Impact Funds Insights by Innpact
On 21 October 2021, the Financial Action Task Force ("FATF") removed Mauritius from its grey list of high-risk jurisdictions (the “FATF Grey List”). 13 March 2022 marked the official delisting from the EU list of high-risk third countries (“EU Blacklist”). Mauritius is now back on track, positioning itself as a major hub between Asia and Africa, and attracting investors – and many impact investors – from around the world. Christophe Chabaud, Director of Innpact (Mauritius) Ltd ("Innpact Mauritius"), looks back on these twenty-three months of listing parenthesis and the horizons that are opening up for impact businesses.
Innpact: Christophe Chabaud, how do you analyse the period of grey and blacklisting and what did this episode change for impact fund managers?
Christophe Chabaud: Indeed, during that period not only us at Innpact but the whole Mauritian financial sector has felt the pinch of the listing. It all started when the FATF identified strategic deficiencies in the AML/CFT framework of Mauritius and included Mauritius on its grey list in February 2020. Mauritius was then officially placed on the EU Blacklist. To address this challenge, the Mauritian government, the financial players both from the public and the private sector worked hand in hand to demonstrate Mauritius political commitment to enhance its AML/CFT framework, which resulted in its removal from the FATF Grey list and EU Blacklist.
This delisting process definitely helped Mauritius to embrace a clearer legal, compliance and regulatory framework adhering to international best practices and boosting the confidence of investors in the jurisdiction. The Mauritian financial ecosystem has now the full infrastructure with a transparent and resilient legal and regulatory framework with political stability providing a conducive approach for the setting up of impact funds.
Is Mauritius still a legitimate choice for impact initiatives?
C.C.: As it always was! Mauritius is not only known for its sandy beaches or amazing sunsets, but the excellence of the Mauritian offshore is historical. It was built on three decades of know-how in the service of the fund industry. Originally, Mauritius was a gateway for the creation of local funds to make investments in Asia, and now in Africa where it offers many advantages: bilateral treaties, ease of transacting with African banks, ease of opening up accounts in local currency, legal networks, etc. Over time, a broad spectrum of financial services has been built to form a financial ecosystem of excellence. Its ideal geographical location bridging Asia, Africa and Europe, its political stability and resilient legal and AML/CFT regime, qualified professionals make it the preferred choice for investors.
This explains why despite the listings and the Covid pandemic, the activities of the fund industry slowed down but were not at a halt. According to the FSC Newsletter July to September 2021, 4,186 new licenses were issued by the regulator only for the period from June 2021 to September 2021 – out of which 759 GBCs. 26% of the licenses are from Europe with 55% investment in Africa. At Innpact we were in continuous discussion with prospective partners who were confident that Mauritius would address the AML/CFT challenge, and they are now ready for rebooting business relationships by using our platform for their impact investments. The figures for impact funds using Mauritius as their structuring platform is increasing day by day and the Mauritian authorities are actively supporting them.
Why choose Innpact Mauritius services for an impact fund project?
C.C.: We offer an integrated financial approach to service impact investment funds from design to set up and implementation and ongoing fund management services. With Innpact Mauritius you have the choice between the CIS manager services operating with Innpact S.A., the mother company and one of the leading European experts in impact finance advisory, and a fund platform offering a mutualised approach between leading service providers in the industry and in an efficient and cost-effective manner.
Now let’s talk about substance, which is a major concern when you setup a fund. We are present in Mauritius and we provide you with substance via dedicated resources to assist you in your investment process, with a compliance function, as well as portfolio monitoring and reporting tools co-developed with DFIs and impact investors. Apart from the core services, we provide a series of top-notch financial and impact services for first-time or experienced fund managers, from support in structuring their impact fund from start to finish – from the design to the implementation of the structure – to ongoing CIS Fund management services. We also endorse an independent risk management function.
And for those managers who want a short time to market structure, we propose MIFGA as a turnkey solution with pre-selected partners. MIFGA is a “one stop shop” fund management solution for impact investment managers allowing them to focus on their core expertise of deal origination & management. Set up as a Mauritius PCC with individual segregated impact investing funds, MIFGA provides you with legally existing, cost efficient, and timely solutions. Our objective is to offer impact measurement and management services to make sure that impact considerations are at the centre of the activities of the fund.
Via these solutions, we bring our group’s 15 years’ experience with 32 impact funds established and $ 8 bn of impact projects advised to the Mauritius market. As a result, we established numerous impact structures invested by DFIs and commercial investors in Mauritius.
What are the other facilities for impact fund initiators in Mauritius?
C.C.: Apart from transparent tax, legal and AML/CFT frameworks, the jurisdiction provides political and economic stability, the ease of doing business, with human capital skills as a major asset, Mauritius provides the right environment attracting impact investors and Foreign Direct Investment (FDI) to set up impact funds.
Following the trend towards a sustainable IFC, Mauritius is moving towards the net zero ecosystem aligning with the European regulations. Major banks and other service providers such as management companies and auditors are following this trend. The Government has also put in place green bonds in line with international best practices. Additionally, an increasing number of investment managers are creating and developing impact investment funds.
Whilst there are currently no statutory requirements in Mauritius for reporting on non-financial factors or impact factors with the regulators such as impact reporting, there is no doubt that Mauritius will sooner rather than later adopt such requirements to follow the international trend.
Innpact Mauritius as part of Innpact S.A., which has unrivalled experience in providing Impact Measurement and Management Services, is a clear front-runner in developing such services in Mauritius. Mauritius is definitely worth considering if you have an investment project targeting Africa!