Agri impact investing on private capital radar

An agriculture impact investment fund recently reached $100 million in active loans to the agriculture sector in Africa and Latin America, as private capital investors increasingly look to tap impact investment opportunities in the sector.

Root Capital, the US-based non-profit, reached the milestone last week on its 15th anniversary; it has loaned a total of $659 million to more than 504 agricultural businesses in over 30 countries since its inception in 1999.

The firm is funded by private individuals, foundations, individual wealth managers and corporations; the vast majority are private individuals, according to Catherine Gill, investor relations and operations manager at the company.

“Impact investing is part of their overall wealth strategy,” she told Agri Investor. “We are excited about the growth as it is a result of more and more investors going to their wealth managers and asking what they have in terms of impact investment products.”

Dutch agri-agency Agriterra has also noticed an increasing amount of interest in its work from the private capital market, according to Luc Groot, liaison officer and advisor advocacy.

Agriterra is a government-funded agency that aims to stimulate, support and finance international co-operation between agricultural communities in the Netherlands and developing countries. Its core business is to make farming cooperatives in developing counties investable and to ensure that any investments – from banks, foundations and investment funds – are properly managed and implemented. This is mainly done through training alongside Dutch agribusinesses and advisors, and through financial guidance to improve governance, financial management and business development.

“Private investors are getting more interested in this kind of work,” said Groot. “They are reaching out to us to help identify good cooperatives and projects where there is a specific financing need and that’s where we can help. We have quite a big network. We know a lot of organisations and we work closely with them.”

One private impact investor recently travelled to Uganda with Agriterra with a view to helping build up promising cooperatives that are being trained by the organisation.

The Dutch agency is also working with a French investment fund – Solidarité Internationale pour le Developpement et l’Investissement (SIDI) – to help ensure its loans to community banks and cooperatives are being spent properly. SIDI is funded by French NGO CCFD-Terre Solidaire – the French committee against hunger and for development – along with institutional and private capital.

Root Capital has noticed increased demand from the private capital sector through increasing numbers of conversations with private wealth management companies, most recently Morgan Stanley Private Banking.

“Wealth managers and independent advisors are keen to show their clients that their finger is on the pulse so we are getting increasing enquiries on the back of this,” said Gill. “Client-driven demand is influencing the future of the mainstream which is exciting.”

Root Capital needs to raise between $15 million and $20 million in 2015 to meet projected lending needs. It offers 1-year loan products that return 1.25 percent, a 2-year product for 1.75 percent, a 3-year product for 2.25 percent and a 5-year product for 2.75 percent.

The minimum investment is $25,000. While loans are not matched up to specific projects, investors can opt in to funding a specific sector or affinity such as women in agriculture projects or climate-smart agriculture. “This is how we can support the passion of the investor and give them more info to help them on the impact investing journey they are on,” said Gill.

The company opens subscriptions each month and currently has 170 individual note holders. The largest investment is $20 million from an overseas investment corporation, according to Gill.