Flowfund impact investments
A helpful picture of the various concepts of investing can be found on the website of Phenix Capital:
We will classify our most illustrative investments in this section, while recognizing this is not a straightforward exercise.
The biggest position in the investment portfolio of Flowfund is the Global Equity Fund (listed large companies) managed by Generation Investment Management. We also participate in their Asia Fund (listed companies) and three of their Private Equity funds (unlisted companies). Looking through the company names in its portfolio’s, some would qualify in the ‘spectrum of capital’ pictured above as ‘ESG Integration’ and some as ‘Financial First Impact Driven’.
In our home country, Holland, we are an active supporter of initiatives promoting impact investing by setting the example. As such we have been a founding investor for Social Impact Ventures (Social Impact Ventures NL Fund I) in 2015/2016, and so are we at the start of their second fund in 2020: Rubio Impact Ventures (Rubio Impact Fund II).
In 2017 we have participated in the first close of Pymwymic Healthy Ecosystems Fund, and in 2020 we have topped up our participation.
In 2019 Wire Group initiated a PE fund-of-impactfunds: Wire Private Markets Fund and Flowfund is a founding investor for this fund. For several years Wire Group has been very helpful to us in finding and selecting PE impact funds abroad (below) and we welcome their initiative to make life very easy for impact investors through their fund-of-impactfunds. In 2021 we increased the initial commitment to Wire Private Markets Fund.
We consider the Dutch impact funds above as true impact driven funds, generally ‘balanced’ between ‘Financial first’ and ‘Impact first’.
A particular ‘Financial first’ case is our participation (at the first close in 2018) in Forward.one‘s first fund (also based in Holland). Most of the companies in their portfolio intentionally target positive societal & environmental impact, but the prospectus does not explicitly claim an impact dimension to the investment process. In 2021 we also committed to participate in their second fund (Forward.one Fund II).
Abroad we have positions in a few impact driven PE funds: Better Ventures Fund II, Better Ventures Fund III and Better Ventures Fund IV, Ananda Impact Fund III (based in Germany), EcoEnterprises Fund III (based in Costa Rica), Regenero Impact Fund (jointly managed by Belgian De Groof Petercam and Swiss Quadia), and Technology Impact Fund II (Capricorn Investment Group based in the United States of America). We consider these as ‘balanced’ on impact and financials with some tilt to ‘Financial first’.
Our policy is not to invest directly in social enterprises (and to do this through the PE funds mentioned above), but some exceptions have arisen over time. Thus we have made capital available to:
- Carbon Tanzania to support their innovative business approach to protect forests and wildlife;
- Fastned to support the transition to Full Electric Vehicles;
- Weeding Technologies to support herbicide-free weed control at scale;
- WakaWaka to support those who live off-grid and need some electricity.
In all of these direct investments our intention at the time of investment has been ‘Impact first’, while we respect that management at the same time targeted to offer Flowfund a competitive risk-adjusted financial return.
Flowfund also holds two non-equity impact investments: participation in the responsAbility Agriculture Fund, and in the BlueOrchard Microfinance Fund. We tend to classify these as ‘Impact first’; however, the risk-return profile of these portfolios currently appears better than in the traditional fixed income space.
We hope that sketching these impact investments underscores that this part of the investment universe is developing nicely, and encourages readers to do their bit.