Private-equity firm CoreCo has an investment thesis you’re not likely to read about in The Wall Street Journal. The $54 million fund spots high-growth businesses in Central America that operate with sustainable business practices.
CoreCo is among this year’s Best for the World funds named by nonprofit B Lab, based on an assessment of the impact of each company in a fund’s portfolio. More than 90 funds have now opted to have their portfolios independently measured and verified by B Lab’s GIIRS Impact Rating system, a rating system analogous to Morningstar.
Of those, B Lab identified 28 funds for their outperformance in social and environmental impact. B Lab has assessed more than 30,000 companies, enough to allow fund portfolios to be benchmarked and compared.
This year’s list recognized top performers in six categories: overall, environment, community, governance, workers and customers. The list includes many funds familiar to those who have followed impact investing in recent years, such as Leapfrog Investments, Village Capital, Deutsche Bank and Vox Capital (see the full list here). Here are five others with distinct impact strategies that helped them stand out.
Capitalizing sustainable Central American growth businesses. A young and growing population, GDP-growth outpacing that of the U.S., relative stability and lack of private capital for good businesses make Central America an attractive region for private equity. The $54 million CoreCo Private Equity’s Central America Fund I made B Lab’s list of Best for Environment Funds. CoreCo, founded in 2012, has offices in Guatemala, Costa Rica and the U.S. The regional fund makes growth equity investments across a wide range of sectors in Guatemala, Belize, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, and Dominican Republic. In 2016, the firm backed GRS, a Honduras-based firm that commercializes household appliances in Guatemala, El Salvador, Honduras and Nicaragua. CoreCo’s Central America fund, which is backed by the Multilateral Investment Fund and private investors, says it works with portfolio companies to improve sustainability and ethical impact to create long-term value.
Working capital for Mexican small and mid-sized businesses. In Mexico, only 2.5% of small businesses receive institutional financing. PC Capital is a Mexico City-based private equity firm that wants to close that gap. Its first fund, Mexico Development Fund I, makes working capital investments of $1 million to $10 million in small and mid-sized businesses targeting the food, sustainable food and energy, financial services and education industries in Mexico. PC Capital was recognized in B Lab’s list of Best for Community Funds. Like CoreCo, the fund is backed by development banks such as IDB’s Multilateral Investment Fund as well as family offices and funds of funds. It’s nine investments include Universidad International, an education institution that provides traditional and technical degrees, and Te Creemos, a Mexican microfinance institution. PC Capital has a real estate fund in the works, partner Pablo Cervantes told Acquisition International.
Expanding financial services in India. The India Financial Inclusion Fund, the second from Caspian Capital Partners, raised $89 million and made 12 equity investments in banking institutions providing finance for affordable housing and services to the unbanked. Like other firms with roots in microfinance, Caspian’s strategy has evolved with the growth of the market. Caspian has launched Caspian Impact Investments to offer debt to fast-growing early-stage impact enterprises in food and agriculture, financial inclusion, housing, healthcare and clean energy. Caspian made B Lab’s 2017 lists for governance, workers, community and customers. Its fourth fund, the Caspian SME Impact Fund, launched last year, will invest equity in small and mid-sized Indian companies focused on basic services for the under-served, opening new producer markets and financial services for micro-enterprises.
Seeding early-stage social ventures in the U.S. The SustainVC Patient Capital Collaborative (PCC) series of funds began in 2007 to offer professionally-managed funds for impact investor network Investors’ Circle. The five funds, launched every other year, have raised $12 million in total, and have expanded to included non-Investor Circle limited partners. SustainVC, with offices in Boston, Durham and Philadelphia, has provided seed and early-stage venture investments to 32 U.S. companies with a focus on clean energy and sustainable agriculture, equality and empowerment, and health and education. The funds have exited four companies including Palo Alto-based Goalbook, an education platform to help special-ed teachers design lesson plans, and New Jersey-based Locus Energy, a solar monitoring and data analytics platform. SustainVC’s PCC 13, its 2013 vintage fund, was recognized by B Lab for its impact business model.
De-commoditizing commodities. The Netherlands-based investment fund Annona Sustainable Investments 1 finds companies in Africa and Latin America with sustainable and profitable business models in tourism, and food and agriculture. The small fund was founded in 2009 by Dutch pension fund SPF Beheer and development institute, KIT. Annona’s portfolio includes Gold Coast Fruits, a Ghanaian agribusiness that produces and commercializes fresh pineapple for export, and Asilia, a Kenyan travel company with 18 camps and lodges in natural habitats in Tanzania and Kenya. It was recognized by B Lab as one of the top-three overall funds for operating impact, and also for environment and governance performance.