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Impulsum
Impact investment, interview with Jean Philippe Donge, head of fixed income at BLI-Banque de Luxembourg Investments.
Banque de Luxembourg Investments
At BLI, we are convinced that the fixed income asset class, by its characteristics (limited investment duration, fixed remuneration), is a particularly suitable instrument for impact investment since, through the direct financing of targeted projects, it makes it possible to actively contribute to the achievement of the Sustainable Development Goals.
As an asset manager involved in developing more responsible finance, BLI wishes, through targeted impact strategies, to develop investment solutions that are able to generate, for the investor, a financial return meeting his expectations and which at the same time generate a significant and measurable impact on the major social and environmental issues today
The first BLI impact funds were launched in 2010; they were closed end funds focused mainly on microfinance that have now all matured.
At the same time, we have also implemented impact strategies in our open funds mainly through green bonds. But beyond traditional markets, impact investing requires us to move to less liquid instruments that are more difficult for everyone to access. These instruments are not generally eligible for inclusion in UCITS funds. We decided to launch an alternative fund; a Raif (Reserved Alternative Investment Fund), which allows us to deploy a relevant and effective investment strategy within a regulatory framework adapted to the instruments used.
Through this structure and its first sub fund, SIMA Impact Investment Fund, we will be able to direct investments towards the basis of the economic pyramid, that is to say the most unemployed populations in the planet who not only are excluded from the traditional financial system but also generally do not benefit from basic access to energy and education, for example.
Our ultimate goal is to make a difference by addressing not only this challenge of financial inclusion, but also by addressing relatively complex issues that are little addressed by the traditional microfinance industry. In doing so, we want to structure solutions that are in line with investors' financial needs as well as with the social challenges of targeted communities and thus contribute to improving the living conditions of these populations in a much broader sense (education, gender equality, access to energy, etc.).
Sima is a company specialized in the identification and analysis of impact investment opportunities. Its founders and employees have extensive expertise in this area. In addition, we know SIMA a long time through its founders, with whom we had already collaborated on other projects. Compared to other consulting firms, SIMA has relatively broader sector coverage, as it is open to activities other than traditional microfinance, such as access to energy through solar-based solutions or education.
With a fund such as SIMA Impact Investment Fund, we have the opportunity to target a variety of SDGs on a variety of mainly social themes without excluding the challenges related to the energy transition and their impacts on the environment.
Indeed, if microfinance will be at the heart of our allocation (between 30% and 50%), we will diversify our investments into viable economic sectors in which we will be able to generate a significant impact; in particular, access to solar energy, education, the financing of vehicles (used by the beneficiaries for their work), or the financing of very small and small businesses.
This diversification will allow us to directly or indirectly target the following key SDGs:
Furthermore, by creating this fund and working with stakeholders other than those from the private sector alone, we also intend to answer SDG 17.
It should be noted that through the same investment, several SDGs can be hedged. For example, through the funding of a dedicated microfinance institution for women, we focus on both SDG 1 and SDG 4 (quality education), 5 (gender equality) and 8 (decent work).
All investments will be monitored by us with the help of SIMA. In order to aim at the impact generated, different variables have been identified for each targeted SDO.
A formal investor report will be produced on an annual basis containing different information on the fund's financial profile and a specific impact report measuring progress across the relevant SDGs.
We are also considering setting up less formal communication channels through a specific newsletter that would allow us to address issues related to the social and environmental challenges on which we intervene or highlight certain projects that we are financing. This will always be done from the perspective of informing our investors and raising awareness of the challenges of the socially equitable development of our societies.