INVESTING TOWARDS INCLUSIVE AND SUSTAINABLE INDUSTRY, INNOVATION AND INFRASTRUCTURE



As a response to the climate emergency and social crises, the United Nations has established a set ofSustainable Development Goals, to be achieved by 2030. These are organized in 17 concrete objectives to tackle global issues in order to reach a sustainable and peaceful future for everyone, everywhere. The SDGs aim to bring together all countries, private companies, and individuals to promote a prosperous future while protecting the planet. The achievement of a particular goal is often interlinked with the others, as will be seen in our series of articles.

In this article, Kanopé analyzes investment alternatives which contribute to the 9th SDG, aiming to build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.



Over half of the world's population now lives in cities, making infrastructure such as transport and energy ever more important. Inclusive and sustainable industrialization, together with innovation, can generate dynamic and competitive economic growth which create employment and income. This plays a major role in promoting new technologies, facilitating international trade and improving the efficiency of resource use.


Indeed, least developed countries often lack basic infrastructure like roads, information and communication technologies, sanitation, electrical power and water, yet these are key to finding potential solutions to both economic and environmental challenges.


The global manufacturing sector growth was declining even before the COVID-19 pandemic. The confinement measures imposed in many countries have hit the manufacturing industries hard and caused disruptions in global supply chains of products. This crisis has also highlighted the need for resilient infrastructure. Information and communication technologies have been crucial for the accelerated digitalization of many businesses and services, for example through teleworking and video conferencing systems in and out of the workplace.

KEY FIGURES

3.8 billion people do not have access to the internet, 90% of which live in developing countries. This excludes them from access to online education, employment, health and sanitation advice, and other critical services. Furthermore, 16% of the global population does not have access to mobile broadband networks.


In many African countries, especially the lower-income ones, the lack of infrastructure affects firm productivity by around 40%. This is why SDG 9 seeks to develop resilient, quality, and sustainable infrastructure and promote inclusive industrialization, to significantly raise industry's share of employment and gross domestic in line with domestic circumstances. This can improve human well-being and increase resource-use efficiency thanks to adoption of clean and environmentally sound technologies and industrial processes.


The share of manufacturing value added in the global GDP has increased from 15.2% in 2005 to 16.3% in 2017, largely driven by its fast growth in Asia. An encouraging figure as every job in manufacturing creates 2.2 jobs in other sectors. Small and medium-sized businesses which engage in industrial processing and manufacturing are especially important for the early stages of industrialization and typically generate the most employment. They make up 90% of business worldwide and account for 50 to 60% of employment. Supporting innovation and small- and medium-sized enterprise creation is therefore also part of this SDG.



Least developed countries have a huge potential for industrialization in the textile and garment sector, as well as agro-industry, which provide good prospects for sustained employment and higher productivity. There are great opportunities since barely 30% of agricultural production undergoes industrial processing in developing countries, compared to 98% in high income countries. Middle-income countries can benefit from entering the basic and fabricated metals industries, which offer a range of products facing rapidly growing international demand

SDG 9 aims to facilitate sustainable development through the promotion of sustainable industries, investments in scientific research and innovation, and the construction of infrastructure so there can be universal to basic services such as communication and transport.

WHAT INVESTMENT SOLUTIONS EXIST TO CONTRIBUTE TO THIS SDG?


It is nowadays possible to demand more than a financial return adapted to a risk level from your investments. Impact investing is placing a third dimension at the core of your investment strategy: to have a positive impact on the world.


Regarding industry, innovation and infrastructure, the investment themes* are the following:

  • Digital infrastructure

  • Sustainable physical infrastructure

  • Technology and technology transfer

  • Small enterprise lending

Before moving forward with the presentation of investment solutions we have identified, we’d like to remind you that the ensuing presentation does not constitute a buy, sell, subscription or advice in financial investments offer from Kanopé Impact. This presentation analyzes data and numbers without accompanying them with comments or value judgements regarding their worth for the reader. This article seeks to illustrate how an investor’s capital can contribution to solving global issues. The performance or numbers mentioned are estimates from asset managers communicated over a given time period and are therefore in no way a guarantee of the value of said investment in the future. If you wish to invest financially, please contact your financial advisor who will be able to guide you towards your objectives given your civil, fiscal, and asset situation while ensuring an adequate investment.

Digital infrastructure


As mobile-cellular signal coverage increases, the world is becoming ever more connected. Digital infrastructure is especially relevant for developing countries, who have the chance to leapfrog developed countries. Leapfrogging means to get ahead technologically through the stages developed countries have experienced (for e.g. getting mobile phones without having cable phones).


Vanu is a private equity company currently raising its series-C financing round, which develops, sells and provides equipment, tools and services to help mobile network operators serve off-grid markets. It eliminates power cost by reducing consumption by a factor of 25, making solar energy feasible, and reduces maintenance costs by using software radio.

Sustainable physical infrastructure Clean and affordable energy is an essential part of sustainable infrastructure. The fund Kayne Anderson Renewable Infrastructure Partners invests in a portfolio of publicy listed renewable infrastructure companies that are involved in business activities related to renewable energy production, storage and transmission. Thanks to innovation and greater demand, renewables (mainly solar and wind) have hit an inflection point and are now economically competitive with fossil fuel power without subsidies.

Technology and technology transfer Scientific research and technological capabilities can significantly advance economic productivity, disrupt industries, reduce barriers, and lead to scientific investigation.

Promoting technology also includes the technology transfer to developing economies to promote local capacity building.


Wiit S.p.a provides outsourcing services through information technology, including big data, application management, disaster recovery, and cloud services.

Regarding funds, Goodwell Investments finances high growth & high impact firms providing access to basic products and services for underserved populations in India and Sub Saharan Africa through early stage equity.


Small enterprise lending


Lendable is a fintech company which empowers small and medium enterprises by providing debt capital to non-bank lenders in frontier and emerging markets. Lendable offers investment opportunities via multiple tranches. The senior tranche makes up 50% of the fund and has a fixed coupon of 4%. The mezzanine tranche makes up 47.5% of the fund and takes the fund's residual income, with a target return of 10-13%. Both of these tranches are protected by first loss, which Lendable will underwrite (2.5% of the first $100m). 11 clients have been offered credit facilities across Kenya, Uganda, Ghana and Nigeria. Financial inclusion is primordial for the development of businesses and innovative solutions to global problems.

AND NOW? If you want to become an impact investor, contact your financial advisors specialized in impact investing. They will be able to support you in measuring and connecting the three dimensions that are risk, return and impact, according to your property status and investor profile.


#ImpactInvesting #FinanceDurable #ODD #FamilyOffice #BroccoliVirus#ClimateChange

*Toniic - 2020

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