‘It was a challenging year that resulted in negative returns, but it was also one in which we grew. We broadened the portfolio’s diversification and demonstrated our stronger commitment to align with the Triodos vision on food and agriculture,’ says Appers.
2019 performance overview
The fund produced a negative return of -13.7%, despite the promising new and impactful companies added to the portfolio. When asked about the results Appers explains that in general it was due to book value devaluations of three investee companies (Aarstiderne, Naturfrisk and Naty) as a result of their growth flattening.
Appers says, ‘The three companies were all early adopters. As their sector and the market circumstances have evolved, they have had to adapt themselves and their strategies. We are a long-term investor, so we support them through their various growth cycles. They are now really stabilising, and I believe they may be well-suited to expand in 2020.’
Historically, Triodos Organic Growth Fund has targeted companies related to sustainable lifestyle in the broader sense, but Appers says that this is changing. The three new companies that were added to the fund’s portfolio during the year, closely align with the vision articulated in the Triodos position paper on food and agriculture. They increase the fund’s potential to positively impact on the subthemes of an ecologically and socially resilient food and agriculture system, specifically balanced ecosystems, healthy societies and inclusive prosperity.
‘Over the past two years we have increasingly focused on investing in companies that support the necessary food transition. Alongside the mature companies already in the portfolio, we have evolved by adding high-growth, disruptive scale-ups. These younger companies have proven products and sales traction, but they require growth capital to take the next step. The move has resulted in a stronger, more diversified portfolio.’
The three investments in 2019 were:
- Group Natimpact – founded together with two French entrepreneurs, it aims to create a federation of autonomous small and medium-sized enterprises active in organic and sustainable food so they can share operational and sales expertise.
- TIPA – a leading producer of bio-based fully compostable packaging that extends the shelf life of food and addresses the problem of plastic pollution.
- HARI & CO– a young, fast growing company that produces meat alternatives, and whose products are 100% organic, locally produced, clean label and vegetable (non-soy) based.
The year also saw the divestment of Dutch sustainable food retailer Marqt. Due to a strategic reorientation, the search began for a suitable partner that could take the company forward. In December it was sold to a larger Dutch organic retailer Udea, with strong support from management, employees, suppliers and most shareholders. The sale realised an IRR of 9.7%.
The demand for organic food across Europe continues to rise, alongside disruptive market trends and consumer awareness. Countries such as France, and those that focus on food quality and local supply, are strongly attracted to organic food. With the increasing demand and activity comes significant investment deal activity and increased competition. There are now more investors, more funds, more big corporates wanting to invest in food, and even more players catering to niche needs.
Appers believes however that the fund has a strong and uniquely different position in the market: ‘We are an impact investor that is fully focused on supporting ecologically and socially resilient food systems, and we are in it for the long-term. This is a combination that you just don’t easily find.’
New measurement framework
During the year the fund’s impact measurement framework was updated, also aligning closer to the Triodos’ food and agribusiness vision. Appers tells, ‘We have now linked our investee companies to all of the three subthemes. We report on their impact using aggregated indicators plus additional indicators matched to their own specific products and activities. We hold a seat on the Board of all companies we invest in so we can encourage them to focus their management on creating positive impact and to report in this way. We also share the information publicly in the fund’s annual impact report.’
When asked about next steps for the fund, Appers is cautiously optimistic about positive future financial performance of the existing portfolio and wants to diversify it further. With the fund now fully invested, he is determined to attract new investors and to grow the fund to around EUR 50-55 million.
Impact of COVID-19
This interview was conducted on the brink of the World Health Organisation declaring COVID-19 a pandemic, and such does not mention potential impacts.
Every Triodos Investment Management fund has its own mission, investment theme/s and strategy. The correlation and potential impact of COVID-19 on each fund therefore differs.
When asked at the time about the impact on the fund, Appers acknowledged the investor interest. “Luckily, our investees are not driven by stock volatility, but we don’t know yet how hard they will be hit from a sales perspective. This depends largely on its business model, country and the sector it is active in. Obviously, we are monitoring developments closely.”
Visit the fund page on our website for more information about Triodos Organic Growth Fund.