CHALLENGE
What role can impact investors play in encouraging climate action?
Climate change in Sierra Leone threatens the food security and the livelihoods of most of the population, while the country only contributes 0.02% of global emissions. It is also home to an innovative network of small and medium-sized enterprises (SMEs). These have the potential to diversify the economy and improve livelihoods but need financing to build resilient ventures.
Truestone, an emerging market private equity manager, actively invests in Sierra Leone’s SMEs, directing financing from Europe into Sierra Leone’s private sector. The company’s goal is to broaden access to basic goods and services in the region by supporting and enabling small businesses to transform and grow.
As climate change impacts the livelihoods of communities, Truestone saw a unique opportunity to help its investee companies grow their climate ambitions, inspiring early-stage decarbonisation efforts. In doing so, Truestone hoped to help its investee companies to become more climate resilient and attract future capital. For this, the private equity manager needed tools that assist investee companies on their climate journey.
SOLUTION
Building capacity for investee companies to leverage climate action as an opportunity
For businesses to grow sustainably and make climate action part of their agenda, they first need to understand their emissions profile. To bring Truestone’s investees into this journey, we:
Engaged with investee companies through workshops to raise awareness of the climate risks and opportunities to their business. This helps investee companies understand the importance of decarbonisation.
Measured the Scope 1 and 2 emissions of each investee company, identifying key emissions hotspots. Here, we also developed 1.5C-aligned emissions reduction targets for each company.
Developed targeted climate action plans to identify carbon reduction opportunities for each investee company. A quick service restaurant, for example, can reduce its energy bills and emissions by 15% through low-cost energy efficiency interventions.
Created a robust climate impact measurement framework with which Truestone can demonstrate the positive environmental and social impacts associated with its investments.
IMPACT
Leveraging investment to build climate resilience in Sierra Leone
By prioritising their decarbonisation efforts, Truestone’s investee companies can integrate climate solutions in their strategy and scale their business in a sustainable manner. With this, Truestone can report tangible results towards what it means to create social and environmental impact. Our work will allow Truestone to:
Help its investees prioritise climate action at an early stage instead of going down a carbon-intensive path and transitioning later.
Contribute to climate resilient efforts for Sierra Leone by prioritising climate action through its investee companies.
Communicate the value of its investments, and their associated environmental and social co-benefits, to potential investors through the framework.
Build an investment case for its investees to attract sustainable financing from development finance institutions.
Sierra Leone is becoming increasingly vulnerable to the effects of climate change, and as investment managers, we understand the urgency for our companies to take action. The Carbon Trust collaborated closely with our management teams to measure their carbon footprint and develop effective decarbonisation strategies. This enabled us to identify interventions that deliver tangible, real-world impact.
