Adobe Capital

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Project Number: 
ME4016A-01
Expected Consideration Date by the Board: 
12/03/2013
Date Posted: 
10/18/2013
Company: 
Adobe Social Mezzanine Fund I L P (Investee)
Sponsoring Entity: 
Adobe Capital, LLC
Financing Requested: 
US$2.5 million (Investment Amount)
Sector: 
Investment Funds
Location: 
Mexico
Country: 
Scope Objective: 

Adobe Social Mezzanine Fund I Limited Partnership (“Adobe” or the “Fund”) supports the growth of sustainable (from a financial, social and environmental perspective) SMEs which have adopted innovative business models focused on commercializing environmentally friendly products and/or alleviating poverty by serving underprivileged segments of the population. The Fund targets a number of different sectors that provide products and services to the base-of-the-pyramid, as well as agribusiness, water, recycling and waste management, clean tech and clean energy, and ecotourism. As of October 2013, Adobe has already made one investment, and has  commitments from investors for US$15.9 million. The Fund’s final closing is expected to reach US$20 million by early 2014.

The Fund will invest in 8-10 Mexican SMEs by providing flexible financing solutions through quasi-equity, equity and debt that will be used for working capital, purchase of long-term assets, company expansions, and acquisitions. The Fund will work closely with target SMEs to identify their real needs and offer creative financial structures which (i) properly align incentives; (ii) adequately support the growth of social enterprises; and, (iii) maximize their profitability and probability of success to continue pursuing their social missions.

The Fund leverages New Venture Mexico’s (“NVM”) existing technical assistance platform which has supported more than 200 sustainable SMEs since 2004. The Fund’s access to the NVM business accelerator, mentor network, institutional third-party relationships and deep local industry knowledge provides it with a competitive advantage in identifying the most promising SMEs within the social impact segment in Mexico, while helping reduce the Fund’s costs.

The IIC’s participation in the Fund, for up to US$2.5 million, is expected to play an important role in providing Adobe with a direct link with the IDB Group. This would give the Fund access to: technical assistance programs, key sector regional experience and network, potential additional sources of financing for co-investments or follow-on investments in the Fund’s portfolio companies, and access to best practices in corporate governance and environmental and social standards.

Other investors in the Fund include: DEG, Mexico Ventures, CAF, and other institutional investors.

Environmental Review: 

Environmental and Labor Issues:

This is a category FI-2 project according to the IIC’s Environmental and Social Sustainability Policy because the portfolio companies in the Fund’s current or future portfolio are those where the risk potential is considered medium. Companies in which the Fund invests will be required to provide evidence of compliance with all applicable laws, regulations, and standards regarding the environment and occupational health and safety. To enable Adobe to better understand the IIC’s requirements, Adobe will be required to attend the IIC’s environmental training workshop for financial intermediaries. In addition, Adobe will be required to submit annual environmental reports to the IIC.

Adobe currently has an Environmental and Social Management System (ESMS) in place for managing risk and the environmental and social issues associated with its financial operations. Adobe’s ESMS includes an Investment Code and a list of excluded activities, based on the IFC Environmental, Health and Safety General Guidelines and Performance Standards, as well as monitoring report requirements. Each company in which the Fund invests is subject to an environmental and social review, and must comply with national environmental and labor laws, regulations, and standards, as well as IFC Performance Standards.