The Shell Foundation and the Dutch development bank FMO have committed to work together to increase funds for impact finance in the energy sector in Sub-Saharan Africa and India.
The parties have signed a memorandum of understanding, agreeing to co-fund and co-create project opportunities in the energy access and clean energy sectors in the two regions, including investment in financial institutions with specific goals to increase access to finance, reduce inequality and promote green financing and agribusiness.
They will use tools such as capital solutions (debt and/or equity), grants, non-financial support, social investment, leadership and joint evaluation and advisory of funding opportunities.
FMO has been working together with the charity on projects over the last 10 year, unlocking over €70mn-worth of funding into high-impact enterprises providing essential services in Africa and Asia.
According to an FMO spokesperson, the MoU “further cements the relationship and formalised it”. The parties plan to co-invest in at least two projects a year, but have not specified the value of the investments.
Pradeep Pursnani, deputy director at the Shell Foundation, says the first joint investment under the agreement is expected to be made in Q1 2018. Together with the UK department for international development, the parties will create a fund to provide growth capital to social entrepreneurs.
“We are targeting a US$50mn growth fund that will invest in ticket sizes of U$1mn-US$5mn of mezzanine debt,” he says. “The fund is designed to provide the entrepreneur with the patient, flexible, risk-tolerant capital that the energy access markets in emerging economies need. This will be a great opportunity for social entrepreneurs in Africa and India who are working on energy access initiatives to access supportive bespoke capital. We are currently looking for other investors to join the fund.”
Jurgen Rigterink, FMO’s CEO, adds: “Working together with the Shell Foundation means that we are able to fulfil one of our key objectives, increasing our impact through partnerships and leveraging these partnerships to mobilise more capital and catalyse investments in frontier markets. We look forward to sourcing projects together that have great potential to make a difference.”
Previous collaborations between the Shell Foundation and FMO include the support for the Ability Energy Access Fund, a fund that provides working capital to the off-grid sector in Africa and South Asia; Grofin, a specialist financier that provides debt and business support to startups and growing businesses across Africa and the Middle East; and Aavishkaar, a fund manager based in India and Africa, which invests in early-stage social enterprises and monetary financial institutions.