UK’s impact investor Snowball on ‘democratising’ impact investment

The impact investing sector cannot remain the exclusive realm of the wealthy if its potential is to be maximised, according to Snowball Impact Management’s CEO Daniela Barone Soares

Daniela Barone Soares, CEO of UK-based impact investor Snowball Impact Management, believes that if impact investing is to realise its full potential as a driver towards meeting the UN Sustainable Development Goals (SDGs), it must not remain the preserve of the wealthy and large institutions. The sector needs to bring in a more diverse range of investors, she argues. 

“So far, impact investing has been dominated by wealthy people that can invest the large amounts required to invest in the funds that provide most of the alternatives. Our idea is that it can be democratised, if investments are diversified enough to provide stable returns that preserve capital and grow over the long term,” she told Impact Investor. 

Snowball has already made progress in that regard. It was founded in late 2016 by six family offices and foundations, including the UK’s Friends Provident Foundation (FPF), to provide better scalable impact investing opportunities than would be available to the individual entities working alone.  

Soares took over as CEO in 2019, having held several high-profile roles in the UK impact and charity sectors, following an early career in the international private equity sector. Since her arrival at Snowball, the six have grown to 36 investors, with more joining every year.

The multi-manager fund has £30-35m of assets under management. Snowball is a certified B-Corp, as are around a quarter of the fund managers in which it invests.   

Existing investors are also stepping up their involvement. In August, FPF pledged to more than double its investment in Snowball with immediate effect and will also invest a further £1m for every £10m Snowball raises. 

Returns

The fund is still set up for professional rather than retail investors, with a minimum investment of £150,000, but Soares hopes that will change.  

“In the future, we really want to have a retail reach one way or another. We don’t have the formula for that yet, but the idea is that we have an impact product that can reach everyone who wants to base their investments on their values and make the world better without forfeiting returns,” she said. 

The founders have aimed to maximise impact while providing stable returns – Snowball has a five-year history of investing to make a risk-adjusted annual return of 6-7%, net of fees, over the long term.  

Achieving those sorts of returns has meant casting the net wide when looking for investment opportunities within Snowball’s two main impact themes of environmental sustainability and social equity. The fund currently invests in 40 specialist funds – mostly based in the UK and continental Europe, but with global reach. There are more than 500 companies in the underlying portfolios. 

“To achieve risk and return which can compete with non-impact strategies without compromise on impact, you have to take a broad view of possible investments,” Soares said. 

Impact themes

Within the two main impact themes, Snowball focuses on six investment areas: the energy transition, resource efficiency, regenerative ecosystems, health and wellbeing, equity and inclusion, and homes and communities. This mix reflects the fund’s ethos of supporting a just transition, while making investments that further progress towards the UN-backed sustainable development goals (SDGs). 

“We were never of the belief that we could invest in just one side of that equation, because the greatest impacts of the environmental emergency are on the poorest people in society – and that’s true in the developed world, as well as the developing world,” she said.  

Renewable energy and social housing have attracted most investment thus far. An example on the energy side is the responsAbility Access to Clean Power Fund, which is an investor in M-Kopa, the financing company which helped get Africa’s PAYGO off-grid solar market started.  

On the social housing side, Resonance Ltd’s Women in Safe Homes fund supports the development of affordable, safe and secure homes across the UK for women and their children, experiencing or at risk of homelessness. 

Soares said Snowball has also been able to provide catalytic investments that have enabled startup funds to draw in further capital and establish themselves in the market.

One is Ananda Impact Ventures, a German-based venture fund manager that invests in impact-driven for-profit enterprises in healthcare, education, sustainability, and social justice. Another is Circularity Capital, which invests in the development of the circular economy.  

“We invested in Ananda on their first fund, which was very small, and now we’re investing in their fund four, which is significantly larger. We were also with Circularity Capital on their first fund and we’re now also investing in their second fund as well,” she said. 

SDG 14

Snowball has also remained alert to the evolving possibilities for impact investing, as opportunities whose returns wouldn’t have stacked up for investors five years ago become more attractive. That has been the case with investments in the marine environment to meet SDG 14 objectives to conserve and sustainably use the oceans, seas and marine resources for sustainable development.  

“We looked into possible investment related to SDG14 five years ago and we weren’t convinced by what we found back then, but a couple of years ago, we looked again and found a few good opportunities and ended up investing in one of them,” she said.  

That investment was in Aqua-Spark, one of the first impact funds to focus on small and medium-sized enterprises in the aquaculture sector, which is based Utrecht in the Netherlands. One of their holdings is in Indian firm Sea6 Energy, which has developed SeaCombine, a mechanised system that can harvest and replant seaweed in the deep ocean. 

Education

But Soares said some sectors remain difficult for impact investment, notably education. While there is no shortage of investable opportunities in the developing world involving schools with high fees serving the relatively wealthy, making a bigger impact by ensuring the poor and underserved get improved access, largely remains the preserve of governments and philanthropists rather than impact investors. 

“Education is an area that we are very interested in investing in, and we are doing some due diligence on some possibilities right now. But we’ve found few opportunities there that can have a really deep impact, while meeting our return requirements,” Soares said.