Fabio Mandorino, Economic Adviser at ABBL (The Luxembourg Bankers’ Association), is currently attending the Oxford Impact Investing Programme thanks to an InFiNe.lu scholarship. Read here the outcomes of what he is currently learning.
DAY 3: Impact Investing in Latin America – Structuring a impact investing deal
In the morning of day-3, we focused on impact investment in LatAm (taking a deep dive on Brazil) based on the experience of Vox Capital. Interestingly enough, Brazil is facing the same challenges that the entire Latin America market is actually facing, being: capital raising, missing accelerators and lack of a developed ecosystem.
A lively and open discussion took place when 2 controversial questions were raised, as follows:
“Would you approve an investment if the proposed solution had a clear impact, but the entrepreneurs were not necessarily committed to that impact? Why? »
The class came out with different views. Some highlights of the debate included, for instance, trying to positively influence the entrepreneurs with quick wins in order to embed them in the journey to achieve the intended impact. For sure further due diligence is needed as well as comparison with similar companies. A potential solution could be the insertion of specific covenants in different phases of the project.
But, at the end of the day, in an impact investing project, intentions are key!
« What if, once the company is already on your equity portfolio, you realize it is performing well financially, but it is not delivering the intended impact? What would you do? Why? »
Same here, there was no common solution to the raised issue: some people were in favor of an investigation of the reasons why the intended impact is not delivered and put in place corrective actions to bring impact on track. Others wished to directly exit the business.
After the Brazilian experience, we then changed continent, moved to Africa, where we were confronted to a serious and important theme: access to education. The issues in providing universal access to education in Africa are diverse and include lack of access and utilisation, such as low enrolment rates, high dropout rates, and gender disparities, as well as school quality issues, such as lack of infrastructure and resources and quality of teachers.
We identified various investment opportunities for private investors including investments in service provision (schools and school infrastructure), human capital (teacher and management training), technology and services (software, curriculum and back-office support) and the eco-system itself (accreditation and standards-setting bodies).
We also discussed the existing multiple channels for education investments, such as direct investments into companies with innovative business models, or investments through intermediaries who support education providers. Investment intermediaries can include banks which provide school loan portfolios, education holding companies that offer a range of education services, and investment fund managers with specialised funds in the education sector.
In the afternoon, we had a more technical section dedicated to the strategy and the structuring of an impact investing deal, as well as the different phases / steps of a deal based on the experience and expertise of Calvert Impact Capital.
If you want to know about Day 1 and 2 click here
Author: Fabio Mandorino