The anxiety caused by COVID-19 is very real, and the personal and social impacts will only be exacerbated by deeply unsettled markets. But while investor appetite is understandably affected, the flow of capital into impact investments – such as those on which our clients depend for the important work they’re doing with communities in need – cannot and should not be disrupted.

As we continue to pursue transactions that connect clients with the capital they need, how can we use this crisis as an opportunity to improve the way in which our industry works? These lessons could be key to ensuring that the much-needed impact investment dollars keep flowing.

Using Available Technology

Development finance has always required a huge amount of travel. Nothing beats personal relationships, in-person brainstorming, and identifying the right partners by looking them in the eye. But there are alternatives that can replace at least some face-to-face interactions, and until now, there hasn’t been reason enough to use these to full effect. Current travel restrictions provide an opportunity, but also an obligation, to revisit these practices (ensuring that in-person interactions are all the more effective when they can occur).

Optimising Investment Processes

These are exceptional times, and investors should carefully consider their current requirements for on-site due diligence. Where these requirements are just a box to tick in the process, there is likely scope for either doing away with the requirement, or if that feels a little radical, to be much more granular about the purpose of the visit. This will create flexibility to progress investment processes even during the current travel restrictions, with the in-person interaction moved to the backend of the process, potentially as a condition precedent.

In many cases, the investee/borrower is already known to the investor. Similarly, the investor may have already visited the investee’s head office and, in the case of fund investments, met with one or more of the fund's investees or pipeline companies. In such instances, pragmatism can prevail, and a physical visit may not be needed at all.

Whether the in-person elements are done away with or simply pushed to the backend, there is a lot that issuers, investors and intermediaries can do to keep the ball rolling in the meantime. In fact, a series of shorter, targeted video conferences, each involving just the people directly involved, can be more efficient and give better insights than the oftentimes rushed and exhausting on-site visit.

Quality Intermediation

There is also a role to play here for intermediaries. We can help with breaking the process down, sequencing steps, and proposing helpful ways of interacting to keep things moving towards completion. Converting an on-site visit, with the opportunity for interactive Q&A and free-ranging conversations, to a series of targeted due diligence calls takes planning. The sessions need to be curated and organised to address the questions that investors want to get answered, while allowing for the impromptu interactions that help build relationships between principals.

It’s beneficial to organise a series of calls at set times over a series of days. Discussion topics should be shared beforehand so that, beyond required attendees, people know which calls they want to attend. Calls should be long enough to allow for in-depth Q&A, but should not run over 1.5 hours, when attention spans wane.

Care needs to be taken not to fit too much into each call, so that investors’ questions can be fully addressed without a sense of rushing through an agenda.

Smaller, more targeted audiences reduce the risk of people moving into “observer mode”, and running calls with video makes it more difficult for people to start focusing on other things. While not essential, it can also be helpful to have at least one person who sits in on all calls, so that they can make connections between and see across all the items discussed.
Organised well, targeted calls can be an effective process for all involved. Without the disruption of travel and leaving ample time for other obligations, it’s potentially more efficient than the alternative and may allow a wider range of people to participate actively in the on-site due diligence process.

Moving Forward

Travel restrictions may very well be with us for some time, and investors should take a serious look at how processes can be streamlined to keep committing to investments, or at least to keep the conversations moving forward. It’s possible to do so in a way that is more efficient (and perhaps more pleasant) without increasing risk.

Whether you are an investor, entrepreneur, fund manager or intermediary, a positive outcome of this crisis may well be that we position ourselves to work remotely more efficiently and effectively, thus saving on time, cost and our bloated carbon footprint.

Contact info@thepalladiumgroup.com to get in touch.