According to Sazini Mojapelo, the managing principle responsible for Corporate Citizenship for Africa at Absa Group Limited, “innovative finance is an aspect of the impact investing ecosystem – that is, investments made with the general intention to generate positive, measurable social and environmental impact alongside a financial return”. These models have been designed to stimulate private capital flows into impact investing and to encourage private voluntary contributions through matching funds. Mojapelo introduced four innovative finance models to delegates at the Trialogue Business in Society Conference: development impact bonds, green bonds, crowdfunding and blended financing.
Development impact bonds enable investors to provide upfront investment for development projects, with government or international aid donors making the repayments. Mojapelo highlighted that “in Swaziland they have looked at how to come up with vaccines around HIV/Aids and this is being funded by high net worth individuals”. If adequate risk management is implemented, this avenue could provide the assurance that government and donors need. This assurance can be provided through effective monitoring and evaluation frameworks which ensure credibility.
Green bonds are conventional bonds that are issued by banks, corporates and cities whose proceeds are earmarked for specific projects with climate and environmental benefit. In Africa, South Africa has issued the most green bonds. According to Mojapelo, “green bonds are simply normal bonds, but what is different about them is that the outcomes and proceeds of these bonds have to positively impact the environment”. GrowthPoint and the City of Cape Town were the first JSE listed entity and first city to issue green bonds. Other countries like Morocco are assessing the implementation of green bonds. Green bonds have been successful because of the focus on transparency, impact reporting and enhanced disclosure requirements.
Crowdfunding utilises various platforms to allow large numbers of people to invest small amounts of money for development impact. A renowned crowdfunding platform, Kiva, has raised in excess of $949 million since 2005.
Blended financing is the strategic use of development financing and philanthropic funds for the mobilisation of capital flows towards sustainable development initiatives.
“Research has extensively proven that, through innovative and blended financing which pools different forms or capital and resources, we will be able to achieve the Sustainable Development Goals (SDGs). It will not be achieved through traditional forms of financing,” said Mojapelo. The 17 SDGs are a comprehensive set of goals that focus on people, planet, prosperity, peace and partnership and provide a framework and standardised approach to guide the contribution of investors to sustainable development.
Companies in different industries can find goals aligned to their capabilities to focus on. Sazini noted that ABSA, “offers innovative financial solutions and business development support services to small and medium businesses to nurture the entrepreneurs of tomorrow”.
IMAGE: Sazini Mojapelo, Absa
Article written by Claude Kamangirira
Photo taken by Cobus Oosthuizen