The Emerging Markets activities consist of the management of internationally operating funds that invest in emerging markets in Latin America, Africa, Asia and Eastern Europe. The goal of these microfinance and fair trade finance funds is to contribute towards the development of a sustainable financial sector in developing countries and to encourage trade in certified fair trade and organic products; because both microfinance and fair trade finance are effective tools for fighting poverty in developing countries.
The microfinance sector continued to grow in 2010. It served more clients, and microfinance institutions offered more services, such as savings and insurance, to meet the financial needs of low-income people. But the sector was also criticised during the year, prompted by a crisis in the Indian microfinance sector, in the state of Andhra Pradesh in particular. Problems were caused by over-indebtedness, an excessive drive for growth and profit, and inadequate legislation.
Portfolio Triodos Microfinance Funds
31 December 2010
During a turbulent time Triodos Investment Management continues to be a value-driven investor, offering financial services responsibly and transparently to people on low incomes so they can improve their living conditions. And its work was recognised in October 2010. CGAP (Consultative Group to Assist the Poor) announced that Triodos Investment Management was one of three best-in-class microfinance asset managers for their commitment to integrate environmental, social, and governance (ESG) issues in their investment decisions and business processes.
Early in 2010 a group of investors, including Triodos Investment Management and Her Royal Highness Princess Máxima of the Netherlands, UN Secretary-General's Special Advocate for Inclusive Finance for Development, began an initiative to draft Principles for Investors in Inclusive Finance. These investors believe that specific principles for investors in inclusive finance, such as microfinance, will strengthen the movement towards responsible finance. The principles have been developed with a broad group of investors together with UNPRI (United Nations Principles for Responsible Investment Initiative) and in consultation with CGAP and other industry players. The principles will be launched early in 2011.
The second half of 2010 showed a particular increase in demand for both loans and share capital from microfinance institutions. The four Triodos microfinance funds financed 85 microfinance institutions, in 43 countries. They are now shareholders in 19 of the leading microfinance banks and institutions worldwide. These institutions reach over 7.2 million clients, poor or low-income small entrepreneurs in developing countries. Senior staff and managing directors of Triodos Bank have a seat on the Supervisory Boards of these institutions, bringing valuable knowledge and expertise in sustainable banking. Total assets under management in microfinance increased by 17.9% to EUR 277 million, by the end of 2010.
Triodos SICAV II-Triodos Microfinance Fund (Europe)
2010 was the second year of operation for Triodos SICAV II-Triodos Microfinance Fund. The fund is open to institutional investors, high net worth individuals and private banking clients across Europe. New investors during the year came from Austria, Australia, Belgium, Germany, Ireland, the Netherlands, Norway, and the United Kingdom with net assets increasing by 56.8% to EUR 61.7 million by the end of 2010. The fund’s microfinance portfolio reached EUR 50.8 million or 82.4% of the fund’s total assets and was invested in 23 microfinance institutions in 20 different countries in Latin America, Asia, Africa and Eastern Europe.
Triodos Fair Share Fund (The Netherlands)
Strong growth of Triodos Fair Share Fund’s assets in the second half of 2009 and into the first weeks of 2010 exceeded opportunities to invest them. Because of this, the fund ran the risk of dropping below the statutory limit of investing 70% of its assets. So, in January 2010, further investment in Triodos Fair Share Fund was temporarily suspended.
Despite these challenges, the fund reopened opportunities to invest in October and enjoyed strong growth, increasing its assets by 15.6% from EUR 83 million to EUR 95.4 million at the end of the year. Investors continued to enjoy the fund’s tax benefit during 2010. The fund achieved a return of 4.8%, excluding a 2.5% tax advantage for Dutch private investors.
Triodos Doen Foundation (The Netherlands)
Triodos-Doen Foundation began in 1994 as a partnership between Triodos Bank and DOEN Foundation. The fund invests in microfinance institutions with a higher risk profile and is able to provide local currency funding. In 2010 the fund increased its total assets by 11.7% to EUR 76.6 million.
Hivos-Triodos Fund (The Netherlands)
Hivos-Triodos Fund was founded in 1994 as a partnership between Triodos Bank and Hivos Foundation. The non profit structure and the cooperation with Hivos Foundation allow the fund to accept higher than average risks to enable innovative investments. In 2010, a new strategic plan for 2011-2015 was adopted stating that the fund will continue to invest in microfinance institutions with a higher risk profile. In addition, it will invest in green industries, sustainable production processes, and products that target specific groups in underdeveloped markets and regions. In 2010 assets of the fund stabilized at EUR 43.4 million.
Sustainable Trade Finance (Europe)
Triodos Sustainable Trade Fund provides trade finance to both cooperative and private agricultural exporters in developing countries, producing certified organic and/or fair trade products. Trade finance means these companies can pay farmers a fair price on delivery of their product.
In 2010 the fund’s volume of trade finance transactions doubled to EUR 23 million. In total 36 loans were made benefiting 33 cooperative and private exporters, producing 16 different agricultural products in 27 countries. Most of the loans were made to African companies (17), followed by Latin American companies (12). Products financed include coffee, cotton, cocoa, olive oil, cashew nuts, sesame seed and sugar. The fund also played a crucial role financing Artemisia, an herbal plant used as a key ingredient for anti-malarial medicines. Disbursements were made to Artemisia producers in Madagascar, Vietnam and China. Funds for this finance came from Unitaid/World Health Organisation. Triodos Sustainable Trade Fund receives most of its funding from a credit facility provided by Triodos Bank, which is partly secured by guarantees from Dutch and international governmental and non-governmental organisations.
Emerging Markets Prospects for 2011
Triodos SICAV II Triodos Microfinance Fund, Triodos Fair Share Fund, Stichting Triodos-Doen and Stichting Hivos Triodos Fonds expect to grow by at least EUR 40 million to more than EUR 320 million in 2011. Triodos Sustainable Trade Fund expects to grow by approximately EUR 2 million to EUR 19 million.