Examples of Impact Investment Funds
Illustrative examples of impact investment funds are included below.
Sustainable Trade Financing
A U.K.-based $65 million fund invests in sustainable trade and targets high-impact, sub-market rate returns for investors. The fund has provided more than $200 million in loans to 300 small and growing businesses in across Latin American and Asia, with borrower repayment rates surpassing 98 percent.
Example investment: The fund has invested in Fair Trade and organic-certified coffee cooperative located in Ecuador. The cooperative’s 300 active members are smallholder farmers who cultivate shade-grown coffee. The trade finance loan allowed the cooperative to cover operating costs and invest in new processing equipment. Additional revenue gained from Fair Trade coffee sales are used to sponsor projects in reforestation, education, and community-based health clinics in the community where smallholder farmers live.
A private equity fund based in Brazil closed with $75 million in assets. Investments target market-rate financial returns and social benefits to rural communities in South America. The fund’s investors include large financial institutions, private family offices, development organizations, and large-scale foundations.
Example investment: The fund has made an investment of $4 million to a provider of affordable homes designed for low-income families in rural settings. More than 10,000 homes have been constructed in three South American countries, focusing particularly in areas affected by natural disaster.
Clean Energy Access
A EUR 150 million European private equity fund invests between EUR 2-10 million in companies that provide clean electricity to rural communities in developing countries with limited access to energy. The fund targets competitive private equity returns, and has made five investments in Asia and Africa.
Example investment: The fund made a EUR 2 million equity investment in a company that provides solar energy for lighting and refrigeration in rural Indian households, schools, and hospitals that have limited access to the main electricity grid. Enabled by this investment, the company has installed more than 40,000 systems and currently offsets 25,000 tons of carbon dioxide emissions.
Clean Drinking Water
An India-based impact investing fund manager started investing in microfinance institutions more than ten years ago. After delivering 14 percent returns to investors, the fund manager decided to raise a second fund to target businesses across a broader set of sectors, including renewable energy, agriculture, health, and education. The fund provides risk capital and support to early stage ventures with investments averaging $50,000 in size.
Example Investment: The second fund invested in a company that sets up water purification plants in rural villages. The plants are owned by the local community and operated by the installation company, which sells the purified water to the village at affordable rates. The installation company also trains local entrepreneurs to develop businesses that deliver water to neighboring villages.