India’s Aavishkaar, Germany’s KfW Unveil $250m Environmental, Social & Governance Fund
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Indian based Venture Capitalists, Aavishkaar Capital (Aavishkaar) in partnership with KfW, a German state-owned investment and development bank, have unveiled $250m “ESG First Fund” focused on strengthening the Environmental, Social and Governance (ESG) practice of mid-cap businesses while offering them flexible capital to scale to new markets.
Leveraging on the global drive for sustainability and equality, the ESG First Fund is a fund focused on investing in Africa and Asia with the mandate of generating superior ESG outcomes and commercially viable financial returns alongside positive social impact.
The ESG First Fund will seek to provide transformational capital which can be invested across the capital structure, helping businesses improve their ESG standards so that they can capitalize 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 Fund aims to partner with mid-cap businesses and entrepreneurs sharing Aavishkaar’s goal for enhanced ESG standards to deepen their access to markets in Europe. The ESG First Fund is in general open to all sectors, but focuses on those with high exports towards Europe.
The Fund is a global initiative with an investment process centred on ESG, gender equality and climate change goals. The Fund investment strategy aims to measure ESG improvements across value chain while providing catalytic capital across the capital structure, for mid-market businesses.
The fund will go a long way in scaling businesses especially exporters in the agriculture, apparel and sustainable supply value chain in Uganda, by strengthening their ESG capacity to win in the global market. With agriculture being the backbone of Uganda’s economy, this initiative will also help boost the country’s economic growth.
Commenting on behalf of BMZ, Federal Ministry for Economic Cooperation and Development Germany, Anosha Wahidi, Head of Division 120 - Policy on sustainability in global supply chains, Commissioner for sustainability standards, said that with the investment of 50 million euros, they want to help set up a fund that demonstrates that increased respect for ESG can be a viable investment and business model.
“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. Corresponding European regulation will 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. The fund is therefore primarily intended to help SMEs in Africa and Asia to meet the growing demands from European companies. ”
Aavishkaar Group Founder and Chairman, Vineet Rai said the ESG First fund takes forward the Aavishkaar Group vision to “Bridge the Opportunity Gap for the emerging 3 Billion” with its focus on ESG, Africa- Asia region, flexible instruments, Gender and climate change.
“The ESG First fund underscores the unique partnership that Aavishkaar Group has built with KFW Group to develop rapidly innovative products and launch them quickly with trust and long term impact as the bedrock of this partnership. 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.” Aavishkaar Capital (Aavishkaar) is part of Aavishkaar Group Company and a global pioneer in taking an entrepreneurship-based approach to scaling businesses for impact.
Speaking about their investment in the ESG First Fund, Dr. Jan Martin Witte, Director, KFW said “We believe in the ability of purpose-driven, responsible capital to be transformative while creating attractive investment returns. 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. With this initiative, funded by the Federal Republic of Germany, we want to improve the Environmental, Social and Working Conditions as well as the Gender Equality in the SME along the supply chain.”
Commenting on the investment, Ashish Patel, Managing Partner, ESG First Fund - Aavishkaar Capital said, “Our focus is to help businesses scale by allowing them to participate in the significant growth of consumer demand for ‘socially-conscious products’. We will support our partners develop stronger ESG standards and share the benefits of our south-south leanings. Additionally, our investment approach of providing flexible solutions across the capital structure will help businesses which may not be ready for an all-equity or all-debt solution, or where shareholders may not wish to dilute.”
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