responsAbility takes in $106m for blended finance ag loan fund

responsAbility Investments has gathered $106 million from private investors and development finance institutions for a fund that will support loans to developing world agribusinesses.

The Switzerland-headquartered impact manager secured an anchor commitment from German bank KfW for the Climate Smart Food Systems Fund in late June. It was joined by  Calvert Impact Capital, the Visa Foundation, Bank of America and others. Also contributing was Global Affairs Canada, the Danish Investment Fund for Developing Countries and the US International Developmental Finance Corporation, which acted as guarantor

Suhasini Singh, head of sustainable food debt at responsAbility, told Agri Investor the fund arose from an observation it was difficult for many small- and medium-sized enterprises within developing world food systems to secure the medium- and long-term financing needed to support steps to become more environmentally sustainable.

“A lot of climate de-carbonization strategies in food and ag are focused on production and forestry and less so within other parts of the food value chain,” said Singh, who is based in Mumbai and joined responsAbility in 2012, according to her LinkedIn profile. “Our focus was very much mid-to-downstream, and that’s what made it attractive for our seed investors to come on board.”

The Climate Smart Food Systems Fund will aim to support innovative agribusinesses that are undertaking plans to help mitigate climate change and help make food systems more resilient and inclusive in the Asia-Pacific region, Latin America and Africa. Singh said investors have been attracted to the opportunity to support decarbonization through actual projects, rather than research. Plans initially called for a fund of up to $150 million, she added.

“We are still considering that we can potentially go up to $150 million by issuing notes over the current fund,” she explained. “That we would do at a later stage, when the market environment and interest rates settle down, and we have reasonable visibility about investing the current amount available.”

Singh declined to address return expectations directly. She explained that because loss ratios for developing world agribusinesses loans is quite high, part of the Climate Smart Food Systems Fund’s strategy is to partner with public and private investors in blended structures that can absorb losses through programs used to invest.

“The public investors are strongly focused on impact and are often willing to consider more moderate returns. That’s where the difference would come in, in terms of return expectations of public investors versus those that are private,” she said. “Notes will come in, as well, at a different pricing, given the risk protection they will have, at a later date.”

Investments from the Climate Smart Food Systems Fund will be organized around four themes: sustainable intensification of production, value-added processing logistics, climate technology providers and consumer brands offering healthy food.

“The ultimate goal is for us to be able to catalyze private institutional investors into these strategies as well,” Singh explained. “There are investors elsewhere who are looking at the kind of investments that come out of strategies like this to see if those are then viable investment opportunities for them to pursue directly. This is a niche space, there is a lot of effort required in finding, originating, analyzing and then monitoring investments of particular sizes, which may not be the sweet spot in terms of size for many public investors.”

In February, responsAbility raised $274 million in distinct closes for a pair of growth equity vehicles devoted to Asia and Latin America. The firm drew from the Asia-focused fund in mid-July when it made a $40 million investment into a $200 million Series D for Indonesian aquaculture company eFishery.