Filters: Trade Finance

The Global Economy’s Secret Engine: Middle Market Trade Finance

Posted on by trilinc_admin17

TriLinc is pleased to share with you our latest white paper: The Global Economy’s Secret Engine: Middle Market Trade Finance.

To download our whitepaper, please click here.

Abstract

Trade finance, defined as short-term financing to facilitate the movement of goods, is a $17.7 trillion industry, with world merchandise trade volumes historically growing around 1.5 times faster than world real gross domestic product (“GDP”).1 The industry offers large investment potential with an estimated $1.5 trillion funding gap,2 and trade finance exhibits attractive characteristics such as U.S. dollar-denominated transactions, non-correlation, strong collateralization, and extremely low default rates, along with other risk mitigants. Middle market companies, also known as Small and Medium Enterprises (“SMEs”), are vital players in the sector, accounting for 40 percent of exports from Organisation for Economic Co-operation and Development (OECD) countries, and a somewhat smaller share in developing countries worldwide.3 The trade finance gap affects SMEs disproportionately,4 which creates potential for attractive risk-adjusted returns from trade financing to SMEs in select high-growth economies with stable political environments and reliable legal systems.

 

1World Trade Organization. World Trade Statistical Review, 2018. 2Asian Development Bank. ADB. 3OECD, http://www.oecd.org/std/its/trade-by-enterprise-characteristics.htm 4World Trade Organization”. Trade Finance and SMEs, 2016.

Why Trade Finance? Webinar Replay

Posted on by trilinc_admin17

On March 28, 2019, Gloria Nelund, Founder and CEO of TriLinc Global, and Paul Sanford, Chief Investment Officer, hosted an educational webinar – Why Trade Finance?

The webinar covered topics including:

  • Why Trade Finance is the Lifeblood of the World Economy
  • The Importance of SMEs in Trade Finance
  • Why access to affordable capital is constrained in developing economies
  • The favorable characteristics of Trade Finance
  • Opportunities and Impact of Trade Finance


Click here to download a copy of the webinar deck.

TriLinc’s ESG and Impact Measurement: the IRIS Framework

Posted on by MBC Strategic

As a certified B Corp, TriLinc Global supports the high environmental, social, and governance (ESG) standards to which B Corp organizations hold themselves, and the companies they work with, accountable.  TriLinc is a fund sponsor and the majority owner of TriLinc Advisors, LLC, which manages the TriLinc (together, “TriLinc”).  We believe that transparent tracking, analyzing and reporting on the impact of portfolio holdings is a fundamental component of impact investing.

When we were establishing our policies and procedures as an impact fund sponsor, impact measurement systems were in early-stage.  At that time, we elected to use the Impact Reporting and Investment Standards (IRIS) framework for our ESG and Impact screening, measurement, and reporting processes, given that IRIS was emerging as a recognized taxonomy with broad acceptance among impact investors.  In recent years several new tools have launched to help investors evaluate ESG and impact factors in their portfolios.  TriLinc continues to use the IRIS framework for consistency in describing ESG performance.  By using a standard set of impact components, definitions, and measurement formulas, IRIS makes it possible for us, and for fund investors, to measure and compare ESG/impact metrics over time, both within a given fund and across a broader portfolio of investments.

TriLinc’s approach is to track core metrics at the fund level to assess progress in the stated, overarching goal of the fund, and to track company-level metrics to evaluate investees’ specific performance contributions.

TriLinc requires that potential borrower companies demonstrate their intention and ability to self-identify, track, report, and improve on at least one economic, social, or environmental impact objective, using the IRIS framework. TriLinc conducts this ESG and impact assessment concurrently with the credit approval process, as outlined in the diagram below. Specifically, prospective borrowers must adhere to the IFC Exclusion List, provide details on their environmental practices  (e.g. energy savings, waste reduction, and water conservation), employee benefits (e.g. health insurance, capacity-building, and disability coverage) and community engagement (e.g. community service and charitable donations), and select an IRIS metric as its impact objective. TriLinc’s Impact team prepares an Initial Sustainability and Impact Review on each potential investment, which includes information from proprietary ESG and impact screens, an assessment of sustainability risks and opportunities, and identification of relevant watchdog organizations and certifications regarding best practices, among other factors.

Borrower companies provide baseline data and annual updates for the five socioeconomic development IRIS metrics tracked at the portfolio level – job creation, wage increase, revenues increase, profitability increase, and taxes paid – and for their self-selected impact metric(s).  Borrower self-identified metrics include job creation, capacity-building, access to health care, and agricultural productivity, among others.

TriLinc produces an annual Sustainability and Impact Report, which tracks and reports on performance metrics for the overall portfolio and borrower companies.

 

A Small Drop in a Large Bucket

Posted on by MBC Strategic

Abigail Noble, head of the Impact Investing Initiative at the World Economic Forum, talks about why impact investing needs to go mainstream. With their Mainstreaming Impact Investing Initiative, the World Economic Forum is looking at the challenges and constraints that mainstream investors, such as pension funds, venture capital and private equity, are facing in getting engaged with impact investing. Noble says “one thing to keep in mind is that there’s a range of returns. Some investors only make a 0-1 percent return. But if you look at impact private equity funds like Leapfrog, they’re making in the 20 and up percentile in returns. One of the things that I find most encouraging is that we looked at the GIIN ImpactBase survey data, and found that over 70 percent of impact investment funds surveyed target an 11 percent rate of return or higher.”

She mentioned the effects on financial markets of environmental shocks like climate change, or destabilizing events like social unrest related to youth unemployment. “When you have more stable political and social situations, it’s a better business climate, and you have more stable financial returns. Impact investing is a very real way to create a more stable and inclusive market economy, and once we start to adapt that mindset, we can see how you can target both social and financial returns and, over the long run, create the world that we want to see.”

Click here to read more.