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November 28, 2010

Agriculture, farmland in Africa attracting "impact investors"

by Carey Gillam

Investors eyeing agriculture in Africa, Latin America and other global markets are increasingly merging their pursuit of profits with a philanthropic zeal that promoters say will pay benefits over the long term.

So-called "impact investing" is catching on with a range of private equity groups, financial services firms, venture capital funds and other moneyed players.

"There are a cadre of investors who are working under the hypothesis that one can invest for the long-term in a manner that is both economically sustainable and socially palatable," said Ademola Adesina, a former investment banker for JPMorgan who oversees business development and corporate strategy for AQUIFER, an investment company. "Long-term sustainability, particularly in agriculture, requires a deep collaboration and symbiosis between investor activities and the communities in which they operate," Adesina said.

Diana Glassman, one of a group of investment specialists attending an agricultural investment conference in Boston on November 8, said her firm EBG Capital is one of a growing number of players steering millions of dollars into such impact investments.

"You make money and do good, but it really is a pursuit of profit," said Glassman, an EBG partner. EBG is a boutique advisory spin off of Credit Suisse that invests in environmental areas, including agriculture.

The interest is growing so rapidly that several larger players last year launched the Global Impact Investing Network (GINN). It includes such well-known banking names as JP Morgan Chase, Morgan Stanley and Deutsche Bank, as well as private investment groups such as Capricorn Investment Group which manages $3.5 billion in capital and is investing in such things as sustainable farming techniques in Africa.

"The approach of the community we work with in general is to identify the kind of benefits that create a return ... but also create local benefits," said Camilla Seth, GINN director of programs and operations.

For Boston-based Root Capital, impact investing means focusing on financing small farmer groups or suppliers in countries where capital for those groups is hard to come by.

Founded by former Lehman Brothers financial analyst William Foote, Root has a main focus in Latin America but has been expanding into Africa over the last five years. Its finance arm is involved in everything from cashews to cocoa.

This year about 80 percent of its $75 million in credit disbursements will go to Latin American businesses with 20 percent concentrated in Africa, Foote said.

Last month the firm made its first loan in Tanzania -- a $150,000 loan to a maize seed company, and issued a $700,000 working capital loan to an organic cotton farmer cooperative in Uganda.

AQUIFER's Adesina said the group has made about $40 million in impact investments over five years. The investment company, whose sole shareholder is the Gatsby Charitable Foundation in the United Kingdom, is also pursuing deals in Africa and elsewhere under the premise that profits can be found through strategies that are socially responsible.

As interest grows, GINN has recently developed a standard set of performance measures to help investors compare results.

The project, Impact Reporting and Investment Standards (IRIS), is supported by the United States Agency for International Development (USAID) and the Rockefeller Foundation.


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