A transformative journey: Innovating and expanding impact investing frontiers at responsAbility
As we mark the 20th anniversary of responsAbility, we contemplate the influence of the aforementioned trends on our business and partnerships throughout the past two decades.
Mobilizing for impact: Innovating in Blended Finance
responsAbility has adeptly navigated the previously mentioned developments, leveraging the opportunities presented by blended finance structures and innovative instruments, such as a social bond with SIDA as the guarantor, and a similar guarantee provided by USAID/DFC for our climate smart agriculture strategy, to foster collaboration with diverse financing institutions and optimize our impact. Blended finance, a strategy combining public and private sector funding to support development projects and achieve sustainable goals, has enabled responsAbility to utilize a diverse range of blended finance instruments such as credit lines, bonds, and risk-mitigating tools which use first-loss tranches, guarantees and technical assistance.
responsAbility has expanded beyond its three core themes into new sectors such as healthcare, water, and sanitation, while mobilising the flow of capital into impact investments in emerging markets.
Find out more: Transforming Global Food Systems
responsAbility's expertise in impact investing led to us being entrusted with the portfolio management of SIFEM (Swiss Investment Fund for Emerging Markets) from March 2023. SIFEM, the development finance institution of the Swiss confederation, has invested approximately USD 1.2 billion since its inception in 2011, primarily in private equity and financial institutions. The fund’s objectives align with promoting sustainable economic growth, market development and job creation in emerging markets.
Looking ahead, it's important to emphasize that we will maintain our focus on investing in accordance with our core impact themes of climate finance, financial inclusion, and sustainable food in emerging markets, demonstrating our steadfast commitment to advancing these objectives within the SIFEM framework.
Climate Finance
In climate finance, we remain committed to supporting clean energy enterprises and companies that provide energy access solutions to emerging markets. As climate adaptation becomes increasingly important for investment, an uptick in investment opportunities related to climate resilience solutions is expected. In response to this trend a climate smart agriculture and food systems strategy has been launched to contribute to the advancement of climate-resilient food systems that are better suited for the planet. This solution aims to provide long term financing to innovative agribusinesses in Asia Pacific, Latin America and Africa with a focus on mitigating climate change, reducing food loss and promoting climate change resilience in their value chains.
Sustainable Food
responsAbility recently launched two Sustainable Food strategies: one targeting the growing food market in South Asia and Southeast Asia, and the other focusing on fruits and vegetables in Latin America. These initiatives reinforce our commitment to sustainable development alongside our focus on Financial Inclusion and Climate Finance, underlining our dedication to creating positive impact in emerging markets.
Our sustainable agriculture investments are structured to align with the financing requirements of smallholder farmers. We provide seasonal working capital loans and warehouse financing solutions that are in sync with harvest cycles, along with offering supply chain management solutions, specifically benefiting smallholders in emerging markets. This approach ensures that the financing structures within Sustainable Finance Department (SFD) are attuned to the unique capital needs and operational cycles of the farmers. Going forward, we will place even greater emphasis on biodiversity considerations within these investments.
Financial Inclusion
Our recent fintech investments in emerging markets display our growing internal capabilities and interest in this space. We firmly believe that FinTechs have the immense potential to disrupt the structure and operations of the existing banking sector and find new and innovative ways of reaching unbanked segments in emerging markets.
FinTechs help to increase operational efficiency and offer customized financial strategies by leveraging customer data and analytics thereby combating information asymmetries in the market.
Within our open-ended financial inclusion funds, we have built enduring and long-term partnerships with nearly a quarter of our partners for over a decade. These enduring collaborations have been crucial in enabling these institutions to evolve and navigate uncertain macro situations with greater resilience.
We remain devoted to bolstering microfinance investments in emerging markets recognizing its transformative potential to enhance livelihoods, fortify financial resilience, and notably, empower rural women by providing access to crucial financial services.
Additionally, responsAbility is actively expanding our capabilities in gender lens investing and developing the ecosystem around it to advance gender equity goals among investors.
The initiation of the SFDR (Sustainable Finance Disclosure Regulation) has propelled us to refine our internal processes, ensuring robust and transparent sustainability disclosures that align with the advancing regulatory standards. These swift process improvements have enabled responsAbility to effectively undertake comprehensive periodic disclosures, reflecting the ever-evolving demands of sustainability regulation. Moving forward, our ambition is to continuously elevate our internal procedures for assessing and managing impact.
This strengthens our pledge to foster positive transformation in emerging markets by deploying strategic investment capital and technical support, thereby solidifying our commitment to sustainability and meaningful change.
For the past two decades, our investments have been guided by the overarching goal of fostering a sustainable world.
Remaining dedicated to this mission, we reaffirm our pledge to align all of our investments with the following objectives:
- Establishing enduring access to essential and affordable basic services for individuals at the base of the income pyramid
- Cultivating sustainable growth with an emphasis on environmentally conscious practices
- Pioneering innovative products that empower the private sector to invest in a sustainable global future
Under the current regulatory framework, all of our SFDR products are classified as Article 9, reflecting their primary focus on sustainable investment objectives. However, we recognize that the regulation requires significant evolution to truly fulfill its intended purpose. In this regard, we commit to actively contribute as an engaged industry participant, lending our insights and feedback to drive meaningful regulatory development through consultations.