In the highlands of Ecuador, a long purple potato grows all year round. It is sweet and can be prepared in many ways: boiled, crisp, fried. Yet until about 10 years ago, barely anyone outside of a small group of mountain-residing farmers knew this rare potato existed. That’s when Ecuadorian-born businessman Martin Acosta launched his company Kiwa, and began handing out the purple potato seeds to farmers, buying up their crop at a flat rate and promoting it to new markets that the farmers couldn’t have reached alone. The aim? Increasing demand for the product, thereby growing profits for the suppliers.

When he founded Kiwa, Martin was inspired by debates on how people at the “bottom of the pyramid” – those living beneath the UN’s official poverty bracket of two US dollars a day – could benefit from business. His aim was to increase living standards for small-scale farmers around Ecuador. In addition to a fair rate for the crop, Kiwa offers training and technical assistance to the farmers which greatly increases the efficiency of production. And with the purple potato nearing extinction, the farming of this “white tiger” of vegetables is also helping to keep it alive.

Kiwa is precisely the kind of business that Tammy Newmark is always on the lookout for. She runs EcoEnterprises Fund – one of a growing number of so-called impact investors. Funds like these make sure to put their money in businesses that are sustainable – both environmentally and socially. EcoEnterprises Fund currently invests in 11 businesses around Latin America, managing nearly $150 million, and driving growth in sustainable sectors such as eco-tourism, agriculture and forestry. Over the years the fund has invested in a total of 42 sustainable businesses.

Having had its eye on Kiwa for years, EcoEnterprises Fund finally struck a deal with them two months ago: investing three million US dollars so that the little purple potatoes – along with other products such as beets, parsnips and plantains – can go global. The idea is to make profit while helping people and the planet along the way. But the focus is on the bottom line: “We don’t get into this business unless we can get a return for our investors,” says Tammy.

Money first

The Covid-19 situation has made this the first time in Tammy’s 22 years of running EcoEnterprises that she has spent more than a few weeks off the road. “Usually I’m always on the go,” she says, “travelling to meet and connect with the people behind the businesses that EcoEnterprises currently invests in across Latin America. It’s humbling and it’s an honour to work with such passionate people on the ground”. She also spends a lot of time seeking out new businesses to add to the portfolio.

On EcoEnterprises Fund’s website, Latin American faces smile out from the screen, as they pull colourful fruits from trees, against glorious backdrops. You could easily mistake it for the website of an NGO. But this is no charity, it’s an investment fund, and it’s about making money. “The first thing that we look at is a business’ commercial viability, not its environmental and social impact,” Tammy says firmly.

Impact investment is a trendy buzzword, but one that both Martin and Tammy use with caution. Many investors would like to be known as impact investors, but do they live up to the label? Even if their intentions are good, how can they know from an office in New York or London that their money is making that all-important impact?

Martin has seen these issues play out on the ground. “Suddenly everyone is saying they are an impact investor,” he says. “It’s a term that needs to be carefully defined. We’ve been exposed to all sorts of investors who’ve claimed they want to do good, signed off the deal, taken a 15% interest rate, then never bothered to come to find out if their investment is actually adding social value or not,” he says.

To make sure it has the impact it aspires to, EcoEnterprises Fund operates under a clear set of ethics: only investing in companies it believes will do social and environmental good. The metrics it uses to track this are familiar from the UN’s Sustainable Development Goals: such as sea-life preservation and agricultural enhancement. Yet, at the end of the day, Tammy says: “You always bet on people. We never invest in people we don’t trust, where it’s not on the up and up”.

The fund tailors its financing offer for each business, which might involve traditional lending, an equity stake in the business, or other agreements tied to the future performance of the company – or any combination of the above.

The deal with Kiwa, for example, is a seven-year programme with three million dollars invested as a mixture of debt and equity, structured in line with the company’s business plan. (It’s a better deal than they would’ve gotten on the market in Ecuador, Martin says.) It also gives Kiwa a direct line to the EcoEnterprises team for business advice. EcoEnterprises tries to ensure long-term success for its businesses – it has been involved with some for more than 20 years, while others have gone on to be sold, to access further financing from local sources or to finance their own growth.

Perhaps most importantly, EcoEnterprises does regular on-ground checks, interviewing farmers, tour guides and factory workers to make sure investments are impacting lives for the better.

Over the years, support for developing economies has taken any number of forms, from state-to-state loans in 1980s Africa to NGOs taking over large chunks of essential services in parts of 1990s South America. This newest form of capital injection doesn’t replace any of the old ones (“we need all hands on deck”, as Tammy puts it), but unlike other approaches, it is first and foremost about making returns.

At first, that might sound more cynical than other ways of supporting development, but proponents of impact investment argue that it’s also one of its great strengths. The point is that businesses only get support if they are viable in their own right: if they suit local needs enough to make profit in the first place. And as Martin says, the focus on profit is precisely what makes impact investment, and businesses like Kiwa, a self-sustaining system: “as long as people are getting returns, the money keeps coming”.

A culture shift

At the beginning of her career Tammy seemed to be on the path to becoming a typical Wall Street banker. She graduated from Wharton Business School in 1990 and worked for JPMorgan Chase, entering the world of finance in the “Bonfire of the Vanities era” of fast cash and dubious morals. “I realised it wasn’t for me,” she says. “I thought there were more progressive ways to invest.” Tammy joined a group of women doing pro bono work with micro-finance (all the vogue in socially responsible investing at the time). She became CEO of EcoEnterprises in 1998, and hasn’t looked back.

In many ways, Tammy’s trajectory mirrors a bigger trend in the banking world. With fund managers (including BlackRock, the world’s largest) lining up to divest from fossil fuels and invest in green business, it’s evident that there’s a new profit-maker in town and its name is social and environmental justice. Impact investing is on the up: these funds combined deployed an estimated 30 billion dollars worth of capital last year alone. Today’s investors prick up their ears at the sound of social responsibility – many impact investment funds report having a competitive advantage when they meet with potential clients. A recent survey by Deloitte found that millennial workers were far more likely to say the purpose of a business should be “improving society” than “generating profit” – a finding referenced by none other than BlackRock CEO Larry Fink in his latest annual open letter to fellow chief executives.

These shifts are of course only made possible by consumers, whose new taste for organic products is a driving force. Acai, rare potatoes and organic fruits are stocking the shelves of Whole Foods and its equivalents across the northern hemisphere. Many argue that the new markets for sustainable products are the biggest consumer revolution since supermarkets became commonplace. They’ve forced everyone from McDonald’s to Nespresso to at least pay lip service to sustainability as a company value.

The art of the possible

Of course, the overall impact of every individual business is complex. Kiwa for example, helps rural farmers, but exporting vegetables has a high cost in carbon emissions. For Martin, it’s always about doing more good than harm, and setting high standards for what good is (saving a potato that’s part of Ecuador’s national treasury, for example). Accountability and transparency, as well as clear-cut vows to improve sustainability whenever economically sensible, are what counts for him. For example, Kiwa is currently looking to go from plastic to paper packaging for the purple crisps as the price of the latter goes down.

But these things happen slowly. “I’ve seen a lot of changes in the last 30 years,” says Tammy. “I am optimistic – wow – it would be good for the trajectory to be ratcheted up”.

Martin and Tammy both believe in the ability of capital to save people and the planet. Those who doubt it should look at the results, they say. The changes might not be radical, but they are happening as we speak.

Thanks to Martin, Tammy and the farmers on the ground, it probably won’t be long before you start seeing those purple potatoes at your own local supermarket.