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TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing. ...

TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.

TBLI CONFERENCE USA New York 2013
Monday and Tuesday, June 17-18, 2013

Speakers:
Paul Rose
Vice President of the Royal Geographical Society
Richard L. Kauffman
Chairman for Energy Policy and Finance for the State of New York - Governor of New York's Office and Cabinet - United States of America
Martin Rapaport is chairman of the Rapaport Group and founder of the Rapaport Diamond Report

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Pierre kladny Pierre kladny Presentation Transcript

  • ValleyRoad Capital Impact Investing – a practical approach towards sustainable returns Triple bottom line difficult to attain through social entrepreneurship approach A Swiss perspective Pierre Kladny, MSc, Managing Partner ValleyRoad Capital Inc.
  • ValleyRoad CapitalThe big picture • What – in our view Impact Investing (I2) is not: • SRI – Socially responsible investing is targeted at companies which act responsibly towards their employees, the environment and the product or service they deliver. Investment criterion essentially focused on lowering long term risk. • Philanthropy – Philanthropy has no objective of financial return and is often sought as a way to give back to society or causes for successful and wealthy people. • Social Entrepreneurship – SE is an investment strategy which puts social impact before profits, thus lowering the sustainability of the venture and increasing the risk for investors.
  • ValleyRoad CapitalImpact Investing – a few questions• Impact investing differentiates itself from “traditional” investing by focusing on more (but not less) than profits: it takes into account the positive social and environmental impact. Now is this distinction clear or blurry?? • In other words should you ask whether a business case is labeled I2 or traditional? Is traditional business insensitive to social and environmental issues? • We believe not. Lots of business cases from today’s entrepreneurs have a positive social and environmental dimension, regardless of their label.
  • ValleyRoad CapitalAn excuse to underperform? • We are regularly interviewing entrepreneurs who use the social and environmental impact of their business case as an excuse for low returns and lackluster performance. This is not a sound approach in our view. • We are of the opinion that any sustainable long term business activity must be supported by solid and long term profits. When there are solid profits, the company has the means to invest in social and environmental programs without endangering its own financial situation.
  • ValleyRoad CapitalPerformance comparison Source: GIIN, JPMorgan, 2013
  • ValleyRoad CapitalSectors and goals Basic needs • Agriculture • Water • Housing Basic services • Education • Financial services • Health • EnergyIncrease Income and Assets for the Emerging Classes Improve Basic Welfare Mitigate Environmental Impact Resting on these three essential premises
  • ValleyRoad CapitalVRC Investment Selection processWe review more than 100 projects each year There needs to be a solid business case Are we having a meaningful social impact? Is there positive impact on the environment? Can it last? We promote 5 to 6 projects a year Selection process
  • ValleyRoad Capital3 examples of what we are doing Tyre Recycling Solutions GhanaLtd by Livinghana Ltd
  • ValleyRoad CapitalThe case of SMIXIN® • Wash your hands with 10x less water. • Reduce weight on board aircrafts, thus reducing fuel consumption. • Wash your hand before and after you eat (fast-food chains) • Wash your hands in public places (reduce germs SMIXIN Hygien epoint©
  • ValleyRoad CapitalSMIXIN® Business case highlights • Very smart engineering (inventors of the Swatch watch). • Good IP approach (strong patent portofolio). • Innovative design. • No idea where the market was. • Value chain disconnect: Those who use it don’t pay for it! • Saving water not sufficently motivating to foster investors’ interest. • Rethink go to market with a comprehensive money-making business case.
  • ValleyRoad CapitalSmixin transformation BEFORE • Save water, save the planet • Green technology, social entrepreneurship • People should naturally recognize advantage and purchase a very expensive device (> USD 2000) • Private use, essentially. AFTER • Water saving is a secondary positive side-effect, which enables money-generating activity. • Technology is useful and solves problems. Thus it can be marketed and sold. • Clients need to try and validate the concept, before
  • ValleyRoad CapitalSMIXIN®, key take-aways • When you develop your green technology, think of market potential. • Business success will drive your impact on people and the environment. • If you think you don’t really have a market, don’t expect investors to believe there is one. • If your technology is adopted by all major airlines, the environmental impact will be orders of magnitude of what you thought possible (CO2 reduction).
  • ValleyRoad CapitalTyre Recycling Solutions® - TRS • Used tyres are an ecological disaster throughout the world. • In each developed economy, there are as many used tyres discarded per year as there are inhabitants (300 million/year in the USA). • This (USA) represents 3 billion (!) pounds of rubber, wasted in the nature, which • So far un-economical, subject to subsidies. • Devulcanization is a complex and costly process.
  • ValleyRoad CapitalTyre recycling market • Today, tyre recycling is a process which is not or hardly profitable. Shredding, removing metal particles and fabric will give you vulcanized rubber scrap, worth USD 500-600 per ton. This price does not cover for cost, thus recyclers receive subsidies under different form. • Alternatively, tyres are burnt in cement factories or discarded in the environment, where they rot away or become nests for mosquitoes. • Vulcanized rubber scrap cannot be used in the production of new tyres.
  • ValleyRoad CapitalFunding – How can I participate? • Invest in current tyre recycling projects or companies? Problem: none of them shows any motivation for the end product, which draws little profits. • How do you enhance the value-chain? • Are there high value products which can be created? • Leisure, recreational and playground surfaces. • Stud farms, equestrian gallops. • Landscapes, Garden and Golf courses for walkways, weed prevention or simply for decorative purposes. • Asphalt additive for road construction and aggregate replacement. • Carpet Underlay. • Road side drainage. • Sound barriers along motorways. • Engineered landfill sites. • Thermal insulation for pipe laying and foundations. Current usage
  • ValleyRoad CapitalDevulcanization? Many have tried…“Approximately 25 potential devulcanization technology researchers and developers were identified throughout the world, however, only a very small number of devulcanization systems are now operating.” Laura Fontana, CenterPlastics Enterprise Ltd, China. • Solution: Setup a top level scientific and business team to crack the nut. • Never loose sight of profitability in whatever solutions comes up. • Never loose sight of industrialization potential. • Check your market premises and make sure there is demand at the end of the line. • Make the business fundamentally scalable, because the entire
  • ValleyRoad CapitalA multi-talended team and THE solution • A biochemist • An industrial engineer • A salesman • A project
  • ValleyRoad CapitalTRS® - Lessons learned • Check your premises: to accelerate the recycling of used tyres, there need to be a strong incentive, beyond social and environmental benefits. • Don’t give up on current shortcomings and don’t satisfy yourself with state subsidies, because they are not sustainable. • Look for where the profit lies: recycled, devulcanized rubber sells for USD 1500-2000/ton depending on quality. This is 3-4 times the sales price of vulcanized and makes the entire process comfortably profitable.
  • ValleyRoad CapitalAffordable housing in Ghana 2000, sub-Saharan African GDP has risen at a CAGR of 5% is one of the fastest growing economies in both Africa and the world. lows have quadrupled since 2000 There is an African emerging middle class, which longs for solid housing. The current offering is dismal. • The current shortage is estimated at 1.5 million units. • The average purchase price is USD 30’000 • Mortgage banks are well established • Land ownership is safe and organized • The legal system (English Common Law) works and contracts can be enforced ficulty : Find a solution to build tens of thousands of quality affordable hou
  • ValleyRoad CapitalHow to succeed in Ghana? • The local construction companies still use very conservative building techniques. • It takes for ever to build a house (18 months). • Few houses are built to modern standards (bathroom, toilet, kitchen). • Quality of cement and construction are scary (literally). • Government corruption is low by African standards, but still present when big projects seek government support. • Recourse to state funds (development funds) is a lengthy and
  • ValleyRoad CapitalHow it’s done – BetoniQ Ghana® • BetoniQ Ghana has in-licensed an existing German proven technology to build pre-cast concrete panels, fully equipped with pipes, cables, windows and doors. • Assembly can be made within 24 hours. • One such factory can produce panels to build 10’000 houses a year. • Total investment cost limited to USD 32m, including 150 first houses and land (proof of concept).
  • ValleyRoad CapitalThe new offering – BetoniQ Ghana®Model Size Sale price1 Sunscreen Bungalows 60 m2 $28,500 46 m2 $22,500 32 m2 $17,500 18 m2 $10,000 Air-con Bungalows 93 m2 $47.500 60 m2 $35,000 46 m2 $25,000 Apartments 100 m2 $37,500 86 m2 $33,000 72 m2 $28,000 57 m2 $22,500 Commercial space2 $250/m2 School 463 m2 $150,000
  • ValleyRoad CapitalProfitable and sustainable (in US$’ 000) Constructio n Year Year 1 Year 2 Year 3 Year 4 Year 5 Turnover - 75,000 140,000 190,000 233,000 233,000 EBIT -3,000 28,000 47,000 63,000 77,000 77,000 EBIT margin n/a 37.5% 33.8% 32.9% 33.0% 33.0% Net Profit -3,500 26,000 45,000 61,000 75,000 75,000 Capex -24,000 -- -- -- -- -- Free Cash Flow -32,000 1,200 19,000 40,000 58,000 76,000
  • ValleyRoad CapitalLessons learned • Understand the local eco-system really thoroughly and have a reliable local partner, who can guide you through the meanders of the system. • Do your own due-diligence, spend time on the ground. • Tailor the setup and business plan to local constraints. • Avoid implicating government (if you can). • Get local bankers to have skin in the game, by providing some form of off-take guarantees. • Have a solid exclusivity agreement with technology provider.
  • ValleyRoad CapitalTHANK YOU FOR YOUR ATTENTION ValleyRoad Capital Pierre Kladny Managing Partner Phone: +4122-906-1020 Mobile: +4179-621-1459 Mail: pierre.kladny@valleyroadcapital.com