Mumbai: Impact investment firm Aavishkaar Capital (Aavishkaar), in partnership with German state-owned investment and development bank KfW, has launched a $250 million ESG First Fund.
This fund will focus on strengthening the Environmental, Social and Governance (ESG) practice of mid-cap businesses, while offering them flexible capital to expand to newer markets, the firm said in a statement.
Leveraging on the global drive for sustainability and equality, the ESG First Fund will back companies in countries across Africa and Asia.
The fund will provide capital that can be invested across the capital structure, helping businesses improve their ESG standards so that they can capitalise on the increasing consumer preference for ecologically conscious, gender-equal and purpose-driven businesses and meet increasing demands on corporate due diligence in the course of regulatory measures in the European market.
The ESG First Fund will focus on sectors with high exports towards Europe.
“With our investment of €50 million, we want to help set up a fund that demonstrates that increased respect for ESG can be a viable investment and business model,” said Anosha Wahidi, on behalf of BMZ, Federal Ministry for Economic Cooperation and Development, Germany.
The German government has passed a due diligence law that obliges German companies to pay attention to social and ecological sustainability in their global supply chains. European regulations are set to follow.
“It is important to us that we do not exclude companies in other parts of the world from supply chains towards Europe, but rather enable them to participate in better due diligence management,” said Wahidi, who is also the head of division 120, which oversees policy on sustainability in global supply chains and is the commissioner for sustainability standards, said.
“As we launch this fund, we exhort other development finance institutions looking to enhance ESG impact to join us in delivering significant impact and generate attractive returns whilst bringing about a significant positive change in the lives of the people,” said Vineet Rai, founder and chairman, Aavishkaar Group.
Aavishkaar Capital is the impact investing arm of the Aavishkaar Group, the impact platform with presence in microfinance, MSME lending and ecosystem building across India, Emerging Asia and Sub-Saharan Africa. It currently manages more than $1 billion in impact assets across its platform.
“We believe in the ability of purpose-driven, responsible capital to be transformative while creating attractive investment returns,” said Jan Martin Witte, director at KFW. “This fund aligns with our focus on ecologically conscious sustainable businesses that bring in financial inclusion and economic development and will help us reach businesses globally that are impactful.”