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Creating Shared Value for Asset Managers: Pursuing Impact with Catalytic Investments

As businesses navigate the pressing threats of climate impacts and face demands from stakeholders to better serve their communities, the concept of shared value is becoming ever more central to success in the market. Financial institutions, particularly, are grappling with what shared value can look like in their supply chains. In contrast to direct product or service providers, financial capital flows tend to be less tangible, which may challenge the creation of shared value. Yet, shared value presents a unique opportunity for asset managers to leverage their influence over both funders and portfolio companies. As the actors standing between the funding source and the end beneficiaries, asset managers have tremendous power to create impact.

Capital + SAFI is one company leading the way for asset managers to step into shared value through their focus on individual (portfolio) companies and investors as well as the ecosystem that is addressing sustainable and inclusive agriculture in Bolivia and across Latin America.

Founded in 2007, the Bolivian asset manager’s headquarters is nestled between the colorful Andes mountains in La Paz, Bolivia. Jorge Quintanilla Nielsen, Chairman and CEO, founded the firm with a vision to provide high quality investment products throughout the Latin America region while improving the financial well-being of clients. As a player in a market without a long-standing financial industry, the company has grown to be a leader in Bolivia’s private debt market, namely in the microfinance, agriculture, and manufacturing sectors. Having realized the importance of promoting sustainability within the business, Capital + SAFI embarked on a journey to deliver shared value to stakeholders through business activities.

In early 2022, FSG partnered with Capital + SAFI to deliver a series of shared value trainings for portfolio companies in the agriculture sector. Shortly after, Capital + SAFI engaged FSG once more to navigate the firm through a process to develop an enterprise-wide business strategy anchored in the concept of shared value and corporate purpose. With passionate, dedicated leaders and high ambitions to create impact, the asset manager had grappled with the question of how to deliver on their purpose given their distance from the communities being reached with their investment dollars. They now had one main goal: improving the lives of people and protecting the planet.

Capital + SAFI was keen to learn the ins and outs of creating shared value, from offering products that truly addressed community needs, to measuring the impact of their activities on society and the environment and other operational shifts, to supporting a transformation of their entire strategy towards shared value. This process would result in a strategic roadmap identifying implementation considerations to activate a strategy focused on improving sustainable and inclusive agriculture in Bolivia and Latin America.

The Process

Shared value creation focuses on identifying opportunities that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Companies can do this by reconceiving products and markets, redefining productivity in the value chain, and by enabling local cluster development

While not all three components are a requirement to a successful strategy, companies often find that creating value in any given area reinforces and improves opportunities in the others–a symptom of the “virtuous cycle” of shared value.

Guided by this framework, FSG and Capital + SAFI embarked on a journey to explore opportunities to create impact at each of the three levels of shared value. Throughout the engagement with FSG, Capital + SAFI collaboratively engaged staff from all levels in interviews, working sessions, and capacity-building presentations to explore pressing social and environmental needs. Key public and private stakeholders were consulted, including multilateral development banks, foreign government representatives, and additional financial service providers. From this data collection and market landscape research, the teams identified three challenges to tackle: lack of farmer profitability for resilient agricultural livelihoods, commodity-driven deforestation and lack of soil health, and disparities for women in agricultural systems.

FSG then generated key insights and a strategic roadmap for the strategy and supported the development of a new regional fund focused solely on shared value. The final strategy encompasses a value chain, comprised of catalytic investments, that spans the three areas of shared value. The strategy comprises two main pillars:

  • Catalytic investments to support greater adoption of sustainable and inclusive agribusiness practices and innovations
  • Market-building collaboration to unlock opportunities for sustainable and inclusive growth in agricultural systems

Here’s how Capital + SAFI is creating impact across all three areas of shared value:

Reconceiving Products and Markets

Asset managers hold significant power as they can dictate the direction (and often, the outcome) of large amounts of money being invested. If used correctly and intentionally, this power can be key to making progress against some of the most pressing societal and environmental issues. To reconceive products and markets, asset managers should work to identify a societal or environmental problem that interferes with their issuers’ business goals.

After conducting interviews with local partners, Capital + SAFI surfaced some of the most pressing needs in the community that it could play a role in addressing. For example, smallholder farmers often lack the skills and resources to produce efficiently and sustainably, which impacts their income and livelihood. Women are especially deprived of capital, resulting in a large need to finance women-owned businesses. In addition, AgTech surfaced as a potential solution to improving both outputs and livelihoods. By understanding these needs, not only common to Bolivia, but also to Latin America more broadly, Capital + SAFI saw a solution in sustainable and inclusive agriculture and decided to leverage its expertise and resources to develop a shared value strategy focused on it.

Redefining Productivity in the Value Chain

Asset managers should think about transforming the value chain through unlocking capital that aligns with their long-term goals and desired impact. For example, they can address the inefficient or inequitable parts of the value chain where capital is currently caught up. This may look like thinking about whether they are sourcing capital from catalytic sources (e.g., mission-aligned investors) and how they are deploying investments in a way that increases access to investor conversations and capital for portfolio companies from underserved backgrounds.

Capital + SAFI is working to have its strategy embedded across its value chain system, from ensuring that each segment of the value chain has elements of shared value to working with portfolio companies to directly link their value chains to Capital + SAFI’s value chain and strategy. Because Capital + SAFI does not directly serve smallholder farmers, the company considered how to create impact through value chain integration. By choosing to prioritize building meaningful relationships with both investors and portfolio companies that align with Capital + SAFI’s impact goals and delivering beyond the dollar to better meet the issuers’ needs (ex., recognizing a need for technical assistance on farming practices and  fostering learning and innovation along the supply chain), Capital + SAFI is now leveraging different aspects of the value chain to unlock opportunities for shared value creation. Capital + SAFI is also rethinking investment decisions to focus on deploying capital to companies who typically struggle to access it, such as founders from marginalized identities.

Enabling Cluster Development

The last critical way to create shared value is through cluster development of the surrounding business environment. By sourcing and deploying capital, asset managers can utilize their influence to convene stakeholders upstream and downstream to work together and more strategically reach their goals while creating social and/or environmental impact. By playing this role, asset managers and their peer firms can collaborate and align to ensure that their investment dollars are contributing to improving societal conditions.

As part of their strategy development, Capital + SAFI is driving innovation, productivity, and competitiveness by building relationships with local actors and engaging in public-private partnerships that enable cluster development. The asset manager is now working to create space for dialogue and collaboration among stakeholders across the agricultural value chain, which includes farmers, cooperatives, suppliers, buyers, and government agencies. A key feature of Capital + SAFI’s approach is their understanding that they, alone, cannot drive all the investment needed to create change. They recognize a responsibility to collaborate with and encourage other investors in the country and region to lead in shared value approaches and shift agriculture investment to focus on sustainable and inclusive investment. In addition, Capital + SAFI plans to work with local and international NGOs, as well as multilaterals, to better understand community needs and advocate for policies that support smallholder farmers and promote sustainable and inclusive agricultural practices.

The Impact

Capital + SAFI’s fundamental values for long-term success of sustainability, diversity, and inclusion made FSG an ideal partner to embark on this journey with. Exploring opportunities at the three levels of shared value has set Capital + SAFI up to work towards its impact goals through activities that reinforce one another. Designing products that enable the adoption of sustainable and inclusive practices, supporting innovative approaches to improve agricultural productivity throughout the value chain, and partnering to build demand and advocate for the reduction of barriers to sustainable and inclusive agribusiness are only some examples of initiatives that, when undertaken simultaneously, can unlock significant impact.

Also critical to success throughout the process was the collaborative nature with which Capital + SAFI approached the strategy development process. A willingness to learn along the way and to co-create is crucial to shifting mindsets and fostering more inclusive relationships within the company and among stakeholders. For Capital + SAFI, a continuous learning culture is the linchpin for the successful implementation of their strategy.

As Capital + SAFI undertakes these efforts, it encourages investors to break away from costly, short-term activities and learn to embrace long-term shared value creation. The company urges asset managers to add a social dimension to their strategies to unlock sustainable value and fuel new competitive advantages.

“Working with FSG was consistent with our commitment to our fundamental values for long term success: sustainability, diversity, and inclusion. We are deeply grateful to FSG’s unmatched strategic firepower, as shared value has now become our constant inspiration and guide for a unique value proposition.”

– Jorge Quintanilla Nielsen, Chairman and CEO of Capital + SAFI

About Capital + SAFI

Capital + SAFI is a vibrant fund manager with a regional presence, providing high value and impact products to improve the lives of people and planet. A Bolivia-based investment manager with more than 12 years of experience, Capital + SAFI is focused on building and developing a balanced portfolio with a long-term vision. As one of the most important Investment Fund Managers in Bolivia, Capital + SAFI manages four closed-end investment funds and incorporates in their management a vision of generating shared value. Capital + SAFI also leads the Bolivian closed-end fund industry as the largest private debt investor. Capital + SAFI aims to be a financier of the communities where it operates, a responsible investor, and an accelerator in the necessary transition towards a sustainable economy. For more information, visit www.capitalsafi.com.

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5. Disbursement for the purchase of the value

With the approval of the Investment Committee, receipt of the issuance documentation and the risk rating, the disbursement proceeds!

4. Investment Committee Approval

The Due Diligence process is reflected in an evaluation report that is sent to the Investment Committee for consideration of the operation.

3. Due Diligence

3.1.Issuance of securities:

It is important to have all the necessary documentation to carry out the issuance of securities. For this activity they have the support of the Capital Legal Area +SAFI.

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The potential issuer must request the Risk Rating report from a rating agency authorized by the ASFI.

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1. Initial Visit

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Es importante contar con toda la documentación necesaria para realizar la emisión de títulos valores. Para esta actividad tienen el apoyo del Área Legal de Capital +SAFI. 

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