Impact investing is all about increasing the flow of capital to vital impact projects. As the dollar amounts increase, so too does the complexity, and when you add cross-border currency transactions, there’s plenty of places where risk and fees can eat away at the core benefits.
For this reason, Record plc and Lemma FX are coming together to offer ‘Impact FX’ services. Record offers currency and derivative services, while Lemma FX manages impact verification.
The model was tested last year when Record partnered with UBS Global Wealth Management to launch its Emerging Market Sustainable Finance Fund.
The fund brings together capital from the private wealth clients of UBS, with Record’s strategy designed to help stabilise emerging market exchange rates and to absorb currency risk.
For those located in illiquid markets, this offers greater potential for access to development finance, which has the potential to remove a layer of friction when funding impact projects.
It also adds a layer of ESG oversight to the underlying credit flows by integrating green and sustainability bonds issued by development banks.
An example is the Georgian 2-year Sustainable Development Bond, valued at lari 31 million (US$10 million). The fund was the sole investor in the latest debt issuance of the World Bank (International Bank for Reconstruction and Development). With the funds directed towards advocating for road safety, its “Safe System” contributes to the Sustainable Development Goals.
“The target universe for Record’s Emerging Market Sustainable Finance Fund is large; with UBS Global Wealth Management, in partnership responding to the anticipated demand for a sustainable currency strategy, we aim to grow and develop this fund further over the coming years. This fund launch is the latest development in our strategic transition towards modernisation and growth, whilst also developing our ESG and sustainable investment capabilities, a very important area for Record.” says Leslie Hill, CEO of Record plc.
Impact Verification in Currency Trading
Lemma FX recognised the potential growth in the space, and the importance of impact verification to assure the integrity of claims being made.
It offers guidance when preparing investment strategies, and provides ongoing oversight as the transactions progress. This includes an impact dashboard with impact insights across cash, bonds, currency and peer-to-peer trading.
“This forex market is far larger than the equities market, so we see major potential for growth in the demand for impact verification.” Says Paul Somers, Managing Director of Lemma FX
“The fund showcases the appetite that private wealth investors have for innovative investments that drive genuine impact in emerging markets, where it’s needed most.”