The state investor committed to anchoring multiple future funds launched by the impact GP, as well as taking a minority stake in the firm and a non-executive seat on the management board.
Given LeapFrog’s longstanding focus on healthcare and financial services, there will likely have been limited interest in the partnership from food and ag stakeholders, but that changed in 2022 when LeapFrog launched a climate strategy and hired Nakul Zaveri, as reported by affiliate title New Private Markets, as partner and global co-head of the climate investing team.
Zaveri sat down with Agri Investor to discuss his unit’s core investment areas of food and agriculture, energy efficiency, mobility and the built environment, which he says is united by changing social values towards more sustainable business models.
With regards to the food and ag subsectors into which some of Temasek’s $500 million commitment could be put to work, he highlights food traceability, smart seeds and water re-use as potential targets.
Zaveri said that agriculture is among the most critical of the essential services LeapFrog seeks to provide and predicted recent attention on the sector’s contributions to material food security and climate change risks will continue.
“There is going to be this massive revelation around energy and water on meat products, not because it’s an ethical issue, but because it’s a cost issue. It’s a transportation issue. It’s a supply chain issue. It’s a traceability issue,” he said. “Some of these things are becoming very, very real right now.”
LPs want insight and returns
LeapFrog was established in 2008 and focuses largely on financial services and healthcare investments across more than 35 growth markets in Asia and Africa. It defines its approach as looking to support investments that contribute to state level leaps in growth, profitability and social impact. Its investments have included remittance, pharmacy and healthcare providers, with exits coming through sale to buyers including Prudential, Allianz, Swiss Re and others.
Mumbai-based Zaveri joined LeapFrog to help guide a natural extension of the firm’s impact investing focus into provision of essential services that help can other sectors mimic the “leapfrogging” of traditional telecommunications and banking models seen in certain markets. He joined after more than four years as managing partner at Mumbai-headquartered Relatively Investment Management and previous stints managing investments at the Global Environment Fund, Climate Change Capital and elsewhere, according to his LinkedIn profile.
Also among LeapFrog’s recent hires has been Saurabh Bajaj, who joined earlier in 2023, after seven years at Proterra Investment Partners, in a role that will see him lead Southeast Asia climate investing and advise food-related investments globally, according to his LinkedIn profile.
Zaveri declined to discuss ag-focused efforts under development in detail. He did describe which investor groups will likely be of focus for fundraising efforts relevant to agriculture, based on recent conversations with investors.
“There are some large food companies that become very interesting for us in this case, because not only do they understand that the supply chain wants this [sustainability] but there are times where they are not able to take direct exposure themselves into trending companies, whether it be for regulatory reasons or geography reasons,” he said.
“The second level of investors, from a large-check-writing perspective, are pension funds and endowments. They are looking for returns and food safety and security is a critical theme that they want to fund. They believe that is something that becomes very interesting, but there is also some value coming out of it.”
Sovereign funds like Temasek are another important focus of LeapFrog’s climate efforts, said Zaveri, who added that such investors understand food security at an especially deep level, but remain committed to commercial returns.
“They are addressing this [from the perspective of], how can we make emerging markets self-reliant and self-sufficient? Complimenting the element of growing food safety and security, not about what comes back to us. What they [sovereign wealth investors] want to do through this is not only understand, at a macro level, some of these trends that are evolving, but also make sure [they understand] how does that interplay around returns and technology happen across geographies.”
Agtech across geographies and business sizes
LeapFrog’s statement announcing Zaveri’s hire highlighted smart farming alongside electric vehicles, rooftop solar and distributed energy as components of its climate investing strategy. Zaveri said in addition to climate smart agriculture and projects to strengthen water use efficiency, LeapFrog will look to invest in supply chain innovation that can be especially impactful in countries with large, inefficient agricultural sectors such as India.
“A large part of climate investing – including food and water – is right now [being used to] de-carbonize the West,” he said. “There are very few firms like LeapFrog that have a right to not only coexist in emerging markets, but understand these transitions to emerging markets very deeply to capture this transition, not only around the humanitarian opportunity, but also the value opportunity in commercial terms.”
Zaveri stressed the firm’s investments in ag and elsewhere will look to harness the spread of cost-effective technologies and services including weather data and crop insurance that has accelerated over the past 10 years, and especially after the onset of covid-19.
“We’re also seeing parts of traceability that really excites us. We’ve heard so much noise around certification and standards and clean books across different countries that this has also become front and center,” he said.
“Regulations around certifications and traceability are being enforced by governments in these areas because export clients are demanding it. If Unilever is saying ‘I want spices’ they are going to be focusing on traceability very, very clearly. Therefore, currently very, very small companies are adopting traceability standards that have been best in class in the world.”
Zaveri said agriculture is a key venue for the kind of connection between regions that can play a pivotal role in catalyzing the national level developments LeapFrog seeks to support.
“Israeli technologies around irrigation coming to India. Indian technologies around smart seeds going to Africa. Water technologies coming to Latin America and Africa. That cross collaboration was not possible earlier but with commercial funds coming into play, this becomes exciting. For someone like us, who is sitting across the emerging markets, this becomes even more exciting.”