Established in 2009, AgDevCo’s vision is a thriving commercial African agriculture sector that benefits people, economies, and the environment. The organisation contributes to this goal by providing investment capital and technical assistance to grow sustainable and impactful businesses across the agricultural value chain. In doing so, it aims to promote resilience, gender equality and the production of better-quality, more nutritious food.

This new funding builds on the original endowment funding provided by the UK government which helped establish AgDevCo over the past decade. This endowment has provided capital to agribusinesses that have directly created or sustained more than 15,000 jobs and to work with 750,000 smallholder farmers to help increase their income and improve their resilience to climate change. It has also allowed AgDevCo to build a capability and track record to the point where it can secure external investment capital.

In welcoming the investment, Keith Palmer, AgDevCo’s founder and Chairman, said: “Securing investment from CDC, Norfund and DFC is a major milestone in AgDevCo’s history. It is a strong endorsement of AgDevCo’s team and our strategy. We are excited that our vision is shared by our new funders, who recognise the important contribution that AgDevCo investments can make to productivity, sustainability, and inclusivity in Africa. Their funding marks the beginning of a partnership in which AgDevCo will use its sector specialism, drawing on our new funders’ networks and resources, to increase the number of impactful investments in African agriculture.”

UK Minister for Africa, Vicky Ford, said: “I am proud to see how AgDevCo’s investing has boosted sustainable agriculture across Sub-Saharan Africa over the past 10 years, including deepening impact on smallholder farmers and SMEs. This new investment will bring continued growth, by enabling agribusiness SMEs to expand, improve farmer incomes, create new jobs and strengthen climate resilience across Africa.”

Tenbite Ermias, CDC’s Managing Director for Africa, said: “This investment reinforces our long-term commitment to investing in key sectors in Africa including agriculture, which is critical for creating jobs, promoting gender equality and supporting people to build a better life for themselves and their families. Furthermore, it reflects our continued focus on climate finance which is central to our new strategy over the next five-year period, to support emerging economies that are most vulnerable to the impacts of the climate emergency.”

Ellen Cathrine Rasmussen, Executive Vice President of Scalable Enterprises in Norfund, said: “Norfund is very pleased to partner with AgDevCo to deliver on our joint mission: to create jobs and improve lives by investing in businesses that drive sustainable development. A thriving commercial African agriculture sector is vital for economic growth and job creation. More than half of Sub-Saharan Africa’s population work in agriculture, yet Africa does not produce enough food to feed the continent. The investment in AgDevCo will create jobs, increase food production, improve climate change resilience, and promote gender equality. The AgDevCo team’s skills, networks and achievements are impressive – and we look forward to working with them.”

Algene Sajery, DFC’s Vice President of External Affairs and Head of Global Gender Equity Initiatives, said: “DFC is thrilled to support AgDevCo with a $20 million loan to bring additional capital to smallholder farmers and agricultural businesses in Africa, promoting food security for lower-income communities across the continent. DFC’s loan, alongside financing from our partner DFIs, will enable AgDevCo to link more farmers to markets and create jobs for underserved populations, with a focus on women farmers.”

Time is running out to fulfil the United Nations Sustainable Development Goals (SDGs) and ensure an equitable world for the next generation. Success will require an eye-watering amount of money – between US$5-US$7 trillion a year, according to a World Bank report.

In more positive news, there has been an increasing shift in mindset as investors adopt SDG-aligned impact investing strategies, which means more private capital is being allocated towards these 17 global targets. Encouragingly, 85% of 440 impact investors assessed by the Global Impact Investing Network (GIIN) in 2021 said their impact investment strategies focus on SDG-alignment.

But the next step is more difficult. How do investors measure the extent to which their capital is making a real-world difference?

Impact investing is when investors funnel capital into companies that are having a positive effect on the environment or society around them. To qualify as an impact investor, investments must have a measurement system in place, the International Finance Corporation (IFC) noted in a recent report. Worringly, the IFC highlighted that just a quarter of the US$2.3 trillion impact market in 2020 operated under a clear impact management system.

This is because understanding of how to quantify real-world outcomes of financial contributions to SDGs is still in its infancy.

“Investors want to stop guessing on impact,” says Lissa Glasgo, Senior Manager of impact measurement platform IRIS+ and Impact Measurement and Management at GIIN. “They want to be making impact-based decisions with the same rigour and quality of evidence as they do for risk and return-based decisions.”

Pressure is mounting for those tracking climate-related SDGs, as 2030 is also a significant milestone for investors, companies and governments that have set ambitious decarbonisation targets on the way to net zero greenhouse gas (GHG) emissions by 2050.

To accelerate action, policymakers are beginning to ask companies and investors to disclose their impact on society and the environment, adopting a double materiality lens.

Standardised, high-quality impact reporting is still a long way down the road, experts say. Getting there will require further collaboration between investors, standards-setters, data providers and policymakers to navigate the complexities surrounding impact measurement.

As reporting requirements yield the required data, investor demand will increase for comprehensive impact measurement methodologies, tools and frameworks. This is where organisations and initiatives such as GIIN, the Impact Taskforce (ITF) and Impact Management Platform (IMP) come into play.

Metrics and models

There are a number of barriers preventing impact investors from accurately measuring and modelling their contributions to the SDGs. Most obviously, these goals were not designed primarily with investors in mind and so aren’t easily quantifiable.

For example, SDG 13 (climate action) can be measured according to the number of investee companies that have made net zero commitments, but how do investors track their impact against SDG 16 (peace, justice and strong institutions)?

Even when metrics are straightforward, impact still isn’t so cut and dry. After all, how does the investor know an investee company set a net zero target as a direct result of its influence? If the company was under pressure from multiple investors, the public and its domestic government (as is most likely the case), who’s to say who had the biggest impact?

“Investors are currently trying to understand what kind of information they need, what relevant information is already being reported, and how impact-related information should inform decision-making,” says Peter Paul van der Wijs, Chief External Affairs Officer at the Global Reporting Initiative (GRI). “It’s definitely challenging.”

An unsurprising hurdle is the inconsistencies in third-party sustainability data, says Nick Parsons, Head of Research and ESG at specialist infrastructure investment firm ThomasLloyd. “A lot of asset owners and managers are trying to measure their impact at an arm’s length by relying on third-party vendors, which simply doesn’t work with this kind of strategy,” he says.

“Being a direct investor means we owns a stake in companies, so we can more easily get hold of proprietary data. As we have tracked SDG-related data since 2015, we know our impact over time.”

A number of asset owners and managers measure contributions to SDGs through investee companies’ revenues, according to a GIIN report. However, interviewees admitted that “the SDG revenue-alignment approach is […] insufficient in speaking to the outcomes or impact associated with the investments”. Instead, there is a demand to shift to more “standardised metrics”.

But a number of the impact measurement tools introducing standardised metrics are still in the “early stages of development” and therefore not yet useful to investors, according to a report by the World Wide Fund for Nature (WWF). In theory, investors can already compare their own portfolio impacts to benchmarks and other portfolios, WWF noted, adding that company laggards can be identified by comparing their SDG commitments and progress to competitors, i.e., identifying how many of the company’s direct competitors have publicly committed to the SDGs and outlined which goals are their priority.

Of course, this is assuming companies are providing investors with decision-useful information in the first place.

Standards-setter GRI recently published its findings following analysis of 200 companies’ approaches to SDGs. While four in five committed to the SDGs within their sustainability reports, less than half set measurable targets outlining how their actions are contributing to the goals, the report said.

In response, the GRI has outlined a series of recommendations for companies making commitments to the SDGs, including meeting stakeholder demands for transparency on negative impacts, making SDG performance data accessible by using recognised frameworks, and disclosing targets outlining how they plan to support the SDGs.

Asset managers are continuing to struggle to analyse data from investee companies using different disclosure frameworks, meaning they cannot accurately work out the overall impact of the fund, Cliff Prior, CEO of the Global Steering Group for Impact Investment (GSG), tells ESG Investor.

“Likewise, an asset owner using multiple asset managers across its impact investments – who are likely all providing differing data – has the same problem,” he adds.

Too many options?

Nonetheless, there are a number of platforms and initiatives offering guidance to help investors get started on their journey towards aligning their impact strategies with the SDGs.

“Investors are coming to us every day, saying that they want to drive impact and they need XYZ data to be able to understand what their impact even looks like and what targets they need to set moving forward,” says GIIN’s Glasgo.

The network’s COMPASS methodology gives practical examples of how investors can measure their impact across the SDGs. For instance, investors tracking SDG 6 (clean water and sanitation) can measure the percentage increase (or decrease) in the number of people accessing clean drinking water compared to the previous year. This can then be compared to the rate of increase in access to clean drinking water that is required to achieve SDG 6.1: universal access to clean water.

IRIS+, also run by GIIN, was originally set up as a “dictionary of impact metrics”, explains Glasgo. However, recognising investors’ growing need for a single source of information and guidance on assessing impact, the platform evolved and began aligning with multiple frameworks, generating over 700 metrics covering a variety of standards – including the SDGs.

“If an investor is tracking the SDGs, they can select the specific goals they are focused on and then IRIS+ outlines the recommended metric approach for them,” she says.

For private equity funds, bonds and enterprises, the UN also offers the SDGs Impact Standards framework, which provides best practice guidance and self-assessment tools to align internal processes and practices with contributions to the SDGs.

With funding from the Swedish International Development Cooperation Agency (SIDA), the GRI also updated its disclosure standards, outlining how corporates can align their GRI disclosures with the SDGs.

Building on the work of the Impact Management Project, in 2021 the 2° Investing Initiative (2DII) consulted on and created an impact investment framework. Finalised in November, its Climate Impact Management System provides investors with guidelines on how to devise, refine and communicate about impactful climate strategies.

Further, advisors and consultants are working with impact investors on SDG alignment. Pensions for Purpose, an impact-focused advisor to pension funds uses SDGs as a framework for discussion with clients on their sustainable investment beliefs and priorities.

Despite impact data remaining unstandardised, investors are proving they can partially measure SDG contributions for themselves.

The Sustainable Development Investments (SDI) platform is run by asset owners and supported by index provider Qontigo. Powered by AI-driven technology, SDI has so far analysed over 8,000 companies globally on their existing contributions to the SDGs. It identifies which SDGs companies within an asset owner’s portfolio have committed to, mapping the portfolio’s overall exposure to the 17 goals according to companies’ reported areas of focus. Asset owners involved include PGGM, AustralianSuper and APG.

Bespoke approaches proliferate among asset managers, too. Morgan Stanley Investment Management (MSIM) identifies one or two relevant SDGs it believes are relevant to an investee company’s business model, according to Vikram Raju, Head of Impact Investing for MSIM AIP Private Markets. From there, the firm creates a contractual obligation for this data to be reported by the company in question at a reasonable periodic interval so MSIM can capture any meaningful changes.

“The key is avoiding overcomplicating the reporting ask, bearing in mind that smaller companies with limited resources will struggle to comply with onerous data tracking and reporting requirements,” he notes.

Having financed and developed five utility scale solar plants in Negros, in the Philippines, as well as three biomass energy plants, ThomasLloyd measures the impact of its investments independently, says Parsons. For example, the investment firm measures its contributions to SDG 7 (affordable and clean energy) by annually recording the number of houses in the local area that have access to electricity provided by the plants.

The firm also reports on the indirect contributions its investments are making to other SDGs. “In the Philippines, we contribute to SDG 11 (sustainable cities and communities) when paying local taxes,” says Parsons. “We look at how much tax we pay in the region every year and compare that to how total tax revenue is being generated and spent locally.”

Global standardisation

Of course, the most certain way to ensure companies are all providing the accurate and comparable impact-related data in the future is to mandate standardised reporting requirements and, ideally, a common methodology for impact assessment.

“Investors do have a role to play in asking for SDG impact-related information from corporates, but governments can have a lot of influence here – more are going to be asking for companies and investors to disclose their social and environmental impact,” says GRI’s van der Wijs.

The shift to double materiality-based sustainability reporting in the EU and the UK will increase the need for an alignment in existing impact and SDG standards, he notes.

The ITF – an independent, industry-led body of more than 100 businesses, investors and public policy institutions – recently called for the Group of Seven (G7) nations to mandate impacting accounting. The report outlined the importance of policymakers leading multilateral efforts to improve the transparency and integrity of disclosures around impact investment outcomes.

“The Taskforce has found that companies and investors are really interested in aligning standards around impact reporting,” says GSG’s Prior. “Ultimately, they recognise that there are investment opportunities in impact investing, and standardised reporting will help to unearth them.”

ITF further outlined proposals to stimulate the development of policies that would channel more capital into the SDGs, including increasing the supply of investment vehicles suitable for institutional investors and promoting the use of just transition principles to better integrate social and environmental objectives.

The WWF report also called on regulators and policymakers to mandate sustainability disclosures, and called for impact disclosures for financial products to better encourage financial institutions to adopt “robust and credible impact assessments”.

Other initiatives are working to improve interoperability. Launched in November 2021, the Impact Management Platform was developed to improve cohesion between existing standards as well as support industry impact-related dialogue with policymakers.

“IMP is ensuring that everybody – investors, standards-setters, regulators – are using the same language around impact, which is pivotal to driving improvement and growth,” says van der Wijs.

Coordinated by the Impact Management Project, a five-year consensus-building forum that ended in 2021, the platform hosts impact measurement and reporting resources provided by standards-setters and frameworks, such as the SDGs. Currently, the Organisation View for companies is now live, with the Investment View for asset owners and managers expected later this year.

“As the world moves towards greater cohesion on how to deeply and thoughtfully measure impact, we will see an emergence and strengthening in the impact-related data sources we need for investors to be able to make smarter SDG-oriented decisions,” says Glasgo.

By Emmy Hawker

Verdane, the European specialist growth equity investor, has announced that it has held a final close on Verdane Idun I (“Idun” or “the Fund”), an impact focused fund investing in technology-enabled businesses based out of Europe. The Fund is classified as “Article 9” under the European Union’s Finance Disclosure Regulation and closed at its hard cap of €300 million, over its target fund size of €225 million. With Idun, Verdane continues to demonstrate its commitment to driving positive impact through investments in ambitious companies whose impact scales with business growth.

The Fund has already made three investments: in Auntie, a digital provider of workplace wellbeing services; in Spond, a digital enabler of grassroot sports and physical health; and in a third business that contributes to a low-carbon society, to be announced in the next few weeks.

Bjarne Kveim Lie, Co-Founder and Managing Partner at Verdane commented: “We are delighted and humbled by the strong support from existing and new investors for Idun and would like to thank them for putting their trust in us. Today more than ever, there is a growing pool of opportunities to combine technology and sustainability, and we believe that investors like Verdane can take a leading role by supporting founders and management teams who can truly integrate sustainability into their business models and create value through impact. The success of the Idun fundraise reflects the continued development of the firm, and we are excited by the unique opportunities available to us on this journey to drive positive impact with our investments.”

The Fund counts leading institutions among its investors, including Nysnø Climate Investments, Norway’s state climate investment fund, AP3, one of Sweden’s main national pension funds, Adams Street Partners, a private markets investment management firm, and clients advised by Mercer.

Building on Verdane’s proven track record of investing in European tech-enabled sustainable businesses, Idun will make investments focused on driving impact in three clusters: energy transition; sustainable consumption; and resilient communities. The Fund will leverage technology to significantly scale portfolio companies’ impact, and Verdane’s background as a growth investor means the firm is uniquely positioned as a leader in this space.

Every investment that Idun makes will have to meet both financial and elevated impact criteria, with impact defined as addressing at least one of the Sustainable Development Goals (SDGs) and qualifying inside Verdane’s proprietary impact framework, built on the Impact Management Project. At the portfolio level, each Idun portfolio company will regularly report on bespoke sustainability KPIs and both the Fund’s ‘carried interest’ and credit facility are linked to goal attainment. The credit facility is issued by Nordea.

Idun received strong investor support from Verdane’s existing pool of LPs and is made up by a majority of institutional capital, including endowments, family offices and pensions funds.

Idun’s dedicated team combines entrepreneurial and impact investment experience and will be integrated with Verdane’s wider platform of over 90 investment professionals and its team of operational experts, Verdane Elevate, to create value and drive impact in the portfolio. The Fund is headed by partners Christian Jebsen and Erik Osmundsen, who will work alongside directors Reed Snyder and Karin Kans, and Sustainability Lead Axel Elmqvist.

Christian Jebsen, Partner at Verdane commented: “As we enter 2022 and announce the final close of Idun, we are seeing a very strong pipeline of potential investment opportunities across Northwestern Europe, as demonstrated by the Fund’s early deployments into three compelling and ambitious new portfolio companies. We believe that sustainability is an increasingly competitive strategy, especially as the growth and private equity industry is steadily moving towards a more impact-driven mindset. As both a technology and sustainability growth partner, Verdane is strongly positioned to add value and scale its partner businesses, and we look forward to working alongside management teams to drive positive impact.”

Verdane is one of the most active growth equity investors in Northwestern Europe, having completed 17 investments, of which four were portfolio deals, in 2021. Idun will sit alongside Verdane’s existing strategies, Capital and Edda, and represents an important initiative for the firm. The Fund will develop leading-edge, best practice frameworks and toolkits within the impact space that will help Verdane’s teams drive value across all of its strategies.

Nine years since its inception, Yazhari reports that Beyond Capital is impacting 2.3 million people–1.6 million of which are women–with eight investments that are helping to provide healthcare, clean water, sanitation, energy access, and agriculture tools. We asked her for a closer look at impact investing, the risks vs. the rewards, tips for success, as well as her forecast for where it’s headed.

A Q&A with Eva Yazhari

So, why has bettering the world become a mantra for a new generation of entrepreneurs?

More than ever, today’s entrepreneurs are striving to build businesses that make a difference in the world. Businesses that make money — but pursue a path greater than just profit. Call it altruistic-capitalism, or, as I prefer, “impact entrepreneurship.”

Impact entrepreneurs are driven by a desire to disrupt the status quo. Doing their bit to push the world forward is what gets them out of bed in the morning. They believe in creating businesses that are more ethical and transparent, dislodging the dinosaurs that give the consumer a bad deal. They believe in starting businesses that make people’s lives easier, removing unnecessary complexity. Simply put, they don’t believe in selling — they believe in solving problems.

Impact entrepreneurs embody the George Bernard Shaw quote, “the reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

So, what is the importance of wealth to the “unreasonable man”? If impact entrepreneurs happen to become overnight millionaires, then the cause doesn’t stop; it just becomes more viable. PayPal founder Elon Musk made enough money by the time he was 30 to retire for the rest of his life. Instead of Ferraris and desert islands, he used his newfound funds to launch electric car manufacturer Tesla, disrupting the automotive industry forever. However, acknowledging that Tesla alone cannot save the planet from heavy emission vehicles, Musk is making public all of their patents for the advancement of the industry. The enemy is the carbon crisis, not rival car manufacturers.

Facebook has a higher market cap than the GDP of Qatar, but like Musk, Mark Zuckerberg knows that money can only bring so much happiness — and that you can’t take it with you to the grave. Despite being one of youngest billionaires in the world, he has already committed to giving away at least half of his wealth. Additionally, he is spending much of his efforts leading Internet.org, the organization to help bring the internet to the two-thirds of the planet that are not yet connected. Impact entrepreneurs do what they do for legacy, not for places on rich lists.

The late Apple founder Steve Jobs, was one of the earliest impact entrepreneurs. In Apple’s 1997 “Here’s to the crazy ones” ad (above) — undoubtedly one of the greatest commercials of all time — like-minded pioneers are described as “pushing the human race forward,” accompanied with the dialogue, “while some may see them as the crazy ones, we see genius, because the people who are crazy enough to think that they can change the world, are the ones who do.”

It’s no coincidence that in “pushing the human race forward”, Jobs created one of the world’s most valuable companies. Dreaming big is big business.

Among the “crazy ones” featured was Virgin founder Richard Branson. Since the 1970s Branson has been the champion of the “better alternative.” From health clubs to airlines, Branson has disrupted the old guard and won the hearts, minds — and importantly — loyalty of customers by guaranteeing a better way of doing things. His philosophy is embedded firmly in the DNA of the 400+ Virgin companies operating across the globe.

Furthermore, as Branson has stepped back from running his empire, he has become a prolific ambassador for what he calls “business as a force for good.” Whether this is leveraging entrepreneurial tenacity to tackle problems that governments have failed to solve, or by launching The B Team, a not-for profit that encourages businesses to be of “social, environmental and economic benefit,” Branson is paving the way for impact entrepreneurs everywhere.

With this new approach to entrepreneurship rapidly shaping business in the 21st century, we’re on our way to business success being judged not by just profit, but through cultural impact. Subsequently, business is becoming more responsible, more transparent, more rewarding, more interesting and ultimately more fun.

Things are looking up. But please, for all our sakes, don’t put “making the world a better place” in your mission statement.

By Adam Levene is SVP at the mobile innovation + design studio Monitise Create.

This momentum is likely to continue. With the U.N.’s recently enacted Sustainable Development Goals and the historic Paris Agreement on climate change, there is a strong sense that making the world a better place is no longer viewed as some lofty ideal strictly reserved for academics, policy wonks, and activists. On the contrary, global business leaders are demonstrating unprecedented private-sector commitment to addressing the most important social and environmental issues of our time. This, in turn, promises to open up a range of opportunities for impact investors to drive change at scale. Simply put, the moment that many impact investing pioneers and experts have been envisioning for years is finally here.

But despite these important tailwinds, impact investing continues to face its share of challenges. In thinking about the next phase for impact investing, I see a number of competing factors that could complicate its trajectory. In particular, here are three key tensions that are likely to define impact investing in 2016 and determine its progress for years to come.

First, in recent months, we saw a number of high-profile organizations and individuals enter the impact investing space in a major way. This trend seemed to signal that impact investing has become an elite field that is highly desirable and dynamic. But this initial impression masks a stubborn reality at many organizations—a sense that impact investing is still an emerging area that hasn’t fully captivated the hearts and minds of the rank-and-file of the financial services industry. With this in mind, one of the primary goals in 2016 should be to cement the status of impact investing as an elite area within the broader investment management universe.

Second, since its earliest days, impact investing has been driven by innovative thinking, both with respect to the types of organizations that are funded, as well as the mechanisms through which this funding is provided. But as the innovative spirit of impact investing meets the realities of the capital markets and growing client demand, we are likely to see some retrograde thinking in efforts to “settle into” more scalable and more easily marketable solutions. We need to resist this temptation. Quite simply, given its nuanced, complex nature, impact investing will not reach its full potential unless we continue to dedicate significant resources to impact-centric financial innovation in 2016 and beyond.

Third, close observers of the field are likely to notice two emerging interpretations of impact investing. Some view impact investing as a relatively informal practice that adds a bit of financial acumen to charitable giving. Others, however, think of impact investing as an innovative area of investment management that requires considerable financial sophistication and rigor. Even those who are most passionate about the future of impact investing are divided when it comes to which of these two interpretations should become the norm. However, if our objective is to leverage impact investing in order to achieve positive social and environmental impact at scale, the need for financial sophistication is inevitable. Underscoring this inevitability should be one of our key objectives in 2016.

Amidst all these underlying tensions, there is a bigger question: Will impact investing redefine finance as we know it, or will it be redefined by finance? In other words, are we at the cusp of unprecedented financial innovation that promises to change the world, or will the noble and ambitious promise of impact investing get moderated by market realities?

Ultimately, it’s up to us. If we are passionate about turning impact investing into the most impactful and transformational version of itself, it is paramount that we dedicate 2016 to driving cultural change within our own organizations, to striving for true impact-centric financial innovation, and to a relentless focus on investment sophistication and excellence.

Indeed, this work won’t be easy, but it’s the most promising path forward. Here’s to an important year of growth and transformation!

By Jem Hudson, Founder & CEO, Caldy Group