Performance Report
2023

Phuong Pham, SWEEF Capital’s Director for Vietnam, mentors a middle manager at USM Healthcare to set and achieve targets. ADI’s investment in SWEEF, enabled SWEEF to provide USM healthcare with equity investment and technical assistance.

The Australian Development Investments (ADI) 2023 Performance Report showcases the socio-economic impact achieved through its targeted investment strategy, stakeholder engagement, and partnerships. ADI’s multifaceted approach focuses on accelerating climate action, promoting gender equity, fostering inclusivity, and adopting practices to drive market-building through blended finance.

A landmark achievement for ADI was the Australian Government’s decision to expand the Emerging Market Impact Investment Fund (EMIIF) pilot from AUD 40 million to AUD 250 million in May 2023. This expansion aims to address gender inequality and scale climate investments across South and Southeast Asia and the Pacific. The increase in ADI’s size as a blended finance instrument significantly enhanced its profile within the Australian Government.

ADI has effectively demonstrated its ability to deploy capital, with the original pilot program committed to four fund investments by the end of 2023, and fully committed by the first quarter of 2024. These funds have successfully raised additional capital for public and private investors, with ADI’s own mobilisation ratio standing at over 1:6 as of the end of 2023 (one dollar of ADI capital leverages six dollars in private sector investment). This ratio is much higher than the average of 1:2  reported for the South Asia, East Asia and the Pacific region by Convergence [5].  ADI also completed its first investment in climate finance in 2023. ADI committed AUD 4.4 million to the Southeast Asia Clean Energy Facility II (SEACEF II) using a blended finance instrument, mobilising an additional AUD 47.4 million for climate finance.

ADI’s fund investees have facilitated value-add projects with local businesses, focusing on adopting gender and climate lenses in operations and safeguarding. This approach leverages ADI’s technical assistance program to maximise impact. Notably, ADI indirectly invested in 26 companies, supporting 9,834 full-time jobs, with women comprising 50% of the workforce.

Despite stable economic growth in the region, 2023 posed several challenges for ADI’s portfolio companies. The global economy was strained by escalating geopolitical tensions, persistent inflation, and rising interest rates. These factors particularly affected the tech sector, as investors grew wary of high-risk tech startup investments. The tightening of follow-on capital forced some startup tech firms to shut down, while others had to forego expansion and cut costs, leading to job losses.

In terms of gender quality, the portfolio shows strong results in financial inclusion with 99% of MSME borrowers being women and balanced representation of women employees. However, women remain underrepresented in higher leadership positions, such as board roles. The number of women-founded companies in ADI’s portfolio stood at 23%, surpassing the global venture capital industry benchmark of 10%, but still below ADI’s minimum target of 25-33% for its investees. Additionally, considerable differences across countries highlight that progress toward gender equality is still in its early stages in certain markets. ADI’s highly tailored technical assistance program has focused primarily on gender lens coaching and improvement in policies and processes for fund managers and portfolio companies this year. While much remains to be done, it is a positive sign that 81% of portfolio companies are aligned with the adapted 2X Challenge Criteria [6].

Looking ahead, ADI’s strategic expansion aligns with a pivotal moment in the global fight against climate change. Significant barriers still exist for clean energy investments in the region, including limited early-stage funding and a lack of technical expertise. ADI is well-positioned to act as a key anchor investor in climate funds, leveraging its strategic expansion to drive impactful climate investments in the region.

Full report available here

 

[5] Convergence defines private sector mobilisation as the amount of commercial capital, specifically from private sector investors, which has been leveraged by concessional capital. Blended finance leverage ratio – Blog – Convergence News | Convergence

[6] The 2X Criteria is a global standard for assessing and structuring investments to promote gender equality. It emphasises providing women with leadership opportunities, quality employment, finance, enterprise support, and products and services that enhance their economic participation and access. The set of criteria was updated in Q1-2024 to reflect specific country and industry contexts.

 

Summary of Findings

ADI Theory of change 2023 outcome
Development Impact Decent work opportunities In 2023, ADI indirectly invested in 26 companies via four fund investments, supporting 9,834 full-time jobs, with women comprising 50% of the workforce.

Jobs figures declined by 1,171 as compared to 2022 primarily due to layoffs in the tech sectors in Bangladesh and Vietnam.

Inclusive products and services ADI’s portfolio served 27 million beneficiaries, a significant increase from 1.6 million in 2022. The growth was driven by the addition of patients served by USM Healthcare, a new portfolio company of SWEEF I.
Gender equity 81% of portfolio companies aligned with the adapted 2X Challenge Criteria, meeting the impact investing industry’s gender equity standards.

In total, 23% of ADI’s portfolio companies are women-founded, surpassing the global venture capital industry benchmark of 10%, but still below ADI’s minimum target of 25-33%.

Climate action ADI initiated greenhouse gas (GHG) emissions measurement for its portfolio companies in 2023 using the Joint Impact Model to better understand its carbon footprint and develop net-zero strategies.

Fund managers like Lendable and Sweef Capital took proactive steps in reporting emissions and integrating climate risk management into their investments.

Market building Broadening the impact investment market ADI continues to play a pivotal role in shaping the investment landscape by taking early and catalytic positions in transactions.
Crowding in private capital In 2023, ADI committed AUD 4.4 million to the SEACEF II climate mitigation fund using a blended finance instrument, mobilising AUD 47.4 million for climate finance. In total, ADI has mobilized 150 million in private investments from 2020-23 with a mobilisation rate of over 1:6.
Promoting industry best practice ADI continued to promote gender lens investment and climate action at ESG events and conferences, and hosted a gender lens investing (GLI) networking event for regional investors in 2023.