Browsing by Author "McPherson, Sharron"

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    Open Access
    Bound to Impact: a best practices guide to term sheets in African Impact Investing deals
    (2016) Pepper, Nicholas; Patton, Aunnie; McPherson, Sharron
    This study focuses on the Impact Investing industry in sub-Saharan Africa through a comparative analysis of three industry-leading institutions' term sheets. A key output of this exploratory research is the development of a best practices guide to social and environmental covenants (clauses included in the term sheet). The researcher has compiled primary data through practitioner interviews; secondary data was compiled by analysing executed legal documents and templates. The process was conducted with academic rigour in order to categorise and compare specific information. Preliminary research involved the researcher exchanging with a DFI and two commercial Impact Investors. The DFI provides both equity and debt, whereas one of the commercial Investors specialises in private equity and the other in private debt. The institutions are industry agnostic. The study has the objective to test two linked null hypotheses:  Impact Investors do not align their terms sheets to their values; and  Impact Investors do not require that certain clauses be systematically included in order to protect their interests Through case studies, the research initially develops on the key elements of an equity term sheet and provides a fictitious debt term sheet as a reference. Equity and debt legal documents are compared and analysed independently. After having isolated and analysed social and environmental covenants, the researcher concludes that neither hypothesis can be rejected. Further research is recommended limiting the scope to a specific industry or a specific asset class. Understanding and comparing Development Finance Institutions' methods would be of value. A quantitative analysis would isolate the success factors and appropriate constraints on the legal documentation in order to maximise financial and social and environmental returns.
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    Is renewable engery a suitable investment choice for South African non-bank institutional investors?
    (2017) Molewa, Kholofelo; Biekpe, Nicholas; McPherson, Sharron
    The research set out to examine the investment & economic suitability of Renewable Energy ("RE") assets for South African institutional investors. Data was collected through a series of structured and semi structured interviews and further triangulated and cross-checked through a thorough literature review of available policy documentation and academic literature. The limitations concerning this study have much to do with the nascent nature of the renewable energy program and therefore the lack of availability of hard economic and financial historical data. Further there is very little academic literature on renewable energy investing pertaining to a South African context. To mitigate some of the risks presented by the aforementioned limitations, interviewees were mainly subject-matter experts on the issue of RE investing and therefore provided key insights through a series of structured and semi-structured interviews. Within a South Africa specific context, there is very little academic material dealing with RE or infrastructure finance and investment. The implications of this study are therefore crucial in helping set the basis for the development of future theories around this and related topics. Interview discussions and review of other material revealed key themes, which allowed the researcher to discern some key findings: Firstly, there's a cautious but emerging consensus that the economic and financial features of RE assets make them suitable (and even attractive) for consideration in asset class allocation decisions. Further and related: the merging view was that RE assets could offer the benefit of both reducing risk and increasing expected returns within a given portfolio. A key related sub-theme and finding was the need to establish a common set of nomenclature, which would describe and ultimately help benchmark the economic and financial features of RE assets – the ability to benchmark financial and economic data being a key aspect of the asset allocation framework. Secondly data collected indicated that there is strong institutional support for government's energy policy and how it has been implemented to date. Thirdly, in working out the suitability of RE assets investors tend to default to comparable proxies such as bonds, equities, REITS. The emerging theme coming out of the data is that RE assets are likely to resemble fixed income assets in their financial and economic characteristics. Lastly, for all the emerging consensus in support of the government's RE policy, many investors seem to hedge their optimism and remain generally unsure and in some instances sceptical of the overall sustainability of the program, citing the fact that there are still too many unknowns regarding RE assets and their respective futures. This research therefore has some useful practical applications for institutional investors, hopefully further demystifying a sector that could be a lynchpin of the South African economy for some time to come.