‘The difference lies in the impact’

FMO Investment Management and fund manager Privium have set up the FMO Privium Impact Fund, a new fund that offers ABN AMRO’s clients the exclusive opportunity to invest along with the FMO loan portfolio in emerging economies. ‘You’re not simply making an investment when you put your money in this fund,’ says Yvonne Bakkum, Director of FMO Investment Management. ‘You’re helping to take local economies in development areas to a higher level by supporting private businesses with potential.’

‘Impact investing’ sounds brilliant. But why would an investor do this through the FMO Privium Impact Fund?

‘A lot of people associate impact investing with microfinancing of small, self-employed people in developing countries – farmers, for example. But it’s much more than that. We specialise in investments in larger companies and projects, such as coffee plantations and windparks. We want to make a large impact on society and the environment in developing countries. This isn’t charity – it’s important that we get returns on investors’ money. We have been around since the 1970s. Thanks to our network, we are quicker than others at discovering promising businesses. We know from our many years of experience what it takes to lift businesses in developing countries to a higher level – to make them successful.’

How exactly does the FMO Privium Impact Fund contribute to a better world?

‘We only invest in companies if they have a positive impact on the local social climate or environment. The social impact is reflected in the increase in employment – more jobs. As for the environment, we look at the company’s efforts to prevent toxic emissions. We support these businesses and help them succeed so that they can set an example for other companies. They inspire other companies in the area to conduct their business in a socially responsible manner.’

Can you give an example of an ideal project?

‘The first one that comes to mind is a rice processing plant in India, based in the province of Uttar Pradesh. The company has been around for decades and is run by two hard-working brothers who are always on the lookout for improvements. The result? The company is one of the largest, independently operating rice processors in the region – and therefore a big employer. With their innovative culture, they have developed a method for burning rice husk, a residual product, to generate sustainable energy. And that’s not all. They even use the ashes to make silica, a substance used to make car tyres and other products. The silica from this Indian rice processor is of such high quality that tyre manufacturer Goodyear has signed a contract with them.’

Can you give an example of a company that turned out not to meet your strict criteria?

‘Definitely. Some time ago, we were just about to grant a loan to a large company in Colombia. But, just in the nick of time, we discovered that the company’s employees were not allowed to join a trade union. We couldn’t reconcile that with our social mission, so we called off the deal.’

What can an investor expect if they invest in this fund?

‘The difference lies in the impact and in making the world a better place. That’s how we select the sectors in which to invest: energy, agri-business, telecoms infrastructure and financial institutions. Success in these sectors is often an indication of long-term improvement. For example, a few years ago FMO set the target that 80% of the energy portfolio had to be composed of sustainable energy projects by 2020. It’s now 2016 and this figure is already more than 80%. Wind, solar, water energy – they all have enormous growth potential. Not only commercially, but especially socially. A stable, sustainable energy supply is perhaps the best foundation for growing prosperity. For this fund, we have therefore chosen to finance only sustainable energy.’

Won’t truly promising companies, wherever they are based, draw the attention not only of development banks like FMO, but also of ‘mainstream’ banks?

‘That’s exactly right. But there’s an entire segment of business that has completely escaped the attention of the mainstream international banking sector. Because they’re too small. Because they have a different risk profile. Because their development requires local knowledge. These are the companies that FMO focuses on as a development bank. We often reach SMEs through our financing of local banks. A well-functioning financial sector is the engine of the local economy – and that’s what makes this a very important segment for FMO.’

How large is this fund going to be, in terms of millions of euros?

‘We set up this fund together with ABN AMRO and Privium because we believe it has the potential to grow to at least 100 million euros. If it reaches 200 million euros, that would be an enormous success. For now, we have agreed on a maximum of 300 million euros.’

What is the role of each of the parties you just mentioned?

‘FMO provides the loans in which the fund can participate. FMO Investment Management advises the fund manager on selecting the best loans. As the fund manager, Privium performs the administration. ABN AMRO believes that this fund is very interesting to Private Banking clients, who increasingly not only want to see financial returns, but also want to make a positive impact on society. The bank wants to make that possible by offering this type of impact fund.’

Find out more

More information, including essential investor information and other documentation, is available at http://www.fmopriviumimpactfund.nl/ (in Dutch only).

‘ABN AMRO has noted that investors are becoming ever more interested in investing in sustainable funds. Existing sustainable funds are experiencing explosive growth. The FMO Privium Impact Fund offers investors a new choice in the spectrum of sustainable funds, one which revolves around impact. Impact investing is often seen as a risky investment which is barely, or even totally not, liquid. This fund is reasonably liquid and can be included in the investment portfolio. That’s why we are offering it to our clients – it’s an attractive choice for investors who want to make an impact while getting good returns.’Solange Rouschop, Global Head of Investment Services & Sustainability at ABN AMRO