Temasek backs Aussie impact firm with $US500m investment

The Temasek investment, which he helped broker, shows that some funds are now big enough to service large institutional investors.

“Many of the big super funds, correctly, have difficulties in investing in small funds, because they don’t have the liquidity, they don’t have the certainty of management, they don’t have size they’re looking for,” Mr Gonski said.

Another LeapFrog adviser is Simon Israel, a former executive director and president of Temasek.

He and Mr Gonski have deep business ties to Singapore via several directorships. Their connections led to an introduction to Temasek, which set up its own impact investing fund in 2019.

When you see that scale ... it’s not only because people want to do good but also because they are getting the returns they are looking for.

— Andy Kuper, LeapFrog founder

Under this week’s agreement, Temasek will commit $US500 million to future raisings, take a minority stake in the business and appoint a non-executive director to the board.

“That [equity] gives us essentially the balance sheet to build out our teams in Africa and Asia, and to double down on those areas like impact measurement, digital strategies and talent acceleration,” Dr Kuper told the Financial Review.

Impact and scale

LeapFrog was founded in 2007 by Dr Kuper and has raised more than $US2­ billion from institutional investors, including three Australian institutions: HESTA, Christian Super and QBE.

The fund has a profit-for-purpose philosophy and seeks to generate financial gains by investing in businesses that have a social welfare aim. It has invested mainly in emerging markets.

Temasek’s head of impact investing, Benoit Valentin, said there was an urgent need to address critical social and environmental challenges, and impact investing would unlock the capital to meet them.

“Our partnership with LeapFrog, with its focus on serving underserved markets, underscores Temasek’s commitment to investing for impact, and the contributions these investments make towards shaping a better world for our communities,” Mr Valentin said in a statement.

The impact investing asset class is estimated to have grown to more than $US715 billion, according to the International Finance Corporation, a division of the World Bank. That organisation estimates the value of impact investing could grow to $26 trillion.

“When you see that scale come through, it’s not only because people want to do good but also because they are getting the returns they are looking for,” Dr Kuper said.

Home-grown

He said investments “in unsavoury industries, stranded assets or assets with reputational difficulties” were not rewarding investors relative to the risk they were taking.

“Generally when companies are serving customers really well, and they’re well governed, you tend to have better risk management. You’re also getting diversification because you’re tapping the four billion emerging consumers,” said Dr Kuper.

The most significant companies in the Leapfrog portfolio to date are WorldRemit, the cross-border payments company, Goodlife, a pharmacy chain in Africa and BIMA, a digital insurance provider.

Mr Gonski said a situation where a Singaporean sovereign wealth fund was committing half a billion dollars to a fund run out of Australia with investments in the far-flung corners of the planet boded well for the local industry.

“First, we can entice top people to live here, because this is the place to bring up children, and to live,” Mr Gonski said.

“Second, there’s quite a distance to these other places but we have the facilities these days with technology to actually allow and equip Dr Kuper to administer investments around the world from Bondi Junction.”

“The third thing is that investors – in this case from Singapore, but in the case of others from all over the world – are prepared to trust their money to a guy who ultimately is running it in Australia.”