understanding the opportunity for impact investing in africa june 5, 2013

Understanding the Opportunity for Impact

Investing in Africa

June 5, 2013

Our Panelists

Niamani MutimaAfrica Grantmakers’

Affinity Group

Daryn DodsonWallace Global Fund

Scott WallaceWallace Global Fund

Cynthia MullerArabella Advisors

Impact investing uses return-seeking investments to help

accomplish social and environmental goals.

Industry Timeline

1790

1968

1980-2000

2007

2010+

Franklin establishes

1st fund

PRIs included in Tax Code

Socially Responsible Investing Movement

Global Financial Crisis

Development of market infrastructure

4

Projected market size of Impact Investing

5

Impact Investing5-10 year projection

~$650 billion

Philanthropy (U.S. only)~$300 billion

Total Investing~$60 trillion

Impact Investing in 2013~$9 billion

Mapping the Impact Investing Industry

6

USA 

CHINA (HONG KONG)NETHERLANDS    UK

INDIA

BRAZIL  SOUTH AFRICA 

KENYA 

 MEXICO 

 GERMANY

 SINGAPORE

AUSTRALIA 

The Sterling Group

Cynthia Muller

Director, Impact InvestingArabella Advisors

Impact Investing

Commercial Investors

FoundationsHigh Net

Worth Individuals

Development Institutions &

Banks

Where Does the Capital Come From?

Source: F.B. Heron Foundation Mission-Related Investing Continuum

Impact Investment Continuum

Below Market-Rate Hybrid Market-Rate

Grant Support Equity Subordinated

LoansSenior Loans Cash Guarantees Cash Fixed

IncomePublic Equity

Private Equity

Higher Risk Lower Risk Lower Risk Higher Risk

Below Market-Rate Investments(Impact First)

Market-Rate Investments(Finance First)

Mission Related Investments

Investing with social or

environmental screens

Market rate expected return

“Double or Triple Bottom

Line Investing”The 95%

Program Related Investments

IRS Tax Code –can be counted

toward 5% payout

Below Market Returns

Foundation Impact Investing

Impact Investing in Africa

• Size of African impact investing market between $300-400 million per year

• Sub-Saharan Africa represents a large area of growth with the continent

• Kenya and South Africa represent large areas of interest and growth

• Challenges around transparency and general uncertainty about business and political environment

 SOUTH AFRICA

KENYA

GHANA 

Examples of Impact Investing in Practice

Scott Wallace

Co-chairWallace Global Fund

Background on Wallace Global Fund and Impact Investing

• WGF progressive family philanthropy • Henry A. Wallace• Programs in environment, democracy, women’s

human rights, media and corporate power • Funds globally and domestically

• Work in Africa• History of supporting women’s human rights in Africa,

reproductive rights and abandonment of FGM/C• Support for civil society in Southern Africa• Example: Zimbabwe Alliance, donor collaborative

Mission Related Investing

% Return 2012Wallace Global Fund II 11.80%Custom Index (1) 10.58%

(1) Custom Index reflects a blended return composed of various indices: 25% S&P500, 30% BGCI, 15% MSCI EAFE, 8% TBills, 7% R2000, 5% MSCI Emerging and 10% HFRI.

Past performance not indicative of future returns.

• Commitment to breaking down the wall between 95-5%

• 2009-2011 – Process begins to align program and assets

• New investment committee, advisors and managers, with substantial savings in overall management cost to Fund

• 2012 first year of performance – 11.8% beating benchmarks

• Screening goal is 100% positive + negative screens, currently over 90%

• Example of Environment Program alignment – fossil fuels and climate solutions/clean tech

• 99% fossil fuel free• 5% + in clean tech

Portfolio Screening System

Impact Investing • 5% of fund minimum for impact investments, will

increase• Early interest: Shared Interest• Board set criteria for impact investment

– Benefit marginalized communities, potential for scale

– Women– Sustainability and climate solutions

• Engaged consultant to research impact opportunities

Daryn Dodson

ConsultantWallace Global Fund

Q&A

Niamani MutimaAfrica Grantmakers’

Affinity Group

Daryn DodsonWallace Global Fund

Scott WallaceWallace Global Fund

Cynthia MullerArabella Advisors

Sampling of AGAG Membership with an Impact Investing

Strategy

Opportunity for AGAG Funders

• Help to build networks and awareness• Seek opportunities where Grants and or PRIs

can help to reduced transactional risk and costs

• Cultivate strong entrepreneurs• Don’t forget about public policy• Share your results and experiences

Impact Investing Resources

• The Global Impact Investing Network (The GIIN)

• Mission Investors Exchange• Council on Philanthropy• Publications

– Impact Investing in West Africa (Dalhberg)– Case Study: Mtanga Farms– Special Report: This is Africa

Stay in Touch

• Web– www.ArabellaAdvisors.com– www.AfricaGrantmakers.org – www.WGF.org

• Twitter– @ArabellaAdvisor & @CynMull – @AGAGAfrica

• Email– Info@ArabellaAdvisors.com

Niamani Mutima

Executive DirectorAfrica Grantmakers’ Affinity Group