SYGNUS, the recently appointed fund manager of the Caribbean’s climate resilience and economic sustainability fund, spearheaded the Jamaican leg of the fund’s launch last Thursday. The Caribbean Community Resilience Fund (CCRF), a US$135-million investment fund, promises to revolutionise the region’s approach to tackling climate change and fostering growth.

The fund is a collaborative effort by Caricom Development Fund (CDF) and Sygnus, with support from USAID.

“We were built for alternative investments, and this is an alternative investment fund so it falls squarely in our path,” said Jason Morris, co-founder, chief investments officer, and executive vice-president of Sygnus Capital, in an interview with the Jamaica Observer at the launch event held at the AC Hotel Kingston.

According to Morris, Sygnus had been considering a fund of this nature for two years and was working on its own impact fund to bring it to market. However, after speaking with the CDF they realised they shared a common goal and decided to collaborate on the venture.

In pitching the fund to potential investors Morris highlighted that, aside from its focus on climate resilience, the fund encompasses other objectives including: enhancing the robustness of infrastructure in Caribbean countries across the region, including port infrastructure, road infrastructure, dry docks, and electric vehicle infrastructure; providing technical assistance for capacity building, including grant funding and resources, to make business ideas bankable. This “catalytic capital” will fill the gap in the alternative space, providing patient capital for long-term investments (10 years, with the option to extend to 11 or 12 years) with a minimum entry amount of US$250,000.

In breaking down the fund’s structure Morris revealed that there are two portfolios: a debt portfolio and an equity portfolio. The debt portion has an investment period of up to seven years during which Sygnus will invest the money, get repaid, and reinvest the money for a total of seven years. Afterward, investors will receive their principal. The equity leg of the fund, on the other hand, has a five-year duration.

“If you’re doing equity investments it takes longer to generate the returns you need and to harness that capital to exit,” he explained, highlighting the difference in the periods.

Under the debt portfolio seven key priority sectors have been identified: renewable energy, the blue economy, sustainable housing, information and communication technology (ICT), transportation, financial services, and climate-smart agriculture. The equity portfolio is similar but more focused on four sectors: renewable energy, blue economy, sustainable housing, and ICT, targeting early stage investments. A total of 70 per cent of the capital will go to the least-advantaged countries while 30 per cent will go to richer countries. However, there are no limits on where the capital can go in the equity portfolio.

“I daresay that 10 years ago, or 15 years ago, an idea like this would not have had the reception it’s having today — and it is because of what we have been able to achieve as a country that this idea and this fund have an excellent chance of being successful,” said Finance Minister Dr Nigel Clarke while making his remarks during the launch.

While noting that he is not endorsing or selling any investment product, as it requires licensing and registration with the Financial Services Commission (FSC), he cautioned that an investment product with a 10-year lock-in period is not suitable for individual investors such as “mom and pop” investors as this type of investment is only appropriate for individuals who can afford to have their money tied up for extended periods. However, in addressing the launch of the CCRF, Dr Clarke highlighted the challenges faced by small island states in the Caribbean. Despite having a high per capita GDP, these nations are vulnerable to economic shocks due to their narrow economic bases and dependence on the outside world. He stressed that economic resilience is crucial for Caribbean countries and can be achieved through various means. The ultimate goal is to build resilience to withstand economic shocks and ensure sustainable economic stability.

“The challenge that we face is that the Government will never have the resources in their entirety that are required for the investments that we need in just one of those areas alone,” said Clarke before hailing Sygnus for the fund. “A fund like the Caribbean Resilience Fund and its targeted areas such as energy and renewable energy and transportation, areas that we are critically in need of private investment, is like music to the ears of policymakers.”

The Caricom Development Fund (CDF) has already committed US$15 million, which Morris says will go into the riskiest tier of the fund. The debt portfolio is the only one with preference shares, which are protected by up to US$15 million of first-loss capital. To absorb any losses, preferred shareholders will be the first to have their money returned. The fund is to be registered with the regulatory authorities for Jamaican investors.

“We have been championing and pioneering alternative investments across the Caribbean region for seven years now, which has one dedicated purpose — to accelerate the pace of growth across the Caribbean using alternative investments. That’s our only purpose in life,” said Morris.