Venture Capital Q&A: Manuela Cedarmas, Investcorp-Tages

Multi-asset alternative investment firm Investcorp Tages is known primarily for its hedge fund business, but in recent years has expanded its footprint to the private markets, both in private credit and early-stage impact investing. Greg Winterton spoke to Manuela Cedarmas, Head of ESG and Impact at Investcorp-Tages, to learn more about the firm’s activities in this area.

GW: Manuela, what were the drivers behind launching an impact-based strategy? And why early-stage in particular?

MC: Traditionally in the impact space, investors have tended to focus on investment in environmental projects over social as it is easier to measure. This has resulted in a trend of under-investment in social projects. Investcorp-Tages has always been sensitive to ESG themes and particularly those where there are attractive investment opportunities in emerging strategies. In Europe, we identified a step change in the development of the impact space in the years preceding the pandemic. While the space was maturing prior to 2020, the pandemic acted as a catalyst to increase awareness by institutional and retail investors for sustainable products. In response to this, talent begun to migrate to the sector as managers / entrepreneurs begun to see more opportunity in the sector.

GW: Are there any sectors that you focus on specifically, and if so, why?

MC: At Investcorp-Tages, we believe that environmental issues are closely related to social issues. Effective measures against climate change require social cohesion, which is currently at risk, especially in deprived areas, fragile communities or for the unemployed. Climate change can lead to social crisis; social and political crisis lead to environmental disasters, so we focus on four main areas of activity that relate to nine of the UN’s Sustainable Development Goals: education, health care, job opportunities and addressing climate change.

GW: The venture capital fund of funds model is arguably the main provider of capital to underlying VC GPs, which makes it crowded in some ways. What’s the logic for Investcorp-Tages to build a fund of funds model to access these opportunities?

MC: It’s important to remember that many institutional investors don’t have a large enough investment team or staff that they would need to manage many individual GP relationships. Add to that the risks in early-stage investing generally, and you end up at the fund of funds model, that’s why it’s so common in venture capital. And then in terms of impact, it is still an emerging area, so the fund of funds model makes the most sense for our clients that want exposure to impact investing while still having the traditional fund of fund benefits of risk mitigation and administrative ease.

GW: Can you tell us about one or two of the underlying investments that you have that you’re particularly excited about?

MC: A recent investment we made through our German manager Ananda is in Resistomap, which provides an end-to-end service for antimicrobial resistance (AMR) monitoring. AMR is a significant cause of death around the world, and is tied to climate change, biodiversity loss, and pollution with the highest burden being in poorer countries. Resistomap is led by Founder and CEO, Windi Muziasari, and has developed one of the most extensive environmental AMR databases to date.

Another investment that we’re excited about is French company Eurekam. Eurekam has built a flexible yet robust technology to secure the composition of drug preparations, with focus on chemotherapy bags. Securing the composition of custom-made drug preparations in hospitals prevents serious incidents and the death of patients who are already fragile because they are undergoing chemotherapy. Eurekam’s technology also helps to protect hospital pharmacy workers from unnecessary exposure to dangerous drugs and avoidable stress.

The third investment I’d like to mention is an Austrian company, SAVD, that we have through our French partner, Impact Growth. SAVD. SAVD helps improve access to healthcare services for non-German speaking populations, especially refugees and migrants, via a platform on which public service and health workers can access a pool of over 300 qualified interpreters to remotely interpret discussion between them and their non-German specking client or patient. The services are already available in many hospitals and clinics, prisons, courts, the Red Cross, employment agencies, women shelters, and for instances such parent-teachers meetings.

GW: Lastly, Manuela, you’ve got article 9 classification on your impact strategy. But there’s been something of a push back against ESG in the past few months - the EU has already proposed a review of the SFDR regime and it’s not even three years old, for example. What’s your message to investors?

MC: First of all, we welcome any regulatory initiatives which might help to improve transparency on sustainable investments because we think that’s better for everyone from the end investor to the underlying company. Indeed, we at Investcorp-Tages have partnered with our portfolio managers to better understand SFDR requirements and share best reporting practices in line with Article 9 requirements. We also welcome the initiative by the EU Commission to organise a public consultation to gather feedback and views from financial market participants on how to correct any inevitable shortcomings of this new regulation.

But the message to investors is to stay the course. Impact investing is still an emerging strategy, and there are going to be changes at the regulatory level and in terms of general best practices that will occur over time. But the argument remains – there are numerous opportunities to generate outsized returns through an impact initiative.

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Manuela Cedarmas is Head of ESG and Impact at Investcorp-Tages