Demand for agriculture-related assets from impact investors is picking up pace, according to Andrew Parrucci, senior marketing officer at Calvert Foundation, a Community Development Financial Institution that manages a global impact investment lending facility.
Calvert’s Community Investment Note has already lent to a range of agri-related projects — the most recent a $1.25 million line of credit to Africa’s OneAcre Fund to support small farmers in December — but is now considering launching a dedicated environment and agriculture investment channel as a subset of the broader portfolio.
“We have heard from our community of investors that they want investments that support agriculture-related industries — such as fair trade — in an environmentally sustainable way, and we are now developing a strategy to deliver that,” said Parrucci. “The strategy would follow on the lessons we learned from our Women Investing in Women Initiative, where we created a campaign to attract investors interested specifically in empowering women through their investments.”
OneAcre Fund focuses on helping small African farmers to improve the productivity of their farms through loans, training, technology and connecting them with the market. And Africa is an obvious destination for impact investors.
“Anything you do in Africa is impact,” said Michelle Essommé, chief executive of the African Private Equity and Venture Capital Association. “Your goal is to grow the company or industry so there is a positive growth impact on recruitment, on the economy, everywhere.”
But agricultural impact investing is also picking up elsewhere —some $40 million of impact capital was invested into Indian agriculture in 2013, according to Unitus Capital, the Bangalore-based impact investment house. “The agriculture sector in India is still plagued with considerable inefficiencies,” said Ishita Verma, an analyst at Unitus adding that there are multiple opportunities for entrepreneurs to make agriculture more sustainable and productive.
Agriculture is not the mainstay of Calvert that invests in a range of sectors from sustainability to affordable housing and communities. And since investing in agriculture is riskier than other sectors, Calvert looks for capital support in the form of co-investors or grants to “reduce the risk on capital” according to Parrucci.
Any agriculture-dedicated side-line is unlikely until 2015 however, he added.
Prior to this Calvert loaned $425,000 to National Capital Investment Fund (NCIF), a business loan fund that provides financing and technical assistance to entrepreneurs and enterprises across America with a focus on the distressed communities of Appalachia. To qualify enterprises must be working in sustainable and value-adding agriculture, sustainable forestry and forestry products, water conservation, natural medicines and green products, renewable energy, recycling or tourism. It started the loans programme in 2007.
In 2003 it loaned $300,000 to Alterfin, another loan house, which finances farmers and entrepreneurs in the developing world. Calvert is now investing $5.7 million into the Belgium-based cooperative, Parrucci told Agri Investor.
Investors in the Community Investment Note can commit capital to the open-ended facility in one, three, five, seven and 10 year terms. The projected rate of return for these terms is 50bps, one percent, 1.5 percent, 2.25 percent and three percent respectively. The returns are not pegged to the wider interest rate environment but will be loosely connected so a rise in interest rates would trickle down into investor returns, said Parrucci.
“The interest rates at which we lend are tied to our cost of funds and the credit risk of the deal,” he added.
There are currently 5000 investors in the Note ranging from family offices and banks to foundations and faith-based organisations.