responsAbility brings $274m into Asia and LatAm food vehicles

Zurich-headquartered impact asset manager responAbility Investments has raised $274 million through first closes on a pair of food and ag-focused vehicles.

The firm reached a $173 million first close for the Sustainable Food in Asia fund and $101 million first close for another vehicle devoted to Latin America. The LatAm fund targets $300 million, with a $350 million hard-cap the firm expects to reach within 18 months. The Asia fund’s target is up to $400 million.

Rik Vyverman, responsAbility’s head of sustainable food private equity, told Agri Investor both vehicles grew out the firm’s effort to raise a growth-equity fund focused on sustainable food investments in 2017.

He said performance of that vehicle and UK asset manager M&G’s acquisition of responsAbility earlier this year have been among factors bringing the firm – which also manages climate finance and financial inclusion vehicles – to the attention of larger US and European investors.

“You cannot talk about climate without talking about agriculture, given the footprint of agriculture around climate. That has also increased attention from LPs on agriculture,” Vyverman said. “The modernization, transformation and digitalization of the sector, plus the focus around climate, is offering us quite a bit of tailwind and creates interest from investors around agriculture and food.”

Stephanie Bilo, chief client and investment solutions officer, told Agri Investor that covid-related supply-chain disruptions, concerns around inflation and the war in Ukraine have also made food and agri seem less niche to investors and increase attention on the food-focused investments managed by responsAbility.

“In Scandinavia you see a lot of investors who are very interested in sustainability investment opportunities. Generally, these are large pension funds and large institutional clients who need a fund to be a certain size in order to actually have a proper look at it. If they are too big compared to fund size, they won’t even look at it,” said Bilo.

“It’s mostly Northern Europe interested in this – we see interest in Germany, Scandinavia and Benelux – but we also see some interest out of Asia or LatAm in the family office space as well.”

Vyverman said that while the 2017 growth equity fund began with a global mandate and eventually came to focus on Asia and India specifically, the second iteration of the fund will seek mid and downstream companies increasing the efficiency, production and distribution in markets including the Philippines, Indonesia, Vietnam and India.

Investors in the second Asia fund, according to Vyverman, include repeat commitments and a combination of European institutions.

For the Latin America fund, responsAibility began with a similar plan to focus on mid and downstream opportunities, but it quickly found more promising dealflow in the target countries of Mexico, Peru, Colombia and Chile was connected to primary agriculture, he added.

“What you see in Latin America is that most of these businesses are family-owned businesses where the land has been in the family for generations,” he said. “Given the underlying trend of increasing demand for healthy and nutritious food and you very quickly end up with vegetables and fruit.”

In late 2019, responsAbility was forced to close an agriculture-focused retail fund it had managed since 2011 when surging interest rate pressure and currency costs sapped earnings from a vehicle that had supported more than $1 billion investments across 52 countries. Vyverman said currency concerns also played a role in the firm’s decision to structure investments from its new Latin America fund as debt rather than equity.

“Quite a few US-denominated funds are doing well in local currency, but having mediocre returns in US dollars for the investors. That led us to want self-liquidating instruments to take out the exit element,” he said. “At the same time, we do want to align ourselves with the businesses we are investing in – given that we are financing expansion of the businesses predominately.”

Founded in 2003, responsAbility has $4.8 billion in assets under management, including a mandate from the Swiss government that was subject of a legal challenge last year and has since been resolved, according to Bilo.