Global Impact Pool Quarterly Investor Letter
Specifically, we aim to address the following impact themes:
- Basic needs & well-being: the provision of basic goods & services for the underserved including water and health & wellbeing;
- SME development & decent work: creating decent jobs with fair employment practices to eradicate poverty;
- Circular economy: Support sustainable consumption and production aimed at doing more and better with less, and;
- Climate & energy: Contribute to abundant clean energy and reduction of CO₂ emissions.
Bearing in mind our mission, there is also the explicit target to generate a market rate financial return.
The Kempen Global Impact Pool (GIP) achieved a return of -1.1% for the FA fund class in the first quarter of 2021.
The GIP entered its fourth year of existence in 2021 and the investment partners, appointed by the GIP for making impactful investments, have taken good steps in investing the capital committed by the GIP. Since its inception, the GIP has neutralized the so-called J-Curve effect* by investing in an impactful basket of green bonds, pending the call of committed capital by our investment partners. This has largely prevented a negative return since inception. GIP's returns are expected to better reflect the value development of underlying investments in the coming years, as the portfolio companies continue to develop, and holdings are sold profitably.
- a J-Curve effect occurs in private markets (Private equity, infrastructure, etc.) funds where the cash flow is negative in the first years due to investments and fund costs, after which the cash flow is positive in the second half of the term of the fund due to distributions and divestments of interests
The COVID-19 pandemic is still dominating world news. Although the ultimate economic and social consequences are not yet clear, the Global Impact Pool and its investments continue to develop well so far, confirming the relevance of the companies invested in. The investment partners appointed by the Global Impact Pool prove their worth by being selective with their investments, carefully assessing risks and opportunities.
The GIP ended the first quarter with assets under management of €116 million. The GIP management team has developed a very promising pipeline of new investments in recent months, with which the new assets under management can make impactful investments. An investment in Trill Impact was completed in the first quarter of 2021. Trill Impact is a Swedish Private Equity house that invests in impactful companies active in the field of energy transition, circularity and access to education for all.
The management team of the Global Impact Pool experienced a change this quarter. Marjoleine van der Peet has left Kempen Capital Management to focus on new challenges outside the organization. The search for a replacement for Marjoleine is currently in full swing, we expect to be able to introduce a replacement later this year.
The overview below provides a brief overview of the most important developments in the portfolio this quarter per Impact theme.
Investments within the theme of SME development and decent work developed well this quarter. A significant part of the GIP's investments within this theme focus on (digitized) financial services (fintech) in developing countries. Financial inclusion is an important goal in itself, but also in achieving other SDGs. WorldRemit, a company that facilitates cross-border payments in emerging countries, continues to grow rapidly. The impact of WorldRemit is significant: with the company's services, migrant workers can transfer (part of) their salary at very low cost to their families in poor regions, improving the standard of living there. Several new investments were added to the GIP portfolio by our investment partners this quarter, including CowryWise in Nigeria. CowryWise is a digital platform that enables savings and investments from just USD 0.25.
One of the GIP's investment partners within the Circular economy theme focuses on sustainable agriculture and continued to provide loans during the quarter to, among others, cooperatives that give small-scale farmers access to better-paid markets that offer greater financial and operational stability. As usual for the first quarter of the year, most of the loans provided by this investment partner were in Latin America, where the coffee harvest provides a capital need for farmers in countries such as Costa Rica and Colombia. In Africa, loans were made to farmers active with cashew nuts, cotton and sesame.
With its investments within the Climate and energy transition theme, the GIP contributes to the transition to more sustainable energy sources. During the quarter, an investment partner of the GIP made good progress with the development of wind farms and solar energy parks, which will add sustainable capacity to the energy network in the foreseeable future. Approximately 35% of the investments by this partner relate to solar energy, 45% to Onshore wind projects and approximately 20% to Offshore wind projects.
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Luxembourg. Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorized as a management company and regulated by the Dutch regulator Autoriteit Financiële Markten. The Sub-Fund is registered under the license of KCM at the Autoriteit Financiële Markten and not subject to Luxembourg supervision. The shares of the Sub-Fund are admitted for (public) offering in the Netherlands, the UK, France and Switzerland. The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (only for the Netherlands) and the prospectus. These documents of the Fund are available on the website of KCM (www.kcm.nl).
The Sub-Fund may have investments in financial instruments mentioned in this document and it may at any time decide to execute buy or sell transactions in these financial instruments. The views expressed in this document may be subject to change at any given time, without prior notice. The information in this document not intended and should not be considered as research, an investment recommendation or as an offer and provides insufficient information for an investment decision.
Although the contents of this document have been compiled with the utmost care, and are based on reliable sources of information, no guarantee or warranty is given and no liability is accepted, express or implied, regarding the completeness or accuracy of the contents.