FinDev Canada’s agri investments to mix fund and direct approaches

FinDev Canada plans to carry out a significant minority of its agricultural investments in the form of private fund commitments ranging from $5 million to $20 million, according to its chief investment officer.

Speaking to Agri Investor soon after the completion of its first direct agribusiness investment – an $8 million loan to a subsidiary of Peruvian agribusiness DanPer International – Suzanne Gaboury said the development finance institution, which was established in January 2018, had carried out two of its first four investments through funds.

“As a new organization, we recognize that funds give us a window into regions and to sectors that we may not have the initial reach for,” she said. “What I’m trying do is construct a portfolio that is balanced – not only from a direct/indirect point of view, but from an equity investment/debt investment [point of view], on a sectoral basis, on a regional basis – so, within that, funds, particularly now, have played a large role.”

FinDev announced its first agricultural fund commitment in May, when it invested $12.5 million into EcoEnterprises Partners III. The women-led vehicle will make debt and equity investments in the agriculture, forestry and ecotourism sectors of Colombia, Peru and other Latin American states.

Gaboury, who joined FinDev as its inaugural CIO last May after serving as director of agribusiness at Dutch development bank FMO, said the institution was evaluating a number of funds for possible investments. Although FinDev has the ability to commit to longer-duration funds of up to 20 years where appropriate in sectors such as clean energy, Gaboury said she expected any agribusiness investments to have a duration of seven to 10 years.

Across sectors, FinDev has identified Latin America, Sub-Saharan Africa and the Caribbean as its target markets. According to an overview published last year, its investments in these regions will target returns sufficient to pay debt or provide an “adequate” return on equity.

In addition to agribusiness, FinDev has identified financial services and green growth (a combination of energy and infrastructure) as its priority sectors. It has also identified women’s economic empowerment as one of its key development-impact goals, alongside market development and measures to mitigate and adapt to the effects of global warming.

Gaboury said FinDev would look to partner with businesses in which women played a role in management and throughout the value chain. In evaluating potential fund investments, she said the focus on women’s economic empowerment meant FinDev would be evaluating the track records of particular firms as well as broader considerations of key executives’ backgrounds and experience.

“We recognize that at times, women just don’t have the access to funding that others may have,” she said. “You are going to be looking at people who are well-respected in the areas in which they have been working. They have the financial know-how, they have the in-country experience, they have experience in fundraising with, perhaps, other companies. But in a new fund, maybe they haven’t necessarily worked together.”

Gaboury said that while FinDev planned to make most of its investments in the form of debt, it also planned to pursue a “material” amount of equity investment because this often offers the opportunity to exert more direct influence over companies.

She said FinDev would never want to displace local lenders. She said the institution looks to ensure that its investments help provide access to capital on a scale or for a duration that small businesses in developing markets are often unable to access locally.

“Our role is to facilitate these companies in developing within their market, but also, indirectly then, help to facilitate the development of the local financing market,” she said.