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Impact investing: How Centum Capital has used responsible investing to generate sustainable business models
Interview with Fred Murimi, Managing Partner- Centum Capital Partners Ltd
1. Please provide a brief overview of Centum Capital Partners and how you could partner with pension funds
Centum Capital Partners, a private equity fund manager, has been operating as a division Centum group, the largest investment firm in East Africa-cross listed on Kenya and Uganda stock exchanges.
Centum Capital Partners has since been spun out of Centum Group and given the mandate to continue to manage Centum group’s private equity assets that now sit under its Fund I. The investment team is made up of 15 talented individuals who have made and managed investments in over 16 companies achieving 7 exits and a portfolio gross dollar IRR of 26% as at 2018 for a period of 10 years.
I see great opportunity for African pension funds to participate in private equity as a way to diversify their returns. As CCAP raises its Fund II, we anticipate pension funds are to be among investors in the Fund. This is in line with increased interest by African pension funds to participate in private equity.
Fred Murimi, Managing Partner- Centum Capital Partners Ltd
2. What has been your experience with SDGs as Centum Capital?
We have made investments that have direct impact on SDGs over the years. For instance, our investment in geothermal energy addresses the need to progressively adopt clean energy as part of climate action. We have also made investments in the education sector with the aim of availing quality education to the society. Furthermore, our investments in agriculture and financial services have focused on poverty reduction through our out-grower schemes and financing programs respectively.
Indirectly, we ensure our investee companies offer decent working conditions for their employees and encourage them to give 0.5% of their profits after tax towards CSR activities.
Our team recently participated in an SDG competition-organized by Beyond Profit- emerging second best in terms of our awareness and adoption of Environmental Social and governance pillars.
3. In your experience, is responsible investing a lag on company profitability?
Our view has been that responsible investing boosts profitability of our portfolio companies, reduces the cost of capital and helps in conservation of value by limiting exposure to litigation and negative publicity.
Take an example of Sidian bank, one of our portfolio assets, where we managed to provide financing solutions to drivers through partnership with Uber. The result was boosted job creation on one end, favorable lending conditions on another and bank profitability.
Another good example would be our Almasi Bottlers’ which runs a women empowerment campaign that helps women set up distributorships by educating women, providing access to finance and helping set up a business. The impact has been significant to creating jobs while growing revenue for the bottler and women involved.
Our bottling subsidiaries have also been on the fore-front of recycling PET bottles leading in setting up a PET recycling association that will eventually see all PET bottles released to the market recycled.
These are but a few examples and I must say it has been inspiring to see how impact investing touches so many lives in Kenya, from that of a kiosk owner to that of the investor.
4. In your Fund II, how will you integrate responsible investing in your investment processes?
Just as we continue to grow our investment acumen as a team, we plan to grow impact investing even further within our Fund II using the same 3 ESG pillars we have perfected over the years.
In Fund II our approach towards ESG is holistic. We conduct an ESG screen at the deal screening stage to identify ESG opportunities and risks. We then factor in the opportunities into our value creation program and actively monitor the risks throughout the investment cycle so as to conserve value for our investors. We have implemented a toolkit that measures and tracks several ESG principles within each asset in our portfolio.
"Just as we continue to grow our investment acumen as a team, we plan to grow impact investing even further within our Fund II using the same 3 ESG pillars we have perfected over the years.
In Fund II our approach towards ESG is holistic. We conduct an ESG screen at the deal screening stage to identify ESG opportunities and risks.
We then factor in the opportunities into our value creation program and actively monitor the risks throughout the investment cycle so as to conserve value for our investors.
We have implemented a toolkit that measures and tracks several ESG principles within each asset in our portfolio.
It may be worth noting that one of our core criteria in making an investment in a company is the demonstration of stable management with strong governance structures. In the past we have reaped great dividends from such companies.
Our focus for Fund II with regards to impact investing will continue on a trajectory of marrying social and environmental welfare programs towards increasing overall profitability for both the society and our investee companies.
Fred Murimi: Has served as Corporate affairs Director and Centum’s company secretary from 2013 and has been the Managing Director, Centum Capital since August 2015
He is a board director of Nairobi Bottlers, Isuzu East Africa, Nas Servair and Longhorn Publishers
Fred has 14 years of experience in investment management, corporate finance and transaction advisory: he was the Senior Compliance Officer at the Capital Market Authority, Corporate Financial Analyst at Dyer and Blair and Vice President, Head of Legal and Compliance at Renaissance Capital
He is a Tutu African Leadership Fellow, a Certified Public Accountant, a Certified Public Secretary and an Advocate of the High Court in Kenya.