The Directors of the U.S. Government’s development finance institution, the Overseas Private Investment Corporation (www.opic.gov), decided on 27 October to provide financing up to $285 million to equity funds. These in turn should raise more than $875m, representing the largest commitment by the U.S. Government to impact investing in emerging markets so far.
“Impact investing” usually means private investing looking for investments that deliver social and environmental benefits while generating profits, and is a very fast-growing area of investment. OPIC called for impact investing proposals in March and received 88 applications from which it picked 6 funds. According to a OPIC press release, the response was “so positive that OPIC expects to announce additional approved facilities in 2012.”
OPIC President and CEO Elizabeth Littlefield commented in the press release: “This is a watershed day in the evolution of impact investing. These new funds, and the additional investment facilities we announce in 2012, will help to fill financing gaps and introduce more innovation into the impact investing space, helping it grow and mature.”
The 6 funds are:
Investment Fund for Health in Africa II (IFHA II): A private equity fund investing in companies that improve health for Africans with low and middle incomes. It expects to target investments in companies that operate in small and medium-sized hospitals and clinics, healthcare products import, distribution and manufacturing, insurance and supporting industries such as water and sanitation, food and nutrition, education and environmental services. The fund manager is Africa Health Systems Management Company B.V. The International Finance Corporation in 2007 invested in the Netherlands-based IFHA I. OPIC: $83m, target capitalization: $250m.
ManoCap: This fund will invest in small and medium enterprises (SMEs) in Sierra Leone, Liberia and other West African countries, with a focus on post-conflict nations. It will invest in sectors including agriculture, agro-processing, sustainable fisheries, services, healthcare, sanitation, construction and building materials, tourism, light manufacturing, and financial services. These SMEs are expected to have a direct effect on the standard of living of “base-of-the-pyramid” communities by providing employment and access to goods and services. Fund manager is ManoCap LLC. OPIC: $34m, target: $100m.
Latin Idea: Growth capital to Mexican SMEs within the technology, media, telecomms and services sectors. Fund manager Latin Idea Ventures III LLC. OPIC: $25m, target: $125m.
MPOWER Ventures: Unbanked and the under-banked populations in emerging markets through providing prepaid debit cards (or GPR cards), and related alternative financial services, starting with Mexico, Brazil, Colombia, Peru and Bolivia. Fund manager MPOWER Ventures III L.P.,OPIC: $15m, target: $50m.
Sarona: Fund-of-funds will invest in 12-18 private equity funds that target market-based returns while investing in SMEs in frontier markets. Fund manager Sarona Asset Management, Inc. OPIC: $87.5m, target: $250m
Terra Bella: Private equity fund will invest in projects that generate carbon credits through protecting and enhancing forests while generating valuable social and environment co-benefits. Terra Bella will generate returns through the sale of carbon on the growing voluntary, compliance and pre-compliance markets that are emerging in the forest and land-use carbon sector. Fund manager Terra Global Investment Management LLC. OPIC: $40m, target: $100m.
According to Ms. Littlefield: “Each of them promises a strong development impact —be it mobile banking for the unbanked, investing in small businesses in the post-conflict countries of Liberia and Sierra Leone, improved health care in Africa, preservation of highly vulnerable forests, or growing small businesses in Mexico. OPIC has a long history of investing for both social and financial returns and we believe impact investing will gain significant traction in the coming years. We are proud to support its development.”