Vital Capital is pleased to share the results following the independent verification of our alignment of our impact management practices with the Operating Principles for Impact Management.
Vital engaged BlueMark, the industry’s foremost verifier, to perform the independent verification and benchmarking process. Their report reveals that Vital matched – and in many cases outperformed — against both the median ratings and a peer group of impact-only asset managers, across all aspects.
As industry standards continue to evolve in the ESG and impact investing space, this verification validates Vital’s commitment to deliver impact at scale in line with impact management best practices. We invite you to read the verification report here.
Vital Capital is pleased to have been named as one of the most innovative impact fund managers in the 2022 Real Leaders of Impact Investing list.
The list, a collaboration between Real Leaders and ImpactAssets, recognizes the firms leading the way in how capital is deployed to transform the health of our planet and its people. It includes some of the most innovative private equity and debt fund managers in impact investing, who bring unique approaches to solve challenges associated with climate change, poverty, inequality, sustainability and more.
The listing references how we use our “unique operational expertise to identify overlooked opportunities to build successful, scalable businesses that transform lives” and the fact we have transformed the lives of more than five million individuals since 2011.
Vital Capital is pleased to be participating as a supporting partner in the World Economic Forum’s Humanitarian and Resilience Investing (HRI) Initiative to support the Humanitarian Impact and Resilience Challenge. The challenge is a global call for commercially viable and scalable efforts that benefit the recovery of local communities at heightened risk or have suffered from conflict, natural disasters and forced displacement. Over one billion people live in fragile settings around the world and 274 million people will need humanitarian assistance this year. As the impact of conflict, hunger, and natural disasters grows around the world, the initiative recognizes the critical need for solutions that increase the self-reliance and resilience of affected and at-risk communities.
The challenge invites organizations, entrepreneurs and partnerships from both the private and public sectors to make their submissions by 17 November 2022. Winners of the challenge will receive mentorship and guidance from the World Economic Forum’s Humanitarian and Resilience Investing (HRI) Initiative and supporting partners—including Vital Capital—to help them become investor-ready and advance their impact.
Vital is glad to support this challenge in partnership with IKEA Foundation, Deloitte, British International Investment (BII), the European Commission, the U.S. Agency for International Development (USAID), the World Bank Group, and the World Food Programme (WFP).
PwC’s Experience Consulting hosted Vital Capital’s Head of ESG & Impact Tamar Pashtan on its PreWork Walk virtual interview series for a conversation focused on aligning profit and purpose through impact investing.
The session, entitled “Driving profit for purpose: How to successfully invest for impact,” explores Vital Capital’s impact investing origins and some of its most innovative portfolio companies. PwC’s Anjali Multani and Elise Harper also talk with Pashtan about measuring and managing impact, and about what is exciting her most about Vital Capital’s recent work.
The PreWork Walk interview series, which features insightful conversations with leaders from a variety of fields, encourages the audience to start their day outside on a walk, rather than in front of a computer, while listening to engaging and thought-provoking discussions.
Vital Capital has again received recognition as an Emeritus Manager on ImpactAssets’ IA50 listing for 2022, an achievement that reflects the firm’s pioneering role in the impact investing industry.
The IA50 is the most recognized free database of impact investment fund managers. The annually updated list is considered the gateway into the impact investing world for investors and financial advisors, offering an easy path to identify experienced and emerging impact fund managers and illustrating the industry’s breadth around the world. As such, the IA50 is an invaluable resource for institutional and private investors, as well as their advisors and consultants.
2022 marks the eighth consecutive year that Vital Capital has been included on the IA50 list – an accomplishment in which our firm takes tremendous pride as we continue to generate positive impact by building successful, scalable businesses that solve critical social and environmental challenges and transform lives.
The IA50 2022 list is available on the ImpactAssets website, and Vital Capital’s profile can be found here.
The World Economic Forum’s Regional Action Group for Africa recently published an important report examining the impact of digital transformation in Africa and the role of policymakers and investors. Titled “Attracting Investment and Accelerating Fourth Industrial Revolution Adoption in Africa,” the report aims to stimulate a more considered approach by policymakers and investors for accelerating the region’s digital transformation and spurring investment that aligns with environmental, social and governance (ESG) aspirations.
The report includes contributions from Vital Capital Managing Partner Nimrod Gerber, who discusses how strong access to financing can assist African businesses in rising to the challenge of the Fourth Industrial Revolution. In particular, Gerber states that the lack of an investment regulatory framework can be prohibitive to funding projects and can lead to uneven competition between investors who are ESG compliant and those who lack ESG credentials.
The full report is available on the World Economic Forum website, here.
Vital Capital is pleased to share the results following the independent verification of our alignment of our impact management practices with the Operating Principles for Impact Management.
Vital engaged BlueMark, the industry’s foremost verifier, to perform the independent verification and benchmarking process. Their report reveals that Vital matched – and in many cases outperformed — against both the median ratings and a peer group of impact-only asset managers, across all aspects.
Climate and Africa: The stick and the carrot
There’s one significant difference between the two issues: In the climate context, the main question is ‘What can we do today so tomorrow is not catastrophic?’ We know we have to seriously adjust our production and consumption habits. Our global transition to a greener and more climate-resilient economy will be expensive and disruptive, but inertia or lackluster approaches will be much more so.
Postponing immediate gratification in favor of future returns is not something we always excel at, although it often pays off. Studies have shown that children who managed to delay instant gratification in the famous marshmallow test turn out to be more successful adults than the children who choose instant gratification. But ours – the adult version of the test – is much harder. We have to give up our marshmallows – whether that means sacrificing air travel or changing our diet – for other children, some of whom have not yet been born. It’s not just a matter of avoiding something pleasant now to gain something pleasant in the future – we must act now to prevent future negative outcomes. Trying to motivate action with a threat is rarely effective.
In the African context, however, the discourse can and should be completely different as it involves motivating primarily with a carrot rather than a stick, and there is no marshmallow to turn down – with Africa’s current trajectory of growth, investing in the continent promises returns both in the immediate future and well beyond.
An obligation and an opportunity
Over a billion people in Africa are becoming, in an accelerated process, consumers of basic goods and services such as healthcare, clean drinking water, food, housing and in time, more advanced services. The continent has the world’s youngest population and a rapidly rising middle class, which has tripled over the last 30 years to 313 million people, making up over 34% of the continent’s population, according to a report from the African Development Bank (AfDB). So while there may be great risk, there is even greater opportunity.
The opportunities to sustain Africa’s future populations, and enable them to thrive, rest heavily on the development of the continent’s critical infrastructure; to meet the basic needs of these communities; and serve as a platform for transition towards modern technology, connectivity, health and wealth. The AfDB estimates that the continent’s infrastructure financing needs will be as much as $170 billion a year by 2025, with a gap of around $100 billion per year – a gap that will only widen as the population burgeons.
Africa’s population growth permeates every part of its countries’ physical, economic and societal infrastructure. What will those millions do when they are no longer able to sustain themselves through agriculture, when they lose access to water resources and the ability to make a living? Many will emigrate. And a quarter of the world’s population is a mass that we cannot, and must not, try to stop. No wall or maritime patrol will stop people driven to the edge of desperation who are trying to save their children. In fact, Africa’s demographic growth alone, if not met with suitable infrastructure, could lead to similar outcomes even if we manage to avoid extreme climate scenarios.
Several noteworthy Africa-focused development finance initiatives are underway but the pace of progress needs to be stepped up. African multilaterals and banks like the AfDB and Afreximbank are focused on this mission. In the US, the Development Finance Corporation (DFC) has invested around $8 billion – roughly a quarter of its total portfolio – across over 300 projects in Africa.
Meanwhile, under China’s Belt and Road Initiative (BRI), Chinese banks and companies seek to fund infrastructure projects around the world, while advancing Beijing’s geopolitical interests. In such initiatives, all stakeholders must be wary of debt dependence, which could lead to long-term damage. Even good intentions are sometimes not enough, as explained in the book ‘Aid Is Dead’ by Zambian economist Dr. Dambissa Moyo. She attributed Africa’s poverty partly to aid from governments of developed countries that had made leaders and populations dependent, in some cases to the extent of halting their own agricultural production, while spurring corruption and unemployment. The EU’s Global Gateway strategy, an international investment plan for transport and infrastructure, counters the BRI “to create links and not dependencies”.
But governments and public institutions cannot bridge Africa’s infrastructure gap alone. Water and wastewater, food production and agro-processing, healthcare services and other sustainable infrastructures can all be led by the private sector, some through public-private partnerships (PPPs) and others as pure private operations. Recent IMF research shows that the private sector could, by the end of the decade, bring additional annual financing equivalent to 3% of sub-Saharan Africa’s GDP for physical and social infrastructure. This amounts to $50 billion per year.
The levels of investment and innovation brought by the private sector will be key to improving accessibility and quality of services with a direct effect on economic productivity and job creation. This will in turn create transformative impact at scale and help to unlock the continent’s full potential.
A win-win or a corporate fig leaf?
There may be significant synergies in which everyone can win. Adequate private, institutional and national investment can both reduce risk and generate profits. This insight is now led by impact investors. Some fund managers investing in Africa and the developing world have proven clearly that meaningful positive social outcome can be created in improving the lives of tens of millions of people while generating significant returns to the investor. Funds like Leapfrog, DPI, Helios Fairfax Partners and Vital Capital are not philanthropic – they have promised, and delivered, return on investment alongside a significant social impact.
In the past year some of these funds have jumped to the next level and moved into the ‘Big Boy’s League’ in terms of the capital they manage with over $1 billion in assets under management. It is very possible that in the next decade we will see the emergence of the ‘Blackstones’ and ‘BlackRocks’ of Africa, hopefully adjusted to local realities and needs.
The issue of impact raises legitimate concerns that need to be addressed: is it a corporate fig leaf?
The good news is that the ones who are most concerned about these issues are those who are leading the impact investment industry. The latest Global Impact Investing Network (GIIN) survey found that 60% of impact investors are concerned about ‘impact washing’. Why are they worried? Because in order to measure and monitor impact, you have to invest a lot of thought, work, time and money. You have to learn and become experts in assessment and analysis, practice clear standards and full transparency for regular audits and verification.
What bothers those who do all of this seriously and professionally are the ones who hitch a ride on the concept. The investors that wave the ‘impact flag’’ but don’t actually commit to standards, don’t use comprehensive impact management and measurement frameworks, and don’t open for audit and checks by external parties. These are the investors whose ‘impact’ is found mainly in presentations and websites but in reality, they maintain total freedom to decide when to apply it and when not to. The term ‘impact’ has unfortunately become a marketing tool. One thing is clear: if this concept is too broad and not clearly defined, it will become meaningless. And those who stand to lose the most will be those who have taken on commitments, and have dedicated their mission and resources to it.
A major shift is underway
It is encouraging to observe how the impact industry is evolving and maturing rapidly, fueled by shifting consumer values and technological innovation. Clear and uniform standards such as the IFC-led Operating Principles for Impact Management have been developed, while measurement and monitoring tools such as the Impact Management Project (IMP) have taken root.
Disclosure documents, verification practices by third parties and evolving regulation are some other tools embraced by those who want to show seriousness. Most recently, the IFRS Foundation announced the creation of the International Sustainability Standards Board, a new standard-setting board to deliver a global baseline of sustainability-focused disclosure standards. In the vision of Sir Ronald Cohen, the ‘Father of Impact Investing,’ ESG and impact reports will eventually become a corporate obligation, just like financial statements.
Until that happens, you can use a relatively simple test: the next time you meet an ‘impact’ investor, ask them what standard they committed to, what they’re signed on, and whether there is periodical external audit of their impact and ESG reports. This will give you a relatively immediate picture of how seriously and professionally committed they are, helping to separate the talkers from the doers and achievers. If beyond this, they also have independent measurement and monitoring tools and are an integral part of leading the impact industry – even better.
A true impact investor should be proud of the formal commitments and standards he has subscribed to. A true impact investor should also not be ashamed of earning and generating good investment returns. On the contrary, the more handsome the returns, the greater the attraction for investors, and the greater the potential to achieve impact at scale in a self-nourishing circle.
[This article was originally published in Funds Europe]
At the recent SuperReturn Africa event, which saw private equity and venture capital professionals gather to discuss all aspects of investing in the continent, there was one key takeaway – summarized succinctly, by author and Africa advocate Deanne De Vries in her keynote speech: “Africa is open for business.” Deanne urged the private capital community to step up their investments in this vast, vibrant and diverse continent with a wealth of human and natural resources that translate into business opportunities. A continent with a population of 1.3 billion people across 55 countries which, by 2050, 2.5 billion people will call home.
Secrets to success from post-Covid “winners”
Africa, like other emerging markets, was hit hard by Covid-19-induced lockdowns. Still, many businesses managed to turn the crisis into an opportunity, improving their services and resilience to create more value for their clients and grow further. Our Managing Partner Nimrod Gerber joined George Odo, Senior Partner at AfricInvest, Luc Rigouzzo, Managing Partner at Amethis, Paul Boynton, joint CEO at Old Mutual Alternative Investments and Danladi Verheijen, co-founder and CEO at Verod Capital Management, on a panel to discuss the recipe for success. Here are the main ingredients:
1 Operational expertise
Companies – particularly in the retail sector – were faced with a flurry of Covid-19 adversities, including reduced consumer confidence, new spending behaviours and a dispersed workforce. Panellists agreed that the resilience and success of the private equity firms investing in these businesses – namely the GPs that have structured their deals in a way to exert greater influence over their portfolio companies – have been largely down to their expert operating teams who have been able to efficiently and swiftly adapt supply, cash management and operations, and upgrade digital capabilities.
Nimrod said: “Operational value is the single most important factor that has enabled us to deliver on our promises over the last decade.”
On the topic of investing for resilience, Nimrod went on to highlight the enduring value of essential services – such as in critical sectors of food, water, healthcare and sustainable infrastructure – that we look to convert into high-return opportunities here at Vital. Companies in these sectors, with the right team and operational expertise behind them, are well-cushioned to weather economic shocks.
2 ESG and Impact = Resilience and Returns
In a similar vein, the panel agreed that those that take a long-term look ahead to future-proof their portfolios with a focus on sustainability and ESG are at an advantage during turbulent times.
When it comes to investing for impact, you go one step further – generating risk-adjusted returns is part and parcel of the process. “If we want to scale up impact, we have to accelerate financial returns,” Nimrod noted. Impact investing should generate significant enhancing synergies that create a strong positive correlation between an investment’s impact and its financial performance.
It is this correlation, strengthened by improved tools for impact management, enhancement and measurement – with the goal of achieving an industry consensus for assessing and quantifying positive impact potential – that will engage more investors and propel this asset class further into the mainstream.
3 Digital and technology drive
The pandemic’s acceleration of the digitalization trend was a recurring theme during the event. Africa continues to attract unprecedented levels of investment in digital infrastructure and technology, fuelled by increased demand for connectivity and data in the post-Covid environment. Just last month, Google announced plans to plans to invest $1bn in Africa’s tech infrastructure and talent over the next five years.
Private equity managers have had to step up their tech game to stay competitive, leveraging tech and digital strategies and helping to instill an innovation-led mindset across their portfolio.
Vital Capital has been listed as one of the Real Deal’s “Future 40: Impact Investment Fund.” The Real Deal’s Future 40 list features leading funds that “align profit and purpose” and demonstrate clear impact agendas, measurable results, and fascinating stories behind their investments.
This recognition is a testament to Vital Capital’s mission as a firm that is committed to turning critical challenges into high-return opportunities that deliver impact at scale. Vital is applauded for its no-compromise approach to impact investing and our seeking to enhance synergies between and investment’s impact and its financial performance.
We are proud to be among the top firms making a measurable difference in our world.
The World Economic Forum’s Regional Action Group for Africa recently published an important report examining the impact of digital transformation in Africa and the role of policymakers and investors. Titled “Attracting Investment and Accelerating Fourth Industrial Revolution Adoption in Africa,” the report aims to stimulate a more considered approach by policymakers and investors for accelerating the region’s digital transformation and spurring investment that aligns with environmental, social and governance (ESG) aspirations.
