RiverRock announces the appointment of Tenke Zoltani as Senior Impact & ESG Advisor. To coincide with Tenke’s appointment, we took the opportunity to have a conversation about her background, ESG frameworks and their application to the soon to be launched RiverRock Supply Chain Impact Fund (“RSCIF”).
Q: Having recently joined as the Senior ESG and Impact Advisor to RiverRock, can you give us an overview of your background and experience in supply chains and in the monitoring of Impact/ESG factors within the asset class?
TZ: Sure. I founded Better Finance, an advisory boutique to focus on direct investments that made a positive social or environmental impact. The work grew quickly, and I now advise on issues from strategy implementation and effective asset allocation, to Impact monitoring and evaluation.
In terms of Supply Chain Finance, I worked in the asset management arm of global agribusiness Bunge, managing a portfolio of food-water-energy investments. Through assessing and executing those opportunities and in doing the same for private clients thereafter, I built an expertise in sustainable commodity value chains and the financing challenges faced by smaller agribusinesses and SMEs. Since then I have been advising businesses and investment funds on ESG integration and impact strategy.
Q: What do you see as supply chain finance’s main potential in creating a positive impact and is the asset class well-suited to upholding an impact/ESG policy?
TZ: A lack of supply chain finance is a bottleneck which hampers exports from emerging markets, but also a limiting factor to growth for SMEs in Europe. The impact of addressing this can be significant: supply chain financing enables economic growth and development, supporting enterprises which produce and import/export essential goods and those in related services. It also helps companies to broaden their international client base and to increase flows of foreign currency and investment in markets where it is most needed.
SMEs, who are key drivers of local economic growth and employment, are disproportionately affected by the funding gap which has resulted from bank retrenchment in Supply Chain Finance. Supporting these companies is vital to maintaining and improving employment levels both in Europe and in emerging markets. Crucially, we can also help SMEs align to international standards and build robust business practices.
In addition to creating significant impact by enabling economic growth and supporting job creation, sustainable Supply Chain Finance, can improve how companies operate, their community relationships and the availability of goods and services. Furthermore, by promoting sustainable and resource-efficient practices and reporting on these metrics, we can spread the knowledge and understanding of those practices to a broader audience.
Q: What attracted you to work with RiverRock and, in particular, with this fund?
TZ: The opportunity to better integrate impact into supply chains is fascinating in that you have to piece together a complex ecosystem of stakeholders to deliver sustainable returns that ensure both the customer and the community prosper, while delivering attractive returns to investors. RiverRock is among the first to launch a trade finance fund with an impact intention, and I was convinced that the fund and company principals were dedicated to the mission of delivering this.
Q: You helped to design the RSCIF Impact & ESG policy; how will that policy be upheld and is it compatible with optimising investments from a returns perspective?
TZ: We are building a system of checks and balances and working on enabling RiverRock staff to identify and address ESG risks and opportunities. By adding information on ESG and impact to the DDQs and embedding it in the investment process and post-deal monitoring, we can identify new opportunities for value creation.
Sustainability-driven inquiry can help uncover potential problems before they become red flags, providing risk mitigation as well as surfacing possible sources of alpha. Advising RiverRock’s customers on small measures that can make a big difference—like improving board diversity or saving water, can sound insignificant but can have an outsized effect on long term financial performance.
Q: Will you report on the impact performance of the fund to investors?
TZ: Yes, we will work on our first report for 2019 in Q1 next year. We have identified impact metrics tied to the SDGs (for RSCIF specifically around Goal 8 Decent Work & Economic Growth, Goals 9 Industry, innovation & infrastructure, Goal 10 Reduced Inequalities, Goal 17 Partnerships for the goals) so our impact performance report will reflect our first year of collecting this data. We think this will improve the relationship with our investors by increasing transparency and aligning missions, showing we are good stewards of our assets, as well as improving the communication with our customs and clients.
Q: ESG & Impact are increasingly taking a more central role in investment considerations. In what way does RSCIF offer an opportunity for investors to increase the impact their investments make?
TZ: Megatrends such as climate change, scarcity of finite resources and changes in demographics and lifestyles towards ones of sustainability will influence production systems, prices, risks and opportunities. RSCIF promotes the creation of positive social and environmental impacts both in its investment decision-making process and in its engagement with counterparties and partners, believing that companies with sound ESG practices and good standing in their communities will outperform.
RSCIF has designed an impact policy aiming to deliver on key indicators of the UN’s Sustainable Development Goals (SDGs). The Fund targets specific areas where a positive socio-economic impact is deemed achievable and works with its counterparties and partners to quantify and report on that impact. The metrics we have identified will be communicated to our investors and form part of our reporting, so investors will be able to see how we are creating positive impacts and aligning successfully to ESG considerations.
Ultimately therefore, RSCIF offers investors the opportunity to address an underserved market and not only obtain attractive risk-assessed returns, but also to make a genuine, positive and trackable social and economic impact.
Q: What is the sustainable investment trend – upward or downward?
TZ: From 2014 to 2018, assets managed under responsible investment strategies grew by 68% in USD terms to $14tril AUM in Europe alone (of a total market of about $30tr managed sustainably at year end 2018). Why? I believe investors are realizing that adhering to a sustainable approach is not detrimental to performance – on the contrary, it has been adding value: companies with better sustainability scores outperform companies with low sustainability scores, and the market research is substantiating this claim, with 90% of these studies finding a positive relationship between ESG scores and corporate financial performance. A positive ESG approach is therefore justified by returns and sustainable investment assets are continuing to climb globally. The impact investment market has also reflected this trend and is now valued at $502bn.