GRC Project Spotlight: Impact Investing Fuels Decarbonization in Taiwan
This article is part of a series called GRC Project Spotlights, where GRC project team members illustrate their experience on a GRC project, the skills they leveraged from their experience, and the lessons they hope to take forward.
Who is Apala Group?
Climate change, one of the great challenges facing our modern world, has inspired many companies to seek unique solutions to reduce their carbon footprints. More companies are striving to become carbon neutral, or even climate positive, in the near future. Apala Group is a boutique consulting and procurement services firm that strives to accelerate the global transition towards clean energy production. Their clients include corporations, project developers, NGOs, and stakeholders with goals to reduce their overall carbon emissions in their supply chains, operations, and investment portfolio. One of Apala Group’s regions of interest is Taiwan.
Apala Group engages in a popular investing strategy known as impact investing. Impact investing is a relatively new investing strategy seeking to have a positive social impact alongside a financial return. Social impact has historically been the domain of government funding and philanthropy, but because the volume of private capital vastly exceeds government and philanthropic funds, a shift in global capital markets towards impact investing even as low as 1% could constitute a massive increase in funding for social and environmental issues[1]. In impact investing deals, the investor is usually seeking to achieve measurable social impact while also generating wealth, and the investee is a company with a mission to combat social issues with a market-based strategy. In the case of Apala Group, it has two types of clients: investors and suppliers. The investors are US-based companies that have supply chains in Taiwan and want to contribute to decarbonization in the region but do not have the means to decarbonize their own supply chains. Suppliers are Taiwan-based corporations and manufacturers that want to decarbonize their own operations.
Apala Group’s Relationship with its Investors and Suppliers
The two primary reasons that Apala Group’s investors cannot directly decarbonize their supply chains are a lack of direct connections with the companies in their supply chains and the companies in their supply chains having already decarbonized as much as possible. For these companies, Apala Group provides a helpful alternative way to invest in decarbonization efforts as their money will go towards decarbonization in the exact region where the investors’ supply chains are located. Although it is Apala Group’s goal to give their investors a substantial return on investment, the investors are willing to accept an ROI that is less than the market rate, knowing that their investments are contributing to an important global issue. Additionally, investors often receive carbon credits for helping contribute to the overall reduction in carbon emissions globally. Besides having monetary value, these carbon credits are sought after by companies as a way to signal their contributions to carbon neutrality. There are many reasons to strive for carbon neutrality; among them are boosting the competitiveness of the company, as consumers often prefer companies with a smaller carbon footprint, and adhering to future legal requirements which will enforce higher standards of carbon-consciousness among corporations. For instance, the European Union is committed to becoming climate neutral by 2050.
Apala Group’s suppliers are given a loan using the aforementioned investments, which they use towards technology and solutions that foster reduced carbon outputs in their operations while also saving the company money in the long run. Eventually, the suppliers pay back their loans with interest, but the interest rate may be reduced if the suppliers satisfy certain agreed upon social and ethical standards; these standards are designed to foster a healthier and more inclusive working environment.
How did GRC Berkeley Help?
To help develop a fund structure plan for Taiwanese decarbonization activities, GRC Berkeley performed the following three tasks for Apala Group:
- Sourcing investors, i.e. finding US-based companies with supply chains in Taiwan that may be interested in decarbonizing their supply chains.
- Creating a fund structure concept that is well suited for the unique needs of Apala Group’s clients.
- Identifying decarbonization activities that could work well with Taiwan-based companies.
Our consulting team decided to split into smaller groups to handle the 3 separate tasks of this project. Each task required a heavy research component. For example, the first task of sourcing potential investors required our team to look into existing US corporations and identify signs that the corporation may be interested in decarbonizing its activities in Taiwan. Some potential signs included the company's previous attempts to decarbonize its activities, its stated goals to decarbonize, any excessive carbon emissions that could warrant decarbonization efforts, or simply having supply chains in Taiwan.
For the second task, much research was needed to develop a relevant fund structure concept for Apala group. Our consultants had to research different fund structure types and understand their typical use cases. They then had to identify features of existing fund structures that could be relevant to Apala Group’s specific use case and create a new concept that was specifically tailored to Apala Group’s unique needs. The resulting concept would include certain aspects of existing fund structure concepts while potentially including original ideas meant to address Apala Group’s specific situation. Some of the requirements of the fund structure were as follows:
- Generate ROI for investors.
- Allow for investor exit options.
- Raise initial capital to start off the fund.
- Incorporate strategies to mitigate potential losses and insure investors.
The third task, identifying viable decarbonization activities, required our consultants to analyze how much return on investment each activity could bring to corporations in Taiwan and how effective they would be in lowering carbon emissions. This analysis was based on factors like the amount of physical space available to Taiwanese companies and the payback period, cost average, and savings rate of different investments.
Project Deliverables
The team gave two deliverables—oral presentations to Apala Group representatives—as well as a PDF document summarizing their high level findings. From this experience, the consultants report notably improving their public speaking and presenting skills. Throughout the course of this project, our consultants also sharpened their research abilities. They became more comfortable with many of the difficult aspects of the research process such as finding reputable information sources, extracting relevant pieces of information, synthesizing disjoint pieces of information into a cohesive narrative, and constructing a strategy from their newfound knowledge and insights. They also grew stronger in delivering their findings through the oral presentations. Lastly, our consultants learned a lot about the fields of impact investing, corporate economics, and decarbonization efforts going on worldwide.
Working with Apala Group proved to be a very formative experience as our consultants got a detailed firsthand look into the fields of clean energy production and impact investing. They came away from the project thankful for the chance to help implement an impact investing fund from scratch and with a better understanding of how consulting can make a significant impact on important global issues. Our consultants are eager to continue making an impact in this way, just as GRC will continue advancing global sustainability through future projects.
Citations:
[1] Rockefeller Philanthropy Advisors. “Impact Investing: An Introduction.” Accessed November 26, 2021. https://www.rockpa.org/guide/impact-investing-introduction/.
