South Asia Growth Fund III

Equity : June 2023

BIO has invested USD 10 M in equity in the South Asia Growth Fund III, an SME fund focused on South-East Asia

Amount

$ 10,000,000.00

Type of investment

Equity

Development impacts

Fight against climate change
Local economic growth
Private sector consolidation/innovation
Promotion of ESG best practices
Gender

Beneficiary locations

Asia: India, Indonesia, Philippines, Vietnam

Investment field

Investment Companies & Funds

Activity

KK.64.300 SME Fund

Organisation

South Asia Growth Fund III

Website

https://gefcapital.com/capital-partners/aboutus/

Domicile

Canada / Luxembourg

South Asia Growth Fund III LP is a 10-year closed-end investment fund whose investment thesis revolves around 3 axes: Climate mitigation, climate adaptation and the circular economy. SAGF III is the successor of South Asia Clean Energy Fund and South Asia Growth Fund II, in which BIO invested in. The fund will largely follow the same strategy as the previous two funds, investing in 9-12 SME active in the climate solutions’ supply chain, although with a broadened investment mandate and a more pronounced climate focus. India will remain the main target country, but the fund might also opportunitistically pursue investments in other Southeast Asian countries.

The fund will be managed by GEF Capital Partners.

Development impacts

Fight against climate change
The fund will have a stronger focus on climate-change adaptation and Mitigation, and the circular economy than the predecessor funds. These three investment axes that will guide the fund’s investment strategy, have been further divided into 9 relevant and climate-focused investment sub-themes: (i) Renewable Energy Value Chain, (ii) Energy Efficiency Enhancement, (iii) Food Security Solutions, (iv) Resource / Waste Recovery Solutions, (v) Water Security Solutions, (vi) Mobility Solutions, (vii) Smart Cities and Green Building Solutions, (viii) Technological / Digital Solutions, and (ix) Low Carbon Transition Solutions.
Local economic growth
Providing additional long-term growth capital to small- and mid-sized companies whose business models fit with the fund’s climate thesis in India and other South Asian countries. The fund shall reach a target size of USD 300 M and support between 9 and 12 companies.

Moreover, the fund shall have an important employment effect, considering that it shall support 6-8k direct jobs over its lifetime.
Private sector consolidation/innovation
Hands-on approach to value creation: GEF has built a robust team with deep sector expertise that provides cross-functional support to portfolio companies. The Manager’s team and its Operating Advisors will follow the same approach as with the predecessor funds, employing a consultative management style and leveraging their local and global resources to partner up with portfolio companies. The fund manager is considered by other market participants as a subject-matter expert.
Promotion of ESG best practices
GEF is impact oriented and has been a pioneer in early adoption of international ESG standards (e.g. PRI signatory, TCFD and more recently Operating Principles for Impact Management). ESG is perceived as a key driver of value creation and monitored closely by the fund manager.
Gender
The fund will commit to take actions on Gender and will seek 2X eligibility.

Female employees account for 30% of the Indian team (4 out 13). The manager also aims to increasing female employment in its portfolio companies.

E&S Impact

GEF Capital will formalise and strengthen a few areas of E&S management that it had already started working on: human rights, physical climate risk, gender-based violence and GHG calculations. Furthermore, it will set up an E&S panel to ensure a regular channel of communication between E&S professionals and will exclude all fossil fuels from its investment.

Situation at the time of investment

The fund manager upgraded its ESMS to meet the EDFI requirements and has started developing new approaches towards supply chain management and climate physical risks. The E&S team is experienced and systematically requests external E&S due diligence. New investees are requested to hire senior E&S officers.

Risk Category: B+