Social Impact Funds: An Investment Alternative to Make the World Better
Kimironko is a neighborhood in Kigali, the capital of Rwanda. It is home to the headquarters of Yak Fair Trade, an agro-industrial and livestock company that focuses specifically on post-harvest processes and marketing products at an affordable price to food companies, paying special attention to highly nutritious foods for children and pregnant and breastfeeding women. The company’s mission is also to enhance the livelihood of small farmers and improve the community’s food security.
This company fulfilled all the conditions to receive financing support from the Global Social Impact Fund (GSIF), a fund managed by GSI and created with Santa Comba and MAPFRE as its main investors. In fact, MAPFRE AM acts as its investment adviser.
Specifically, the company received a $500,000 loan in October last year to tackle a social issue: 75% of the Rwandan workforce is concentrated in agricultural activity. Most people dedicated to this activity are small farmers who face several difficulties that prevent them from increasing their revenue and improving their living conditions. The lack of grain drying spaces or facilities means that the crops are exposed to adverse weather conditions such as rain, which increases the raw material’s moisture level, affecting its quality and making it difficult to sell. Furthermore, finding markets where they can sell their crops is complicated for these farmers, and this is further exacerbated if the grain is of poor quality. With this financing, support is being offered to this company which is mainly supplied by small farmers (60%), improving their and their families’ livelihood. In addition, Yak Fair Trade trains farmers in best practices, as well as post-harvest technologies to avoid production loss.
This is one of the impact investments that MAPFRE has made, and it will not be the last, as this is one of the strategic pillars of its fund manager, MAPFRE AM, but also of the new Sustainability Plan 2022-2024 that the Group announced last Friday. As MAPFRE chairman and CEO Antonio Huertas said, even if the order of factors does not alter the product, “the end result must be a cleaner, more protected and sustainable planet. However, we must prioritize actions that protect and promote human development.” “First, we must protect people, and only then can we move forward with everything else. It’s time that we put the “S” in Social, which is the same as putting the “P” in people, first,” he added. That is why we changed ESG, which corresponds to investments with environmental, social, and governance criteria, to SEG, prioritizing the “S” in Social.
Furthermore, this social profitability is not at odds with traditional financial profitability, but quite the opposite. In the above-mentioned case, the GSIF fund has an annual profitability objective of between 5% and 8%, with annual liquidity from 2024. This is also the case with the other funds that MAPFRE has launched. Two of these stand out: MAPFRE Compromiso Sanitario [Health Commitment] and MAPFRE Inclusión Responsable [Responsible Inclusion]. The former was launched in April 2020, at one of the worst points in the pandemic. It is a social impact fund that was created in collaboration with the Community of Madrid to bring together customers’ savings and the financing of a specific health assistance project. To this end, this product, guaranteed for three years, was launched. Its underlying asset is a bond issued by the Community exclusively for the purchase of medical supplies. It offered a 3% return over three years, payable on maturity in 2023, which is well above the bond yield thanks to an additional contribution from the fund manager itself of close to one million euros. Once again, it is proven that social profitability and financial profitability are perfectly compatible.
That connection is demonstrated even more clearly in MAPFRE Inclusión Responsable, a fund launched by the fund manager at the end of 2019. Its portfolio features companies that are committed to including people with disabilities in the workforce. In 2021, it was one of the full-range products that MAPFRE offers its customers that performed the best last year, with returns of 26.74%, significantly surpassing the benchmark.
These are just three examples of MAPFRE’s commitment to society and, above all, to people. And the company will continue to work on new projects. In this regard, there is another vehicle under way, aimed at fighting against childhood malnutrition and poverty, which will come on line in the coming months. If we work together so that we can live and work in a world that is more inclusive, more supportive, and more just, we will have a much easier path toward a more sustainable and balanced society.