Black asset managers invest half a billion rand in renewable energy project
Clean energy will be more important than ever post-Covid-19
Two established, female-led black asset managers have co-invested just under half a billion rand in a renewable energy project, with Mergence Investment Managers and Third Way Investment Partners investing R225m each. The project, in a remote area of SA, cannot be named for confidentiality reasons.
Both parties to the transaction have strong track records in impact and infrastructure investing on behalf of institutional investors, mainly retirement funds whose long-term liabilities are a perfect match for long-term infrastructure investment, providing an inflation-linked return and portfolio diversification while investing in the local economy.
The renewable energy and infrastructure funds of both Mergence and Third Way have respectively outperformed their investment targets of CPI+4 since inception, providing stable returns to investors.
The vital role of asset managers in facilitating responsible investing of pensioner retirement savings into viable infrastructure assets is multilayered and cannot be underestimated.Yoza Jekwa, joint MD of Mergence Investment Managers
The private sector is set to play a major part in financing domestic infrastructure, which is now needed in SA more than ever to accelerate growth in the devastating economic aftermath of the lockdown in SA. Asset manager support will bolster the government’s R100bn package to stimulate infrastructure development.
Mark van Wyk, head of infrastructure and development investments at Mergence Investment Managers, says: “SA’s acclaimed renewable energy independent power producers procurement programme (REIPPPP) has been stalled for a number of years and we urgently call on the relevant authorities to open up rounds 4.5 and 5 for bids.”
“Secondary investments in an existing project indicate a positive maturation of the renewable energy market in that transactions between project lenders can be executed. It means that the energy projects can be sustained, jobs retained and energy continued to be dispatched into the grid,” he says.
Fulufhelo Makwetla, founder and MD of Third Way Investment Partners, says: “We raised funds for our infrastructure proposition to offer institutional investors a match for their long-term liabilities, backed by the strong governance of the REIPPPP framework and our passion for developmental investments.
“We are excited at the opportunity to collaborate with Mergence to co-invest into the struggling SA economy. We still have dry powder close to R1bn and will welcome new opportunities to invest in fast-tracked subsequent rounds of the REIPPP.”
Third Way has made a name for itself in developmental and infrastructure investing on behalf of retirement funds, given the company’s experience at the Government Employees Pension Fund, where they implemented its developmental investment strategy with a focus on economic and social infrastructure, greening the economy and job creation through investments in small-and medium-sized enterprises with a focus on transformation.
Yoza Jekwa, joint MD of Mergence Investment Managers, says: “The vital role of asset managers in facilitating responsible investing of pensioner retirement savings into viable infrastructure assets is multilayered and cannot be underestimated. The asset manager has a fiduciary responsibility to safeguard the monies it invests on behalf of pension funds and its beneficiaries through sourcing, vetting and structuring infrastructure deals, as well as stringent continued oversight of project management.”
Responsible investing and ESG pioneers
Mergence Investment Managers was an initial signatory to the Principles for Responsible Investment supported by the UN, as well as an initial signatory to the Code for Responsible Investing in SA, chaired by Third Way co-founder John Oliphant.
Mergence Investment Managers has also been a trailblazer in environmental, social and governance (ESG) impact investing as far back as 2010, long before it became trendy. The company produces an annual impact report quantifying the social and environment impact of its investments. The report also includes investment case studies ranging from renewable energy to low-cost housing, taxi finance and a medicinal cannabis project in Lesotho. (Mergence was the first institutional fund manager in Africa to invest in such a project.)
Mergence has raised R1.7bn for its renewable energy funds, and invested in 14 renewable energy projects across both wind and solar, 11 projects of which have been operational for years. Mergence has raised R3bn across other sectors such as affordable housing, ICT, water and sanitation, as well as renewable energy. About 17,000 jobs have been created, often in rural and remote parts of SA.
Third Way Investment Partners has raised R2.5bn for its Infrastructure Debt Fund, investing in more than 30 projects in the poorest of SA’s provinces including Limpopo, Northern Cape and Eastern Cape, and affecting the lives of communities frequently excluded from such opportunities.
Mergence Investment Managers is an authorised financial services provider (FSP no 16134). Third Way Investment Partners is an authorised financial services provider (FSP no 48341).
This article was paid for by Mergence Investment Managers and Third Way Investment Partners.