FOUNT is a leading impact investment firm, providing strategic advisory and investment management services focused on driving social and environmental impact alongside financial returns in emerging markets.
Building upon earlier experiences in their previous roles, Bernadette Blom and Bob Assenberg established FOUNT in 2013 as a strategic advisory firm, specializing in impact investing within emerging markets. As FOUNT advised and supported its numerous clients to achieve substantial impact, the firm expanded their involvement to encompass fund and investment management activities, leveraging their existing networks and expertise in setting up and managing impact investment funds. This evolution started with the management, restructuring, and eventual divestment of an affordable housing portfolio in emerging markets.
We spoke with co-founder Bernadette Blom about FOUNT’s portfolio, blended finance insights and learnings, integrating a gender lens, and more.
Can you tell us about FOUNT’s portfolio of impact funds?
FOUNT currently oversees a diversified portfolio of four impact funds that span various sectors, geographies, and instruments, all characterized by innovative and sustainable business models.
Since 2017, we manage BIX Capital, focusing on pre-financing impact receivables (mainly carbon credits) in Sub-Saharan Africa. Additionally, since 2019 we are Fund Manager for the Good Fashion Fund, contributing to systemic change within the textile and apparel industry and as of 2020, we serve as the Investment Advisor for the AGRI3 Fund, collaborating with Cardano Development, to provide guarantees for sustainable agriculture, forest protection, and improved rural livelihoods. FOUNT recently added the Organic Development Finance to its portfolio, dedicated to providing affordable finance for organic agricultural producers in developing countries.
Our commitment revolves around innovative, unique, and impact-focused initiatives, with blended finance constituting a central role in all our endeavours.
What is FOUNT’s approach to blended finance? What have you observed in your practice of blended finance?
The impact funds under our current management exhibit a blended capital structure comprising distinct risk/return tranches. This structural composition is imperative for innovative impact funds without a proven investment thesis. In instances where risks are indeterminate, investors frequently perceive them as high, underscoring the indispensability of a blended capital structure to stimulate private investor participation. The strategic allocation of varying risk/return profiles across diverse investors within a unified capital structure facilitates the attainment of substantial impact.
As a prudent practice, ascertained from experience, we observe that upon establishing a robust track record, the concessional tranche can be strategically diminished. Simultaneously, leverage can be augmented for subsequent funds, capitalizing on the diminished risk perception among investors. This nuanced approach aligns with industry best practices and enhances the overall viability and attractiveness of subsequent investment vehicles.
FOUNT has an array of blended transactions, ranging from fashion, to clean cooking to agriculture. What lessons have you learned working with different instruments and across sectors?
When establishing an innovative fund, particularly one entering a new sector or featuring a novel investment instrument, as exemplified by our experience with all our mandates being first-of-its kind impact funds, the primary objective is to showcase the financial, environmental, and social viability of the investments. In the context of such a ‘demonstration fund’, the inclusion of junior equity/first-loss is imperative to attract private investors.
The distinctive innovation introduced by BIX Capital (investors include Shell foundation, International Finance Corporation (IFC), FMO: Dutch Entrepreneurial Development Bank (FMO), and U.S. International Development Finance Corporation (DFC)) lies in its unique investment instrument, impact receivable finance. Under this mechanism, carbon credits generated through the utilization of cookstoves or other impact products are pre-sold to reputable offtakers, based on a pre-agreed volume and price . The underlying agreement serves as collateral, mitigating the need for recourse to the balance sheet of the financed SME. Since its inception BIX Capital has successfully demonstrated the efficacy and scalability of this business model, and is now fully invested prompting the initiation of a follow-on fund, BIX2, characterized by increased leverage, a larger fund size, and a broader investment mandate.
AGRI3 (investors include the Dutch Government, Rabobank, and Global Environment Facility (GEF)) , on the other hand, specializes in providing risk mitigation, employing various types of guarantees to empower financial partners in developing countries to collaborate with their clients towards greater sustainability, encompassing areas such as sustainable agriculture, deforestation avoidance, and support for rural livelihoods. AGRI3 facilitates transactions that might be beyond the capacity of individual partners, ensuring scalability through collaborative efforts.
Tell us about a past transaction that benefitted from using a blended finance approach.
The strategic utilization of blended finance empowers FOUNT to foster innovation and engender positive environmental and social impact, aligning seamlessly with our commitment to maintaining an impact-focused and innovative approach in managing our funds.
A notable illustration of the successful implementation of blended finance is the establishment of the Good Fashion Fund in 2019.The fund strategically targets apparel manufacturers. Investments are directed towards impactful equipment that results in a substantial (>50%) reduction in the utilization of energy, water, or chemicals in the production process, concurrently improving workers' conditions and rights.
The textile sector is known for its environmental impact, challenging labor conditions, and reputational challenges. Laudes Foundation initiated the fund, acknowledging the pressing need for investments and the considerable potential for positive impact within the sector. The junior equity investments from Laudes Foundation and the Mills Fabrica catalyzed senior debt funding from Rabobank. This collaborative approach not only validated the viability of the business model but also exemplified the indispensability of the blended finance strategy in overcoming inherent challenges and propelling the success of such initiatives.
How does FOUNT integrate a gender lens into its investment decisions?
Gender inequality remains a formidable global challenge, and FOUNT is unwaveringly committed to the rights of women and contributing significantly to the realization of gender equality. Within our funds, women, whether as customers, company proprietors or employees, play pivotal roles. A comprehensive gender lens is meticulously integrated into the investment decisions of AGRI3, Good Fashion Fund, and BIX. Each fund adheres to an individualized gender policy, incorporates leading industry standards and best practices, and tailors to address specific gender challenges within the targeted sectors.
In the case of BIX2, the fund has undertaken multifaceted adaptations to the 2X Challenge criteria, aiming to yield tangible gender outcomes from its investments. The primary focus is on the percentage of investments targeting products specifically designed to enhance the livelihoods of underserved female populations. Our steadfast commitment involves dedicating 80% of investment capital, via SME finance, to such products and services. We are committed to quantifying the number of women reached and calculating time saved by women, utilizing a proprietary model. Where feasible, we intend to pre-finance companies based on monetized time savings, denoted as "Gender Credits."
Beyond our core focus, we actively engage with portfolio companies to promote gender-positive workforce and supply chain policies and. Additionally, we consciously exhibit a positive bias towards investing in female-led or owned businesses.
What are some key challenges FOUNT has faced in your blended finance journey?
Securing risk capital, particularly for the first-loss/concessional tranche, poses a considerable challenge, yet is pivotal for mobilizing private funding, especially for innovative impact funds.
Our track record has become instrumental in facilitating the expansion of our funds. Given our focus on establishing high-impact, pioneering funds with innovative approaches, operational in developing countries, the associated perceived risks are often elevated. Over the years, we have systematically instituted standards and policies that can be applied across various initiatives, encompassing investment, environmental, and social impact considerations.
We are seeing lots of interest in the potential for blended finance to enable scaled opportunities and impact. Could you share some insights and advice based on your experience managing funds of a significant size?
We see many opportunities for blended finance and foresee substantial prospects in its future application. It is often imperative to initiate a first fund to establish the proof of concept. Drawing from the insights gained in this initial endeavor, a considerably larger second fund can be formulated. The second fund typically necessitates a reduced reliance on junior or concessional capital, given that the viability of the business case has been substantiated, resulting in a commensurate reduction in perceived risk.
How do you see FOUNT’s blended finance activities evolving in the future?
As we focus on the continued management and investment of existing funds in our portfolio, a logical progression for FOUNT is to leverage the insights garnered, sector networks, knowledge, methodologies, and processes from our current funds. These valuable assets will be strategically channeled into the creation of larger follow-up funds, including a first close of BIX2 in 2024 and our imminent plans for GFF 2.0.
Moreover, we are dedicated to exploring new, innovative initiatives capable of generating substantial impact and that have not yet achieved widespread implementation.
Thinking about your time at FOUNT to date, what has stood out to you?
FOUNT was founded in 2013 by two visionary entrepreneurs committed to enhancing livelihoods and ecosystems in emerging markets. Presently, FOUNT is strengthened by a dedicated team of international professionals. Over the years, FOUNT has successfully established multiple impact investment funds, disseminated knowledge, and facilitated financial flows to impact investment initiatives. Through the creation of innovative and scalable projects in emerging markets, FOUNT actively contributes to advancing the Sustainable Development Goals.
Our commitment is to persist in this journey alongside our stakeholders, with a focus on expanding FOUNT's influence as an innovator in the sector. Simultaneously, we aspire to maintain our status as an inspiring workplace dedicated to making a meaningful impact.
