Triodos Investment Management (Triodos IM), the investment manager of SFRE Fund, understands finance to be transformational, and defines it as directing money so that it benefits people and the environment over the long term. The impact Triodos IM is interested in – for each of its investment strategies - is the effect of its activities on society and the environment.
For its financial inclusion investment strategy this impact is about providing access to finance to those traditionally excluded and building robust, sustainable and professional financial institutions. These are key actors in developing an accessible, well-functioning and inclusive financial sector that fuels social and economic development, and promotes access to basic needs.
In a context of stories and numbers
Triodos IM realises that its role and efforts in this complex web of change can only be captured in quantitative metrics and indicators to a limited extent. It also believes that investing for impact moves beyond providing capital and requires a strong intention and a holistic and long-term approach, not just one-dimensional solutions. With this approach Triodos differentiates itself from other capital providers.
To understand this vision and the extent to which Triodos IM is delivering on it, means sharing stories that illustrate the whole picture. These stories provide the essential context and background for its activities. They illustrate ‘our theory of change’.
Quantifying and managing impact
SFRE Fund has embedded the Smart Campaign’s Client Protection Principles and the UN Principles for Responsible Investment in its due diligences. More specifically on an individual investee company level, SFRE Fund uses the Investment Scorecard developed by the Global Alliance for Banking on Values to measure commitments to financing the real economy and triple bottom line activities, scoring from 0-100:
- The Investment Scorecard captures the financial viability of the institution, its intermediation of money in the real economy and its intermediation of money supporting clients who deliver triple bottom line results for society. It then overlays an assessment of the institution’s core culture and capabilities across six dimensions, which are added to the base score for calibrating.
- If there is a need for improvement in specific areas, or the fund sees a deterioration in a score, this is discussed and monitored with the investee during regular visits and quarterly board meetings for equity investees.
SFRE Fund uses the Investment Scorecard to quantify and manage impact. This is an integral part of capital deployment and portfolio management. In accordance with the ‘Principles of Sustainable Banking’ investees must have a minimum score on the Investment Scorecard to be eligible for portfolio. Post-investment, the score is reassessed on an annual basis, making it a tool for proactive managed impact alignment between SFRE Fund and the investee.
Furthermore, the fund's investees report on a quarterly basis on the following impact indicators: number of borrowers and savers, female borrowers, rural clients, and average loan amount.