The fourth annual report by Singapore-based impact private equity fund ABC Impact boasts a slew of impressive numbers.
The division of Temasek Trust Asset Management has invested in 13 companies across Asia and Europe since its inaugural US$300 million ($404.82 million) fund in 2019, and has so far notched one successful exit in Sunseap, the Singapore-based solar company now known as EDP Renewables APAC.
ABC Impact’s 2023 Impact Review, released on March 28, says the investor supplied 26.9 million people with “essential services”, 2.9 million patients with healthcare services and 11.96 million students access to digital education content.
The list continues. ABC Impact says 47,100 stakeholders have benefited from autism therapy services as at end-2023, while 4.08 million individuals and micro-enterprises have gained access to financial services and 7.92 million farmers worldwide have received “customised farming advice and information”.
These were achieved through ABC Impact’s portfolio companies, which span four investment themes: financial and digital inclusion, better health and education, climate and water solutions, and sustainable food and agriculture.
Through these investments, ABC Impact says it has helped avoid 1.71 million metric tonnes of carbon dioxide emissions, up from 1.68 million metric tonnes this time last year. The firm also saved 57.6 billion litres of water through “avoidance of livestock agriculture”, up from 42.6 billion litres in the previous edition of the report.
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The latter figure is thanks to ABC Impact’s portfolio company v2food, an alternative protein company based in Australia. Founded in partnership with CSIRO, Australia’s national science agency, the company has harnessed the ability to produce sustainable, plant-based meat alternatives at “accessible price points for the masses”, says ABC Impact.
The company uses protein extracted from legumes to create plant-based meat. ABC Impact says the company’s products emit 91.9% less carbon and use 99% less water than conventional livestock rearing.
Notably, ABC Impact has opted to summarise its annual report this year, releasing a three-page highlight of its activities in 2023. This is much shorter than the 21-page report released for 2022, which examined its nine portfolio companies in detail.
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ABC Impact launched its second impact fund in August 2023. In January, the firm announced that it secured over US$550 million at the first close of Fund II, backed by new investors, including an undisclosed Southeast Asian sovereign wealth fund; and existing partners Temasek Trust, Temasek, SeaTown Holdings and Mapletree Investments, among others.
The final close is expected later this year.
Management and measurement
How does ABC Impact ensure it invests in impactful companies? How does it measure impact and how does it arrive at these staggering numbers each year?
ABC Impact chief impact officer Sugandhi Matta points to the firm’s four-step “Impact Measurement and Management” process, which starts from identifying potential investments.
This “impact screen” is applied “early in the process”, according to ABC Impact’s disclosure statement from August 2023. “Initial screens can be more or less intensive, from a simple focus sector alignment to the development of an impact thesis and assessment of the target according to impact criteria.”
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Next, ABC Impact sets out an impact thesis for the company and how it contributes to the United Nations Sustainable Development Goals (SDGs). “An impact thesis is initially built upon a series of assumptions that need to be verified during due diligence using company data and evidence-based research.”
ABC Impact seeks to identify companies whose products or services drive “positive and measurable impact” in line with the SDGs.
Created in 2015 by the UN General Assembly, the 17 SDGs are designed to serve as a “shared blueprint” for peace and prosperity, for people and the planet. They include No Poverty (SDG 1), Good Health and Wellbeing (SDG 3) and Climate Action (SDG 13), among others.
ABC Impact then creates a scoring system, which helps inform an investment committee recommendation. “A scoring system can define [a] minimum threshold for impact and therefore ensures that all deals meet a required baseline for impact.”
Finally, ABC Impact creates a set of metrics and indicators that are tied to the impact thesis, which can be tracked over the duration of investment.
Post-investment, ABC Impact tracks and measures the performance of its portfolio companies on a quarterly basis and from both financial and impact perspectives.
ABC Impact monitors its companies’ progress on identified key performance indicators and compares it to an underwritten impact plan. The performance is reviewed by ABC Impact’s senior management and is reported to limited partners of the fund every quarter.
ABC Impact has engaged New York-based BlueMark to independently verify the firm’s impact management practices with the Operating Principles for Impact Management (OPIM), an industry standard for integrating impact throughout the investment life cycle.
‘Own set of challenges’
Measuring social impact, especially in areas like education or healthcare, presents its own set of challenges, says Matta.
This is due to the “inherently qualitative and diverse nature” of these outcomes, she adds. “This is especially true in a region like Asia, where we focus, with its diverse socio-cultural, economic and political landscape.”
While the approach to measuring social impact shares some similarities with measuring emissions, Matta says there are “distinct differences” that call for a more nuanced methodology. To better present social outcomes, for example, ABC Impact relies on “strong storytelling and clear visual aids”, anchored by contextual reporting, says Matta.
Equally important is tracking improvements in outcomes, she adds. In healthcare, for example, an “outcome-centric approach” includes tracking access to care or preventing disease.
Portfolio company Kim Dental, for example, is increasing access to oral healthcare services and prevention efforts in Vietnam.
Established in 2016, Kim Dental runs preventive screenings and advanced treatments via its network of clinics across the country. According to ABC Impact’s 2022 Impact Review, Kim Dental operates a customised dental bus — complete with equipment — and offers mobile services to rural, underserved communities and schools.
Kim Dental also visits factory floors, providing free dental services to factory workers in Vietnam’s industrial sector.
Qualitative data paints a more complete picture of the true impact of ABC Impact’s investments, says Matta. “Unlike tracking emissions, surveys, interviews and case studies often provide more valuable insights into the experiences of individuals affected by social impact investment initiatives. These also promote accountability, alongside metrics.”
For social impact, changes should also be monitored over an extended period, says Matta. This provides a “more comprehensive understanding of the sustained impact”, she adds. “While some principles from emissions measurement can be applied, it is essential to recognise the unique characteristics of social impact.”
Together, qualitative data and contextual understanding play a crucial role in capturing the “holistic nature” of social change, says Matta, who was formerly at Temasek and LeapFrog Investments.
“We need a multi-faceted approach that combines quantitative metrics with qualitative narratives. [This] ensures a more comprehensive and accurate representation of the impact of initiatives in areas like education and healthcare.”
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