Impact investing in practice: the story of an investor family

Article 6 of “ESG factors and Impact Investing” series

We started our journey on impact investments in 2016, when we structured our family office. The intention, from the beginning, was to align the portfolio with our values and to boost businesses that operate in partnership with nature.

The first task was to fit the impact investment project into the family strategy. Based on the governance, vision and goals of our family office, we analyzed the 17 UN Sustainable Development Goals and selected the social and environmental themes that most resonate with the family: sustainable consumption and production, life on land, sustainable agriculture and life on water.

Seeing that the eco-system of impact investments was still taking its first steps in Brazil, we chose to start in Europe, accelerating our learning among pioneer investor communities such as Pymwymic and Toniic.

In the beginning, we treated impact investments as a special class of high risk assets, related to the financing of startups with social-environmental focus and financial return. We then decided to create the Meraki Fund, a venture capital fund in partnership with another Brazilian family, with the main objective of boosting the growth of startups that promote the sustainable use of natural resources. Our first investment was in a Dutch company that develops biodegradable packaging based on cane bagasse and palm leaf as a substitute for plastic in the hospitality and catering industry.

Throughout 2017, we broadly expanded our investment possibilities. We understood that impact investing is a life philosophy; a new way of looking at the portfolio of the family office as a whole. Today we intentionally seek to create financial and social-environmental returns through varied asset classes, including fixed income, public equity and real assets, mainly in forestry. We fund clean energy projects and invest in private equity and private debt funds that promote circular economy and sustainable production of food and other consumer goods.

We still make direct investments through the Meraki Fund, now focusing on reforestation and regenerative agriculture, issues that are relevant for Brazil. We have invested mainly in technology startups that boost the recovery of native forests and more sustainable agriculture, making Meraki a bridge between Brazil and Europe, helping European technology companies to access the Brazilian market and vice versa.

Today we look at impact investments not only as a way to align our values ​​to the investment portfolio, but also to modernize the portfolio and prepare it for the new generation, which enters the consumer market less and less interested in big brands, having an own car, industrialized food and mass consumption. Impact investments go far beyond offering services and products that improve the lives of the less privileged; they are an opportunity to invest in market trends that already leverage big business nowadays, like the organic food movement, access to customized education through artificial intelligence, and the shared economy of vehicles, electronics and even clothing. These are new business models that meet the needs of the next generation.

The impact investment movement grows exponentially in the world and in Brazil, and already offers financial products in all asset classes. Far beyond venture capital, which continues to be an important vehicle for leveraging new impact businesses, there are funds and bonds in the market with attractive risk and return profiles, adding the impact dimension, opening the way for the possibility of a portfolio completely aligned with impact and performance investments, superior to the traditional portfolios, which are more exposed to volatility and the systemic market risk.

For those who are new to the impact journey in Brazil, there are already some specialized funds working in venture capital and private equity, such as Vox Capital, Mob and Performa. Thorough banks it is also possible to access investments in major energy projects, like wind farms and solar energy.

To access foreign investment opportunities, the best way is to enter a community of global impact investors such as Toniic, Pymwymic and The Impact, which already have some Brazilian members.

Before that, it is good to discuss the impact strategy with the family and to choose the UN objectives that most resonate with the family office vision. All 17 are very important but focusing on some will help in the investments selection and portfolio synergy.

Finally, it is important to analyze the current portfolio and to divest from companies and funds that generate a negative impact. Where we invest reflects who we are, and today we already have available tools to deploy investments in favor of the planet with interesting financial returns.

FERNANDO RUSSO

Has more than 15 years of experience in Marketing and Entrepreneurship. After selling his startup in Brazil, he attended INSEAD’s Executive MBA in France. Today he manages his own impact investment fund in Amsterdam and is responsible for his family’s Family Office investment committee in São Paulo.