Sectors

Our investments universe focuses on six key sectors where we believe that our investment process can deliver risk adjusted returns and social and environment impacts without compromise. We have chosen these sectors due to the following characteristics. First, each sector has a high social, environmental and financial footprint where market leaders, using a triple bottom line approach, can emerge. Second, each sector is being reshaped by the ongoing transition to a low carbon economy, demand for increasing resource efficiency and demographics changes. Third, these sectors offer investors a diversified, global investable universe of both fixed income and listed equity investment options. Our sectors overlap with the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development adopted in 2015.

Financial Services

Access to finance is the provision of financial services to underserved clients both in developing and developed countries. Microfinance institutions, SME banks and community banks respectively provide financial services to micro entrepreneurs, small and medium sized businesses in local context that cannot access traditional funding. During the past 30 years, the microfinance sector has seen strong and stable growth reaching approximately 130 million clients worldwide.[1] In spite of this growth, it is estimated to have reached only 10% of the total market of 2.5 billion “unbanked” consumers.[2] The customers of these institutions generate 78% of jobs in emerging economies[3], where half of the world’s population is living on less than $2 dollars a day. These jobs, particularly in poor and rural communities, help break poverty cycles and empower entire communities. This successful model has been applied in the US and Europe via community banks and specialized SME banks that provide credit in communities affected by post-industrialization. For investors, these types of financial institutions represent compelling investments because they have successfully adapted a banking model to the local context, are managed by high standards and create clear, measurable impact.

 

Intended impact of investment:

  •      Providing access to finance to small borrowers, typically women, helps next generations out of poverty via improved school attendance
  •      Access to finance supports productive activities, creates jobs, supports entrepreneurship and innovation and encourages the formalization of SMEs

 

Sample of Impact metrics:

  •     At least 70% of loan portfolio attributed to social and environmental businesses
  •     Number of first time clients of financial services
  •     % of female borrowers

 


[1]IFC, International Finance Corporation, 2015

[2]Orrick, 2015

[3]US Agency for International Development (USAID), October 2016

Climate Change 

The transition to a low carbon economy is under way. Between 1990 and 2015, total energy supply from renewable sources grew at an annual rate of 2.2% versus the growth of non-renewable sources at 0.4%. During this period, the grown rate of the contribution of renewable energy to total OECD energy grew from 6.0% to 9.7%.[1] As public opinion galvanizes around the need to address the issue of climate change, demand for renewables will continue. For investors, the opportunity lies with renewable energy producers and thematic bonds supporting climate change initiatives. These type of investments generate stable risk adjusted return, global diversification and provide the clear environmental impact of additional clean energy production and the avoidance of CO2 emissions.

 

Intended impact of investment:

  •    Increasing the amount of renewable energy created thus lowering its per unit cost
  •    Mitigating impacts that fall on emerging economies, which have less resources to handle crisis

 

Sample of Impact metrics:

  •    Per kilo watt hour cost of renewable energy
  •    Greenhouse gas reductions

 


[1]Key Renewable Trends, IEA, 2016

Education

Education plays a key role in reducing poverty and inequality and lays the foundation for sustained economic growth. For individuals, education encourages higher lifetime earnings, reduces infant mortality and promotes better health. At a country level, education leads to increased productivity and higher national income.[1]However, according to the OECD, 800 Million primary and nursery age children living in household earning less than $2 a day lack access to quality schools. Even when there is a school in these developing countries, teachers can be absent from class as much as 47% of the time. With increasing populations and limited availability of education opportunities, demand for education is outstripping supply. This creates opportunities for investors in companies providing higher or primary level education. In developed markets, students face the challenge of finding affordable accommodations, which for investors offers a real estate type investment with a clear social and environmental impact.

 

Intended impact of investment:

  •     Increasing access to education to children for the first time
  •     Education increases social and economic mobility

 

Sample of Impact metrics:

  •     Total number of enrolled students
  •     Number of first time clients of educational services
  •     Student transition rate – % of students advancing school levels

 


[1]The Global Challenge in Basic Education: Why Continued Investment in Basic Education is Important, World Bank, 2009

Healthcare

Over 600 million[1]people worldwide lack access to basic healthcare services in emerging markets. Globally, lower levels of healthcare access negatively impact a countries’ economic growth due to lower rate of life expectancy, fertility and productivity. In emerging markets, the expanding middle class is seeking basic as well as a wider range of healthcare services. In mature markets, specialized healthcare companies are focused on tackling some the leader causes of death such as Diabetes or Cancer. This provides investors with the opportunities to make direct healthcare investments or invest in thematic bonds supporting country wide healthcare initiatives.

 

Intended impact of investment:

  •     Increase levels of healthcare access, especially for lower income groups
  •     Increase in types of healthcare services being offered

 

Sample of Impact metrics:

  •     Number of first time clients of healthcare services
  •     Type of products and services are being delivered

 


[1]World Health Organization, 2015

Food

Throughout the world, the agriculture sector and its supply chain is a huge source of impact in terms of jobs, environment footprint and its effects of people’s health. Agriculture accounts for an estimated 15% of global emissions directly and an additional 15% through land conversion.[1] Agriculture is also the single largest employer in the world providing 40% of the jobs for today’s global population[2] and helping to support many of the 2.5 billion people living at the “base of the pyramid”.[3]In developing countries, fair trade, sustainable agriculture and innovative trade finance are scalable, investable solutions.  In more mature markets, consumers are increasingly demanding more sustainable, organic foods. This provide investors with opportunities in market leading organic and natural products companies in the US or Europe or funds which invest in sustainable agriculture or fair trade in emerging markets.

 

Intended impact of investment:

  •     Increasing the amount of sustainable managed farmland under cultivation
  •     Lower fertilizer application due to is negative effects on freshwater and coastal ecosystems

 

Sample of Impact metrics:

  •     Area of land directly under sustainable cultivation or sustainable stewardship
  •     Third-party certifications for products/services sold by company (i.e., fairtrade, organic)

 


[1]Agriculture is estimated to account for at least 81% of land conversion emissions and, when taking all direct and indirect emissions (including land conversion, agrochemical production and irrigation) from agriculture into account, total emissions from agriculture are estimated to range from 16.8% to 32.2% of global greenhouse gas emissions.  See Bellarby, J., et al., Cool farming: climate impacts of agriculture and mitigation potential, Amsterdam: Greenpeace, IPCC, 2008

[2]According to research by the UN

[3]Kanayo F. Nwanze, Viewpoint: “Smallholders can feed the world” (IFAD, February 2011)

Housing

The global real estate sector impacts our world in terms of jobs, environment footprint and its social benefits. The sector is responsible for nearly 7% of the global work force and it is estimated to contribute nearly 13% of GDP by 2020.[1] It also generate 34% of all emissions while using consuming approximately 40% of the energy output.[2] Cities, with rapid urbanization, are the home of nearly half of today’s global population. In the coming decades, 95% of this urbanization will happen in emerging markets.[3]While cities use approximately 3% of the land, cities account for 60-80% of the world’s energy consumption and 75% of the CO2 emissions.[4]In these emerging markets, real estate developer focused on the low and middle income customers as well as specialized mortgage lenders are investment opportunities. In mature markets, social housing programs, student housing and specialized housing for people with disabilities are opportunities for investors.

 

Intended impact of investment:

  •     Increase the availability of sustainable, more energy efficient housing
  •     Providing adequate housing to urban populations that are affordable and energy efficient

 

Sample of Impact metrics:

  •     Third-party certifications for products/services sold
  •     Carbon emission avoided through energy efficiency and improved materials

 


[1]OECD Insights, August 2016

[2]UN Environmental Program, 2009

[3]UN Environmental Program, 2009

[4]UN Environmental Program, 2009