Tailoring finance tools for impact investors
This is the second blog post in an occasional series
By Mitchell L. Strauss, Special Advisor, Socially Responsible Finance
In my earlier blog post I explored OPIC’s contributions to the evolvingimpact investing sector, mostly by providing financing and insurance products to help American companies working in emerging markets. In addition to these core products, OPIC continues to innovate and offer new products and services for businesses, investors and entrepreneurs supporting projects designed to achieve both a financial and social return.
In addition to our traditional financing vehicles, OPIC has also created several finance products designed to address the specific needs of the impact investing sector. These include:
- Certificates of Participation (COPs). Eligible investors may help fund OPIC’s impact investment activities by purchasing these certificates, which fund loan disbursements to borrowers for impact investment projects.
- Investment fund support. OPIC’s support for emerging market investment funds includes a $285million OPIC commitment to six initial impact investment funds that together aim to inject $875 million into the impact investing sector.
- Co-investment opportunities. Project sponsors working in impact sectors may seek investment to align senior debt financing, including technical assistance funds or some equity cushion to make a project financeable or to expand and scale.
For entrepreneurs and project sponsors looking for support, OPIC also offers a range of projects that address gaps in the impact investment market including:
- Financial intermediary facilities including financing and political risk insurance to financial intermediaries that can lend to the impact sector.
- Political risk insurance products that significantly mitigate specific risks posed to impact investors and offer protection against losses to tangible assets, investment value, and earnings.
- Supply chain financing products for manufacturers and distributors who face working capital or short-term liquidity constraints due to growing production demands that lock up a significant portion of cash in working capital.
- Exit facility created for impact investors involved in early stage investments. OPIC can buy back equity positions in enterprises from initial investors and allow them to cash out when an enterprise is stable and cash-flow positive.
Learn more about OPIC’s finance and insurance products for impact investing here.
As the private sector continues to be more involved in development around the world, and more focused affecting positive social change, the entire impact investing sector will grow. Meeting the demand for this trend will require more collaboration among different types of investors. I’ll explore this theme further in my next post in this occasional series on impact investing. So the saying goes … a little bit from a lot of people can go a long way.