British International Investment and Blue Earth Capital complete landmark secondary transaction

• Blue Earth Capital, through its investment vehicles, acquires partial interest in three funds from British International Investment.
• Transaction marks first fund portfolio sale by the DFI.
• Serves as a pilot to test new mobilisation strategy to attract more private capital into emerging markets.

Blue Earth Capital AG (BlueEarth), the specialist global impact investor, and British International Investment (BII), the UK’s development finance institution (DFI) and impact investor, today announce an agreement for the acquisition of part of BII’s stake in three funds across Africa and Asia. This is the first portfolio secondary transaction by the DFI, which is structured as a pilot to support the development of a more robust secondaries private equity market, and help mobilise more capital into emerging markets.

The secondaries market is well-established in more developed economies but still nascent in emerging markets. This is partially due to the smaller size of the investment market and the heightened perception of risk associated with these regions. This transaction will work to help reduce this risk by providing investors with visibility to a fund portfolio and the ability to make informed judgements on likely performance prior to investing.

With this pilot secondary transaction, BlueEarth through its mandates and vehicles, will acquire stakes in three of BII’s strongest funds for commercial and impact performance. These include Aavishkaar Goodwell India Microfinance Development Company II – an Aavishkaar Capital fund that pioneered impact equity funding in India; Novastar Ventures Africa Fund II – a fund that provides venture capital to improve access to essential goods, services and economic opportunity for everyday consumers, producers and suppliers in Africa; and Adenia Capital Fund IV – a fund committed to responsible investing and taking controlling stakes in companies active in various sectors including renewable energy, agriculture, manufacturing and business services in Africa.

Fund investing remains a central pillar of BII’s investment and impact strategy. The DFI will retain a significant stake in each of the three funds and remain actively engaged through its ongoing position on each Limited Partner Advisory Committee (LPAC). This transaction allows BII to maximise its ability to achieve impact by recycling the capital into more impact investments in emerging markets.

The transaction provides geographic exposure and diversification for BlueEarth, spanning several investment strategies and vintages with proven fund managers, ensuring a balanced and risk-adjusted portfolio with both impact and return potential.

Nicolas Muller, Managing Director and Head of Funds & Co-Investments at BlueEarth, commented: “We’re excited to be working with BII on this landmark transaction. We view this transaction as an innovative approach for blended finance: BII took the initial investment risk, and BlueEarth is providing access to its clientele via a diversified portfolio of high-quality impact assets in emerging markets. Alignment with BII comes down to a shared belief in an impact mandate to help solve the most pressing global development challenges by investing to support private sector growth and innovation.”

 John Owers, Director and Head of Fund Solutions at British International Investment, said: “Mobilisation is a key part of our strategy, and this transaction gives us the opportunity to test a new approach to encourage investors already active in emerging economies to commit more capital and in time encourage new investors into these markets. This will help our fund managers build a diverse investor base and reduce their dependency on DFIs.”

Both BlueEarth and BII are committed to best-in-class impact measurement and leadership initiatives, with both companies well positioned on BlueMark’s Operating Principles for Impact Management (OPIM) Practice Leaderboard. BlueEarth also employs proprietary impact measurement methodologies to benchmark and assess its investments for social and climate impact.

BlueEarth was advised on the transaction by Ropes & Gray London corporate partners Tom Alabaster and Alex Chauvin, and tax partner Andy Howard. BII was advised by Pinsent Masons, represented by Ian Warner and Chloe McMenemy.