Why should investors join the impact investment movement? IIX interviewed ICCO Investments’ CEO, Mark Joenje, for a candid look into the opportunities and challenges for investors within the space.
ICCO Investments, an investment initiative of the Netherlands-based ICCO Cooperation, has invested in over 24 impact enterprises across Africa, Latin America and Asia, impacting nearly 1 million lives worldwide. Within the next 5 years, the firm expects their impact to increase by fivefold. The Impact Investment Exchange (IIX) has had the pleasure of working with ICCO investments on various investment deals that the firm has made within Asia. On December 8th, we were honoured to present them with the first-ever IIX Trailblazer Award for their commitment to redefining finance and generating social impact in the global community.
What attracted ICCO investments to impact investing?
After having worked in multiple economic value chains for decades, ICCO realized that upstream entities in the value chain that are driven by a business model, need other financing instruments than grants to support their development.
In your opinion, what is the greatest value-add to your company by participating in impact investment activities?
Apart from our money, we have a lot to offer to our investees. We are a sparring partner, we put our network to use and we can support them with our modest technical assistance (TA) facility. Besides, we invest with ticket sizes (average 400K) that few other funds do. With this we can address a market that is only served by a few.
Having made 24 impact investments to date, what have you learned about the relationship between impact and financial returns?
They go hand in hand. A good financial performance is a prerequisite to achieve impact. If a company is financially successful, the impact is sustainable. Often companies with bad business models do more harm than good when impact cannot be sustained. With strong business models more volumes can be traded, more products/services can be offered, more jobs are created and stable companies offer good chances for people to develop themselves. In many cases there is no trade off between impact and financial returns.
In your experience, what have been the greatest challenges in impact investment? What do you think would help to overcome these challenges?
The biggest challenge is to manage and mitigate risks that come along with being active in a space where the average size of an investment are relatively small, costs are relatively high and companies are still fragile and immature and require handholding and guidance. A thorough relation and excellent relation with investees is essential. They drive the business and make the success.
What advice would you offer any investor looking at entering the impact investment space?
Be patient, put the entrepreneur in the center and the number-crunching second. Make sure to be close to your investees and stand by them during the challenges they have to overcome.
ICCO Investments has partnered with IIX in deals within Asia. How has IIX assisted ICCO Investments in accomplishing your investment and impact goals across the region?
IIX has lined up a number of opportunities for us that where really ready for us to finance their next growth phase. We have an open and transparent relationship with IIX which we appreciate. As a fund, we have criteria that do not always match the proposed deals. Being around now for more than 3 years, we actually see that initial deals shared with us in the beginning have now further matured and are again being assessed by us. This shows the importance of developing long term relations in the impact community.
Impact Assessments allow impact enterprises to report the impact they are having on society and/or the environment. How important of a role do impact assessments have on your investment decision-making?
We are an impact first fund, and after a certain threshold for financial returns we optimize for impact returns. Our investment committee evaluates the impact thoroughly. However, when financial projections are promising, but the impact projections are weak, they will not approve.
What do you see as the potential for the impact investing market in Asia and beyond?
Actually, the only way forward in the longer term is that impact will become a prerequisite for any investment to be approved. In order to safeguard that future generation are also able to make a decent living on our planet, unsustainable and unsocial and unfair investments are just no longer acceptable. The negative effects of some investments and the negative costs effect they have on society, are already becoming more and more recognized. This development can only go one way and that is that impact investments will be mainstreamed and become the standard.
Winter Associate, Business Development