A typical, commercial fund manager receives investor commitments based on a particular thesis. In a rational yet self-reinforcing cycle, the fund manager becomes a cheerleader for that investment proposition. Even if evidence subsequently mounts that the thesis may not be playing out as advertised, incentives are such that the fund manager ends up doubling down and continuing to expend capital. It is extremely rare to find examples of funds that have decided to not deploy investor commitments.
We continue to believe that bringing cost-effective, reliable energy to populations without access to the grid is undeniably important to development. Our critique is more focused on the current commercial dynamics in the sector, not an indictment of the long-term importance of the endeavor itself.
In concluding, it is not easy for most investors to publicly acknowledge concerns about sectors where they have made financial commitments. It poses a risk to the capital that they have already extended in the market. As we maintain current financial exposure to the solar home system sector, it would be economically rational for us to keep our heads down quietly.
Read the full article by Greg Neichin, Diane Isenberg and Mary Roach about impact investing on NextBillion
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