news - FMO Participating in SuperReturn Emerging Markets Event From 22-24 June

NOTHING VENTURED, NOTHING GAINED

FMO's Message at SuperReturn Emerging Markets: It's Time for PE to Step Up

Running as a virtual event from 22-24 June, SuperReturn Emerging Markets brings together 300+ general and limited partners to discuss the latest trends, risks and opportunities for PE and VC in emerging markets. With its in-depth knowledge of these markets and entrepreneurial mindset, FMO is keen to further carve out its strong position in the emerging market PE and particularly in the VC sphere and has several speakers at this year’s SuperReturn Emerging Markets. We take a whistle-stop tour of some of the topics they’ll cover, from big-picture perspectives to deep dives into key issues and where to find those now-or-never investment opportunities.

Big changes lead to big chances

For FMO, the overarching context is that the world has less than ten years to achieve the UN’s Social Development Goals, which means macro-economic changes are afoot. And for those with vision, big economic changes always mean big commercial opportunities.

Areas where FMO sees opportunities for PE include climate and technology, but also new business models. Because a ‘more of the same’ approach to investment won’t cut it in emerging markets, which tend to require longer-term commitment. FMO has success precisely because it sticks with projects and isn’t afraid to learn, tweak and innovate.

Climate all change

On climate, FMO’s key message is that ‘wait and see’ is no longer an option. An annual injection of some US$100 billion globally is needed to help developing countries adapt to climate change and invest in low-carbon economies. It’s a multi-party challenge FMO is keen to pick up and PE has an opportunity (and arguably obligation) to join the push and drive change.

The financial sector can make systemic changes to how capital is allocated to push the transition to net-zero, for example by harmonizing sustainable accounting practices. The pressing and complex challenges of deforestation need partners who can see beyond the shorter horizons of most commercial investors; amongst others, partnerships are needed like the British government-led Mobilizing Finance for Forests programme that is steering money away from unsustainable forestry practices towards promising areas like tree crops that address emissions reduction, healthy food and hard currency needs all in one.

Beware: gamechangers!

Tech may be disrupting developed economies, but it’s nothing compared to what’s happening in emerging markets. Mobile internet access is delivering a leapfrog effect in the digital transition for many countries, with highly scalable business models and young entrepreneurial talent waiting to be unleashed in almost every sector.

Two examples. First, Egypt. Since the start of the COVID pandemic, Egypt has accelerated its move from an almost fully cash-based economy to an increasingly digital one — a impressive   rate of transition. Secondly, AgriTech, which is improving yields, connecting small farmers to markets and consumers, and making supply chains transparent and efficient. These are examples of genuine gamechangers happening right now that any LP or venture capitalist would be mad to ignore.

FMO’s new Ventures Program hints at what’s possible. In its first year, 13 investments designed to support early-stage tech-enabled start-ups and scaleups that improve access to goods or services in developing markets are now supporting 1,400 direct jobs, 194,205 smallholder farmers and 363 SMEs. FMO is a VC newcomer. Just imagine what could be achieved with more seasoned VC-players on board.

Act local

Developing local ecosystems where start-ups can thrive is another vital piece of the jigsaw, and DFIs like FMO are looking to blended finance to catalyze private investment by enabling risk sharing and capital influx. To flourish, these local ecosystems need at least three additional things beyond capital. First, to address the skills gap. Not just smart entrepreneurs but also the auditors, accountants and mangers that dynamic enterprises need. Secondly, investment in local fund managers, so they can build ecosystems and in turn invest in local entrepreneurs with big dreams. And thirdly, governments and regulators must create an environment in which start-ups can succeed and scale. FMO will be looking at examples of where these things are already happening.

Diversify or perish

The proven diversity dividend of a gender-balanced board applies just as much in developing markets as elsewhere. In emerging markets in particular, boards are currently heavily skewed, with 90% male membership fairly typical. FMO has joined the 2X challenge to support PE firms committed to gender diversity in their own teams and in their portfolios.

ESG: learn to love it

How to embed sustainability at Board level? Initial findings show that companies that have ESG high on the agenda have fared better during the pandemic than those who don’t. They were better equipped to weather a crisis, with more robust policies and more resilient portfolios. Similarly, as governments and regulators move toward ESG standardization, FMO feels the most relevant question for PE is, will tomorrow’s winners be the companies happy to continue doing ‘business as usual’, or the ones who want to actually prioritize the impact they’re having on society and the planet?

They’re out there…

FMO speakers will be throwing light on these and other opportunities. From the potential in Latin America, as it shifts from commodities to broader-based economic opportunities, to the surprising possibilities offered by tail-end funds in Africa.

In other words, for the smart PE investor, there are a lot of interesting things happening out there. And FMO is engaged with most of them and looking for partners.

For more information or to register, visit the SuperReturn site.