A five month internship in a consultancy for environmental services in Sao Paulo set the foundation of Estelle Tanner's Master thesis. In collaboration with the Impact Investing Platform of the HSG Hub Sao Paulo she conducted her thesis at the Chair for the Management of Renewable Energies at the University of St.Gallen.
Although Brazil has a high renewable energy share compared to the world average, there is potential for improvement. The growing Brazilian agroindustry, as well as a study from the International Energy Agency (IEA) promoting the production of bio-energy from residual biomass and energy crops, indicate potential for biomass projects in Brazil. However, so far this type of biomass projects has not gained momentum in Brazil. Assumed reasons for this phenomenon are (amongst others) the dominance of hydro-power plants, extensive oil resources and difficulties in financing biomass projects. This thesis suggests that Brazilian biomass projects could be a viable investment opportunity for impact investors seeking long-term sustainable investment opportunities, which have not only financial return but also measurable social and environmental impact.
Therefore, this thesis investigates the assumed differences in the investment decision making processes of traditional investors (PE, VC) and impact investors in emerging markets, via the example of Brazilian biomass projects. Through empirical research (based on 13 in-depth-interviews with six traditional and seven impact investors, all of whom are assessing a Brazilian biomass business plan) new insights are gained. The scope of this thesis does not allow for the deduction of general applicable theories, thus new insights for further research are created. In general, the investment decision-processes of traditional investors and impact investors do not differ significantly.
However, there are differences within the return and impact expectations. Although impact investing may propose one mean to foster biomass projects in Brazil, it is not the magic bullet accelerating the industry in general. Impact investing makes sense under certain circumstances. Dedication to create an intended and measurable social and or environmental impact in a less developed region, the inclusion of locals (e.g. better education, access to energy, creation of economic value), are just a few examples to point out what defines an impact investment.
For more information please also consider her presentation held at the 2nd Conference for Impact Investing, you can access it here.
Thursday, October 17, 2013
Wednesday, October 2, 2013
Thesis: Portfolio Company Selection in Latin America
Our former
Impact Investing Coordinator Fabian Oppenheimer just completed his master
thesis on Portfolio Selection of Impact Investors. Here is a short summary of his work:
The paper analyses how Impact Investors select their portfolio companies in Latin America and what criteria are assessed in the process. The selection process model applied in Venture Capital has been adopted, since virtually no research on Impact Investing has been conducted to date.
The findings reveal that Impact Investors originate and assess deals in a similar way to Venture Capitalists, but that some criteria are adjusted and others added in order to reflect the dual objective of Impact Investing;
Impact Investors can originate deals passively, but they prefer searching for social ventures proactively: personal contacts, access to networks and industry events are crucial in this context.
Impact Investors considering an investment in Latin America search for integer, honest and reliable social entrepreneurs committed to social impact; eligible social ventures must be profitable with potential for further scalability; the product must have a social impact, i.e. create value for the individual consumer and for the wider community; market size and market growth are crucial external factors; and the deal features depend on the investor’s risk attitude and the prospects of a successful exit in both financial and social terms.
Impact Investors are also willing to provide non-financial support prior to an investment, if a social venture shows high potential for achieving their dual objective.
The paper analyses how Impact Investors select their portfolio companies in Latin America and what criteria are assessed in the process. The selection process model applied in Venture Capital has been adopted, since virtually no research on Impact Investing has been conducted to date.
The findings reveal that Impact Investors originate and assess deals in a similar way to Venture Capitalists, but that some criteria are adjusted and others added in order to reflect the dual objective of Impact Investing;
Impact Investors can originate deals passively, but they prefer searching for social ventures proactively: personal contacts, access to networks and industry events are crucial in this context.
Impact Investors considering an investment in Latin America search for integer, honest and reliable social entrepreneurs committed to social impact; eligible social ventures must be profitable with potential for further scalability; the product must have a social impact, i.e. create value for the individual consumer and for the wider community; market size and market growth are crucial external factors; and the deal features depend on the investor’s risk attitude and the prospects of a successful exit in both financial and social terms.
Impact Investors are also willing to provide non-financial support prior to an investment, if a social venture shows high potential for achieving their dual objective.
If you are interested in the complete executive summary, please click here.
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