I became involved in Impact Investing just as Catholic Relief Services (CSR) was getting involved in impact investing. I had my own consulting firm at the time and was working with CRS advising corporate engagement when the then CEO, Carolyn Woo. The CRS Board became interested in looking at impact investing as another way to advance CRS’ strategy and hired me to lead the efforts given my background in investment banking and finance coupled with my work in Rwanda and South-East Asia with the Clinton Foundation.
I have a few career highlights ranging from starting and leading the finance and business operations of The Walt Disney Company’s live stage business, being there on the opening night of The Lion King on Broadway to launching the Clinton Foundation’s work in Rwanda and partnering with the Government to roll out its HIV/AIDS Care & Treatment program, alongside Paul Farmer & Partners In Health. With CRS, my main highlight aside from assembling a wonderful team has indeed been the work with the Vatican. We convened three Vatican conferences, each with a different focus. The first asked the question of whether faith investors – including CRS – should even engage in impact investing. The answer that came out of that meeting was a resounding yes.
“A sense of solidarity with the poor and with the marginalised has led you to reflect on impact investing as one emerging form of responsible investment. (…) Impact investors are those who are conscious of the existence of serious unjust situations, instances of profound social inequality and unacceptable conditions of poverty affecting communities and entire peoples. These investors turn to financial institutes which will use their resources to promote the economic and social development of these groups through investment funds aimed at satisfying basic needs associated with agriculture, access to water, adequate housing and reasonable prices, as well as with primary health care and educational services”, said Pope Francis to the participants in the conference promoted by the pontifical council for justice and peace on 'Impact Investing for the Poor' (full statement here)
At our last conference in 2018, in collaboration with the Vatican Dicastery for the Promotion of Integral Human Development and Omidyar Network, we brought together a select group of finance-first institutional investors, alongside impact-first actors to profile opportunities across the entire returns and impact continuum. It has been really wonderful to see the momentum within the Catholic and broader faith-based communities related to impact investing, coming out of those Vatican convenings.
We have structured two impact-first blended finance initiatives: Azure, focused on access to clean water, and the other, Isidro, currently in its pilot phase invests in local agriculture value chain companies. Each of these instruments has a debt facility combined with technical services led by CRS teams in the field.
These initiatives utilise the extensive local footprint to identify and strengthen the pipeline.
CRS’ blended finance initiatives respond to the needs and strategies outlined in our Vision 2030 strategy and contribute directly to agency targets and local leadership. Given the underserved communities we focus on, our SME clients are typically not able to access financing, often because the type of financing they need does not exist in the market.
Azure Source Capital LLC (ASC) was established by CRS and the Inter-American Development Bank (IDB) Lab in 2018 and attracted institutional (U.S. International Development Finance Corporation) and impact (Calvert, Mercy) investors in its first round. It is now in its second round of fundraising, seeking to close at $20m in 2024. ASC makes loans to local / community water service providers through local financial institutions. To date, 210,000 people across El Salvador and Honduras have improved water quality as a result of Azure’s work with 60 water service providers. The initiative is delivering outstanding impact, with no loan defaults to date.
We are only interested in impact investing opportunities that align with CRS’ strategy and mission. We focus on emerging markets and investments that will reach deep into local communities.
In addition to structuring our own funds, we look for institutional quality impact funds to place a percentage of our reserves. These require ‘market rate’ (i.e. non-concessional) returns. With these investments, this strategy alignment can be a bit less strict.
For the funds we structure ourselves, we are laser-focused on ensuring we align with our local strategies which seek to reach often un-reached communities for this type of instrument.
It’s unclear what impact we are having as an industry as a whole. If I look around, the vast majority of funds are focused on climate - which is important, but if we consider the enormity of the challenges articulated by the SDGs, along with the massive funding gap, I’m not sure we are making a dent. I’d like to see concrete impact data on what the sector is achieving, and also see a much more concentrated focus on marginalized communities.
I would suggest that investors who are new to the field really define what impact it is that they are trying to achieve – and keep that at the centre of their decision-making and strategies.
That a fund can’t be sustainable without so-called “market rate returns”.