NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, May 26, 2015

A Brazilian investment fund is taking to heart theVatican’s endorsement of leveraging capitalism’s tools to help address inequality.

An investment firm, First, is on track this year to raise the country’s largest so-called impact investing fund, which is aimed at promoting social good as well as profitable returns. And it is being supported by some big players like JPMorgan Chase and the World Bank’s private investment arm.

First is also being backed by an even higher power: a trust established by a 199-year-old international order of the Roman Catholic Church.

The capital provided by the Oblate International Pastoral Investment Trust is its initial investment in a Brazilian impact fund. The amount, about $7 million, may seem small, but it reflects the growing interest in the sector by Catholic groups worldwide. And for the Catholic Church, the concept seems to dovetail with Pope Francis’ focus on addressing inequality.

Ensuring that faith-based investments are consistent with Catholic values has long been difficult. But many people increasingly see what is called impact investing — which measures both financial and social returns — as one way to do so. Not only are investment gains important, but the fund also gauges whether its investments are providing social improvements, such as in education, health care or the environment. This asset class is making inroads in Brazil, home to the world’s largest Roman Catholic population.

First’s fund-raising, if successful, would be a watershed moment in Brazil, even though it has taken several years to get started. It is expected to soon surpass 300 million reais, or $98 million, and hit its $125 million target this year, according to a person briefed on the fund’s activities. The $98 million would be more than half of the cumulative $177 million raised by all other impact funds in Brazil from 2004 to 2013, according to a report last year by the Aspen Network of Development Entrepreneurs.