Blended finance, a dynamic force in impact investing, has boosted the impact investment space by effectively mobilizing private capital towards transformative investments through de-risking or enabling investment fund set-up through impact-first or public investors funding. Offering comprehensive advisory services in conjunction with a fund’s investment activities takes the potential impact further. By using the services of either in-house or external experts, portfolio companies receive unwavering support throughout the investment lifecycle, fostering growth, market readiness and enhanced market resilience. This benefits not only the companies themselves, but also employees, local value chain actors and investors alike. To date, responsAbility has partnered with more than 18 public and private funders and provided more than USD 37 million in grant funding to support portfolio companies. These partnerships are sustained through a dedicated not-for-profit unit that manages the grants and ensures donor requirements are met. This includes designing bespoke projects and tendering assignments to achieve optimal cost-effectiveness.
responsAbility is grateful for the trust and good collaboration with the Swiss Secretariat for Economic Affairs (SECO), Good Energies Foundation and Norfund who joined forces to fund advisory services for portfolio companies that offer energy access to underserved populations or provide power generation and distribution in off-grid or poor-grid areas. Reflecting on key factors behind this successful win-win partnership, the following insights were identified:
Insight 1: Supporting private market investments yields tangible impact.
Partnering with a fund manager allows donors to support investment strategies that align with their own mission and be closer to the investment. The use of grants for advisory services is governed under pre-agreed terms and the use of every dollar requires approval by a committee of donor representatives.
Massimo Bloch from SECO says: “Working with responsAbility on advisory services has been a significant experience on two fronts: first, the collaboration offers an opportunity for us to support private companies in emerging economies to achieve pre-agreed impacts. Second, the provision of advisory services goes hand in hand with investments to ensure targeted de-risking and delivering very tangible development impacts.”
Insight 2: Targeted advisory services can unlock further investment potential.
The targeted advisory support enables investment in companies operating in nascent markets or with untested business models to expand and grow.
Norfund’s representative Johanna Strikwerda says: “Advisory support of just USD 35-50’000 allows the Fund to consider more complex opportunities that would otherwise be difficult to consider. One example that comes to mind is an offshore solar project in the Maldives for which an expert opinion was required to understand the technology-related risks of a floating solar park in that location. This project stood out to me because in the long run, it will allow the island to be less dependent on diesel imports for energy production.”
Insight 3: Local market expertise is crucial in identifying impact opportunities.
responsAbility's advisory support team works closely with in-house experts and the investment team to ensure that grant support for projects is only provided when needed. The teams have proven experience and an in-depth understanding of local markets that allows them to identify and develop new ideas in close collaboration with portfolio companies.
Stephanie Jones, Global Programme Manager at Good Energies Foundation explains why this is so relevant for a grant making institution: “For us, it is essential for grant funding to enable development impacts. We appreciate that the responsAbility team is closer to the projects and therefore have a better understanding of each company, where they’re working, and importantly, when private actors should provide co-financing. I particularly value the transparent discussions that responsAbility and donors have on such matters.”
Insight 4: Bespoke advisory services and swift implementation are key.
With a strong focus on delivering client-centric solutions, responsAbility dedicates the necessary resources to address capacity gaps promptly. Through tailored service offerings, responsAbility secures buy-in from portfolio companies’ management and ensures expert advice is effectively considered and put into practice. Thanks to strong partnerships and ongoing collaboration with portfolio companies, responsAbility is able to closely monitor implementation and ensure that companies get value for money. Looking back on eight years of collaboration between SECO and responsAbility on the provision of advisory services, Massimo Bloch stresses the importance of quality, well-managed projects: “Throughout our collaboration with responsAbility we have valued the strong team of professionals. With deep sector knowledge and regional presence, the team is able to successfully manage tailored interventions that are very specific and timely to enable investments and test new market opportunities.”
Insight 5: Sharing knowledge and driving impact must remain at the forefront.
responsAbility places strong emphasis on building and maintaining know-how when providing advisory services to portfolio companies. This not only directly benefits these companies, but also transcends the value chain. Johanna Strikwerda from Norfund explains how such information sharing can also benefit Norfund: “When new knowledge is generated, we also share it within our networks. This public good can be useful in informing our projects in the various regions, especially where data is limited.” In addition, Stephanie Jones appreciates that responsAbility shares good practices with the wider industry whenever possible: “As a committee member deciding on the use of grant funding, my role is also to ensure that we generate and share knowledge across the impact space. It allows me to have a front row seat in driving impact. I welcome responsAbility’s efforts and readiness to share learnings from advisory services with other market players. These services can play an important role in enabling investments, reducing risks, and reaching impact. I encourage other private investors and philanthropic organizations to consider funding advisory services, and share learnings, as it can be transformational for many companies.”
Doing more to scale climate investments and support innovative companies with advisory services
responsAbility is currently setting up a new climate strategy in Asia focused on supporting companies to achieve significant climate and social impacts at scale, also with the support of an advisory arm of a target size of USD 2.5m. If you are interested in knowing more about advisory services and would like to support impactful companies active in renewable energy, please contact our Head of Business Development, Henk Nijland at firstname.lastname@example.org.