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INVESTING IN OUR VALUES

Grassroots Capital Management PBC marks 10-year anniversary

It’s been ten years since we launched Grassroots Capital Management PBC to build on the work of the pioneering Gray Ghost Microfinance Fund of funds in engaging private investors with the global microfinance market in order to scale access to finance and other basic services for the poor and disenfranchised throughout the world and improve their lives. Over the course of those ten years, we built on our experiences as one of the earliest impact investors and together with our partners we have helped conceive, launch and manage 14 emerging markets equity and debt impact investment vehicles. We have taken the lead in industry efforts to help investors be clearer about balancing their social and financial objectives and incorporated these approaches into our own investment programs to help investors formulate and achieve their investment goals.

The introduction to microfinance for what would become the Grassroots team was courtesy of some of the early path breakers in microfinance: Nitlapan / FDL (Nicaragua) in 1998, the BASIX group (India) in 1999, and BRAC (Bangladesh) in 2000. Interestingly, none of these started as microfinance institutions (MFIs) but opportunistically came to use finance as part of broader strategies to alleviate poverty and empower poor communities. They all forged paths from subsidy and donor support to commercial viability, while retaining to this day a clear-eyed vision of the supporting role of profit in their social strategies. These early exposures informed the Grassroots’ DNA from the start and continue to guide its efforts today, as we continue to work with many of the core collaborators we engaged in those early years.

Over these years we have seen microfinance succeed in half of its revolutionary core equation: MFIs have demonstrated that a sustainable double bottom line (DBL) business model can reach scale and access mainstream capital markets. But the other side of the equation is still a work in progress at best: the dominant narrative taking hold in the impact investing community is that DBL is a means to enhance narrowly defined profitability, rather than changing the concept of profit and value to encompass a more comprehensive set of stakeholders – employees, community, environment as well as shareholders – and forms of value – equal opportunity, resilient communities, environmental sustainability as well as financial return. Some in the impact community have fixated on the question of whether impact investments can match or beat conventional benchmarks, and well intentioned investors are losing their way, seduced by the siren song that the world’s challenges will be solved by the top quintile of investments. Grassroots disagrees and continues to make the case that the essential second half of the equation is a more comprehensive appreciation of “value” (see Grassroots’ blogs on including social impact in performance discussions here and here).

While this remains constant, the past twelve months have forced a reconsideration of the appropriate geographical focus of Grassroots’ efforts. For many Americans, this has been a humbling year, as we have been forced to recognize how much work we need to do to address our own inequities, racism, climate impact and anti-democratic trends. For Grassroots, finding ways to constructively participate in addressing these challenges, as we remain engaged with the rest of the world, is a priority going forward.

As a small, flexible company – unconstrained by shareholders! – but enjoying the force multiplier of a rich network of collaborators, Grassroots has found a niche in identifying gaps in the impact space and trying to tailor solutions. This focus has had its share of successes – Gray Ghost, Caspian and Bellwether, ASA International, LocFund, Antares I – and failures. The goal of breaking new ground continues to animate Grassroots’ current initiatives, like follow on funds for Antares and Prospero. We look forward to working with you on these efforts, and crafting new initiatives, in the years ahead.

Please note the information in this message is for informational purposes only and does not constitute a complete description of our investment services or performance. No part of this message nor the links contained therein is a solicitation or offer to sell securities or investment advisory services. Information throughout this message, whether stock quotes, charts, articles, or any other statement or statements regarding market or other financial information, is obtained from sources which we, and our suppliers, believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information.

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