Impact investing is no longer viewed as someone’s vanity project to promote good business. After years of advocating for the greater social good in terms of clean energy, responsible consumption, or gender equality, impact investing is now mainstream with over $500 billion in assets under management, according to data from the Global Impact Investing Network. There’s an opportunity for businesses to tap into funding at usually concessionary rates provided they can generate measurable social and environmental impact, alongside a financial return. Alliance Finance Company Plc (AFC) is positioning itself as a bridge between the growing pool of global impact investors and Sri Lankan business enterprises.
“Sri Lanka is at the cusp of a takeoff, but if we can attract investments that promote sustainability, the transformational impact will be phenomenal,” says Chanuka Dilhani, Manager Sustainability and Strategic Planning at AFC. AFC has attracted over $30 million from impact investing organizations such as Symbiotic, Tridos Investment Management, DWM, FMO and IFC. These funds generate new loans for Sri Lankan enterprises screened by AFC to identify if they can have a positive sustainability impact. Suppliers are similarly screened. AFC gets them to fill in a consent form so it can check suppliers for their environmental and social impact and also evaluate their compatibility with the finance company’s sustainability philosophy.
“We don’t work with people who are not sustainability-oriented and don’t observe other basic best practices such as the ILO labour conventions including child labour. We want to assure our customers that our lending, leasing or savings products are clean,” Dilhani says.
“There’s a growing pool of global impact investors looking for sustainability-driven businesses. Alliance Finance is helping to match businesses locally to those opportunities to transform the country’s landscape,” Dilhani says.
Social enterprises in Sri Lanka, even the SMEs and microbusinesses have a big role to play in developing the country. “Our mission is to bridge the gap so that impact investors can channel investments to businesses that are pushing the sustainability agenda in Sri Lanka,” she says. .
A sustainable strategy will also win new customers as increasingly younger consumers base their consumption on lifestyle choices framed around social and environmental sustainability. Environmental and social consciousness is a growing trend. Rather than being reactive, AFC envisions itself as a change-agent to make a positive impact. “This is why sustainability is a priority for us”. AFC allocates 3% of profits to sustainability initiatives annually; yet spent 8% of its profits during the financial year 2018/19, supassing the allocated percentage. Sustainability goes beyond CSR projects. While increasingly leasing hybrid and electric vehicles AFC also plants and nurtures 50 trees for each motor vehicle lease it finances.
Sri Lanka is at the cusp of a takeoff, but if we can attract investments that promote sustainability, the transformational impact will be phenomenal
“It takes 50 trees on average to negate the annual carbon emission of the vehicle mix financed by AFC, whilst positively contributing to the environment,” Dilhani says. AFC is also rolling out a venture to convert three-wheeler engines into gas which will reduce emissions by 10-11% and save fuel costs. AFC will deploy Dutch technology for the conversions and hopes to convert a major portion of its three-wheeler leasing portfolio by 2023.
The project also aims to uplift women’s livelihoods in a trade dominated by men, thus achieving an impact on gender balance in the transport sector in Sri Lanka. The two examples above are directly linked to its business strategy, thus demonstrating its sustainable business philosophy. AFC has many other integrated sustainability projects as well. Since 2018, the company has planted over 215,000 trees with the aid of school children and Tri forces who tend the saplings for at least three years so they can grow into trees.
The company aims to plant a million trees by 2023 if not sooner, through its One Million Trees for Unity project. AFC also supports selected conservation and biodiversity projects which complements its overall sustainability strategy and business philosophy. The Company is working with Anjali Watson and Dr Andrew Kittle’s Wilderness and the Wildlife Conservation Trust to build a biodiversity corridor to protect the natural habitat of the magnificent hill-country leopard. Through the participation in this project AFC was privileged to have the honour of naming two recently discovered female leopards. “We named them Nina and Nala, they now serve to inspire our employees to engage in many more similar projects,” Dilhani says. AFC is investing in new systems, which will further facilitate the value creation process of the Company.
By automating processes, the company reduced paper consumption by 13% in 2019. The unit and cost intensities per employee have fallen by 24%. A new systems upgrade is expected to result in direct savings amounting to Rs100 million annually. AFC recently won the coveted ACCA Sustainability Reporting Award under the Finance and Insurance category. This is an endorsement of the company’s visionary business strategy which places sustainability at its core. AFC is a signatory to the Karlsruhe Resolution at the Global Sustainable Finance Conference held in Germany in 2017. The company has pledged its support to Sustainable Development and battling Climate Change by contributing towards achieving the UN Sustainable Development Goals. AFC is also committed to the Paris Climate Agreement.