positioned to weather the storm and we will continue to deploy capital in line with our mission of contributing to positive environmental and social outcomes. Our fund investments and the underlying investees are well diversified across regions and sectors ranging from credit (for use as working capital), greenfield projects in renewable infrastructure, to private equity. In 2019, we are pleased to have allocated capital to the Accion Quona Inclusion Fund. The Fund focuses on financial inclusion by making investments in early-stage fintech companies in emerging markets. We are excited to see the future impact this investment will make. This report highlights the way in which the allocated capital is helping many companies around the world change lives and benefit the planet. We summarise the impact that GIP is achieving at the level of the Fund, the underlying fund investments and at the investees level. The report combines both information about financial performance as well as the impact we helped to catalyse through our investments. Furthermore, we highlight how the GIP contributed to our target Sustainable Development Goals (SDGs) outcomes and sub-targets in 2019. This year we placed a greater emphasis on highlighting how we apply the five impact dimensions of the Impact Management Project (IMP) and understanding both our own and our investees contribution to realising the ultimate outcomes and impact on the ground. We would like to thank you for your trust on behalf of the investees and all the people who benefited from the impact generated through GIP`s investments. We look forward to maintaining this ability to generate positive impact together with financial returns. With Regards, Kempen Global Impact Pool
Impact Report 2019
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GIP THEMES
GIP IMPACT RESULTS 2019
Basic needs & well-being
SME development & decent work
Billions of people lack access to basic products and services, such as sanitation, electricity, clean water. Efficient, good quality and affordable delivery of such products and services leads to a direct improvement in quality of life.
Sustainable SME development and the provision of decent jobs with fair employment practices is essential for the eradication of poverty. Nearly 2.2 billion people live below the USD $2 poverty line and eradicating this poverty is only possible through stable and well-paid jobs.
Climate & energy
Circular economy
Energy is the dominant contributor to climate change, accounting for around 60% of total global greenhouse gas emissions. 3 billion people rely on wood, coal, charcoal or animal waste for cooking and heating. Reducing the carbon intensity of energy is a key objective in long-term climate goals.
The transition towards sustainable consumption and production methods contributes to “doing more and better with less�, increasing net welfare gains from economic activities by reducing resource use, degradation and pollution along the whole lifecycle, while increasing quality of life.
Impact Report 2019
IMPACT RESULTS 2019: Results by theme
SME growth & decent work
Basic needs & well-being
141,000 smallholder farmers supported4
397,000 people
420,000 people
3,400 people
underserved reached via healthcare services1
underserved reached via Financial services2
supported by employment3
producing on
119,000 certified hectares4
receiving on average payment of
$3,000 USD Access to quality affordable healthcare services is a critical unmet need for consumers in East Africa and South East Asia.
Financial services are able to help marginalized consumers and local businesses access capital and afford the insurance or appropriate banking services needed.
Decent work means opportunities to get work that is productive and delivers a fair income, security at the workplace, social protection for families, and better prospects for personal development.
All numbers are pro-rated per GIP investment in the underlying funds Impact Report 2019
5
High-quality inputs, such as seeds, fertilizers, and equipment, are often inaccessible to small farmers in emerging markets. Access to working capital to pre-finance harvest, provision of training and expertise on sustainable practices can improve both the income and livelihoods of smallholder farmers and help lift families out of poverty.
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IMPACT RESULTS 2019: Results by theme Circular economy
Climate & energy 12,000 tonnes worth of COâ‚‚ emissions avoided6 =
4,700 cars taken off the road for a year7
Reducing global emissions and avoiding COâ‚‚ is necessary to be able to reach the Paris Agreement Goals and stay well below a temperature rise of 1.5 degrees Celsius.
1.5 million m3
221 tonnes
19,300 MWh
resource
waste avoided10
renewable energy generated8
estimated water savings over lifetime of solar & wind projects under development & construction12
= =
6,300 Dutch households
waste produced by 9
Renewable energy plays a critical role in reducing greenhouse gas emissions and facilitating the move towards low carbon economy.
450
people per year
11
Avoiding single use plastic and using reusable and biodegradable products can reduce the amount of waste that is incinerated or sent to the landfill.
=
28,600 people per year
water used by
13
Power generation from coal, oil and gas is water intensive. These sources require water for both the production and the generation of electricity. Switching to solar and wind is expected to reduce water withdrawals and consumption for electricity generation.
All numbers are pro-rated per GIP investment in the underlying funds Impact Report 2019
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LOCAL IMPACT GIP Managers invest across Europe Through GIP, we intend to invest with impact on a global scale. GIP is not only making investments in emerging markets addressing impact themes such as basic needs and wellbeing.
eCoffee Cup Renewable cup producer
Naty Eco diaper producer
Falcon Coffee Coffee sourcing
GIP is also focused on addressing challenges that are a bit closer to home. In particular, we have identified impactful opportunities to invest in the transition to low carbon economy and more responsible consumption patterns in Europe. This includes renewable energy, waste reduction through use of reusable products, or the sustainable sourcing of nuts, coffee and dried fruit.
SonderJansen Frozen fruits & vegetables sourcing
SouaSoua Dried fruit sourcing
Veja Mate Nuts2
Wind farm producer
“GIP investments aim to contribute to sustainable production and consumption in Europe.� NARINA MNATSAKANIAN Director Sustainable & Impact Investing
Sustainable nut sourcing Impact Report 2019
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FINANCIAL RESULTS 2019 PORTFOLIO BREAKDOWNS INVESTMENTS
GEOGRAPHY
ASSET CLASS
AQIF Liquidity
Infrastructure Private Debt
Developed Markets
ESPF 4
Green Bonds
Emerging Markets
Emerging Consumer Fund III
Private Equity
Cash
Green Bonds Agriculture Fund
Liquidity
Organic Growth Fund
The GIP continued to allocate capital towards its mission, which is to make investments that positively contribute to solving global problems around the food, water and climate nexus and SDGs. In December 2019, GIP added a new impactful investment to the portfolio, Accion Quona Inclusion Fund, which is aimed at financial inclusion by investing in financial companies with innovative business models. Bearing in mind our mission, there is also the explicit target to generate a market rate financial return. In 2019, the return for GIP (Class FA) share class was +1.6%. The positive return was driven by the Agriculture Fund and Green Bond Fund, while ESPF 4, the Organic Growth Fund and the Emerging Consumer Fund III detracted from performance this year. This was in line with our expectations.
ESPF 4 and Emerging Consumer Fund III are both closed-end in nature and work with a capital call-structure, therefore these investments do not show a linear return profile but rather a so-called ‘j-curve’ return profile. Returns can be negative for a short while, driven by transaction costs related to the build-up of a portfolio and associated deal costs, while investments remain valued at cost as a best approximation to fair value at that time. Thereafter returns are expected to show an upward trajectory as portfolio investments are being revalued and sold eventually.
Impact Report 2019
“Assets in the GIP have swelled considerably in the last year, growing from €68 million in 2018 to over €100 million at the time of publication of this report.” ULRIKE BEYRICH Senior Portfolio Manager
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GLOBAL IMPACT POOL MANAGERS
“GIP offers a unique solution because of its multi-asset approach and combination of emerging and developed market investments.” MARJOLEINE VAN DER PEET
GIP’s % Share GIP’s Commitment of Fund
LeapFrog Emerging Consumer Fund III (‘ECF III’)
$25.0m
3.4%
KGAL Enhanced Sustainable Power Fund 4 (‘ESPF 4’)
€22.0m
3.0%
ResponsAbility Agriculture Fund (‘Agri Debt Fund’)
$20.6m
25.1%
NN Green Bond Fund (‘Green Bond Fund’)
€19.6m
1.6%
Accion Quona Inclusion Fund (‘AQF’)
$11.0m
6.0%
Triodos Organic Growth Fund (‘OGF’)
$2.0m
4.8%
Senior Portfolio Manager
Impact Report 2019
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THEORY OF CHANGE
OUR MISSION
GIP’s philosophy & approach When sourcing new investments, we start with the problem definition. We look at our chosen impact themes around basic needs, climate mitigation, circular economy & SME growth and five SDGs and consider what type of investments and through which asset class would be most suitable to make a positive contribution to address this problem. Within the identified asset classes and geographies we assess the intentionality of the fund manager and the quality of the solutions they are proposing versus the available alternatives. Once prospective investment funds are identified, we check how the countries in which the Fund is planning to invest score on individual SDGs and sub-targets. We want to understand whether people or planet are underserved on the target outcomes in these geographies and whether any additionality of impact can be expected. In other words, we look at whether there are country gaps in our focus SDGs and whether the selected investments can make a positive contribution towards solving these challenges in countries that score relatively low on achieving these selected goals.
Input
Activities
To understand the progress made on the SDGs per country, we use the SDG Index Dashboards that are based on publicly available data from the UN, World Bank, WHO, ILO and other organisations. The maps on the following pages highlight the scores of countries that GIP is currently invested in through our managers, specifically for our selected SDGs. Based on our target SDGs we have identified the subtargets underpinning the SDG-framework which the GIP focuses on. The next section therefore outlines the KPIs we use to scope how our investments have contributed to the efforts towards achieving these target outcomes over the past year. The suitable KPIs to report on these SDGs are a mix of KPIs identified by Dutch institutional investors under the Dutch Central Bank Platform for Sustainable Finance and the key material KPIs that our managers are measuring and tracking. The core KPIs are based on the GRI and IRIS+ metrics indicators.
Output
Outcomes
To make investments that positively contribute to our four themes and five SDGs primarily, though not exclusively, through the goods and services that the underlying investee companies provide. We focus on funds that invest in countries where gaps remain on SDGs. The GIP was created to enable institutional and eligible retail investors who want to realise a market rate of return while also investing in solutions related to the subset of selected SDGs in order to access high quality impact investments.
Impact
Impact Report 2019
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GIP IMPACT MANAGEMENT APPROACH
The IMP13 is a forum for organisations targeted at building consensus on how to measure, compare, and report impacts on environmental and social issues. The IMP is supported by over 2,000 organisations, including Kempen. Since its inception, the GIP has been using the IMP approach and the five dimensions of impact to structure and develop our impact management approach. Impact management is the ongoing practice of measuring and improving our impacts, so that we can reduce the negative and increase the positive effects. The IMP also facilities the IMP Structured Network, a collaboration of standard-setting organisations (see logos below) that are coordinating efforts to provide complete standards for impact measurement, management and reporting.
The IMP enables investors to map their intentions regarding impact according to: (i) the impact goals of the underlying businesses, and (ii) the investors’ contribution to the impact of the business. Contribution to impact achieved can be on three levels: GIP level, manager level and company level. GIP’s contribution is through helping our investors to invest with purpose by creating a multi-asset fund, selecting managers that contribute to target SDGs in countries where there are gaps, and by reporting on impact achieved. The GIP team works closely with our funds to help them improve how they manage social and environmental impact and apply the IMP. The contribution of our fund managers comes from signalling that impact matters, engaging actively and growing new and undersupplied markets. For example, by providing working capital to Agri-cooperatives or providing capital to early-stage companies for financial inclusion.
On the following pages we apply the five IMP impact dimensions – what, who, how much, contribution, and risk – to explain how the GIP and our investments are contributing towards achieving the target outcomes.
WHAT
What outcome occurs in the period? How important is the outcome to the people/planet experiencing it?
WHO
Who experiences the outcome? How underserved are the affected stakeholders in relation to the outcome?
HOW MUCH
How much of the outcome occurs – across scale, depth and duration?
CONTRIBUTION Would this change likely have happened anyway? RISK
Impact Report 2019
What is the risk to the people/planet if the impact does not occur as expected?
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GIP ON THE IMP IMPACT MATRIX:
Impact of Enterprise
Mapping GIP Managers Impact of Enterprise Act to avoid harm prevents or reduces significant effects on important negative outcomes for people & planet.
Benefit stakeholders generates various effects on positive outcomes for people & planet.
Contribute to solutions generates one or more significant effect(s) on positive outcomes for otherwise underserved people and the planet.
Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital
Impact of Investor
Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital
Impact of Investor
Looking at the goals and investments of our underlying managers we believe that GIP firmly sits in the “Contribute to Solutions” category, as it seeks to have a significant effect on specific positive outcomes for people or the planet.
Green Bond Fund
ESPF 4
Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital
Agri Debt Fund
Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital
AQF
ECF III
Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital Signal that impact matters + Engage actively + Grow new/undersupplied capital markets + Provide flexible capital
As highlighted throughout this report our funds contribution is exerted through: (i) “Signalling that Impact Matters” across the capital markets; (ii) “Engaging Actively” with companies to help them improve their business in a sustainable direction, and (iii) “Grow Undersupplied Capital Markets” by investing in businesses that can contribute to closing SDG gaps and identifying opportunities that are often overlooked by the likes of conventional (nonimpact) investors.
OGF
Impact Report 2019
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SDG 3 Target 3.8 ✓ Access to universal health coverage including financial risk protection ✓ Access to quality essential health-care services • Access for all to safe, effective, quality, affordable essential medicines and vaccines • Improved healthy eating and nutrition SDG 6 Target 6.1; 6.3; 6.4 ✓ Increase water-use efficiency • Access to safe and affordable drinking water for all • Improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals • Increasing recycling and safe reuse globally SDG 7 Targets 7.1; 7.2; 7.3; 7.4 ✓ Access to affordable, reliable and modern energy services ✓ Improved efficiency of energy use ✓ Reduced greenhouse-gas emissions SDG 8 Targets 8.3; 8.5; 8.6; 8.7; 8.8 ✓ Improved access to productive employment and decent work ✓ Improved SME access to financial services • Improved availability of and incentives for long-term sustained employment • Promote equal pay for work of equal value • Improved youth education, training and employment SDG Targets 12.2; 12.3; 12.4; 12.5 ✓ Improved sustainable management and efficient use of natural resources ✓ Promote circular economy ✓ Promote sustainable agriculture by improving environmental performance via agri-solutions ✓ Promote local food systems i.e. sourcing, production, processing and access • Reduce waste generation at retail and consumer level • Reduce food losses along production and supply chains • Reduce air, soil & water pollution through sound environmental management
Impact Report 2019
GIP’s contribution to the SDGs In the previous section we explained our theory of change. The image on the left summarises our selection of SDGs sub-targets and target outcomes. The points with check marks on the left are those to which GIP has successfully contributed to through our investments in 2019. The points that are not checked could be contributed to going forward through our current and future investments.
In the following pages we link the impact results from our underlying funds to the targeted SDGs. These impact numbers have been pro-rated for GIP’s share of the funds.
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Through its investment in ECF III, the GIP aims to contribute to the provision of good healthcare for underserved people in countries where gaps exist in achieving target SDG 3 outcomes.
WHAT
Health spending by high-income countries continues to represent the largest share of global spending (81%) despite covering only 16% of the world’s population.14 Globally, the need for investing in quality, affordable, and accessible health services has never been higher. The WHO estimates that every year 150 million people suffer from a financial catastrophe because of out-of-pocket expenditures on health services.15 Across the ECF III target countries, there are estimated to be 2 billion low-income individuals (earning between $2 – $10 per day) who are willing and able to pay for critical products and services, but are either entirely excluded or underserved by virtue of being low-income. The Fund’s investee companies fulfil this need & enable underserved households to build safety-nets for protection against this risk.
KEMPEN INDICATORS SDG 3 PRO-RATED Pro-rated Figures
HOW MUCH
WHO
RISK Challenges Remain
550,000
397,000
Funds Contributing ECF III
The ECF III’s investees directly address issues of accessibility, affordability and product quality (client protection) that are fundamental for financial and health needs.
CONTRIBUTION
Significant Challenges Remain
2019
The decline in the number of pro-rated underserved people reached via the healthcare portfolio is due to the fact that the ECF III grew significantly in 2019, resulting in GIP’s share of the Fund falling from 5% to 3.5%. When not pro-rating the figure, the total number of underserved people reached by the Fund grew from 10.7 million to 11.8 million people.
GIP’s investments contribute to SDG 3 in the highlighted countries.16
Major Challenges Remain
Underserved people reached via healthcare portfolio17
2018
SDG Achieved
Impact Report 2019
Enterprises in ECF III are enabling first-time access to quality healthcare and financial services for low-income consumers in emerging markets. These low-income consumers are underserved by traditional financial and healthcare providers due to multiple factors, including income, availability, geographical access, and product suitability. Investee enterprises are filling this unique unmet need across emerging markets at scale, an outcome that would not have happened otherwise. Overall risks can be considered as low. The long-term impact of financial and health inclusion is well documented in research by the UN, WHO, and World Bank. The impact from all enterprises is measured regularly through performance data and direct customer feedback, occurring since investment and until exit.
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Through its investment in ESPF 4, the GIP aims to contribute to an increase in water use efficiency.
KEMPEN INDICATORS SDG 6 PRO-RATED Pro-rated Figures
WHAT
In most conventional energy production processes, water is a key input. Consequently, 15% of freshwater withdrawals globally are used for fossil fuel energy production alone.18 Although water stress is a local issue, the UN states 2 billion people currently live in countries experiencing high water stress. The importance of this issue is reiterated in the fact that water crises continues to rank in the top global risks based on both severity and likelihood by the World Economic Forum’s Global Risks Report.19 The shift to renewable energy can help to reduce water stress risk as solar PV and wind use up to 200 times less water than a coal power plant to produce the same amount of electricity.18
HOW MUCH
Estimated m³ water savings over lifetime of projects under development and construction20 Projected m³ water consumption savings p.a.20 Actual m³ water consumption saving realized p.a.21
2018
2019
Funds Contributing
2.3 million 1.5 million ESPF 4
92,000
62,000
ESPF 4
0
16,416
ESPF 4
The decline in pro-rated projected water savings figures is due to fund growth, which lowered GIP’s share from 4% to 3%. The projected water savings for all projects remained unchanged. Actual water consumption savings is a newly reported KPI by ESPF 4 this year as two projects became operational.
GIP’s investments contribute to SDG 6 in the highlighted countries.16
CONTRIBUTION
Water scarcity is not an equally pressing issue across Europe. Due to climate change there is regional water scarcity in some Southern European regions (i.e. Spain and Italy). Substituting fossil power plants, which have a considerably higher freshwater demand, with renewable energy helps with conservation. The above savings are due to the shift to renewable energy and are anticipated due to a changing energy mix in selected European countries.
WHO
RISK Major Challenges Remain
Significant Challenges Remain
Challenges Remain
SDG Achieved
Impact Report 2019
The UN World Water Assessment expects worldwide water demand to be 20 – 30% above current levels of use by 2050.22 Without better infrastructure and management, negative impacts on life and the environment will continue and undermine the efforts made towards a sustainable future. GIP’s current investments focus on the transition to renewable energy assets, which require significantly lower amounts of water for operation. While the renewables capacity is added in Europe, the actual water saving is taking place in locations where fossil fuels are produced. \ 15
KEMPEN INDICATORS SDG 7 PRO-RATED
Through its investment in Green Bonds and ESPF 4, the GIP strives to support the sustainable consumption and production of clean and renewable energy.
WHAT
Global primary energy demand is expected to rise as a result of continued population growth, urbanization and growing electrification. As the energy sector accounts for around 60% of the total greenhouse gas emissions, it is essential to support the transition to clean energy.23 Through this we can counter the trend of climate change, which impacts all countries worldwide. Although some of the GIP’s investments are in countries that have sufficient amount of electricity generated from renewables, we would argue that because the planet overall faces the threat of climate change, investing in green energy around the world is positive contribution and is helping to transition the planet towards a cleaner future.
HOW MUCH
Pro-rated Figures
2018
2019
Funds Contributing
Actual tonnes CO₂ emissions avoided p.a.24
10,871
12,000
Green Bond Fund, ESPF 4
Actual MWh renewable energy generated25
12,100
14,500
Green Bond Fund, ESPF 4
The renewable energy generated in 2019 jumped as two projects, located in Bulgaria and Germany, became operational for ESPF 4. These projects have operational lives of 20+ years, and we expect to see these figures grow going forward as more projects become operational.
GIP’s investments contribute to SDG 7 in the highlighted countries.16
CONTRIBUTION
While on the global scale GIP’s contribution to tackling climate change can be considered modest, the duration and depths of some of our projects are significant. For instance, through ESPF 4, we invest in new solar and wind capacity projects that will be operational for the next 20+ years. From this, there is long-term additionality at the manager level. Our investments in green bonds and renewable energy aim to grow undersupplied markets and contribute to addressing the problem of climate change and its consequences by financing green projects which contribute to both mitigating and adapting to climate change.
WHO
RISK Major Challenges Remain
Significant Challenges Remain
Challenges Remain
SDG Achieved
Impact Report 2019
The rate of replacement of fossil fuels could be too slow or a lack of adoption / push for renewable energy sources by the public could limit the impact of the investments. There is a risk that the reduction of CO₂ levels is not significant enough to combat the consequences of climate change. Furthermore, there are execution, evidence and endurance risks that need to be mitigated to make sure the full expected benefits are delivered.
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KEMPEN INDICATORS SDG 8 PRO-RATED
Through all of its investments, the GIP is looking to promote inclusive and sustainable economic growth, employment and decent work for all.
WHAT
Sustained and inclusive economic growth can drive progress, create decent jobs for all and improve standards of living. While real GDP per capita and labour productivity have increased globally, 731 million people remain below the USD $1.90 poverty line.26 This slow and uneven progress requires us to rethink and retool our economic and social policies aimed at eradicating poverty. Increased commitments to trade, banking and agriculture infrastructure will help increase productivity and reduce unemployment levels in the world’s most impoverished regions. The GIP works to invest in funds that provide full and productive employment in emerging markets that support fair wages.
HOW MUCH
CONTRIBUTION
WHO
RISK Significant Challenges Remain
Challenges Remain
2018
2019
Funds Contributing
Jobs supported
6,337
3,436
ECF III, OGF, Agri Debt Fund, AQF
419,200
420,000
ECF III, Agri Debt Fund, AQF
Underserved reached via financial services27
The decline in the number of pro-rated jobs supported is a result of the substantial growth of the Agri Debt Fund in 2019. GIP’s share went from 62% of the Fund to 25%. The number of jobs supported by the Agri Debt Fund on a non pro-rated basis was up by approximately 3,000 – an increase of 28% over the previous year. The AQF is a new investment for 2019, contributing 87 jobs and reaching 41,848 underserved customers after pro-rating.
GIP’s investments contribute to SDG 8 in the highlighted countries.16
Major Challenges Remain
Pro-rated Figures
SDG Achieved
Impact Report 2019
Global unemployment rates currently stand at 5.7% and it is estimated that between 2016 and 2030, approximately 470 million jobs are needed globally for new entrants into the labour market.26 GIP’s investments are directly contributing to combating this issue through job creation and retention efforts. By offering financial services to underserved consumers, GIP’s investments are helping target 8.1: expanding access to banking, insurance, and financial services for all. The jobs created could potentially be insufficient to cover the increased need or only be temporary in nature. There is also the risk that the jobs created or retained in emerging markets could be to support industries with unsustainable practices, counteracting the efforts made on the climatefocused SDGs. We aim to mitigating these risks through continuous dialogue with our fund managers.
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Through its investments in Agri Debt and Organic Growth funds, the GIP aims to promote sustainable agriculture in emerging markets and the transition to sustainable consumption & production patterns in developed markets.
WHAT
The global population is growing. To meet the increasing demand for food, annual investments of about USD $83 billion are necessary in the agriculture sector. This also applies to developing countries, where 34% of the workforce is employed in agriculture and smallholder farmers dominate the sector.28 By providing these farmers with access to capital and efficient supply chains, companies strengthen value chains, promote environmentally sustainable agricultural practices, boost local economic growth and help to improve rural livelihoods. Increasing the quality of products also increases pricing and access to more favourable markets, raising farmer incomes and reducing upstream risk for buyers and other actors in the value chain. Major challenges in Europe exist for achieving SDG 12. Expanding European market for organic food and sustainable consumer products can help close this gap.
KEMPEN INDICATORS SDG 12 PRO-RATED Pro-rated Figures
HOW MUCH
GIP’s investments contribute to SDG 12 in the highlighted countries.16
CONTRIBUTION
WHO & WHAT
RISK Major Challenges Remain
Significant Challenges Remain
Challenges Remain
SDG Achieved
Impact Report 2019
2018
2019
Funds Contributing
Smallholder farmers reached by investees
285,194
141,000
Agri Debt Fund, OGF
Average payment to smallholder farmer
$1,603
$2,999
Agri Debt Fund
Sustainable hectares under cultivation29
194,451
119,000
Agri Debt Fund, OGF
% of investees with a sustainability certification
74%
83%
Agri Debt Fund
Tonnes of avoided resource waste
N/A
221
OGF
Among the 450 million smallholder farms worldwide, the agricultural and non-agricultural financing needs of the roughly 270 million smallholder farmers in Latin America, Africa, and Asia are estimated to exceed USD $200 billion.30 By providing short-term export and working capital financing as well as medium-term financing, the Agri Debt Fund helps to improve both the input quality and the farmers' ability to sustainably manage the ecosystems around them, for example by focusing on producing organic or certified produce. As mentioned earlier, drops in pro-rated figures are based on GIP’s share of the Fund decreasing. On a non pro-rated basis, there were both more certified hectares farmed and smallholder farmers reached over the course of 2019 than in the previous years. Certified hectares under cultivation is an impact indicator reliant on the strength and monitoring of the certification. The potential weakness of certification schemes creates the risk that agricultural practices may not end up being as sustainable as they indicate.
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Fund and company impact case studies
In the following section, we present an independent overview of each of our funds, including a description of the impact story and one case study of a specific investment in that fund. The impact numbers reported for each fund or company have not been pro-rated by the amount the GIP is invested in these funds. For the pro-rated GIP level impact numbers, please refer to pages 5 – 6. These pages summarize the key KPIs. Also refer to pages 14 – 18 for KPIs organised by SDG.
In order to prepare the impact, we developed a set of questions related to the five dimensions of impact. We asked all our fund managers to answer these questions on the fund level and for one of the underlying investees. For each investment, we describe the problem that the investment is looking to address, the solution they are offering, and why this specific approach offers a good solution. We also search for the counterfactual, i.e. what would have happened had this investment not taken place. If you want to know more about the methodology and approach we have taken, or the process of impact management that we followed to put together these case studies, please refer back to pages 10 – 11.
Impact Report 2019
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EMERGING CONSUMER FUND III About the Fund LeapFrog | Closed-end | Private Equity | $25 million committed The ECF III aims to address two specific problems. Firstly, the lack of social safety nets in developing countries which mean that adverse financial or health events can push people back or deeper into poverty. Secondly, the lack of “springboards”, such as access to credit or quality healthcare, to improve the overall financial and social well-being of low-income people.
6
2017
5
$743 million
Countries
Vintage Year
Investments
Fund Size
COUNTRY BREAKDOWN OF INVESTMENTS
The need for investing in quality, affordable, and accessible health services has never been higher. According to a report from the World Bank and the WHO, at least 50% of the world’s population cannot obtain essential health services and over 100 million people are pushed into poverty by health expenses.31 As per World Bank statistics, 66% of adults in ECF III’s target countries are still excluded from access to the formal financial system. The companies ECF III invests in directly address issues of accessibility, affordability and product quality (client protection) that are fundamental for meeting the financial and health needs of low-income consumers in emerging markets. The consumers targeted by the Fund are underserved individuals that are willing and able to pay for critical financial and health services, but are either entirely excluded or underserved by traditional institutions by virtue of being a low-income consumer, or due to other factors (health condition, caste, religion, ethnicity, gender). The underlying companies use innovative models to develop and distribute critical financials and healthcare services at scale, i.e. global remittances at affordable costs or quality pharmaceuticals across 50 location in East Africa.
Impact Report 2019
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EMERGING CONSUMER FUND III
Impact KPIs 2019
Impact Story The Fund invests in purpose driven companies (enterprises) with the aim to reach 80 million people, of whom 70 million are emerging consumers (individuals earning less than USD $10 per day) with critical financial and health tools. The majority of emerging consumers have small and irregular income flows which make them unable to establish sufficient reserves or savings to withstand even moderately adverse events.
2018
2019
People reached
22.2 million
26.7 million
Emerging consumers reached
18.8 million 23.0 million
Emerging consumer customers
11.5 million
13.0 million
Underserved people reached via financial services portfolio
8.1 million
11.2 million
10.7 million
11.8 million
3,459
4,222
No Poverty
Enabling access to high quality, affordable products for financial and health inclusion aligns directly with SDG 1: No Poverty and SDG 3: Good Health & Wellbeing. With the investments made, LeapFrog also aims to create or support 40,000 jobs which aligns with SDG 1: No Poverty, SDG 8: Decent Work & Economic Growth, and SDG 5: Gender Equality.
Good Health & Well-being By the end of 2019, the Fund provided healthcare and financial services to over 23 million underserved consumers through its investee companies. Most of these individuals are accessing insurance, savings, pensions, credit, medicines or healthcare services for the first time. These tools directly mitigate financial shocks and reduce costs for low-income people. Of these 23 million consumers, 11.8 million were reached through the financial services portfolio and 11.2 million through the healthcare portfolio.
Underserved people reached via healthcare portfolio
Decent Work & Economic Growth Jobs supported
The Fund’s contribution to the portfolio companies is to bring its expertise, network and experience to help with revenue growth and reach. For many of the services the portfolio companies provide, it is essential to engage customers. For example, the investee Goodlife requires pharmacists to be the first point of contact for customers, in order for them to understand the use and impact of the pharmaceutical drugs they may purchase. The ECF III also actively engages with portfolio companies about talent management and employments standards.
70 million emerging consumers Number of people ECF III targets to reach through the Fund during its 10 year lifetime
Impact Report 2019
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GIP’s contribution to SDG 3: Good health & well-being Through the Emerging Consumer Fund III The IMP framework was applied and supplied to the GIP by the fund manager LeapFrog for the ECF III. The table highlights an assessment across five dimensions of significant effects the portfolio aims to achieve related to provision of good health.
Significant effects: WHAT
WHO
HOW MUCH
Access to healthcare for low-income people Important negative
Is the outcome important?
Important positive
Aim to reach 13m low-income people
Does this help people in need?
Well-served
Some customers living on $2-10 a day For Few
Scale
Under-served
For Many
10.7m emerging consumer customers
Depth Duration
CONTRIBUTION
RISK
Compared to alternatives?
Marginal
Deep Impact
Short-term
Long-term
The ECF III invests in purpose-driven companies that aim to reach 13 million low-income people in Africa and Asia with critical and health tools. In target countries, there are estimated to be 2 billion low-income individuals (earning $2 – $10/day) who are willing and able to pay for critical products and services, but are either entirely excluded or underserved by virtue of being low-income. The Fund’s investee companies help to fulfil this need by providing the necessary access to essential healthcare to those underserved households. Enterprises are enabling first-time access to quality healthcare for low-income people in emerging markets. Low-income consumers are underserved by traditional financial and healthcare providers due to factors including income, availability, geographical access, and product suitability. ECF III enterprises are filling this unique unmet need at scale, an outcome that would not have happened otherwise. ECF III enterprises keep emerging consumers at the core of their growth plan and hence are differentiated from market incumbents for truly understanding the needs of low-income consumers and reach them using innovative ways with products that provide high quality protection and achieve financially sustainable returns for the enterprise.
Low-income people are particularly vulnerable to health and income shocks due to irregular income flows. In the absence of critical tools being sold in the market, the enterprises are critical for Directly reaching households with unmet needs delivering impact because they directly reach households to fulfil an unmet need.
What if it doesn’t go as planned?
Much Worse
High
Much Better
Low
While there is some execution risk, the overall risk is low. The long-term impact of health inclusion is well documented in research by the UN, WHO, and the World Bank. The impact of all enterprises is measured regularly through performance data and direct customer feedback from the time of investment until exit. Impact Report 2019
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Impact Case Study: World Remit WHAT World Remit was founded by Ishmail Ahmed after experiencing first hand the high costs, limited service and lack of client focus in traditional ways of sending money. This inspired him to develop a new type of money transfer service, where money can be transferred using the internet / mobile phones at the lowest possible cost whilst also achieving better client service. World Remit has grown fast since 2010. To date, the company has enabled $14 billion in remittances and currently has over 77,000 activations per month. In 2019, customers sent $4.0 billion in remittance. WHO World Remit services migrants, the majority of whom have left everything behind to earn money to send back home to support their family. These transfers directly improve the standard of living of the family members left behind, and enable them to stay in their own village or home country. On average a family of five is supported by the money received. Traditional ways to send money back home to emerging regions like Africa, where a large part of the population does not have a bank account, are expensive (using a money transfer office where cash can be collected) or risky (such as a money transfer using banks in the informal circuit). CONTRIBUTION World Remit has achieved scalability, enabling customers to send money easily and at lower cost to over 140 countries. Cost efficiencies and operational improvements to the business were also driven by a new, very experienced management team that LeapFrog helped to install. World Remit focuses on remittances in a number of corridors including Sub-Saharan Africa, historically the most expensive region to remit to globally, at an average cost of 9%. World Remit charges significantly lower fees, on average 3.8%. The UN describes how remittances help SDGs32: SDG 1: No Poverty, as on average, remittances represent up to 60% of recipient families’ income. SDG 2: Zero Hunger, as in rural communities, 50% of remittances are spent on agriculture-related expenses. SDG 3: Good Health & Wellbeing, as infants born into remittance families have a higher birth weight and less likelihood of dying in the first year. SDG 4: Quality Education, as one of the reasons migrants send money home is to ensure access to better education for their children. SDG 10: Reduced Inequalities, as reducing the cost of remittance transfers can substantially increase disposable income for recipients.
HOW MUCH
2019 Key Metrics
11,929,560
Total people reached
$ 14 billion
Amount of remittances customers sent since inception
2,224,112
Total emerging consumers
944
Total jobs supported
Impact Report 2019
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ENHANCED SUSTAINABLE POWER FUND 4 About the Fund KGAL | Closed-end | ESPF 4 | €22 million committed KGAL ESPF 4 aims to support the transition towards energy supply through renewable resources. To do so, the Fund is mainly involved in development (greenfield) projects, but also does some enhancement (brownfield) of renewable energy infrastructure projects.
4
2017
4
€745 million
Countries
Vintage Year
Projects
Fund Size
COUNTRY BREAKDOWN OF INVESTMENTS
Transitioning our energy supply from fossil fuel sources to renewable resources is key to reduce carbon emissions and thereby counter the trend of climate change. As we all know, climate change has a big impact on our planet and threatens ecosystems and food supplies, possibly resulting in hunger, poverty and conflict. It is therefore our responsibility to respond and counteract this trend for ourselves, our planet and our future generations. KGAL ESPF 4 takes this responsibility by investing in renewable energy sources, specifically wind and solar. By investing in assets that have a lower CO₂ footprint and use less water than fossil power generation assets, the Fund contributes to a more sustainable global energy mix. KGAL ESPF 4 has a specific focus on building new solar and windfarms (the greenfield investments projects) as to actively add new renewable energy to the energy grid.
Impact Report 2019
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ENHANCED SUSTAINABLE POWER FUND 4
Impact KPIs 2019
Impact Story Projected Impact 201933
The specific focus of KGAL ESPF 4 is on building new solar and windfarms. This focus has led the Fund to invest in multiple projects since its inception. Two are already operational: a windfarm in Germany which has the capacity to produce 402 MW of wind energy per year, and a solar portfolio in Bulgaria with an annual capacity of 43 MWp of solar energy. KGAL ESPF 4’s combined pro-rated share of these projects is 54 MWp. The other remaining projects are in various stages of development and are not yet able to generate energy, but when finished they are expected to have a combined capacity of 628MWp of which KGAL’s pro-rated share is 231 MWp.
Actual Impact 2019
Affordable and Clean Energy Expected green electricity generation p.a. (‘000)
636 MWh
Additional renewable energy capacity
231 MWp
Green electricity generated in 2019 # of per capita expected to be
served34
CO₂ expected emission savings p.a. (tonnes)
168,400 MWh 401,406 170,000
CO₂ emission savings 2019 (tonnes)
To put these numbers in perspective, the two operational projects from KGAL ESPF 4 have generated enough green electricity in 2019 to power the equivalent of 56 households p.a. The Fund’s target is to power over 1 million households.
54 MWp
44,000
Clean Water and Sanitation Water consumptions savings p.a.
Due to the fact that renewable energy reduces the amount of fossil fuels needed to generate electricity, around 44,000 tonnes of CO₂ emissions have been avoided. This is the equivalent to taking 17,700 cars off the road for a year.
2.1 million m³
Water consumption savings 2019 # of per capita that can be served with water savings p.a.
Substituting fossil power plants has the additional benefit of water consumption savings. Wind and solar farms have a considerably lower freshwater demand than fossil power plants. The Fund’s projects are expected to save an estimated amount of 2.1 million m³ water per year, which is equivalent to the water consumed by 38,200 people on average per year. Comparing the figures from the aggregated impact assessment, while more people can be served with green electricity (over 401,000) compared to the number of the people that can be served from the water saved (38,000), on an absolute basis it is still quite substantial.
555,908 m³ 38,168
Decent Work & Economic Growth Jobs for development & construction35
O&M jobs (in person years) per
786
GW36
46
The Fund targets renewable new capacity volume of
1,500 MW33 expected to serve around 1.5 million European households with electricity per p.a.
Impact Report 2019
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Impact Case Study: Bäckhammar WHAT One of KGAL ESPF 4’s projects is a wind farm under construction in Sweden: Bäckhammar. Investments in wind energy are one of the ways to reduce carbon emissions and move towards a carbon neutral energy supply. This new wind farm is being built in Bäckhammar (hence the name), near to the Vänermeer, the largest lake of Sweden. Construction began over the course of the first half of 2019 and is expected to take 24 months, after which operations can start. The roads are ready and the foundations for the turbines have been laid. In Q1 2020 the power substation of the park and the underground cables were made ready. The next step is to deliver the turbines. No state subsidies have been assumed for the project to be economically viable. The lifetime of the wind farm is expected to be at least 25 years. WHO The Paris Agreement sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C. The EU Nationally Determined Contribution (NDC) is to at least cut GHG emissions by 40% from the 1990 level and have, at minimum, 32% share of renewable energy by 2030. Once constructed, Bäckhammar will contribute to these EU-wide objectives. CONTRIBUTION The fact that this project still has to be constructed means that it will create additionality i.e. it adds net renewable energy to the grid. Bäckhammar will have a capacity of 130 megawatts, which makes it a medium sized wind farm. Estimated annual generation is between 350 – 400 GWh. This will be generated by 31 turbines with a maximum height of 200 meters. During the life time of the wind farm, Bäckhammar is expected to save over 2.7 million tonnes worth of CO₂ emissions, which is the equivalent of keeping 2.4 million barrels of oil underground per year.
HOW MUCH
2019 Key Metrics37
2,745,000
CO₂ emissions savings in tonnes over lifetime
2,457,000
# of barrels of oil left unburned per annum
33,223,000
Water consumption savings m³ over lifetime
31
Total jobs created Impact Report 2019
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AGRICULTURE FUND About the Fund responsAbility | Open-end | Private Debt | $20.6 million invested ResponsAbility’s Agriculture Fund invests in the agricultural sector as a strong driver of poverty reduction. It aims to raise agricultural production while improving the livelihoods of smallholder farmers and promoting sustainable practices. The Fund is focused on smallholder farmers as globally they produce more than three-quarters of food volumes, yet their ability to grow beyond pure subsistence farming is hampered by several factors, including restricted (or unavailable) access to sales markets, capital, training and technology.38 These smallholder farmers rely mostly on family labour and are not capital-intensive.
35
2018
67
$82 million
Countries
Inception Year
Institutions
Fund Size
COUNTRY BREAKDOWN OF INVESTMENTS
By investing in growing SMEs that operate along agricultural value chains and that aim to improve rural livelihoods in emerging economies, the Fund allows smallholder farmers to access stable, higher-paying markets and contributes to creating jobs and strengthening value chains.
“The Global Impact Pool is proud to have seeded the Agriculture Fund, facilitating a strong impact on the life of farmers and on the supply chain” JANINE WHITTINGTON Impact Manager
Impact Report 2019
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AGRICULTURE FUND
Impact KPIs 2019
Impact Story While local and international lenders of smallholder agricultural finance have disbursed over USD $350 million, they currently meet only 2% of global demand.30 This supply gap means smallholders cannot sufficiently improve their livelihoods. They experience fragmented and inefficient value chains with insecure access to markets, low and volatile prices and lack of financing and technology. As a result, they cannot break out of the poverty trap.
2018
2019
460,028
558,693
$1,603
$2,999
9,844
12,569
No Poverty Smallholder farmers reached by investees
Average payments to smallholder by investees
The Fund therefore targets the ‘missing middle’, i.e. growing SMEs with a few years track record that cannot access microfinance loans anymore but cannot yet access the financing of well-established financial institutions. In 2019, the Fund investees made payments of over $1.7 billion to 558,693 smallholder farmers, an average payment of $2,999. More than $2.9 million was spent to train 358,451 farmers.
Decent Work & Economic Growth Staff employed by investees Number of smallholder farmers trained Annual revenues from investees product sales
Environmentally, agriculture is the fourth largest sectoral contributor to greenhouse gas emissions and behind 70% of global water demand. Certified hectares is an important step towards responsible production. In 2019, 56% of the total hectares under cultivation were sustainability certified and 83% of investees held a sustainability certification, such as Organic, Fair Trade, Rainforest Alliance, etc.
347,371
358,451
$3.6 billion
$4.9 billion
60
69
560
1,088
714,159
846,733
398,273
471,475
$366,895
$386,769
Industry, Innovation & Infrastructure Local factories built/expanded in producing country Number of intermediate companies
ResponsAbility’s contribution is through signalling that impact matters and by growing new and undersupplied capital markets. The short-term financing provided allows investee companies to pre-finance existing and new smallholder suppliers, stabilising and growing revenues. The long-term financing allows companies to add value and contribute to market development by expanding their activities, increasing their sales volumes and building new infrastructure. The finance provided also helps strengthen agricultural supply chains, as local factories are build or expanded. Having these activities domestically enables the producing country to capture more of the value chain and revenue stream.
Responsible Consumption & Production Hectares under cultivation
Certified hectares cultivated by clients Investments towards energy efficiency/renewables
1,000,000 Number of smallholder farmers the Fund targets to reach by investees in 2021.
Impact Report 2019
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Impact Case Study: Suminter
HOW MUCH
Q3 2019 Key Metrics WHAT Suminter sources, processes and exports high-quality natural, organic ingredients and materials in socially responsible, environmentally sustainable conditions. They work closely with farmers to grow, harvest and process organic goods with the fairest and most ethical practices. Suminter has an integrated end-to-end supply chain model, which means they deal directly with the farmers, cutting out the cost of brokers and middlemen.
98,648
Smallholder suppliers
WHO Most of the certified organic farmers Suminter works with are from remote areas. Before Suminter, these smallholder farmers did not have market access and lacked resources to farm for more than their household consumption needs, leaving them with a fragile income base. Suminter provides inputs such as organic seeds, bio-fertilizers and bio-pesticides, removing upfront input costs and enabling the farmers to start commercially farming and earning income.
192,518
CONTRIBUTION Suminter pays a premium to farmers for their crops, increasing the farmer’s income 10 – 15%. The company trains these farmers on organic farming techniques, translating into over 1.1 million acres of land being farmed without chemical pesticides. The removal of chemical pesticides in combination with organic supplements from Suminter also prevents soil degradation by making the soil more resilient to adverse weather and pests. This is impactful as soil degradation can be a substantial issue in countries, like India, where agriculture is a large contributor to GDP. An estimated 2.5% of India’s GDP is lost annually due to soil degradation39, while on a global scale it causes food production to be reduced by almost 34 million tonnes of food.40 A domino effect occurs on water usage. The farms Suminter work with have seen up to a 25% reduction in water use due to the improved water retention of their soil. This is exceptionally important in a country where agriculture uses about 90% of the fresh water supply. Other large agricultural countries use significantly lower amounts – 60% in Brazil, and 44% in Nigeria.41 Suminter is currently dealing with the ramifications of COVID-19, the full effects of which are unclear. ResponsAbility continues to actively monitor the status.
Hectares under cultivation
77%
Certified organic
70,641
Farmers trained
Impact Report 2019
\ 29
Impact Management Project Mapping the contribution of Suminter As a pilot this year, we have further explained the significant effects of lowering poverty and promoting responsible production that Suminter is trying to achieve using the IMP’s framework. The scaling of these effects is based on our belief of the contribution created. Like many companies in global supply chain Suminter is currently dealing with the ramifications of COVID-19, the full long term effects of which are unclear for their business. ResponsAbility continues to actively monitor the situation and engage with the company.
Significant effects: WHAT
WHO
HOW MUCH
Is the outcome important?
Does this help people in need?
Lowering Poverty Important negative
69% of Indians (800 million) live on <$2 a day
70% of rural households farm, with 82% marginal/small
Duration
CONTRIBUTION
RISK
Compared to alternatives?
What if it doesn’t go as planned?
For Many
Deep Impact
35% reduction in costs, 10 – 15% organic premium Short-term
Much Worse
Important positive
Increased level of land degradation, <50% irrigated Well-served
Under-served
Global population is effected For Few
For Many
Marginal
Deep Impact
25% less water used due to better soil quality
Long-term
Short-term
Long-term
Much Better
Much Worse
Much Better
Limited transportation networks to sell crops High
Important negative
192,518 hectares of land
>20,000 farmers Marginal
Depth
Under-served
Well-served
For Few
Scale
Important positive
Responsible Production
Low
Impact Report 2019
Lack technical know-how on organic farming High
Low
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GREEN BOND FUND About the Fund NN IP | Open-end | Green bonds | €19.6 million invested The NN Green Bond Fund aims to address the problem of climate change and its consequences. Increasing greenhouse gas emissions are leading to significant climate change, including rising sea levels and more extreme weather.
29
2016
98
€1.2 billion
Countries
Inception Year
Number of issuers
Fund Size
COUNTRY BREAKDOWN OF INVESTMENTS
The Green Bond strategy primarily invests in a diversified portfolio of global green bonds of high quality (with a rating of AAA to BBB-) mainly denominated in euros. The selected bonds adhere to the Green Bond Principles as formulated by the International Capital Markets Association. The proceeds of these green bond investments are used to finance new or existing projects that have a measurable positive impact on the environment.
“Green bonds provide a liquid solution, which enables the Fund to attract large scale investments for green projects.” WIEKE MAARLEVELD Senior Product Manager Sustainable & Impact Investing
Impact Report 2019
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GREEN BOND FUND
Impact KPIs 2019
Impact Story The replacement of fossil fuels with clean and renewable energy sources is an important part of the solution for the climate change problem. Making buildings and transportation more energy efficient also accelerates the mitigation of climate change. Lastly, offering green alternatives for fossil fuel related transport (shipping and air traffic) plays the third key role in reducing the emissions of CO₂ and other greenhouse gasses. Investments that the Green Bond Fund makes contribute to addressing the pressing issue of climate change and help finance much needed mitigation and adaptation projects. In 2019, the Green Bond Fund nearly doubled the avoided CO₂ emissions and renewable energy capacity added from the underlying investments. These emissions represent the full NAV of the portfolio.
201842
201943
360,156 tonnes
657,689 tonnes
169 MW
365 MW
Affordable & Clean Energy CO₂ emissions avoided Renewable energy capacity added
Even though SDG 7 adds the most to the CO2 emissions avoided, it is not the only contributor. This number could include green buildings, energy efficiency, clean transportation, etc.
The chart on the right shows the exposure of the Green Bond Strategy to different SDGs.44 The Fund helps companies and governments finance green projects which contribute to both mitigating and adapting to climate change, as a result the exposure to SDG 13: Climate Action is 100% and exposure to SDG 7: Affordable and Clean Energy is 83%. Many green bonds are used for alternative energy and cleaner transport. The Fund’s contribution to investees lies in signalling that impact matters, engaging actively and growing undersupplied capital markets. In 2019, the Fund manager engaged with 94 issuers operating in 11 different sectors globally. According to the manager, 70% of the engagements left a positive impression, 18% were neutral and 14% of engagements were negative. The Fund does not hold any issuers with negative engagement outcomes. Overall, the Fund was pleased to see increasing corporate efforts to integrate sustainability more fully into businesses and more transparency on reporting.
Around 70% of the engagements with issuers showed some positive impression.
Impact Report 2019
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Impact Case Study: The State of the Netherlands
HOW MUCH
2019 Key Metrics
572
WHAT As much of the Netherlands lies below sea level, the country is especially vulnerable to climate change. In addition to climate change mitigation measures, the government has chosen to enter the green bond market with what it calls a “dark green” issue, which carries strict criteria and focuses on projects that also help adapt to climate change. Proceeds earmarked for projects that help adapt to climate change, include reinforcing flood defences, monitoring/managing water levels, optimizing water distribution and anticipating higher water levels.
Tonnes of CO2 avoided per €1 million invested p.a.
€1.5 billion
WHO The investment into the Dutch Green Bond (issued May 2019) aims to tackle the high CO₂ emissions that come from fossil fuel related electricity consumption. Electricity generated by fossil fuels emit high levels of CO₂ which increases global temperatures and changes the climate. Climate change is visible to everyone and results in extreme weather, flooding, drought and smog. The bond sale is part of the Netherlands’ strategy to lower the carbon footprint of the country, which includes an ambitious target of 49% reduction in greenhouse gas emissions by 2030, compared to the EU’s target of 40%. Acting as an example for the rest of the market, the Dutch green bond may give an important stimulus to the green bond space.
2019 Expenditure on clean transportation
5,462 million kWh
CONTRIBUTION The Netherlands is the first AAA-rated sovereign to enter the green bond market by issuing a €6 billion 20-year green bond with plans to increase the amount to ~€10 billion. Since issuance, the bond was tapped, pushing the outstanding amount to €7.4 billion. This bond enables the Dutch Government to take on climate adaptation and climate change mitigation projects. The bond will finance projects for renewable energy, energy efficiency and clean transportation. Renewable energy projects such as solar and offshore/onshore wind farms have high added-value for the Netherlands, where 92% (2017) of total energy consumption comes from fossil fuels and the energy mix has scarcely changed.45 Financing clean transportation will help to achieve a carbonneutral rail service, while energy efficiency projects will concentrate on energy savings in the rental housing sector.
Annual renewable energy production
45,289
Rented housing units with improved energy performance Impact Report 2019
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INCLUSION FUND About the Fund Quona Capital | Closed-end | Venture Capital | $11 million invested The AQF is dedicated to financial technology for inclusion in emerging markets. AQF invests in scale-up stage companies that are expanding access to quality financial services for underserved consumers and small businesses in Africa, Latin America and Asia. The Fund backs entrepreneurs whose companies have the potential to provide outstanding financial returns and promote breakthrough innovation in financial inclusion. AQF is focused on a few countries within its target regions, including Brazil and Mexico (Latin America), India and Indonesia (Asia) and South Africa and Kenya (Africa).
11
2018
8
$184 million
Countries
Vintage Year
Portfolio Companies
Fund Size
Quona Capital, the fund manager for AQF, leverages a strategic partnership with Accion, a global nonprofit committed to creating a financially inclusive world, with a pioneering legacy in microfinance and fintech impact investing. Quona draws upon Accion’s global presence, technical expertise, and institutional relationships to add value to its investment portfolio.
“GIP participated in AQF’s fourth close in December 2019. We are enthusiastic about the opportunities of fintech in emerging markets, both from a financial and an impact perspective.” RALPH ENGELCHOR Senior Portfolio Manager Impact Report 2019
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INCLUSION FUND
Impact KPIs 2019
Impact Story
201947
The AQF expands access to financial services for previously underserved segments and market demographics. They provide credit to entrepreneurs, enabling them to start, formalize and grow their businesses, which in turn creates jobs, fosters innovation and healthy competition, and builds a start-up ecosystem that is key for growth. This benefits SDG 8: Decent Work & Economic Growth.
No Poverty Lives touched48 % underserved
The AQFâ&#x20AC;&#x2122;s investments provide the underserved with services they need to make purchases and manage unexpected expenses. Digital financial payments products in particular reducing geographic barriers and lower fixed costs. This allows people to collect money from relatives during times of crisis, reducing the likelihood that they will fall into poverty to begin with. This positively contributes to SDG 1: No Poverty. Already, in sub-Saharan Africa, 12% of adults make phone-based payments, mostly through mobile money accounts, a number that reaches 55% in Kenya.46
4.4 million lives touched49
70%
Decent Work & Economic Growth Jobs supported (FTE)
1,448
Revenues generated
$44 million
Number of loans financed
230 million
Industry, Innovation & Infrastructure Digital payment transactions enabled
In 2019, the portfolio companies reached 955,338 customers and 22,559 MSMEs. The Fund believes that in the face of adversity comes opportunity. Technological advances over the past decade have allowed people worldwide to carry on with many aspects of their lives from a distance, and we are proud that the Fundâ&#x20AC;&#x2122;s investments have helped expand these capabilities in the financial sector of emerging markets to support those in need.
MSMEs served
The Fund contributes to financial inclusion by financing companies that expand access to quality financial services for customers and MSMEs that are underserved, with inferior alternatives, or unserved. Fintech innovation promotes financial inclusion by reducing the cost to serve customers â&#x20AC;&#x201C; an average of $15/customer for most fintechs vs. average $107/customer for traditional bank branches.50 AQF sees new capital attracted, new employment generated, and copycat business models and innovations inspired by the portfolio companies as key contributors to shifting financial ecosystems in favour of customers and small businesses.
% underserved retail customers served
% underserved MSMEs served
$296 million 22,559 99%
Reduced inequalities Retail customers served
1 million 70%
We expect these figures to grow significantly as these companies grow and as the AQF further builds out its portfolio.
Impact Report 2019
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Impact Case Study: ZestMoney WHAT With its digital lending platform, ZestMoney provides small loans on a short-term basis of between 9 – 12 months to Indian consumers and small businesses that would often not be eligible for a loan. Accessibility of small loans is limited in India, for reasons such as: • Lack of a credit history preventing traditional lenders, such as banks and credit card companies, from providing credit because they are unable to estimate the risks; • Costs to provide a small loan are too high and margins are too low. The interest on a loan provided by ZestMoney is usually between 20–32% (depending on risk profile), considerably lower than credit card companies, payday lenders and the unorganized credit market. WHO The difficulties of obtaining credit from traditional lenders results in only 3 out of 100 people having a credit card in India.51 This is just a local representation of a global problem: the "financial inclusion gap". It is estimated that 1.7 billion people worldwide do not have access to financial services.52 These people are often living in poor, rural areas. Various studies show that access to financial services has a very positive effect on the prosperity of people and businesses. Poverty decreases, people are better able to protect themselves against health and financial setbacks, and the efficiency of personal financial planning increases. CONTRIBUTION ZestMoney’s additionality lies in providing a product for customers who are unable to get a credit card from traditional sources. ZestMoney aims to reduce the "financial inclusion gap" by providing a solution for consumers without a credit history and with a relatively small credit requirement. Their solution is best compared to a digital credit card, which provides small loans that are repaid in monthly instalments. By using technology to analyse available and relevant data (focused on estimating capacity to repay the loan), ZestMoney is able to perform a good risk analysis. The services provided are largely digital and the costs of serving a customer are relatively low, which creates a healthy margin on the provision of loans. In addition, credit history is then developed by the customer, making traditional lenders accessible. In this way, financial inclusion is achieved to a greater extent. ZestMoney is often the first party to provide a loan. This applies to around 30% of the customer base.
Impact Report 2019
HOW MUCH
2019 Key Metrics
$125 USD
Average loan size
3,000
Network of online merchants
350,000
Customers served to date
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ORGANIC GROWTH FUND About the Fund Triodos | Open-end | Private Equity | â&#x201A;Ź2 million invested The OGF targets the reversal of consumption and production patterns that are leading to global overuse of natural resources.
6
2014
9
â&#x201A;Ź42 million
Countries
Inception Year
Counterparties
Fund Size
COUNTRY BREAKDOWN OF INVESTMENTS
The Fund aims to support a more sustainable production and consumption value chain by providing long-term mission-aligned private equity to leading later-stage northern and western European organic food and sustainable consumer businesses. The businesses in the Fund are devoted to making a difference. While the countries these investments currently reside in are in general scoring highly on most SDGs, their scores on SDG 12: Responsible Consumption and Production are rather low. Therefore, investment in these countries, such as the Netherlands, directed towards sustainable consumer businesses can be said to be positively contributing to this goal. The Fund is active throughout the value chain, from the farm gate to the end consumer.
If the global population reaches over 9.5 billion by 2050, the equivalent of almost three planets could be needed to provide the natural resources needed to sustain current lifestyles.53
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ORGANIC GROWTH FUND
Impact KPIs 2019
Impact Story The OGF provides long-term capital to a diversified portfolio of leading organic food and sustainable consumer companies across Europe, based on an ‘evergreen’ approach, i.e. with a long-term commitment without a fixed exit date. Often, such companies struggle to find mission-aligned (equity) capital. The evergreen approach of the provided fund equity heightens the mission alignment as it supports the entrepreneurs in realizing their long-term environmental, social and financial goals while safeguarding their independence.
2019
N/A
29,000
1,344
1,056
Hectares of certified organic farmland
N/A
11,000
Tonnes waste avoided
N/A
4,640
Organic farmers supported
Decent Work & Economic Growth Jobs supported
The Fund seeks to catalyse and support the value chain for organic food and sustainable consumer products. A chain in which (agricultural) production, distribution and consumption strikes a balance between the earth’s natural resources and the needs of society. Through its investments in sourcing, product development, production, wholesaling and retailing, the Fund is active throughout the value chain. This means from (natural) resources to final products, and from the farm gate to the end consumer. For instance, at the beginning of the value chain, the Fund was able to support 29,000 organic farmers through its investees in 2019.
The aim is to contribute to the transition to processes that work with, instead of against, nature and that do not cause damage to the soil or biodiversity. This works towards reaching SDG 12: Responsible Consumption and Production. Through the products and services of the investees, such as reusable coffee cups or biodegradable diapers, more than 4,600 tonnes of waste was avoided in 2019. The organic food turnover generated by the portfolio companies amounted to €185 million. This figure is an indication of the access that consumers have to sustainable and organic food products.
2018 No Poverty
Responsible Consumption & Production
Total turnover generated by portfolio companies in organic food sector
€278 million €185 million
The organic food and sustainable consumer sector is very diverse which makes impact reporting at aggregated fund level challenging and limited to a small range of indicators.
OGF actively contributes to the expansion of the organic food and sustainable consumer goods sectors in Europe
During 2019, the Fund sold its stake in one portfolio company Marqt. As a result, some of the impact numbers such as jobs supported are down compared to 2018.
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Impact Case Study: TIPA
HOW MUCH
2019 Key Metrics
WHAT TIPA is an Israeli company aimed at addressing the global challenge of plastic pollution through specializing in fully biodegradable plastic solutions. With an average lifespan of up to one year, single-use plastics are highly polluting and constitute a large portion of the millions of tonnes of plastic dumped in our oceans and landfills each year. The negative externalities of this pollution have been conservatively estimated to be around $40 billion. The UN estimates that only 9% of global plastic waste is recycled.54 The vision was to create packaging that would decompose naturally in the organic waste stream. The result is TIPA’s packaging solutions, which are characterized by a similar shelf life, durability and compatibility with existing production machinery in conventional plastic factories. TIPA’s products can broadly be categorized into four packaging-segments: fresh produce, dry food, apparel and mailing. These packaging-segments all fall under single-use plastics, which make up roughly 50% of the 300 million tonnes of plastic produced each year.55
680 Tonnes
Conventional plastics displaced
$3.6 million (80% of turnover)
WHO TIPA creates a solution to conventional packaging and has the potential for far-reaching impact as they are actively trying to end plastic pollution around the world. The company currently has contracts with major retailers and brands globally, thereby starting the transition towards a world without plastic pollution. R&D spending 2019
CONTRIBUTION Since large-scale production began, it is estimated that humans have created an excess of 8 billion metric tonnes of plastic.54 TIPA’s products are 100% biodegradable within 6 months in an industrial or home composting environment. In 2019, TIPA sold 560 tonnes of its sustainable packaging. With the aid of the Fund’s investment, TIPA is expanding its operation and is researching a new blend of biopolymers from renewable sources that could degrade in various environments including consumer homes.
95
Number of Clients
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Impact management dilemmas
Progress towards targets The table below provides a summary of how the GIPâ&#x20AC;&#x2122;s funds are progressing towards their impact targets.56 Not all funds have quantified targets, some focus on a more qualitative approach and report realized outcomes. Impact management is complex. In the boxes on the right side of the page we highlight some impact dilemmas that our funds may be facing.
2019
ECF III
People reached Emerging consumers reached Jobs supported
ESPF 457
Green electricity generation p.a. CO2 emissions avoided p.a. (tonnes)
Jobs supported
Funds which do not have quantified targets:
Green Bond Fund
GOAL %
26.7 million
80 million
33%
23 million
70 million
32%
4,222
40,000
11%
168,400 MWh 4,500,000 MWh 3.7% 44,000
Additional renewable energy capacity 54 MW(p)
Agri Debt Hectares under cultivation Fund Smallholder farmers reached
TARGET
ECF III
1.35 million
0.03%
1,500 MW
3.6%
846,733
1.5 million
56%
558,693
1 million
56%
12,569
30,000
42%
AQF
OGF
ESPF 4
Agri Debt Fund
The portfolio companies target low-income emerging consumers. Understanding the needs of these consumers and translating them into a scalable business strategy can be challenging due to barriers of affordability, financial literacy and access. Not all people reached might be equally underserved or have first-time access to these services. Construction of new wind parks involves land use changes and in some cases industrial forests may need to be cleared to facilitate wind park construction. Although the trees may be due for clearing and the replaced forest can be replanted elsewhere, the CO2 absorption of a young forest is not the same as from a mature forest. The availability of working capital financing is limited for smallholder farmers and cooperatives. The Agri Debt Fund might be one of the few sources of capital they can access. The capital provided might still feel as relatively expensive for some entrepreneurs. This is an inevitable dilemma in the trade-off between financial risk and reward versus impact.
Green Bond The Fund does not have a quantitative impact target as some green projects do not have positive quantified impact (e.g. a windmill replacing Fund nuclear power). As the green bond market evolves various types of projects may be funded which have different CO2 savings, for instance green buildings have lower savings versus renewable projects.
AQF
OGF
Impact Report 2019
The Fund focuses on the qualitative impact thesis, drilling down into whether the companyâ&#x20AC;&#x2122;s business model truly reaches the underserved. There is a focus on setting up company specific KPIs that will be tracked. Given the VC stage of investments, projections would be less scientific and data driven than for later-stage investments. Some reusable products may have unintended negative consequences. For instance, biodegradable plastics may take some additional time to biodegrade depending on external conditions. The investments may also not address the impact or scale that is most needed (largest gap in SDGs).
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THE YEAR AHEAD STATEMENT ON COVID-19 Given the COVID-19 pandemic, progress towards SDGs is at risk as millions of people lose their jobs, resulting in the health crisis turning into a humanitarian crisis. Now is the time for impact investors to show solidarity and continue investing to support the universal values. COVID-19 will undoubtedly have an impact on both our fund managers and investee companies. Delays in capital deployment is to be expected. While some investees will see a slowdown in sales, others will benefit. Our manager selection for the GIP has been very robust and we only partner with fund managers after thorough due diligence.
A look into 2020 In 2020, the GIP team expects to continue to add new investments to the portfolio. The GIP will continue to develop into a well diversified portfolio of investments across asset classes, regions and impact themes. Our focus has and will be to allocate capital where it matters the most â&#x20AC;&#x201C; towards our focus SDGs in countries where gaps in those SDGs are present â&#x20AC;&#x201C; through carefully selected investments.
We are proud of the journey we have made together with our investors and portfolio companies so far and are very excited to continue this journey in the years ahead.
We trust that the investment managers we have selected will navigate their portfolio companies in the best possible way, keeping social and sustainable considerations in mind. In parallel, we expect that our managers will be on the lookout for impactful opportunities. Most of our fund managers are still in the investment period and we expect that there will be attractive investment opportunities as a result of the crisis. This bodes well for future returns, both from a financial and impact perspective. The investment team has identified several compelling investment opportunities and during the first months of 2020 due diligence has commenced for a number of investments. We will also continue to mobilize investors to join us on our impact journey, which will enable us to further increase our impact footprint.
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Impact Methodology and Limitations Reporting the impact of one given investment is complex. Just as in financial accounting, assumptions are needed and there are different standards of accounting and reporting. Reporting on positive impact also has an element of subjectivity and assumptions are built in. In the next paragraphs, we try to shed light on our assumptions in aggregating the impact numbers as much as possible.
Impact attribution Impact attribution is complex process and there is currently not a single established definition. It is important to perform some impact attribution to avoid double counting and impact exaggeration. In the ideal situation the additionality of investor capital, its catalytic role and any non-financial value added should be considered. In practice these values are difficult to calculate.
Renewable infrastructure projects For some of our investments it is more straightforward to calculate impact than for others. The case for brownfield renewable energy projects is an example of this. For these projects, the amount of energy generated and the amount of people employed is known. These are the actual numbers. Looking at the greenfield projects, assumptions need to be made about expected energy generation targets for each project. This can create assumption sensitive outputs for reporting purposes. For our renewable energy manager KGAL, we used the estimated energy generation numbers that were provided by the manager and are based on the four projects, one half being operational and the other half in the development phase. These are impact projections and the actual numbers can differ from the projections. In cases where KGAL ESPF 4 only owns part of the project we take the pro-rated share of impact based on the Fundâ&#x20AC;&#x2122;s ownership of the project.
Private equity In the case of private equity investments, the numbers of employees and contractors may vary significantly due to seasonality. This can make it unclear as what number of jobs should be reported. In that scenario, we analyse the data on a case by case basis, but the general guideline is that we use the annual total of employees.
Impact target Although most of our underlying investments have specific impact targets, we do not have a quantitative impact target for GIP at this moment. The impact achieved by GIP will be highly dependent on the size of the fund, the type and number of investments and the type of the underlying investments. We do expect and ask our underlying managers to set impact targets and report against them. At the GIP level we target for all funds to have positive contribution to our selected SDGs, sub-targets and target outcomes.
To calculate the impact attributable to the GIP we used an approach that reflects the fact that GIP is not the only investor in the underlying funds, and these funds are not the only investors in the underlying companies. This means only a part of the impact generated by the fund investments can be attributed to the funds, and an even smaller part can be attributed to GIP. However, in some cases either the GIP or the underlying investors have been catalytic in bringing about the desired impact at the investees. When reporting on the aggregate GIP level impact, we calculate pro-rated impact based on our commitment to the underlying funds and the fund size at the end of 2019. That means we take the total impact of an investee as reported by the funds, and then prorate it by the percentage that GIP represents in the Fund. We have chosen not to pro-rate the impact based on the percentage the underlying funds own in the companies unless the funds provide pro-rated numbers to us themselves. Often even with minority equity investments or through loans, the impact that the fund has in scaling and growing the business is significant.
Risk & Limitations We must be aware that investments may have a positive contribution to some SDGs while having a negative contribution to others. For example, stimulating growth and decent jobs while emitting COâ&#x201A;&#x201A; and thereby contributing to climate change. We aim to mitigate this risk by selecting high-quality managers that have high ESG-management systems. We only invest when positive contribution outweighs the possible negative contribution. Another risk to impact investing is that the targeted impact and outcomes are not (fully) achieved and that far fewer people benefit from the investments than planned by the investee funds. We strive to mitigate this by continually engaging with our managers to understand their investment processes and how they select and manage investments.
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Sources and Footnotes (1/2) All photos used in this report have either been provided by the Fund Manager or sourced from the underlying company website. 1Data on underserved healthcare services is provided by fund manager LeapFrog. Among the people reached not all the individuals would be equally underserved even if they live in the same country. 2Data on underserved financial services is provided by fund managers LeapFrog, responsAbility, and Quona. Among the people reached not all the individuals would be equally underserved even if they live in the same country. 3Data on jobs supported is provided by fund managers LeapFrog, responsAbility, Quona, and Triodos. 4Data on smallholder farmers reached and certified hectares is provided by fund managers responsAbility and Triodos. 5Data on average payments to smallholder by investees is provided by fund manager responsibility. 5Data on CO₂ emissions avoided is provided by fund managers NN IP and KGAL. 7Source for the equivalent figure on cars is from the EEA. This number is pro-rated for the GIP. Calculation based on the average new car emitting 120 g/km and driving an average 20,000 km. https://www.eea.europa.eu/data-and-maps/daviz/average-emissions-for-new-cars-5#tab-googlechartid_chart_11. 8Data on renewable energy generated is provided by fund managers NN IP and KGAL. 9Source for the equivalent figure on Dutch household electricity usage is from https://www.odyssee-mure.eu/publications/efficiency-by-sector/households/electricity-consumption-dwelling.html. This number is pro-rated for the GIP. Calculations based on figure that the average electricity consumption per household in the Netherlands is 3,051 kWh. 10Data on estimated resource waste avoided is provided by fund manager Triodos. 11Source for the equivalent figure on waste is from Eurostat. This number is pro-rated for the GIP. Calculation based on 492kg (0.492 tonnes) waste generated per person per year on average. https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20200318-1 12Data on estimated water savings over lifetime of solar & wind projects under development & construction is provided by fund manager KGAL. 13Source for the equivalent figure on water use is from Waternet. This number is pro-rated for the GIP. Calculation based on 1-person households using 52,000 litres per year. On average, 2-person households use 99,000 litres per year. Therefore, the water use of multi-person households is more economical than 1-person households (average household of 3 or 4 people). 14Impact Management Project. For further information, refer to: https://impactmanagementproject.com/ 14Global spending on health: a world in transition. Geneva: World Health Organization; 2019 (WHO/HIS/HGF/HFWorkingPaper/19.4). Licence: CC BY-NC-SA 3.0 IGO. 15World Health Organization The world health report 2010 - health systems financing: the path to universal coverage. Geneva: World Health Organization; 2010. 16Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G. (2019): Sustainable Development Report 2019. New York: Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN). 17LeapFrog’s definition of underserved people, which are those willing and able to pay for critical financial and health services, but are either entirely excluded or underserved by traditional institutions by virtue of being a low-income consumer, or due to other factors (health condition, caste, religion, ethnicity, gender). 18IRENA (2015), ‘Renewable Energy in the Water, Energy & Food Nexus’. 19World Economic Forum – The Global Risks Report 2020. Refer to the following link http://www3.weforum.org/docs/WEF_Global_Risk_Report_2020.pdf 20Projected water consumption savings p.a. include those projects that are also not currently operational but are in a development phase. 21Actual water consumptions savings from Photon, Sardegna and Veja mate projects in 2019. 22WWAP (UNESCO World Water Assessment Programme). 2019. The United Nations World Water Development Report 2019: Leaving No One Behind. Paris, UNESCO. 23United Nations Sustainable Development Goals – SDG 7 – Facts & Figures: https://www.un.org/sustainabledevelopment/energy/ 24Actual 2019 CO₂ emissions avoided from KGAL’s Photon and Veja mate projects and KGAL ESPF 4. 25Actual 2019 renewable energy generated from KGAL’s Photon and Veja mate projects and KGAL ESPF 4. 26United Nations Sustainable Development Goals – SDG 8 – Why it matters: Decent Work and Economic Growth: https://www.un.org/sustainabledevelopment/wp-content/uploads/2016/08/8.pdf 27The definition of underserved can vary per fund manger, as well as among the people reached. Not all the individuals would be equally underserved even if they live in the same country. 28responsAbility Press Release June 6, 2018: https://www.responsability.com/en/responsability-launches-new-fund-sustainable-agriculture 29For this metric, responsAbility uses certified hectares, while Triodos uses hectares of land farmed organically. The exact definitions may differ. 30Unlocking Growth in the Era of Farmer finance: https://mastercardfdn.org/wp-content/uploads/2018/06/Inflection-Point_April-20160-accessible.pdf
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Sources and Footnotes (2/2) 31Tracking Universal
Health Coverage: 2017 Global Monitoring Report. the SDGs: https://www.un.org/en/events/family-remittances-day/un-action.shtml 33All numbers in this table are pro-rated based on KGALs share in the underlying projects. Numbers are based on green electricity generation projections that are expected to take place annually. KGAL’s 2019 impact projections are the source for this table. Impact target on green electricity originally based on a €500 million of equity with leverage of 50% results in €1 billion of total investment volume, has been scaled by 1.5x to account for fund growth to approximately €750 million. 34Number of households being served: based on average household electricity consumption of approximately 3.000 kWh p.a. 35Job creation during development & construction of PV or wind projects based on statistical data is on average 3.5 person years/MW. 36Job creation during Operation & Maintenance of PV or wind projects based on statistical data is on average 0.4 person years. 37The numbers are presented for the total project. KGAL has 95% ownership of the project. 38Sarah K. Lowder, Jakob Skoet, Terri Raney, The Number, Size, and Distribution of Farms, Smallholder Farms, and Family Farms Worldwide, World Development, Volume 87, 2016, Pages 16-29, ISSN 0305750X, https://doi.org/10.1016/j.worlddev.2015.10.041. 39Refer to article: https://www.business-standard.com/article/economy-policy/2-5-of-gdp-india-s-annual-economic-loss-due-to-degraded-land-in-2014-15-118060300061_1.html 40Martina Sartori, George Philippidis, Emanuele Ferrari, Pasquale Borrelli, Emanuele Lugato, Luca Montanarella, Panos Panagos, A linkage between the biophysical and the economic: Assessing the global market impacts of soil erosion, Land Use Policy, Volume 86, 2019, Pages 299-312, ISSN 0264-8377, https://doi.org/10.1016/j.landusepol.2019.05.014. 41Figures based on World Bank and Bloomberg Opinion Calculations. Refer to: https://theprint.in/opinion/india-is-the-largest-exporter-of-water-even-as-taps-run-dry-across-the-country/259588/. 42Numbers based on reporting from around 33.1% of the portfolio for renewable energy, 71.4% for emission reductions. 43Numbers based on reporting from around 31.8% of the portfolio for renewable energy, 68.1% for emission reductions. 44Numbers provided by NN IP Green Bond Strategy Brief December 2019. 45Refer to: https://www.cbs.nl/en-gb/news/2018/16/energy-consumption-hardly-changed-in-2017 46Refer to: https://www.cgap.org/blog/financial-inclusion-has-big-role-play-reaching-sdgs 47GIP committed to the AQF in December 2019. Quona focuses on the qualitative impact thesis, drilling down into whether the company business model truly reaches the underserved, and focuses on agreeing with the portfolio company on the specific KPIs it will track – rather than projecting specific figures for each indicator. Given the venture stage of Quona’s investments, projections would be less scientific and data driven than for, for instance, PE investments and is not considered a meaningful focus. 48Lives Touched is the sum of customers and/or businesses served by the portfolio companies and the number of FTE of those companies, together multiplied by the average household size of each market in which those portfolio companies operate. 49The fund has a tailored approach per company for defining its underserved customer segments. Examples include: customers with poor, thin or no-file credit; MSME customers under a certain annual revenue size defined for the specific market. As a result, underserved means something different for each geography and market. 50Quona’s response to the Kempen Impact Questionnaire, 2019. 51Quona’s Year In Review 2019: Fintech for Inclusion in Emerging Markets, Page 21. 52Demirgüç-Kunt, Asli, Leora Klapper, Dorothe Singer, Saniya Ansar, and Jake Hess. 2018. The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank. doi:10.1596/978-1-4648-1259-0. License: Creative Commons Attribution CC BY 3.0 IGO 53Refer to: https://www.un.org/sustainabledevelopment/sustainable-consumption-production/ 54United Nations Environment Programme, Valuing plastic: The Business Case for Measuring, Managing and Disclosing Plastic Use in the Consumer Goods Industry (2014). 55https://wedocs.unep.org/bitstream/handle/20.500.11822/25496/singleUsePlastic_sustainability.pdf?isAllowed=y&sequence=1 56Some numbers from the tables are rounded. These numbers are targets from the underlying managers and have not been pro-rated for GIP’s investment in the underlying funds. 57For KGAL ESPF 4, only actual numbers for 2019 are included. Projects under development and construction are not included. All target numbers are high level estimates based on the fund size of 743 EUR million with leverage 50%, assuming average investment costs of UR 1.000/kW (mix of PV and onshore wind). CO 2 emission savings or water savings calculations are based on the assumption of how a specific power mix develops in a country/region. The remaining life of KGALs operational projects is 25 years. 32Remittances and
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Colophon THIS REPORT WAS PREPARED BY KEMPEN CAPITAL MANAGEMENT N.V.
CONTRIBUTORS Narina Mnatsakanian, Marjoleine van der Peet, Ralph Engelchor, Ulrike Beyrich, Janine Whittington, Wieke Maarleveld
For more information about this report and Kempenâ&#x20AC;&#x2122;s Global Impact Pool / Kempenâ&#x20AC;&#x2122;s responsible investment approach, please contact:
SPECIAL THANKS
Narina Mnatsakanian Director Sustainable & Impact Investing Narina.mnatsakanian@Kempen.nl
To the fund managers of the GIP, for the impact that has been achieved, the data provided, and the effort put towards the publication of this report.
Janine Whittington Impact Manager Janine.whittington@Kempen.nl
To the Impact Management Project, for the feedback and guidance provided during the creation of this report.
Kempen Capital Management to: Global Impact Pool team PO Box 75666 1070 AR Amsterdam The Netherlands www.kempen.com
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Disclaimer Global Impact Pool (the Sub-Fund) is a sub-fund of Kempen Alternative Markets Fund SICAV-RAIF (the â&#x20AC;&#x153;Fundâ&#x20AC;?), domiciled in Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Sub-Fund is registered under the license of the Fund at the Netherlands Authority for the Financial Markets. The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents of the Fund are available on the website of KCM (www.kempen.com/en/asset-management). The Subfonds is registered for offering to professional investors in a limited number of countries. The countries where the subfund is registered can be found on the website. The value of your investment may fluctuate. Past performance provides no guarantee for the future. Kempen Capital Management N.V. (Kempen) is licensed as a manager of various UCITS and AIFs and authorised to provide investment services and as such is subject to supervision by the Netherlands Authority for the Financial Markets. As asset manager KCM may have investments, generally for the benefit of third parties, in financial instruments mentioned in this document and it may at any time decide to execute buy or sell transactions in these financial instruments. This document is for information purposes only and provides insufficient information for an investment decision. This document does not contain investment advice, no investment recommendation, no research, or an invitation to buy or sell any financial instruments, and should not be interpreted as such. This document is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The views expressed herein are our current views as of the date appearing on this document. This document has been produced independently of the company and the views contained herein are entirely those of KCM.
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