Created at the end of 2013, Edmond de Rothschild’s Moringa is an impact investment fund focused on agroforestry projects in Africa and Latin America. Thus far, the €84 million vehicle has invested in a cashew producer in Benin, a coffee plantation in Nicaragua, a citrus and coconut company in Belize, and last week, Asante, a Kenyan forestry company.
Below, Moringa investment director Guillaume Maillard describes the links between agroforestry and impact, European family offices’ evolving approach to impact investing and what staffing around an impact focus can entail.
Can you discuss how the Moringa fund’s focus on agroforestry relates to its pursuit of impact investments?
The idea of agroforestry is to combine agriculture and forestry to create synergies. This includes financial synergies because you help create short-term, medium-term and long-term cash flows. Agroforestry can also have a positive environmental impact because the approach helps the crops and trees work together to re-fertilize the soil.
There can be social impact as well because the strategy is to duplicate what we are doing on our own plantations with small farmers. We help them to increase yields, diversify their revenues and establish access to the market. For them, this is very important because sometimes when they grow a crop they only have access to very small local markets close to their homes. We can help process and distribute their products to get premiums from European or US buyers, for example.
We invest in risky environments and we think that by using agroforestry and an impact investing approach, we can reduce the risks for the company. When we exit, the investments will be considered low risk.
What metrics do you use to measure the social impact of your investments ?
We have developed a specific tool to measure our impact with some metrics that are the same for all of the investments and some that are specific for each investment. The main indicators are standard: jobs created, wages paid, how many farmers in an outgrowing scheme, the number of hectares cultivated, amount of carbon sequestered, the number of trees planted, the number of farmers trained, the number of women compared to men among employees and outgrowers. We also try to measure the amount of money invested in the local economy as a result of the investment.
How has the recent focus on impact investing across markets changed the approach to agricultural deals in the developing markets where you focus?
Now it’s more an obligation than an option. You must do ‘impact’ as you must have people and communities with you if you want your business to work.
What we’ve seen is that the increasing attention on impact investing has helped create a very different approach to the land issues that can arise when investing in agriculture. When we created Moringa and said we would work with farmers, people told us it wouldn’t work because working with farmers is complex and issues around land can create lots of tension and problems within certain communities, particularly in African countries.
So instead of acquiring large pieces of land ourselves, we structure deals to expand the business together with farmers. Other people are starting to do this now and it is an approach we see much more often than before.
How has the desire for impact investments among European families offices changed in recent years?
What has changed is now they measure themselves and their impact and try to be very structured around this effort. In 2012 or 2013, it was more like investors would have a small portion of their money invested in impact because it was something they were interested in. Now the investors are really structured with teams ready to understand exactly what we’re doing and how we measure it. This is now very serious business across all fund management and when we go to conferences, our subject is at the center of the discussion.
How has the focus on impact shaped staffing at Moringa?
We have an ESG officer and an impact officer. There has always been an ESG officer within the team while the impact officer is new for us. She is someone we’ve been working with for a long time as a consultant but who just recently started spending 100 percent of her time with us. The idea is that she is working on all the investments to measure the impact. We had other people within the team in charge of this, but now that we have made more investments and started the portfolio management phase, so we decided to recruit a dedicated person.
We needed a dedicated person because the promise of the fund is that every investment must be profitable and have a positive environmental and social impact. You must have people who are very good at each of this three. The impact and ESG officers need to be a bit independent from the investment managers to be able to challenge and ensure that we will create impact.