What alternatives do you have to keep growing when you need more time and financial oxygen to support the project? In its passage through Córdoba, the sustainable finance specialist Angélica Rotondaro explains what impact funds are and how they work.
The founder of Alimi Impact Ventures, a Brazilian think tank that supports companies with socio-environmental impact projects, focuses on the need to promote partnerships to address social issues that generate returns. “As much as it is a patient fund, everyone must have a project to get out of this type of financing,” he explains after participating as a jury in the contest of accessible housing projects, The Constructon, organized by Holcim cement.
What are impact funds and how do they work?
Impact investment provides financing to organizations that are working with social and environmental needs, that have a clear expectation that is measurable and whose financial and environmental return is possible. It is a channel of the resources necessary to achieve the objectives of sustainable development (SDG). It is a way of providing financing to organizations that are working for social and environmental needs.
What differentiates these funds from others?
What differentiates them from a conventional investment is that there is no exchange between return and impact. That is strategic philanthropy, where someone who is going to start a business knows that it is not possible to have a return on investment and will help him move on to the second phase. In the case of impact investment, it is not that they expect nothing in return. In general it is a patient capital, which has other times. For example, they may have a lower interest rate than the market, but for the risk they are going to take the rate would have to be higher.
In other words, it seeks a balance between profit and its social contribution, which allows the “start up” to consolidate its operation.
Exactly. Investors are going to have a positive social environmental impact while they are going to have a business return. So far, I think a lot about what I need the investment for and what the impact I am going to achieve will be, but it is necessary to know what the exit strategy is like, how it stops relying on those funds. Then you must seek to achieve other income and how to sustain the economic part.
Why is it an attractive place for larger companies?
These funds began with development banks and individual investors. Now companies start to get involved in impact investments. For the company it can bring two benefits: it can be an opportunity for innovation and also a business for its future. In many cases, it is aimed at border markets, which are businesses that are not tested, that are in the initial phase. On the part of the companies, it is a new act in this ecosystem. Start at something related to the community that is already focused on a type of business, which also serves for development and generates income in local development. I see that companies can play an important role.
How are Latin America and Argentina in relation to these funds?
The countries that are more advanced in the subject are Mexico, Brazil, Colombia and then comes Argentina, which has been starting for two or three years. Here in Cordoba there is an important entrepreneurial ecosystem and I see that there is an important profile of border markets with calls and that generates a synergy for the entrepreneur that makes it have a network of contacts.
How is social impact measured?
In general, this has to do with where the business is located. There are several measurement and impact methodologies, but the central point is the connection with the SDGs and what is the contribution to that objective. It is something that is done at the initial moment of the investment.
What role does the State have?
The idea with the blend founds – combined funds – is to attract the State as well. In some cases it is asking the State what it will do in relation to a particular problem or project and in other cases it is to join it with the private sector and achieve a company with a special purpose.
How are these alliances in a world that is increasingly fragmented?
It is curious because the funds have the criteria of raising the need for alliances to invest in a project.
They reward Cordoba in housing competition
The Cordoba venture Simplex won second place in the second national contest of the Holcim Foundation, the Constructon. The event, which brought together 76 projects from 14 provinces, aimed at promoting innovative developments in affordable housing throughout the country.
The Simplex store, which is dedicated to manufacturing steel profiles for the assembly of habitable modules quickly, economically and sustainably, got a contribution of 150 thousand pesos.
First place went to Simacom. The missionary enterprise obtained 300 thousand pesos for its project to make blocks made from recycled wood fibers and chips.
The other finalists of the contest were Green Brick (Tandil), Integral Incremental Housing Project (Florida, Buenos Aires) and San Juan Habitable Modules (San Juan).
The selection was made based on the criteria on improving accessibility of housing and positive impact; innovation and equipment; technical viability; Marketing and scalability.
The jury was composed of Sebastián Bigorito, executive director of the Argentine Business Council for Sustainable Development (Ceads); Angélica Rotondaro, Brazilian expert in impact investment; Gustavo Restrepo, renowned Colombian architect specializing in urban transformation; Lucila Rainuzzo, National Director of Land Access of the Ministry of Housing, and Carlos Espina, the CEO of Holcim Argentina.
Also published on Medium.